Palos Management Inc.

Allegations: THE SEC ALLEGED THAT PALOS, AN SEC REGISTERED INVESTMENT ADVISER WHOSE PRINCIPAL OFFICE AND PLACE OF BUSINESS IS LOCATED IN CANADA, AND ONE OF ITS PORTFOLIO MANAGERS ACTING AS SUCH, MENDEL, ALSO LOCATED IN CANADA, ENGAGED IN CERTAIN ACTIVITIES WITHOUT BEING PROPERLY REGISTERED AS A BROKER-DEALER, OR ASSOCIATED WITH A REGISTERED BROKER-DEALER, IN VIOLATION OF THE U.S. SECURITIES EXCHANGE ACT OF 1934. SPECIFICALLY, THE SEC ALLEGED THAT FROM JULY 2019 UNTIL FEBRUARY 2022, MENDEL, AS AN ACCOMMODATION TO U.S.-BASED CLIENTS, SOLD ILLIQUID SHARES OF STOCK, COMMONLY REFERRED TO AS PENNY STOCKS, THAT THEY OWNED, WITH THE EXPECTATION THAT THE PROCEEDS OF THOSE SALES WOULD REMAIN IN THEIR ADVISORY ACCOUNTS FOR HIM TO MANAGE. MOST OF THOSE PROCEEDS WERE WITHDRAWN BY THE CLIENTS INSTEAD OF MAINTAINED IN PALOS' ADVISORY ACCOUNTS FOR MENDEL TO MANAGE. Status: Final Sanction Detail: PALOS MANAGEMENT INC. WAS ASSESSED A CIVIL MONEY PENALTY IN THE AMOUNT OF $575,000. ITS NON-REGISTERED ASSOCIATED PERSON , ROBERT MENDEL, WAS ASSESSED A CIVIL MONEY PENALTY IN THE AMOUNT OF $35,000. BOTH THE FIRM AND MR. MENDEL WERE CENSURED. MR. MENDEL WAS BARRED FROM ENGAGING IN TRANSACTIONS INVOLVING PENNY STOCKS IN ANY CAPACITY FOR A PERIOD OF 3 YEARS. Summary: ON OCTOBER 15, 2024, PALOS MANAGEMENT INC. ("PALOS"), AND ITS ASSOCIATED PERSON, ROBERT MENDEL ("MENDEL"), SETTLED AND CONSENTED TO TWO ADMINISTRATIVE ORDERS ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS MADE IN THOSE ORDERS (THE "ORDERS"). IN THE ORDERS, THE SEC ALLEGED THAT PALOS, AN SEC REGISTERED INVESTMENT ADVISER WHOSE PRINCIPAL OFFICE AND PLACE OF BUSINESS IS LOCATED IN CANADA, AND ONE OF ITS PORTFOLIO MANAGERS ACTING AS SUCH, MENDEL, ALSO LOCATED IN CANADA, ENGAGED IN CERTAIN ACTIVITIES WITHOUT BEING PROPERLY REGISTERED AS A BROKER-DEALER, OR ASSOCIATED WITH A REGISTERED BROKER-DEALER, IN VIOLATION OF THE U.S. SECURITIES EXCHANGE ACT OF 1934. SPECIFICALLY, THE SEC ALLEGED THAT FROM JULY 2019 UNTIL FEBRUARY 2022, MENDEL, AS AN ACCOMMODATION TO U.S.-BASED CLIENTS, SOLD ILLIQUID SHARES OF STOCK, COMMONLY REFERRED TO AS PENNY STOCKS, THAT THEY OWNED, WITH THE EXPECTATION THAT THE PROCEEDS OF THOSE SALES WOULD REMAIN IN THEIR ADVISORY ACCOUNTS FOR HIM TO MANAGE. MOST OF THOSE PROCEEDS WERE WITHDRAWN BY THE CLIENTS INSTEAD OF MAINTAINED IN PALOS' ADVISORY ACCOUNTS FOR MENDEL TO MANAGE. IN FEBRUARY 2022, PALOS TERMINATED THIS ACCOMMODATION SERVICE. THE ORDERS IMPOSED CENSURES AND CEASE AND DESIST ORDERS ON PALOS AND MENDEL, IMPOSED FINES ON BOTH, AND IMPOSED A THREE-YEAR BAR ON MENDEL FROM ENGAGING IN TRANSACTIONS INVOLVING PENNY STOCKS, WITH THE RIGHT TO REAPPLY THEREAFTER. ACCORDING TO THE SEC ORDER, THERE WERE NO FINDINGS OF VIOLATIONS OF THE INVESTMENT ADVISERS ACT OF 1940.