SEC seeks summary judgment against alleged RMR 'flippers'

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The Securities and Exchange Commission is seeking a summary judgment against the individuals still litigating the RMR Asset Management "flipping" case. The SEC told a federal judge the court should find the defendants broke the law based on the "undisputed evidence" presented.

The SEC filed its motion in U.S. District Court for the Southern District of California April 24, asking that the court to find that Jocelyn Murphy, her husband Michael Murphy, and Richard Gounaud all violated federal securities laws when they allegedly misrepresented themselves as local retail investors to buy and quickly sell or “flip” the securities for a profit.

“The undisputed evidence establishes that each of the defendants acted as an unregistered broker in violation of Section 15(a)(1) of the Securities Exchange Act of 1934,” the SEC told the court in its filing. “The undisputed evidence also establishes that Jocelyn Murphy committed fraud when she bought new issue municipal bonds on behalf of RMR.”

The trio participated in nearly 20,000 combined transactions on behalf of the now-defunct RMR Asset Management, an unregistered San Diego-area firm that was shut down in 2018. RMR and its president, Ralph Riccardi previously settled the SEC’s charges without admitting or denying the allegations.

If the judge were to grant the motion, it would bring an end to the civil lawsuit without the need for the case to proceed to trial. To win a summary judgment, a party to a lawsuit must show that there is no factual dispute at issue and that the facts of the case can only support a finding in that party’s favor.

The SEC is seeking to bring the case to a close without needing to go to trial.

All three of the defendants were charged as part of a major enforcement action in august 2018, when the SEC brought actions against two firms and 18 individuals alleged to have participated in a scheme to improperly obtain new issue bonds from at least 2009 to 2016.

According to the SEC, individuals including the Murphys and Gounaud acted as unregistered brokers by falsely holding themselves out as retail investors or asset managers representing retail investors to buy muni bonds during retail order periods and then “flip” them to a broker-dealer at pre-arranged prices.

The frequency of those transactions demonstrates that the defendants were “in the business of effecting securities transactions,” making them brokers under the law, the SEC told the court, in addition to that they allegedly received transaction-based compensation documented by RMR.

Jocelyn Murphy, a Colorado resident, committed fraud when she allegedly falsely provided Oregon, Puerto Rico, and California zip codes to get allocations in those places, the SEC said. Further, the SEC told the court, she acted with scienter, or a knowledge of wrongdoing that is key to proving fraud charges under Section 10b.

An attorney for the Murphys did not respond to a request to comment, and Gounaud has been representing himself. All three have either personally or through counsel denied wrongdoing in previous court filings, and Gounaud accused the SEC of acting prejudicially by intentionally employing inflammatory language to describe the case.

The judge has set May 8 as a deadline for a response to the SEC motion, and May 15 for the SEC to respond to the response. If summary judgment is denied, the case would continue to trial unless a settlement is reached.

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Enforcement actions Securities law SEC enforcement Lawsuits Washington DC