Tax shelter penalties upheld. The US Supreme Court unanimously upheld an IRS penalty imposed on two investment company partners who participated in a tax shelter by purchasing both long option and short option currency spreads and, when the partnership assets were subsequently disposed of, claimed huge losses by considering only the long option spreads and ignoring the short option spreads in their final accounting. (12/3/2013) US v. Woods.
Failure to supervise penalty affirmed. The US Court of Appeals for the District of Columbia affirmed an SEC order imposing a fine on a broker-dealer for failing to supervise a subordinate who sold variable annuities to elderly clients. The Court found that the US$310,000 fine was neither arbitrary nor capricious. The fine took into account many factors, including the broker’s “egregious” violations, his “blatant failure to deal fairly with elderly, unsophisticated customers,” and the fact that the broker falsified documents. (11/26/2013) Collins v. SEC.