Securities Law Blog

The Securities and Exchange Commission today announced that it has obtained an asset freeze and other emergency relief to protect investors whose funds were at risk due to fraudulent misconduct at North American Clearing, Inc., a Longwood, Fla., based general securities and clearing brokerage firm. The SEC's complaint alleges that the defendants' fraud began earlier this year, when North American Clearing began experiencing severe financial problems. To ease its financial difficulties, North American Clearing secured a bank loan using customer securities as collateral. To comply with the federal securities laws and remain in operation, North American Clearing increased its reserves in an account it maintained for the benefit of customers, which limited funds available to North American Clearing to meet its daily operating expenses. According to the SEC's complaint, on several occasions in March and April 2008, North American Clearing improperly sold customer money market funds as a means of temporarily freeing up funds that it then used to pay for daily operating expenses. The SEC's complaint also alleges that on May 13, 2008, the defendants manipulated North American Clearing's processing system to overstate net customer money market purchases. This enabled North American Clearing to illegally withdraw more than $3 million from the reserves it was required to maintain for the benefit of customers.

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.