The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Attorneys for Gibraltar Global Securities and its principal, Warren Davis, yesterday expressed confidence they would be totally cleared of all charges, and accused US regulators of employing “bullying tactics” against their clients.

Sean Moree, an attorney with McKinney, Bancroft & Hughes, who is representing Mr Davis and his former broker/dealer business, told Tribune Business that the Securities & Exchange Commission (SEC) had omitted key elements in two separate lawsuits it had filed against them.

Disclosing that Mr Davis’s US attorney felt they had “a very strong case”, Mr Moree said the Bahamian broker was upset that the SEC had personally named him as a defendant in both lawsuits.

He added that this appeared to be a ‘pressure tactic’ employed by the SEC to force Mr Davis to co-operate with it, and the Gibraltar principal’s first move - once he is properly served with legal papers - will be to have his name removed as a defendant.

Tribune Business revealed yesterday how Mr Davis and Gibraltar, which he is in the process of closing, had been hit with a second SEC lawsuit in two months.

The latest one, also filed in the southern New York district court, alleged that the Bahamian broker/dealer and its principal had operated “unlawfully” in the US in selling $100 million worth of stocks.

They were also accused of participating in an alleged “illegal unregistered offering and sale” for Magnum d’Or, a small, thinly-traded company.

Mr Moree told Tribune Business yesterday: “It goes without saying that Warren and Gibraltar are going to fight this claim. They don’t believe they did anything wrong, and I’m instructed by his US attorney that he thinks he [Mr Davis] has a very strong case.”

Turning to the particulars of the SEC case against his clients, Mr Moree said it was true that Gibraltar and Mr Davis had sworn affidavits identifying the Bahamian broker/dealer as the beneficial owner of brokerage accounts in which funds and securities were held.

But he alleged that the SEC “failed to state” that Gibraltar and Mr Davis had sworn secondary affidavits, which were filed with the US regulator, identifying the beneficial owners (its clients) of the funds and securities within its accounts.

“I understand that’s a fairly regular procedure for brokers holding funds on their clients’ behalf,” Mr Moree said.

“The other major part we think the SEC failed to indicate, which will come to light in the fullness of time, is that Mr Davis was really doing this through two brokers....

“What they [Mr Davis and Gibraltar] are relying on is that they had advice from both companies, as well as legal advice, that there was no requirement to register with the SEC.

“They were advised that as long as they were brokering through a licensed dealer, there was no need to register.”

Mr Moree added: “A matter Warren feels very strongly about, and his lawyer, is the fact they’ve added Warren’s name to this.

“Gibraltar was not a shell company. It was a going concern, and had a fairly large staff for this jurisdiction.”

The Bahamian attorney suggested that the SEC had deliberately failed to separate the corporate entity from its principal, and added: “We feel this is a bullying tactic in order to pressure him to co-operate, although there have been no overtures made at this time.

“This is very unfortunate, and is affecting Warren and his family. In the fullness of time, we feel Warren will be vindicated, and that he did nothing wrong.

“He hasn’t been served at this point, although he’d not evading service. Hopefully, this can proceed, and the first order of business will be to try and get Warren’s name removed.”

In its first lawsuit, brought just a month ago, the SEC charged Mr Davis and Gibraltar with participating in an alleged $11 million multinational fraud by falsifying affidavits and documents.

Mr Davis previously denied any wrongdoing there, and Mr Moree said yesterday: “Gibraltar and Warren were certainly not complicit in that, and fulfilled all requirements under US and Bahamian law.”

The SEC alleged in the latest action that between March 2008 through August 2012, Gibraltar sold approximately $100 million of low-priced microcap securities on behalf of US customers, earning commissions of between 2-3 per cent on these trades.

In the Magnum d’Or case, some 10 million shares were allegedly sold by Gibraltar on behalf of US customers, netting proceeds of more than $11.384 million.

These shares were sold via 600 transactions between November 2008 and December 2009, with Gibraltar wiring $7.175 million in proceeds back to Magnum d’Or.

The latest SEC lawsuit against Gibraltar and Mr Davis was similar to regulatory action taken against them by the British Columbia Securities Commission in Canada, which found the company guilty of advising on – and trading in – securities in that state despite not being registered to do so.

The outcome resulted in Mr Davis closing Gibraltar down, with the broker/dealer still in the process of winding-up its operations, shutting 1,224 accounts and returning funds/securities to clients.

In announcing the closure, Mr Davis said it was taking $1.5 million, and 15 jobs, out of the Bahamian economy. He added that the move came in response to reputational damage inflicted by the British Columbia Securities Commission.