Three Officers of Brokerage Firm Global Transition Solutions Charged with Fraud
On August 8, 2016 the Securities and Exchange Commission (“SEC”) charged three individuals and the now-defunct firms Global Transition Solutions, Inc. and Global Transition Solutions, LLC (collectively “Global Transition”) with fraud for misleading their current and prospective customers about the fees they charged in connection with securities transactions.
According to the SEC’s complaint, filed in federal court in Philadelphia, Pennsylvania, John Place, Global Transition’s Chief Executive Officer, John Kirk, Global Transition’s President, and his brother, Paul Kirk, Global Transition’s General Counsel and Chief Operating Officer, operated the two Global Transition firms as a “transition management” brokerage consulting business. The complaint alleges that Global Transition assisted its customers – largely public pension funds – in handling large orders to buy and sell securities when transitioning a large portfolio from one investment manager or strategy to another, or liquidating it. The complaint further alleges that Place and the Kirk brothers told many of their customers that Global Transition would receive only explicitly disclosed commissions charged on customers’ trades. In reality, Global Transition also received additional revenue from mark-ups and mark-downs taken by other brokers and shared with Global Transition. Over the course of the scheme, Global Transition received at least $13 million in undisclosed payments.
The complaint further alleges that Place and the Kirk brothers and Global Transition worked with ConvergEx Global Markets Limited, a Bermuda-based broker-dealer, and two other brokerage firms to execute the scheme. In December 2013, the SEC announced charges against ConvergEx Global Markets and two sister brokerage subsidiaries that agreed to pay more than $107 million and admit wrongdoing to settle the matter. ConvergEx Global Markets also pled guilty to related criminal charges.
The SEC’s complaint charges all of the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Global Transition Solutions Inc. with violating Section 15(c)(1) of the Exchange Act. The complaint also alleges that Place and the Kirk brothers are liable as control persons of both Global Transition entities for the foregoing violations and that they aided and abetted Global Transition Solutions, Inc.’s violations of Section 15(c)(1) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement on a joint and several basis with prejudgment interest, and civil monetary penalties.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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