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Official announcements highlighting recent actions taken by the SEC and other newsworthy information.
- Long Island Town and Former Top Official Charged With Defrauding Municipal Investors
published on Tue, 21 Nov 2017 13:10:00 -0500
The Securities and Exchange Commission today charged Oyster Bay, New York, and its former top elected official with defrauding investors in the town’s municipal securities offerings by hiding the existence and potential financial impact of side deals with a businessman who owned and operated restaurants and concession stands at several town facilities. According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Oyster Bay agreed several years ago to indirectly guarantee four separate private loans to the vendor totaling more than $20 million. The agreement to indirectly guarantee the debts allegedly stemmed from the concessionaire’s longstanding close relationship with then-town supervisor John Venditto and other officials that involved gifts, bribes, kickbacks, and political support. The SEC’s complaint alleges that Oyster Bay and Venditto deliberately concealed the indirect loan guarantees when they should have been disclosed in connection with the town’s 26 securities offerings from August 2010 to December 2015. According to the complaint, this information was material to current and prospective investors due to the potential impact on the town’s finances. For example, in one scenario outlined in the SEC’s complaint, the town could have been required to make a termination payment of approximately $16 million (approximately 16 percent of the town’s operating budget) within 60 days had the vendor defaulted on the loans. “As alleged in our complaint, Oyster Bay and its most senior elected official concealed from its municipal investors that the town had gone to great lengths and taken on financial risk in an unusual decision to assist a vendor. Investors were deprived of information they needed to understand the town’s true financial condition as they made investment decisions,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today filed a superseding indictment that included securities fraud charges against Venditto. The SEC’s complaint charges Oyster Bay with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Venditto is charged with violations of Section 17(a)(1) and (a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. He also is charged with liability under Section 20(a) of the Exchange Act as a controlling person for the violations by the town, and with aiding and abetting violations. The SEC’s continuing investigation is being conducted by the SEC’s New York office and the Enforcement Division’s Public Finance Abuse Unit, including Alison R. Levine, Ladan F. Stewart, Charles Riely, Creighton L. Papier, Joseph Chimienti, and Jonathan Wilcox. The SEC’s litigation will be led by Alexander M. Vasilescu, Ms. Levine, and Ms. Stewart. The case is being supervised by Mr. Wadhwa, LeeAnn Ghazil Gaunt, and Mark R. Zehner. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation.
- SEC Names Paul G. Cellupica as Deputy Director of the Division of Investment Management
published on Mon, 20 Nov 2017 16:00:00 -0500
The Securities and Exchange Commission announced today that Paul G. Cellupica has been named Deputy Director of the agency's Division of Investment Management. Mr. Cellupica will oversee a number of the division's strategic, rulemaking, and industry engagement initiatives. He will also serve as a senior advisor to the Director, Dalia Blass. "Paul's extensive experience and knowledge of investor needs, and understanding of how the Commission and its staff operate, will be tremendous assets to the agency during a critical period of change and evolution in the investment management industry," said Ms. Blass. "He is committed to advancing the SEC's regulatory priorities in a thoughtful and strategic way, in order to promote the long-term interests of investors." "It's a privilege to return to the Commission at a time of great importance for the country's millions of investors who look to mutual funds and other investment products to help them prepare for retirement and other financial needs," said Mr. Cellupica. "I am honored and excited to have the opportunity to work with Dalia and all of the other dedicated and talented professionals in the Division of Investment Management and across the agency." Mr. Cellupica most recently was Managing Director and General Counsel for Securities Law at Teachers Insurance and Annuity Association of America (TIAA), where his responsibilities included legal support for the TIAA-CREF mutual fund complex. Prior to that he was Chief Counsel for the Americas at MetLife, Inc., where he had responsibility for legal support of MetLife's financial services businesses in the U.S. and Latin America. Mr. Cellupica served with the SEC between 1996 and 2004 in a number of capacities in the Division of Investment Management and the Division of Enforcement, including as Assistant Director in the Division of Investment Management from 2001 to 2004. He received the SEC's Martha Platt Award in 2002 in recognition of his exceptional dedication, excellence and integrity, and the Law and Policy Award in 2003. Mr. Cellupica received a B.A. magna cum laude from Harvard College and a J.D. cum laude from Harvard Law School. He served as a law clerk for Judge David Nelson of the U.S. Court of Appeals for the Sixth Circuit.
- SEC Announces Agenda and Panelists for the 36th Annual Small Business Forum
published on Thu, 16 Nov 2017 14:45:00 -0500
The Securities and Exchange Commission today announced the agenda and panelists for the 36th Annual Government-Business Forum on Small Business Capital Formation. The November 30 event will begin at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) with opening remarks from the SEC Chairman and Commissioners followed by a morning panel discussion that will explore how capital formation options are working for small businesses. Panelists will include representatives of Texas-based small businesses and advisors to the small business community. Following the morning panel discussion, attendees will work in groups to formulate specific policy recommendations. These breakout groups will develop recommendations on a variety of issues related to small business capital formation, including exempt securities offerings and smaller registered offerings. As the Commission previously announced, this year’s annual small business forum is being hosted in partnership with the Herb Kelleher Center for Entrepreneurship, Growth, and Renewal at the McCombs School of Business at The University of Texas at Austin. It will be held in the AT&T Executive Education and Conference Center on the campus of The University of Texas at Austin at 1900 University Avenue. The forum will be open to the public and the opening remarks and morning panel discussion will be webcast live at www.sec.gov. The webcast will not include the breakout group sessions, but those sessions will be open to the public and accessible by phone to anyone who pre-registers online by November 27, 2017. More information, including forum materials, will be made available on the small business forum webpage. 2017 SEC Government-Business Forum on Small Business Capital Formation AT&T Executive Education and Conference Center On the campus of The University of Texas at Austin 1900 University Avenue Austin, TX 78705 November 30, 2017 Agenda 9:00 a.m. Call to Order Sebastian Gomez Abero, Chief, Office of Small Business Policy, SEC Division of Corporation Finance Opening Remarks Jay Hartzell, Dean, McCombs School of Business, The University of Texas at Austin Introductions of Chairman and Commissioners William H. Hinman, Director, SEC Division of Corporation Finance Remarks Chairman Jay Clayton Commissioner Kara M. Stein Commissioner Michael S. Piwowar 9:30 a.m. How Capital Formation Options Are Working for Small Businesses, Including Small Businesses in Texas Moderators: William H. Hinman, Director, SEC Division of Corporation Finance Sebastian Gomez Abero, Chief, Office of Small Business Policy, SEC Division of Corporation Finance Panelists: Mark Elenowitz, Founder and CEO, TriPoint Global Equities Jan Goetgeluk, CEO, Virtuix Youngro Lee, CEO, NextSeed Antonio Madrid, Co-Founder, The Native Catherine V. Mott, CEO, BlueTree Capital Group Michael S. Pieciak, Commissioner of the Vermont Department of Financial Regulation Annemarie Tierney, Vice President and Head of Strategy and New Markets, NASDAQ Private Market Paul R. Tobias, Partner, Vinson & Elkins, L.L.P. 11:00 a.m. Break 11:10 a.m. Breakout Groups Assemble to Develop Recommendations Exempt Securities Offerings (including Micro-Offerings) Smaller Registered and Regulation A Securities Offerings 12:30 pm. Lunch Break 2:00 p.m. Breakout Groups Assemble to Develop Recommendations 3:30 p.m. Break 3:45 p.m. Plenary Session to Develop Next Steps 4:30 p.m. Networking Reception
- SEC Enforcement Division Issues Report on Priorities and FY 2017 Results
published on Wed, 15 Nov 2017 17:00:00 -0500
In its ongoing efforts to protect Main Street investors, the Securities and Exchange Commission’s Enforcement Division today issued a report highlighting its priorities for the coming year as well as a review of enforcement actions that took place during FY 2017. In the report, Co-Directors Stephanie Avakian and Steven Peikin stated their overall enforcement approach: “Vigorous enforcement of the federal securities laws is critical to combat wrongdoing, compensate harmed investors, and maintain confidence in the integrity and fairness of our markets.” They also stated five core principles that will guide their enforcement decision-making: focus on the Main Street investor; focus on individual accountability; keep pace with technological change; impose sanctions that most effectively further enforcement goals; and constantly assess the allocation of resources. “I applaud the excellent work of the men and women of our Enforcement Division. Through their tireless efforts to uncover wrongdoing and hold bad actors accountable, they defend our Main Street investors and support the integrity of our capital markets,” said SEC Chairman Jay Clayton. “As Enforcement Directors our goal is to continue to protect investors, deter misconduct, punish wrongdoers and keep our markets the safest and strongest in the world,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “The Enforcement Report clearly shows the broad range of the significant enforcement actions, penalties and money returned to investors,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. “We will continue to bring enforcement actions involving misconduct that directly harms investors and our markets.” According to the report, fiscal year 2017 was a successful and impactful year for the Enforcement Division. The Commission brought a diverse mix of 754 enforcement actions, including 446 standalone actions and returned a record $1.07 billion to harmed investors. A significant number of the Commission’s 446 standalone cases concerned investment advisory issues, securities offerings, and issuer reporting/accounting and auditing, each comprising approximately 20 percent of the overall number of standalone actions. The Commission also continued to bring actions relating to market manipulation, insider trading, and broker-dealers, with each comprising approximately 10 percent of the overall number of standalone actions, as well as other areas. And, it obtained judgments and orders totaling more than $3.789 billion in disgorgement and penalties.
- SEC Announces the Formation and First Members of Fixed Income Market Structure Advisory Committee
published on Thu, 09 Nov 2017 17:00:00 -0500
The Securities and Exchange Commission today announced the formation and first members of its Fixed Income Market Structure Advisory Committee. The committee, whose initial focus will be on the corporate bond and municipal securities markets, will provide advice to the Commission on the efficiency and resiliency of these markets and identify opportunities for regulatory improvements. The committee is comprised of a diverse group of outside experts, including individuals representing the views of retail and institutional investors, small and large issuers, trading venues, dealers, and self-regulatory organizations, among others. “Individual investors are highly active in fixed income markets, both directly as retail investors and indirectly through various types of funds,” said SEC Chairman Jay Clayton. “This committee will help the Commission ensure that our regulatory approach to these markets meets the needs of retail investors, as well as companies and state and local governments. I appreciate the committee members’ willingness to participate, and I would like to thank Commissioners Stein and Piwowar for their highly collaborative efforts in establishing the committee.” “During the past several years, the fixed income markets have changed significantly," said Commissioner Kara Stein. "The Fixed Income Market Structure Advisory Committee should provide the Commission with new ideas about how to enhance the efficiency and resiliency of these evolving markets.” “I commend Chairman Clayton for making fixed income markets a priority at the Commission,” said Commissioner Michael Piwowar. “I look forward to benefitting from the insights of this talented group of fixed-income experts.” Chairman Clayton has appointed Michael Heaney, Non-Executive Director, Legal and General Investment Management Americas, as the initial Committee Chairman. Other committee members include: Carole Brown, CFO, City of Chicago Amy McGarrity, CIO, Colorado Public Employees’ Retirement Association Rachel Wilson, SVP, Finance, Iron Mountain Scott Krohn, SVP and Treasurer, Verizon Elisse Walter, Former Chairman of the U.S. Securities and Exchange Commission Mihir Worah, Managing Director and CIO Asset Allocation and Real Return, PIMCO Dan Allen, President, Anchorage Capital Group Matthew Andresen, Co-Chief Executive Officer, Headlands Technologies LLC Brian Archer, Head, Global Credit Trading, Citigroup Horace Carter, Managing Director and Head of Trading, Fixed Income Capital Markets, Raymond James Gilbert Garcia, Managing Partner, Garcia Hamilton & Associates Amar Kuchinad, Chief Strategy Officer, Trumid Financial Ananth Madhavan, Managing Director, Global Head of Research for ETFs and Index Investing, BlackRock Lynn Martin, President and COO, ICE Data Services Richard McVey, CEO, MarketAxess Suzanne Shank, Chair and CEO, Siebert Cisneros Shank Larry Tabb, Founder and Research Chairman, TABB Group Tom Thees, Head of Fixed Income, Head of DirectPool, CastleOak Securities Kumar Venkataraman, James M. Collins Chair in Finance, SMU Larry Harris, Fred V. Keenan Chair in Finance, Professor of Finance and Business Economics, USC Marshall School of Business Tom Gira, Executive Vice President of Market Regulation and Transparency Services, FINRA John Bagley, Chief Market Structure Officer, Municipal Securities Rulemaking Board The committee will be formally established on November 15 for an initial two-year term, which can be renewed by the Commission. The Commission will announce further details about the committee in the near future.
- SEC Warns Investors About Paid-to-Click Scams
published on Tue, 07 Nov 2017 11:25:00 -0500
The Securities and Exchange Commission is warning investors to beware online “paid-to-click” scams that promise an easy payday by merely purchasing a membership or an advertising product up front and then clicking on a certain number of online ads each day. The SEC’s investor alert explains that these online advertising programs may have little to no revenues besides membership fees or sales of “ad packs” and may be nothing more than a Ponzi scheme. The SEC filed an enforcement case that was unsealed last week in federal court in Florida, alleging that roughly 99 percent of the purported “profits” paid to earlier investors came directly from the buy-in fees collected from newer investors. Meanwhile, according to the SEC’s complaint, the alleged perpetrator siphoned several million dollars out of investor funds to purchase a luxury home, automobiles, and private plane charters while also using the money to fund his other businesses. According to the SEC’s investor alert, online advertising programs also can target those with something to advertise, promising to display a company’s ads on their network or guaranteeing traffic to a website by simply paying a membership fee or buying ad packs. “Be skeptical if you are offered high returns for buying advertising products or clicking on online ads,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Some paid-to-click programs are actually Ponzi schemes.” According to the SEC’s complaint filed against Miami-based Pedro Fort Berbel and his company Fort Marketing Group, they operated fraudulent internet advertising businesses under such names as Fort Ad Pays, The Business Shop, and MLM Shop. They allegedly solicited investors through online posts and videos claiming they could share in the companies’ profits and earn investment returns as high as 120 percent by purchasing an ad pack for as little as a dollar and clicking on four banner ads per day. The SEC alleges that Berbel and Fort Marketing Group raised more than $38 million from at least 150,000 investors. “As alleged in our complaint, these companies had no viable source of revenue besides income from investor membership fees and the sale of ad packs, so this boiled down to an ad packs Ponzi scheme in which the promised investment returns to earlier investors were not possible without using funds from new investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. The SEC’s complaint charges Berbel and Fort Marketing Group with violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Securities Exchange Act. They’re also charged with selling investments that are not registered with the SEC as required under the federal securities laws. The SEC encourages investors to check the backgrounds of people selling them investments. A quick search on the SEC’s investor.gov website shows that Berbel and Fort Marketing Group are not registered to sell investments. The SEC obtained a court-ordered asset freeze against Berbel and his companies. The SEC’s investigation was conducted by Sajjad Matin, Cecilia Danger, and Margaret Vizzi of the Miami Regional Office and supervised by Jessica Weissman. The SEC's litigation will be led by Wilfredo Fernandez and Andrew Schiff. The SEC appreciates the assistance of the Florida Office of Financial Regulation, Bureau of Financial Investigations. The investor alert was prepared by M. Owen Donley III and Holly Pal in the SEC’s Office of Investor Education and Advocacy.
- SEC Charges Biotech Company, Executives With Accounting Fraud
published on Thu, 02 Nov 2017 18:20:30 -0400
The Securities and Exchange Commission today charged a Maryland-based biotech company and four former top executives with prioritizing revenue growth over lawful accounting and misleading investors in the process. The SEC alleges that Osiris Therapeutics routinely overstated company performance and issued fraudulent financial statements for a period of nearly two years. According to the SEC’s complaint, the company improperly recognized revenue using artificially inflated prices, backdated documents to recognize revenue in earlier periods, and prematurely recognized revenue upon delivery of products to be held on consignment. Osiris Therapeutics and its executives also allegedly used pricing data that they knew was false and attempted to book revenue on a fictitious transaction, among other accounting improprieties. “As alleged in our complaint, Osiris Therapeutics falsely portrayed to investors that its revenue was growing so rapidly that its performance was consistently exceeding expectations,” said Julie Lutz, Director of the SEC’s Denver Regional Office. “Corporate cultures cannot be so fixated on higher revenues that they use illegal accounting gimmicks to meet the financial numbers they desire.” Osiris Therapeutics agreed to settle the charges without admitting or denying the allegations and must pay a $1.5 million penalty. The litigation continues against four executives who led Osiris during the alleged period of accounting fraud from 2014 to 2015: chief executive officer Lode B. Debrabandere, chief financial officers Philip R. Jacoby Jr. and Gregory I. Law, and chief business officer Bobby Dwayne Montgomery. The SEC’s complaint seeks disgorgement of ill-gotten gains plus interest and penalties along with officer-and-director bars. The SEC’s investigation was conducted by Laura Ordaz and Anne Romero with assistance from Judy Bizu of the Denver office. The case was supervised by Laura Metcalfe and Kurt Gottschall. The litigation will be led by Danielle Voorhees and supervised by Gregory Kasper. The SEC appreciates the cooperation of the U.S. Attorney’s Office for the Southern District of New York, which filed criminal charges against Jacoby.
- Charles Cain Named Chief of Foreign Corrupt Practices Unit
published on Thu, 02 Nov 2017 17:42:00 -0400
The Securities and Exchange Commission today announced that Charles E. Cain has been named chief of the Enforcement Division's national specialized Foreign Corrupt Practices Act (FCPA) Unit that focuses on violations of the anti-bribery provisions of the federal securities laws. Since April 2017, Mr. Cain has served as Acting Chief of the FCPA Unit leading all aspects of the Enforcement Division's national enforcement of the FCPA. Prior to being appointed Acting Chief of the FCPA Unit, Mr. Cain served as the Deputy Chief of the Unit since 2011. In 2013, Mr. Cain received the Irving R. Pollack Award recognizing his scholarship and professional expertise in co-authoring the Resource Guide to the U.S. Foreign Corrupt Practices Act setting forth a detailed analysis of the FCPA and providing insight into SEC and U.S. Department of Justice (DOJ) enforcement practices. "Charles's deep experience in FCPA matters is reflected in his outstanding efforts and results over the years as part of the Commission’s efforts to combat foreign bribery," said Stephanie Avakian, Co-Director of the SEC's Enforcement Division. "Our anti-corruption program under our Foreign Corrupt Practices Unit remains a top priority for the Enforcement Division," said Steven Peikin, Co-Director of the SEC's Enforcement Division. "Charles 'wrote the book' on the Foreign Corrupt Practices Act and his strong leadership ensures that the great work of the FCPA Unit continues." Mr. Cain said, "It's an honor and privilege to be selected to lead the enormously talented and dedicated people in the FCPA Unit. I look forward to building upon the important work the unit has done to combat corruption and level the playing field globally." With over 15 years of experience investigating FCPA matters, Mr. Cain has spearheaded numerous significant and complex FCPA investigations during his tenure. In addition to his broader oversight roles in the last six years, he also directly supervised several matters such as the investigations that led to charges against: Sweden-based telecommunications provider Telia Company AB, which agreed to pay $965 million in a global settlement, along with the DOJ and Dutch and Swedish law enforcement, to resolve FCPA charges to win business in Uzbekistan; Dutch telecommunications provider VimpelCom Ltd., which agreed to pay more than $795 million in a global settlement, along with DOJ and Dutch regulators, to resolve FCPA violations to win business in Uzbekistan; and Hungary telecommunications provider Magyar Telecom, PLC and three of its former top executives with bribing government and political party officials in Macedonia and Montenegro to win business and shut out competition in the telecommunications industry. Magyar and its parent company, Deutsche Telekom, AG, agreed to settle the charges in a global resolution with DOJ under which Magyar paid $90.8 million and Deutsche Telkom paid $4.36 million. After significant litigation, earlier this year, Magyar's former executives agreed to pay penalties and accept officer-and-director bars to settle the SEC's charges. Mr. Cain joined the SEC in 1999 following private practice in Washington, D.C. He began supervising investigations in 2004, and was promoted to Assistant Director in 2007. When the Enforcement Division created the national specialized units in 2010, he joined the FCPA Unit as an Assistant Director. Following his service in the U.S. Navy, Mr. Cain earned his bachelor’s degree from the State University of New York at Stony Brook, graduating with high honors in 1993, and his law degree with honors from The George Washington University Law School in 1997.
- David Glockner, Regional Director of Chicago Office, to Leave SEC
published on Wed, 01 Nov 2017 16:10:00 -0400
The Securities and Exchange Commission today announced that David Glockner, Director of the Chicago Regional Office, is planning to leave the agency later this month. Since late 2013, Mr. Glockner has led a staff of approximately 270 enforcement attorneys, accountants, investigators, and compliance examiners involved in the investigation and prosecution of enforcement actions and the performance of compliance inspections in the nine-state Chicago region that is home to roughly 20 percent of the nation’s population. Mr. Glockner also has served as chair of the SEC’s Cybersecurity Working Group and is generally recognized as one of the agency’s experts on cybersecurity matters related to examinations and enforcement. “David has been a trusted advisor and a real visionary in heightening public awareness of the important intersection between enforcement and cybersecurity,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “David helped grow the Chicago office’s expertise, spearheaded significant initiatives, and led the office to having a tremendous impact in the Chicago region,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. “David has been a tireless advocate for investors during his time in the Chicago Regional Office,” said Pete Driscoll, Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE). “His thoughtfulness and leadership on examination issues has greatly contributed to the advancement of OCIE’s mission.” Mr. Glockner said, “I am proud of the work that the SEC’s examiners and enforcement staff in Chicago do every day to protect investors. The SEC’s Chicago staff has built a culture that is thoughtful and innovative in its approach to a range of important issues, and it has been a privilege to work alongside these talented and dedicated public servants.” During Mr. Glockner’s tenure as Regional Director, the Chicago office has brought many significant enforcement actions, including charges against: State Street Bank and Trust Company, which agreed to pay $12 million to settle charges that it conducted a pay-to-play scheme through its then-senior vice president and a hired lobbyist to win contracts to service Ohio pension funds National audit firm Grant Thornton LLP and two of its partners for improper professional conduct arising from ignoring red flags and fraud risks while conducting deficient audits of two publicly traded companies – Broadwind Energy Inc. and Assisted Living Concepts Inc. Navistar International Corp. and its former CEO for misleading investors about its development of an advanced technology truck engine that could be certified to meet U.S. emission standards The City of Harvey, Ill. and its comptroller for a fraudulent bond offering that the city marketed to investors A former official of the nation’s third largest public pension fund and two brokers for orchestrating a pay-to-play scheme to steer billions of dollars to certain firms in exchange for luxury gifts, lavish vacations, and tens of thousands of dollars spent on cocaine and prostitutes Two exchanges formerly owned by Direct Edge Holdings and since acquired by BATS Global Markets for failing to accurately describe the order types being used on the exchanges Robert W. Baird & Co. for compliance failures within its wrap fee programs R.T. Jones Capital Equities Management for failing to establish required cybersecurity policies and procedures in advance of a breach that compromised the personally identifiable information of approximately 100,000 individuals, including thousands of the firm’s clients Several alleged perpetrators behind a $78 million pump-and-dump scheme involving the stock of Jammin’ Java During Mr. Glockner’s tenure, the National Examination Program staff in Chicago significantly increased its examinations of investment advisers and broker-dealers, and expanded its use of data analytics and its risk-based approach to examinations. Mr. Glockner also enhanced coordination between examination and enforcement teams, deepened relationships with law enforcement authorities, and assisted the Commission’s expanded examination and enforcement efforts relating to public finance. Before Mr. Glockner joined the SEC in December 2013 as the Chicago office’s Regional Director, he was a managing director and head of the Chicago office of a digital risk management and investigations firm. Mr. Glockner also spent nearly 25 years as a criminal prosecutor in the U.S. Attorney’s Office for the Northern District of Illinois, including 11 years as chief of the office’s criminal division. Prior to joining the U.S. Attorney’s Office, Mr. Glockner began his legal career as a law clerk to the Honorable Brian Duff of the U.S. District Court for the Northern District of Illinois. He earned his bachelor’s degree from the University of Chicago in 1982 and his J.D. from Stanford Law School in 1985.
- Petroleum Engineer Settles Charges of Insider Trading Ahead of Oil Discovery Announcement
published on Wed, 01 Nov 2017 14:30:25 -0400
A petroleum engineer who worked at Texas-based energy company Apache Corporation has agreed to settle SEC charges that he conducted insider trading ahead of a market-moving announcement about the company’s discovery of a significant new oil source. The SEC alleges that Christopher J. Lollar traded on nonpublic information while working in the company’s San Antonio office that was performing the geologic and geophysical work to explore and develop the newly discovered resource play called Alpine High. Lollar allegedly conducted trades in Apache shares and call options in the days and weeks leading up to the company’s Alpine High announcement on Sept. 7, 2016. The value of Lollar’s brokerage account skyrocketed approximately 2,700 percent after the announcement, and his alleged profits from insider trading totaled $214,295.07. “As detailed in our complaint, a telling piece of evidence we gathered was a recorded phone call to his brokerage firm during which a concerned Lollar found a faster way to get money into his account after learning the funds in his initial deposit request wouldn’t have been available for trading until September 8, too late for the Alpine High announcement,” said Jessica B. Magee, Associate Director for Enforcement in the SEC’s Fort Worth Regional Office. Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office, added, “Insider trading is an attack on the integrity of our markets, and Lollar allegedly exploited confidential information from his employer to do it. Consequently, he was fired from his job and now must pay back more than double the amount of his ill-gotten gains.” Lollar agreed to pay disgorgement of $214,295.07 plus $7,219.36 in interest and a $214,295.07 penalty for a total of $435,809.50. Lollar agreed to the settlement without admitting or denying the allegations, and the settlement is subject to court approval. The SEC’s investigation was conducted in the Fort Worth office by Tamara F. McCreary and Ty S. Martinez with assistance from Christopher Davis. The case was supervised by Ms. Magee.
- Millennium Settles Charges of Illegal Short Selling in Advance of Stock Offerings
published on Tue, 31 Oct 2017 15:25:00 -0400
Investment advisory firm Millennium Management LLC has agreed to pay more than $630,000 to settle charges that it shorted U.S. stocks in companies planning follow-on offerings and then illegally bought shares in the follow-on offerings. An SEC investigation found that Millennium violated an anti-manipulation provision of the federal securities laws known as Rule 105 on four occasions in 2012. Rule 105 prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing that same security through the offering. By illegally purchasing shares in the follow-on offerings, Millennium reaped $286,889 in illicit profits. “Millennium established and maintained certain accounts that improperly participated in public offerings despite other firm accounts being short the relevant securities,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. “We will continue to actively surveil for, and charge, violations of Rule 105 where appropriate.” Millennium must pay disgorgement of $286,889 plus interest of $51,820.11 and a penalty of $300,000 for a total of $638,709.11. Without admitting or denying the findings in the SEC’s order, Millennium agreed to cease and desist from violating Rule 105 in the future. The SEC’s investigation was conducted by Nathaniel I. Kolodny, Elizabeth Butler, and Thomas P. Smith Jr. The case was supervised by Mr. Wadhwa.
- Day Trader Charged in Brokerage Account Takeover Scheme
published on Mon, 30 Oct 2017 11:05:00 -0400
The Securities and Exchange Commission today charged a day trader based in the Philadelphia area with participating in a scheme to access the brokerage accounts of more than 100 unwitting victims and make unauthorized trades to artificially affect the stock prices of various companies. The SEC alleges that Joseph P. Willner generated at least $700,000 in illicit profits by trading in the same securities in his own accounts and taking advantage of the artificial stock prices that resulted from the unauthorized trades placed in the victims’ accounts. Willner’s activities were detected despite his efforts to disguise his real identity while communicating with at least one other individual through online direct messaging applications using a pseudonym, according to the SEC’s complaint. “Legal trading too hard” is among the online messages noted in the SEC’s complaint. To mask his payments to the other individual as part of a profit-sharing arrangement, Willner allegedly transferred proceeds of profitable trades to a digital currency company that converts U.S. dollars to Bitcoin and then transmitted the bitcoins as payment. The SEC’s investigation is continuing. “Account takeovers are an increasingly significant threat to retail investors, and it is exactly the type of fraud our new Cyber Unit is focusing on,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “We are committing substantial resources to combating cyber-based threats to protect investors and our markets from intruders who manipulate the system for their own illicit gain.” The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, alleges that Willner engaged in fraud and market manipulation in violation of federal securities laws and related SEC rules. The SEC seeks the return of ill-gotten gains plus interest and penalties and a permanent injunction. In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York and the U.S. Department of Justice Criminal Division’s Fraud Section filed criminal charges against Willner. The SEC’s investigation has been conducted by Susan Cooke Anderson, Eric Forni, Marcus Fruchter, Andrew McFall, Mark Albers, Darren Boerner, and John Marino with assistance from Alex Lefferts in the Center for Risk and Quantitative Analytics and Stuart Jackson in the Division of Economic and Risk Analysis. The case is being supervised by Chief of the Cyber Unit Robert Cohen, Chief of the Market Abuse Unit Joseph Sansone, Kathryn Pyszka, and Michele Perillo. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York, the Department of Justice’s Criminal Fraud Section, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.
- SEC Names Peter B. Driscoll as Director of the Office of Compliance Inspections and Examinations
published on Thu, 26 Oct 2017 16:45:00 -0400
The Securities and Exchange Commission today announced that Peter B. Driscoll has been named Director of the agency’s Office of Compliance Inspections and Examinations (OCIE). Mr. Driscoll has served as OCIE’s Acting Director since January 2017. OCIE is responsible for directing the SEC’s National Examination Program. National Examination Program staff conduct examinations of SEC-registered investment advisers, investment companies, broker-dealers, self-regulatory organizations, and transfer agents, among others. The National Examination Program uses a risk-based approach to fulfill its mission of promoting compliance with the U.S. securities laws, preventing fraud, monitoring risk, and informing policy. “Pete has been an exceptional leader of the National Examination Program since taking over as Acting Director of OCIE, including advancing the use of technology to make the Program more effective,” said Chairman Jay Clayton. “With over 15 years of experience at the SEC as an attorney, examiner, and manager, I am confident that Pete and OCIE’s dedicated staff will continue to advance the interests of investors across the country.” Mr. Driscoll added, “I am grateful for the opportunity to lead OCIE, and to continue to work with Chairman Clayton, the Commissioners, and our colleagues across the agency to protect investors and ensure market integrity. It is my privilege to work alongside our talented and dedicated examiners who serve as the eyes and ears of the Commission.” Mr. Driscoll was named as OCIE’s first Chief Risk and Strategy Officer in March 2016 after previously serving as OCIE’s Managing Executive from February 2013 through February 2016. He first joined the Commission as a summer legal intern in the Chicago Regional Office in 2000. He rejoined the SEC in 2001 as a staff attorney in the Division of Enforcement and was later a Branch Chief and Assistant Regional Director in OCIE’s Investment Adviser and Investment Company examination program. Mr. Driscoll began his career with Ernst and Young LLP and held several accounting positions in private industry. He earned a B.S. in Accounting as well as a J.D. from St. Louis University. He is licensed as a certified public accountant and is a member of the Missouri Bar Association.
- SEC Announces Measures to Facilitate Cross-Border Implementation of the European Union's MiFID II's Research Provisions
published on Thu, 26 Oct 2017 07:00:00 -0400
Today, following consultation with European authorities, and in response to concerns that investors could lose access to valuable research, the staff of the U.S. Securities and Exchange Commission issued three related no-action letters. These letters are designed to provide market participants with greater certainty regarding their U.S. regulated activities as they engage in efforts to comply with the European Union’s (EU) Markets in Financial Instruments Directive (MiFID II) in advance of the Jan. 3, 2018, implementation date. The no-action relief provides a path for market participants to comply with the research requirements of MiFID II in a manner that is consistent with the U.S. federal securities laws. More specifically, and subject to various terms and conditions: (1) broker-dealers, on a temporary basis, may receive research payments from money managers in hard dollars or from advisory clients' research payment accounts; (2) money managers may continue to aggregate orders for mutual funds and other clients; and (3) money managers may continue to rely on an existing safe harbor when paying broker-dealers for research and brokerage. "Today's no-action relief was designed with input from a range of market participants to reduce confusion and operational difficulties that might arise in the transition to MiFID II's research provisions," said SEC Chairman Jay Clayton. "Staff's letters take a measured approach in an area where the EU has mandated a change in the scope of accepted practice, and accommodate that change without substantially altering the U.S. regulatory approach. These steps should preserve investor access to research in the near term, during which the Commission can assess the need for any further action. Cooperation with European authorities, including the European Commission, has been instrumental to the SEC's efforts, and I welcome the additional guidance the EC published today. We look forward to continued dialogue on this and other important issues." The temporary no-action relief facilitates compliance with the new MiFID II research provisions while respecting the existing U.S. regulatory structure. It also is intended to provide the staff with sufficient time to better understand the evolution of business practices after implementation of the MiFID II research provisions. During the period of the temporary relief, the staff will monitor and assess the impact of MiFID II's research provisions on the research marketplace and affected participants in order to determine whether more tailored or different action, including rulemaking, is necessary and appropriate in the public interest. To facilitate the staff's monitoring and assessment efforts with respect to the temporary no-action relief, SEC staff encourages members of the public to make their views known on these matters via webform or e-mail. In particular, staff invites the public to provide data and other information relating to the impact of MiFID II's research provisions on broker-dealers (including any changes to their business models), investors, and the quantity and quality of research. Comments would be appreciated by one year before the expiration of the period of temporary relief. FACT SHEET Division of Investment Management No-Action Relief The Division of Investment Management provided temporary relief for thirty (30) months from MiFID II's implementation date under the Investment Advisers Act of 1940 ("Advisers Act") to permit a broker-dealer to receive payments in hard dollars or through MiFID-governed research payment accounts from MiFID-affected clients without being considered an investment adviser. In connection with this temporary relief, the staff will continue to monitor and assess the impact of MiFID II's requirements on the research marketplace and affected participants in order to ascertain whether more tailored or different action, including rulemaking, is necessary and appropriate in the public interest. The Division of Investment Management also provided relief under the Investment Company Act of 1940 and the Advisers Act to permit investment advisers to continue to aggregate client orders for purchases and sales of securities, where some clients may pay different amounts for research because of MiFID II requirements, but all clients will continue to receive the same average price for the security and execution costs. This relief provides clarity and consistency to investment advisers by permitting the continued aggregation of orders while addressing the differing arrangements regarding the payment for research that will be required by MiFID II. Division of Trading and Markets No-Action Relief The Exchange Act Section 28(e) safe harbor addresses the manner in which a money manager can use client commissions to purchase "brokerage and research services" without breaching its fiduciary duty. In the U.S., money managers often use client commission arrangements to obtain brokerage and research services from a broker-dealer, using a single, "bundled" commission that is separated after execution to pay for order execution and research. Under MiFID II, money managers may make payments to an executing broker-dealer out of client assets for research alongside payments for order execution, and the executing broker-dealer must transmit the payments for research into research payment accounts ("RPAs"). The Division of Trading and Markets provided relief to allow money managers to operate within the safe harbor if the money manager makes payments for research to an executing broker-dealer out of client assets alongside payments for execution through the use of an RPA that conforms to the requirements for RPAs in MiFID II, and the executing broker-dealer is legally obligated to pay for the research, provided that all other applicable conditions of Section 28(e) are met. Submit Input: Webform | E-mailComments received are available
- Former Private Equity Firm Partner Charged With Secretly Billing Clients for His Vacations and Salon Visits
published on Wed, 25 Oct 2017 15:50:00 -0400
The Securities and Exchange Commission today charged Mohammed Ali Rashid, a former senior partner at Apollo Management L.P., with defrauding his fund clients by secretly billing them for approximately $290,000 in personal expenditures, including his family vacations, visits to a hair salon, and purchases of designer clothing and high-end electronics. The SEC’s complaint alleges that Rashid falsely claimed that certain individuals accompanied him to dinners to make it appear various personal expenses had a business purpose, and he doctored a receipt in an effort to justify his purchase of a $3,500 suit for his father as a business expense. “As alleged in our complaint, despite earning millions of dollars, Rashid used client money to fund his lifestyle and personal expenses, including family vacations, designer clothing, and spa services. Rashid knew what he was doing was wrong because he took active steps to conceal his misconduct,” said Anthony Kelly, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. According to the SEC’s complaint, despite being caught by the firm and told to stop on two occasions in 2010 and 2012, Rashid continued to expense personal items to clients into 2013. After he was confronted about his expenses for a third time, Rashid admitted that he charged approximately $220,000 in personal expenses. A forensic accountant then uncovered additional personal expenses that Rashid improperly charged to clients. The SEC’s complaint alleges that Rashid violated, and in the alternative aided and abetted violations of, Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC’s investigation was conducted by Donna Norman of the Asset Management Unit and Duane Thompson, and the litigation will be led by Mr. Thompson. The case is being supervised by Jan Folena and Corey Schuster.
- SEC Names Brett Redfearn as Director of the Division of Trading and Markets
published on Wed, 18 Oct 2017 16:26:00 -0400
The Securities and Exchange Commission today announced that Brett Redfearn has been named Director of the agency's Division of Trading and Markets. The SEC's Division of Trading and Markets establishes and maintains standards for fair, orderly, and efficient markets. The division oversees the major securities market participants and infrastructure including, among others, broker-dealers, self-regulatory organizations (including stock exchanges, the Financial Industry Regulatory Authority, the Municipal Securities Rulemaking Board, and clearing agencies), alternative trading systems, and transfer agents. "Brett's extensive markets experience and his longstanding, active engagement with investors, financial services firms, exchanges, and the SEC make him exceptionally well positioned to lead the Division of Trading and Markets," said Chairman Jay Clayton. "Brett has been a thought leader on a wide range of issues facing our rapidly changing capital markets, and I know he will continuously ask the question, 'are our markets best serving the long-term interests of the investing public?'" Mr. Redfearn added, "I have always been impressed with the level of dedication of the Trading and Markets team and feel honored to be asked to take on this important role at this critical juncture in the evolution of our securities markets." Mr. Redfearn has a long history in the U.S. equity markets, having worked with investors, exchanges and broker-dealers. During his career, Mr. Redfearn has focused on how technology, regulation and business trends are changing trading patterns across asset classes and geographic regions. He has helped build electronic trading products, worked closely with exchanges and other trading venues as these products evolved, and engaged with global asset managers on major regulatory developments. He has also been a frequent contributor at policy forums surrounding U.S. equity markets, and has been an active participant at several meetings of the SEC's Equity Market Structure Advisory Committee. Mr. Redfearn joins the SEC from J.P. Morgan, where he was Global Head of Market Structure for the Corporate & Investment Bank. He started his career at the American Stock Exchange, where he ran Business Strategy and Equity Order Flow. During his career, Mr. Redfearn has served on the boards of Bats Global Markets, the Chicago Stock Exchange, BIDS Trading, and the National Organization of Investment Professionals. Mr. Redfearn earned his M.A. in Political Science from the New School for Social Research and his B.A. from the Evergreen State College in Olympia, Washington.
- SEC Announces 2017 Government-Business Forum to Be Held at University of Texas at Austin
published on Wed, 18 Oct 2017 11:00:00 -0400
The Securities and Exchange Commission today announced it is partnering with the Herb Kelleher Center for Entrepreneurship, Growth, and Renewal at the McCombs School of Business at The University of Texas at Austin to host the SEC’s annual Government-Business Forum on Small Business Capital Formation on November 30. This annual forum provides a platform to highlight additional measures to improve small business capital formation and address whether unnecessary, duplicative, or outdated regulations can be eliminated or reduced. “The annual Government-Business Forum on Small Business Capital Formation provides the opportunity to hear directly from small businesses about their experiences interacting with investors and our regulatory system in a very important segment of our capital markets,” said Chairman Jay Clayton. “As a hub for innovation, Austin is a fitting place for this discussion. I look forward to the forum’s recommendations and will carefully consider them as we work to fulfill the SEC’s mission.” The morning session will feature a panel discussion exploring how capital formation options are working for small businesses, including small businesses in Texas. Participants will then work in groups to formulate specific policy recommendations. Information on the panel participants and the full agenda will be announced in November and available on the forum webpage. The forum will begin at 9 a.m. Central Time and will be open to the public. It will be held in the AT&T Executive Education and Conference Center on the campus of The University of Texas at Austin. The opening remarks and panel discussion will be webcast live. The breakout group sessions will not be webcast but will be accessible by teleconference for those not attending in person. Anyone wishing to participate in a breakout group either in person or by teleconference must register online by November 27. The online registration will soon be available on the forum webpage. Members of the public are invited to suggest recommendations or topics to be discussed at the forum by calling the SEC’s Office of Small Business Policy at (202) 551-3460.
- Rio Tinto, Former Top Executives Charged With Fraud
published on Tue, 17 Oct 2017 16:30:00 -0400
The Securities and Exchange Commission today charged mining company Rio Tinto and two former top executives with fraud for inflating the value of coal assets acquired for $3.7 billion and sold a few years later for $50 million. The SEC’s complaint, which was filed in federal court in Manhattan, alleges that Rio Tinto, its former CEO Thomas Albanese, and its former CFO Guy Elliott failed to follow accounting standards and company policies to accurately value and record its assets. Instead, as the project began to suffer one setback after another resulting in the rapid decline of the value of the coal assets, they sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio Tinto’s Board of Directors, Audit Committee, independent auditors, and investors. “As alleged in our complaint, Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch. They tried to save their own careers at the expense of investors by hiding the truth,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. Based on the complaint’s allegations, Rio Tinto plc, Rio Tinto Limited, Albanese, and Elliott are charged with violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. The SEC seeks permanent injunctions, return of allegedly ill-gotten gains plus interest, and civil penalties from all the defendants, and seeks to bar Albanese and Elliott from serving as public company officers or directors. According to the SEC’s complaint, in 2011, Rio Tinto acquired coal assets in Mozambique shortly after disclosing huge losses associated with its previous large-scale acquisition of Alcan. Both acquisitions took place under Albanese’s leadership. The second acquisition was also unsuccessful as it was based on the incorrect assumption that Rio Tinto could inexpensively mine, transport, and sell large quantities of high-quality coal, chiefly using barges for shipping. The SEC’s complaint alleges that the project suffered setbacks almost immediately, as Rio Tinto, Albanese, and Elliott learned that there was less coal and of lower quality than expected, and that Mozambique had rejected its barge application. The complaint alleges that the drop in quantity and quality of coal, coupled with the lack of infrastructure to transport it, significantly eroded the value of the acquisition. The complaint alleges that after already impairing Alcan twice, Rio Tinto, Albanese, and Elliott knew that publicly disclosing its second failure and rapidly declining value would call into question their ability to pursue the core of Rio Tinto’s business model to identify and develop long-term, low-cost, and highly-profitable mining assets. Instead, they concealed the adverse developments, allowing Rio Tinto to release misleading financial statements days before a series of U.S. debt offerings. Rio Tinto raised $5.5 billion from U.S. investors, approximately $3 billion of which was raised after May 2012, when executives at Rio Tinto Coal Mozambique had already told Albanese and Elliott that the subsidiary was likely worth negative $680 million. The complaint alleges Albanese then repeated and reinforced the false positive outlook for the project in public statements. The alleged fraud continued until January 2013, when an executive in Rio Tinto’s Technology & Innovation Group discovered that the coal assets were being carried at an inflated value on Rio Tinto’s financial statements. After an internal review allegedly triggered by the executive’s report to Rio Tinto’s Chairman, Rio Tinto announced that Albanese had resigned and the company reduced the value of the coal assets by more than $3 billion, or more than 80 percent. After a second reduction, Rio Tinto sold the Mozambique subsidiary for $50 million, billions of dollars below the acquisition price. The SEC’s investigation was conducted by D. Mark Cave, Jeffrey Weiss, and George Spanos and supervised by Melissa Hodgman. The SEC’s litigation will be conducted by Mr. Cave, Dean Conway, and Gregory Miller, and supervised by Bridget Fitzpatrick. The SEC greatly appreciates the assistance and collaboration of the U.K. Financial Conduct Authority and the Australian Securities & Investments Commission.
- SEC Announces Whistleblower Award of More Than a Million Dollars
published on Thu, 12 Oct 2017 10:45:00 -0400
The Securities and Exchange Commission today announced that a whistleblower has earned an award of more than $1 million for providing the SEC with new information and substantial corroborating documentation of a securities law violation by a registered entity that impacted retail customers. “Today’s award reflects the impact that whistleblower information can have in uncovering violations that harm the retail investor,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “We welcome high-quality information about potential securities-law violations from those in and outside a company.” More than $162 million has been awarded to 47 whistleblowers. By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money is taken or withheld from harmed investors to pay whistleblower awards. For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.
- Lawyers Charged With Assisting a Microcap Fraud Scheme
published on Wed, 11 Oct 2017 15:45:00 -0400
The Securities and Exchange Commission today charged two lawyers it alleges helped facilitate a microcap fraud scheme involving undisclosed “blank check” companies secretly bound for reverse mergers. In complaints filed in the U.S. District Court for the Southern District of Florida, the SEC alleges that James M. Schneider of Hillsboro Beach, Florida, and Andrew H. Wilson of Nevada City, California, contributed to a fraud involving at least 22 undisclosed blank check companies. Such companies have no operations, making them attractive targets for those seeking reverse mergers for use in pump-and-dump schemes. Despite claims of legitimate business plans, separate management, and independent shareholders, the 22 companies and their securities were secretly controlled by Steven Sanders, along with Daniel P. McKelvey or Alvin S. Mirman, and sold in reverse mergers. The SEC previously filed an enforcement action against Sanders, McKelvey, and Mirman, who were separately convicted of related criminal charges and sentenced to prison. The U.S. Attorney’s Office for the Southern District of Florida today filed related criminal charges against Schneider. “Lawyers are critical gatekeepers when it comes to protecting the integrity of our capital markets,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “Schneider and Wilson failed as gatekeepers and as our complaints allege, played a crucial role in facilitating a wide-ranging microcap fraud.” According to the SEC’s complaints, the scheme required the blank check companies to have shares available for sale in the open market. Schneider and Wilson allegedly provided legal opinion letters falsely stating that the companies’ shares were validly issued or free to be resold publicly. The SEC alleges that Schneider knowingly prepared at least 40 false opinion letters and referred numerous buyers to the shell companies’ secret owners. The SEC alleges that Wilson provided at least five opinion letters that unlawfully allowed restricted securities of at least three issuers to be sold to the public. The SEC alleges that Wilson opined that the shares were unrestricted when he knew or should have known that Sanders and McKelvey secretly controlled them. The SEC alleges that Schneider violated the registration and antifraud provisions of federal securities laws and related SEC rules, and that he aided and abetted the antifraud violations by Sanders, McKelvey, and Mirman. The SEC charged Wilson with registration violations. It is seeking to have the defendants return their allegedly ill-gotten gains, pay civil penalties, be barred from the penny-stock business, and other relief. The SEC’s investigation, which is continuing, has been conducted by Jeffrey T. Cook in the Miami Regional Office. The case is being supervised by Eric R. Busto, and the SEC’s litigation will be led by Christine Nestor. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation’s Miami Field Office.
- SEC Files Charges in Snack Company Investment Scam
published on Wed, 11 Oct 2017 15:00:00 -0400
The Securities and Exchange Commission today charged three individuals who defrauded investors in a company that falsely claimed to be developing a caffeinated chocolate snack and nearing an acquisition by Monster Energy or Coca-Cola Co. The SEC’s complaint alleges that Lisa Bershan and her husband, Barry Schwartz, together with business associate Joel Margulies, falsely promised investors that after being acquired, Starship Snack Corp. investors would get a one-to-one exchange of Starship shares for Monster or Coca-Cola shares. According to the SEC’s complaint, Bershan and Margulies also falsely claimed that investors had “no down-side risk” and Bershan personally guaranteed that investors could get their investment back with 5 percent interest if the shares failed to appreciate over a year. According to the SEC’s complaint, Starship had no agreement with Monster Energy or Coca-Cola , and Bershan and Schwartz used investor funds as their own personal piggy bank, spending them to rent and decorate a New York City apartment, and on travel, meals, and other personal expenses. “As alleged in our complaint, investors trusted Bershan, Schwartz, and Margulies, but that trust was misplaced,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office. “The defendants constantly reassured their investors with lies, all the while taking their money and spending it on themselves.” In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against the three defendants. The SEC’s complaint, filed in federal court in Manhattan, charges Bershan, Margulies, and Schwartz with violating antifraud provisions of the federal securities laws and a related SEC antifraud rule. The SEC is seeking to have the defendants return their allegedly ill-gotten gains plus interest, pay penalties, and be subject to permanent injunctions. The SEC’s investigation was conducted by Cynthia A. Matthews, Kerri Palen and Thomas P. Smith Jr., and the litigation will be led by Ms. Matthews and Richard Hong. The case is being supervised by Ms. Mehraban. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.
- SEC Proposes Rules to Implement FAST Act Mandate to Modernize and Simplify Disclosure
published on Wed, 11 Oct 2017 12:13:00 -0400
The Securities and Exchange Commission today voted to propose amendments to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies and to implement a mandate under the Fixing America's Surface Transportation (FAST) Act. The proposed amendments would make adjustments to update, streamline or otherwise improve the Commission's disclosure framework. "The FAST Act has given the Commission the opportunity to update our rules, simplify our forms, and utilize technology to make disclosure more accessible," said SEC Chairman Jay Clayton. "An effective disclosure regime provides investors with the information necessary to make informed investment choices without imposing unnecessary burdens of time and money on issuers, and today's action embodies that goal." The proposal reflects changes based on recommendations in the staff's FAST Act Report and amendments developed as part of a broader review of the Commission's disclosure system. * * * Fact Sheet FAST Act Modernization and Simplification of Regulation S-K SEC Open Meeting October 11, 2017 Action The Commission will consider whether to propose amendments to modernize and simplify certain disclosure requirements in Regulation S-K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors. The amendments are also intended to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information. Highlights Among other things, the proposed amendments would: Revise rules or forms to update, streamline or otherwise improve the Commission’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold; Update rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements; Simplify disclosure or the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management's Discussion and Analysis that would allow for flexibility in discussing historical periods; and Incorporate technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR. The proposal also includes parallel amendments to several rules and forms applicable to investment companies and investment advisers, including proposed amendments that would require certain investment company filings to include a hyperlink to each exhibit listed in the exhibit index of the filings and be submitted in HyperText Markup Language (HTML) format. Background As mandated by the FAST Act, in November 2016 the staff published a report on modernizing and simplifying the disclosure requirements in Regulation S-K. The report provided specific and detailed recommendations on modernizing and simplifying Regulation S-K in a manner that reduces costs and burdens on companies while still providing all material information. The FAST Act also requires that the Commission issue a proposal to implement the recommendations in the report. What's next? If approved, the Commission will seek public comment on the proposed rules for 60 days.
- Walter Jospin, Regional Director of the SEC’s Atlanta Office, to Leave the Agency
published on Tue, 10 Oct 2017 16:30:00 -0400
The Securities and Exchange Commission today announced that Walter E. Jospin, Regional Director of the agency’s Atlanta office, is leaving the agency. Mr. Jospin will remain in his position until his successor is selected. “Walter and I met many years ago and I was taken with his wisdom, expertise, and care. He has brought those and many other fine characteristics to the Commission,” said SEC Chairman Jay Clayton. “We all are grateful that Walter re-entered public service after a distinguished career in the private sector, and his contributions to the Atlanta office and the Commission have been exemplary.” Since February 2015, Mr. Jospin has led a staff of approximately 100 attorneys, accountants, compliance examiners, and other specialists involved in compliance inspections and the investigation and prosecution of SEC enforcement actions in the Atlanta region. Under Mr. Jospin’s supervision, the Atlanta office brought charges involving investment advisers, financial and disclosure fraud, insider trading, and those targeting retail investors, including: The investment services subsidiary of SunTrust Banks for collecting more than $1.1 million in fees from clients by improperly recommending more expensive mutual fund share classes when cheaper shares of the same funds were available KPMG LLP and an engagement partner, who agreed to pay more than $6.2 million for failing to properly audit the financial statements of an oil-and-gas company charged with accounting fraud Four Atlanta-area brokers for fraudulently inducing federal employees to roll over holdings in their federal Thrift Savings Plan (TSP) retirement accounts into higher-fee, variable annuity products Certain unknown traders who used brokerage accounts in London and Singapore to reap more than $3.6 million in alleged illegal insider trading profits ahead of the announcement that Japan-based Softbank Group Corp. agreed to acquire Fortress Investment Group LLC A Tennessee-based lawyer who served on the board of directors of Nashville-based Pinnacle Financial Partners for illegal insider trading in the shares of an acquisition target done while board members were meeting to discuss the acquisition A Nashville, Tenn.-based investment advisory firm and its owner for scheming to collect extra monthly fees from a pair of hedge funds they managed Fraud charges against 11 former executives and board members at Superior Bank and its holding company for scheming to conceal the extent of loan losses as the bank was faltering in the wake of the financial crisis Also under Mr. Jospin’s watch, the Atlanta office’s exam staff has increased collaboration with enforcement and generated substantial referrals, including those that led to several of the actions referenced above. “Walter has been an insightful and innovative leader of the Atlanta office, and the office and the Enforcement Division have benefited from his experience and sound judgment,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “He has led the Atlanta office to great success, and he will be sorely missed.” “Walter’s work to implement positive changes in Atlanta and across the national examination program will have lasting impact,” said Pete Driscoll, Acting Director of the Office of Compliance Inspections and Examinations. “It has been a privilege to work with Walter.” Mr. Jospin added, “Serving as Director of the Atlanta Regional Office has been an extraordinary opportunity, second only to working as an SEC enforcement lawyer early in my career. Both experiences have given me the chance to work with smart, talented people committed to the Commission’s mission. The SEC is an outstanding agency, and I will miss my wonderful colleagues. It has indeed been an honor to lead the Atlanta office.” Mr. Jospin joined the SEC from the law firm of Paul Hastings LLP, where he was a long-time partner in the Atlanta office with a practice focusing on securities enforcement, internal investigations, corporate transactions, and corporate governance. Mr. Jospin previously worked in the SEC Enforcement Division from 1980 to 1983 in the Atlanta office. He graduated from the Wharton School at the University of Pennsylvania and from the Emory University School of Law.
- Robert Evans III Named Chief of the Office of International Corporate Finance in SEC’s Division of Corporation Finance
published on Fri, 06 Oct 2017 16:30:00 -0400
The Securities and Exchange Commission today announced that Robert Evans III has been named Chief of the Office of International Corporate Finance in the agency’s Division of Corporation Finance. The office spearheads the division’s outreach to non-U.S. issuers that access the U.S. capital markets. Mr. Evans recently joined the Division of Corporation Finance after many years of advising public and private companies on a broad range of matters. SEC Chairman Jay Clayton noted that “Rob’s appointment reflects the importance of facilitating capital formation in the United States for non-U.S. issuers and increasing investment opportunities for America’s investors.” “I am pleased that Rob will focus his efforts at the agency on working with companies from outside the U.S. that are considering registering offerings in the U.S. and listing on U.S. stock exchanges,” Corporation Finance Division Director Bill Hinman said. “I look forward to working with him as we support Chairman Clayton’s goal of facilitating a broader range of investment opportunities for Main Street investors. Mr. Evans said, “I thank Bill for this exciting opportunity and look forward to working with my colleagues in the Division on this effort to engage with companies and regulators around the world.” Mr. Evans received his bachelor’s degree from Harvard College and law degree from Boston University School of Law, both cum laude.
- Investment Adviser Charged in Multi-Million Dollar Options Trading Scheme
published on Thu, 05 Oct 2017 11:10:00 -0400
The Securities and Exchange Commission today charged a Westchester, New York-based investment adviser with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme. The SEC alleges that, starting in approximately 2010, Michael Scronic began to raise money from at least 42 friends and acquaintances, many of whom were from his suburban community, in order to invest in a risky options trading strategy. He allegedly lured investors by informing them that he had a long and impressive track record of proven returns. He also allegedly lied to investors about the liquidity of investments, telling one investor that "what's cool about my fund is that i'm [sic] only in publicly traded options and cash so any redemptions are met within 2 business days so if you do need to withdraw for your business needs it will be quick and painless." However, the SEC alleges that Scronic was actually hemorrhaging investor money through massive trading losses, with at least $15 million in investment losses since April 2010. For the period ending June 30, 2017, Scronic allegedly reported to investors total assets of at least $21,837,475 while the balance in his brokerage account on June 30, 2017 was just under $27,500. According to the SEC's complaint, when certain investors attempted to redeem their investments, Scronic did not disclose his inability to repay them. Rather, he allegedly provided investors with a steady stream of implausible excuses for why he could not pay them back. In other instances, Scronic sought to obtain additional investment funds from new and existing investors in order to satisfy redemption requests from other investors. "Scronic's alleged scheme is just another example of a so-called investment professional acting as fiduciary, but failing to deal honestly with his investors for his own financial benefit," said Lara S. Mehraban, Associate Regional Director of the SEC's New York Regional Office. "Investors should be wary anytime they are promised high or consistently positive returns in a complex, hard to understand investment strategy." The SEC also alleges that Scronic began identifying himself as an investment adviser to a fictitious hedge fund in which he purported to sell interests, or "shares." The SEC encourages investors to check the backgrounds of people selling investments by using the SEC's Investor.gov website to quickly identify whether they are registered professionals and confirm their identity. In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Scronic. The SEC's complaint charges Scronic with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC seeks a permanent injunction, disgorgement, and penalties against Scronic. The SEC's investigation was conducted by Lindsay S. Moilanen, Daphne Downes, and Sheldon L. Pollock, and the case was supervised by Ms. Mehraban. The litigation will be led by Nancy A. Brown and Ms. Moilanen. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.