Published: Mon, 05 Dec 2016 10:30:00 -0500
Last Build Date: Mon, 05 Dec 2016 10:30:00 -0500
Mon, 05 Dec 2016 10:30:00 -0500
The Securities and Exchange Commission today announced that a whistleblower has been awarded approximately $3.5 million for coming forward with information that led to an SEC enforcement action.
“Whistleblowers do a tremendous service to the investing public and we will continue to reward those who come forward with valuable tips that help us bring successful cases against those who violate the securities laws,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.
The SEC’s whistleblower program has now awarded approximately $135 million to 36 whistleblowers since issuing its first award in 2012. SEC enforcement actions from whistleblower tips have resulted in more than $874 million in financial remedies.
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 unique and useful 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 has been 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.
Fri, 02 Dec 2016 15:00:00 -0500
The Securities and Exchange Commission today announced that Chief Economist and Division of Economic and Risk Analysis (DERA) Director Mark J. Flannery will leave the agency by the end of the month. He will return to his position as a finance professor at the University of Florida’s Graduate School of Business Administration.
Dr. Flannery has held the positions of Chief Economist and DERA Director since September 2014 and has led a broad range of activities, including providing economic analysis to support SEC rulemaking and developing sophisticated analytical tools to assist in risk assessment and enforcement activities. He has also worked to secure a defining role for the SEC in the international regulatory arena by representing the agency on the Financial Stability Board’s Standing Committee on Assessment of Vulnerabilities (SCAV). On the SCAV, he has led discussions on the considerations and implications of stress testing asset managers, investment company redemption risk, and fixed income liquidity, among others.
“Mark has provided invaluable insight and analysis on important rulemakings and he has been instrumental in leading the Commission’s efforts in working with international regulators on the economics of financial stability,” said SEC Chair Mary Jo White.
In addition to his international regulatory efforts, Dr. Flannery has provided guidance and direction to economic analyses in recommendations to the Commission to enact rules related to asset management, corporate disclosure and governance, OTC derivatives, and market structure.
“I have thoroughly enjoyed my time heading DERA, whose talented and creative staff have worked so hard to enhance the economic analyses associated with many dimensions of the Commission’s activities,” said Dr. Flannery. “I am grateful to Chair White for providing me the opportunity to work with many other members of the Commission’s staff in developing new tools for overseeing our financial markets.”
Dr. Flannery recently served as Visiting Scholar at the New York Federal Reserve’s Research Department and Chairman of the Federal Reserve System’s Model Validation Council (2013-2014). He has held his position as Bank of America Eminent Scholar in Finance at the University of Florida since 1989. Dr. Flannery received an A.B. from Princeton University, and his master's and doctorate in Economics from Yale University.
Upon Dr. Flannery’s departure, Scott W. Bauguess, the SEC’s Deputy Chief Economist and DERA Deputy Director, will become the acting Chief Economist and acting Director of DERA.
Dr. Bauguess joined the SEC in 2007 from Texas Tech University where he was on faculty in the College of Business. He became an Assistant Director in the division in 2011, and Deputy Director in 2013. Dr. Bauguess received his Ph.D. in Finance from Arizona State University in 2004. He also holds a B.S. and M.S. in Electrical Engineering and prior to his doctoral studies spent six years working as an engineer in the high tech industry.
Fri, 02 Dec 2016 12:35:00 -0500
The Securities and Exchange Commission today announced that the parent company of United Airlines has agreed to pay $2.4 million to settle charges in a case where shareholders wound up footing the bill so a public official could get more convenient flights.
According to the SEC’s order instituted today, United reinstated a nonstop flight between Newark, N.J., and Columbia, S.C., at the behest of David Samson, the then-chairman of the Port Authority of New York and New Jersey who sought a more direct route to his home in South Carolina. The route previously experienced poor financial performance and was canceled by Continental Airlines prior to its merger with United, and a preliminary financial analysis conducted after Samson began privately advocating for the route’s return revealed it would likely lose money again.
Nevertheless, the SEC’s order finds that United officials feared Samson’s influence could jeopardize United’s business interests before the Port Authority, including the approval of a hangar project to help the airline at Newark’s airport. The company ultimately decided to initiate the route despite the poor financial projections. The same day that United’s then-CEO approved initiation of the route, the Port Authority’s board approved the lease agreement related to the hangar project. United employees were told “no proactive communications” about the new route.
According to the SEC’s order, United circumvented its standard process for initiating new routes, and no corporate record at United accurately and fairly reflected the authorization to approve the money-losing flight route from Newark to Columbia. The route ultimately lost approximately $945,000 before it ceased again roughly around the time of Samson’s resignation from the Port Authority.
“United disregarded the books and records and internal accounting controls provisions of the securities laws while casting aside its normal decision process to re-enter one of its hub’s poorest performing markets,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.
Andrew M. Calamari, Director of the SEC’s New York Regional Office, added, “United initiated a money-losing flight solely to curry favor with a public official, and failed to reflect in its books and records a fair and accurate depiction of the rationale behind the decision and its projected financial impact.”
Samson has pleaded guilty to bribery in a criminal case announced in July by the U.S. Attorney’s Office in New Jersey. United entered into a non-prosecution agreement with the U.S. Attorney and paid $2.25 million.
The SEC’s continuing investigation is being conducted by Osman Nawaz, Kenneth Gottlieb, and Celeste Chase of the New York office. The case is being supervised by Sanjay Wadhwa.
Thu, 01 Dec 2016 16:10:09 -0500
The Securities and Exchange Commission today announced that investment management firm Pacific Investment Management Company (PIMCO) agreed to retain an independent compliance consultant and pay nearly $20 million to settle charges that it misled investors about the performance of one its first actively managed exchange-traded funds (ETFs) and failed to accurately value certain fund securities.
According to the SEC’s order issued today, PIMCO’s Total Return ETF attracted significant investor attention as it outperformed even its flagship mutual fund in the four months following its launch in February 2012. The initial performance was attributable to buying smaller-sized bonds known as “odd lots” as part of a strategy to help bolster performance out of the gate. But in monthly and annual reports to investors, PIMCO provided other, misleading reasons for the ETF’s early success and failed to disclose that the resulting performance from the odd lot strategy was not sustainable as the fund grew in size.
“PIMCO misled investors about the true long-term impact of its odd lot strategy and denied them the opportunity to make fully informed investment decisions about the Total Return ETF,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “Investment advisers must accurately describe the significant sources of performance and the strategies being used.”
The SEC’s order further finds that PIMCO’s odd lot strategy caused the Total Return ETF to overvalue its portfolio and consequently fail to accurately price a subset of fund shares. PIMCO valued these bonds using prices provided by a third-party pricing vendor for round lots, which are larger-sized bonds compared to odd lots. By blindly relying on the vendor’s price for round lots without any reasonable basis to believe it accurately reflected what the fund would receive if it sold the odd lots, PIMCO overstated the Total Return ETF’s net asset value (NAV) by as much as 31 cents.
“PIMCO overstated its NAV almost every day for four months because its policies and procedures were not reasonably designed to properly address issues concerning odd lot pricing,” Mr. Ceresney said.
PIMCO agreed to be censured and consented to the SEC’s order without admitting or denying the findings that the firm violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, Rules 206(4)-7 and 206(4)-8, and Section 34(b) of the Investment Company Act of 1940. PIMCO agreed to pay disgorgement of fees totaling $1,331,628.74 plus interest of $198,179.04 and a penalty of $18.3 million.
The SEC’s investigation was conducted by Adam Schneir and Brian Fitzpatrick of the Enforcement Division’s Asset Management Unit as well as Kate Zoladz of the Miami office, Rhoda Chang, John Berry, Donald Searles, and Gary Leung of the Los Angeles office, and José Santillan of the Chicago office. The case was supervised by C. Dabney O’Riordan, Co-Chief of the Asset Management Unit, and Michele Layne, Regional Director for the Los Angeles office. The examination of PIMCO that led to the investigation was conducted by Eric Lee, Ryan M. Hinson, and Shawn McEnnis and supervised by Daniel C. Jung of the Los Angeles office.
Thu, 01 Dec 2016 15:00:53 -0500
The Securities and Exchange Commission today announced that its Advisory Committee on Small and Emerging Companies will hold a public meeting by telephone conference on December 7.
The advisory committee plans to consider recommendations regarding corporate board diversity and continue its discussions regarding outreach to smaller businesses about capital raising. These topics were initially discussed at the committee’s October 5 meeting.
The December 7 meeting will begin at 11:00 a.m. ET and live audio will be available on the SEC’s website.
The Advisory Committee on Small and Emerging Companies provides a formal mechanism for the Commission to receive advice and recommendations on privately held small businesses and publicly traded companies with a market capitalization less than $250 million. More information about the advisory committee is available here.
Thu, 01 Dec 2016 11:45:15 -0500
The Securities and Exchange Commission today announced fraud charges and an asset freeze against Miami Beach-based asset management company Onix Capital LLC and owner Alberto Chang-Rajii, a Chilean national who fled the U.S. earlier this year.
The SEC alleges that Chang and Onix Capital defrauded investors in promissory notes that “guaranteed” annual returns of 12 percent to 19 percent and bilked others who were told their funds would be invested in promising start-ups. Chang and Onix Capital also are alleged to have falsely depicted Chang as an award-winning multi-millionaire “angel” investor with an M.B.A. from Stanford University.
“According to our complaint, Chang and Onix Capital guaranteed returns and touted Chang’s wealth and investment success to entice investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “However, Onix’s purported investment revenue was non-existent and Chang’s claims about his background were not true.”
According to the SEC’s complaint unsealed Wednesday in U.S. District Court for the Southern District of Florida, Chang and Onix Capital sold more than $5.7 million in Onix promissory notes that they falsely claimed were guaranteed by Chang, and raised more than $1.7 million that Chang promised to invest in companies such as Uber, Snapchat, and Square. Instead, the SEC’s complaint alleges that investor funds were diverted to Chang and used to pay other investors.
The SEC’s complaint alleges the scheme began to unravel in March when reports published in the U.S. and Chile exposed the misrepresentations by Chang and Onix Capital. Chang fled to Malta and transferred approximately $4 million, including Onix Capital investor funds, to banks in Malta, the United Kingdom, Switzerland, and Australia.
Glenn S. Gordon, Associate Director of the SEC’s Miami Regional Office, said, “Once the defendants’ alleged misrepresentations were exposed, they stopped paying investors and shifted millions of dollars of investor assets offshore.”
The SEC’s complaint charges Chang and Onix Capital with fraud and seeks return of allegedly ill-gotten gains, prejudgment interest, and financial penalties, among other relief for investors. The Honorable Judge Marcia G. Cooke granted the SEC’s request for a temporary asset freeze against Onix Capital, Chang, and various relief defendants, and a hearing will be set by the court.
The SEC’s investigation was conducted by Sean M. O’Neill, Eric E. Morales, and Paul Hopker in the Miami Regional Office and supervised by Jason R. Berkowitz. The SEC’s litigation is being led by Mr. Morales and Andrew O. Schiff. The SEC appreciates the assistance of the Federal Bureau of Investigation, Chile’s Superintendencia de Valores y Seguros and Ministerio Público, the Malta Financial Services Authority, and the Australian Securities and Investments Commission.
Tue, 29 Nov 2016 09:45:42 -0500
The Securities and Exchange Commission today announced that the Commission voted to renew the Equity Market Structure Advisory Committee’s charter until August 2017 with the current membership. The committee’s charter was originally scheduled to expire in February 2017.
The committee provides a formal mechanism through which the Commission can receive advice and recommendations specifically related to equity market structure issues. The committee has met seven times since it was established in February 2015.
“The Equity Market Structure Advisory Committee’s renewal enables the next Chair and the next Commission to benefit seamlessly from this vital resource for our ongoing assessment of equity market structure issues and potential enhancements,” said SEC Chair Mary Jo White.
Since its inception, the committee has considered a range of issues, including Regulation NMS and a structure for an access fee pilot, the governance framework for national market system plans, transparency for investors of broker-dealer order handling practices, and market-wide volatility moderators. The Commission-approved committee members come from different sectors of the financial services industry, academia, and from public interest groups.
Wed, 23 Nov 2016 14:45:54 -0500
The Securities and Exchange Commission today announced the agenda for its Equity Market Structure Advisory Committee meeting on Nov. 29, beginning at 9:30 a.m. ET. The Commission established the advisory committee to provide a formal mechanism through which the Commission can receive advice and recommendations on equity market structure issues.
The meeting will focus on recommendations and updates from the four subcommittees. These documents are available on the SEC’s website.
The meeting will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public. It also will be webcast live on the SEC’s website, www.sec.gov, and will be archived on the website for later viewing.
Members of the public who wish to provide their views on the matters to be considered by the advisory committee may submit comments electronically or on paper. Please submit comments using one method only. Information that is submitted will become part of the public record of the meeting.
Send paper submissions in triplicate to Brent Fields, Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090.
All submissions should refer to File Number 265-29, and the file number should be included on the subject line if e-mail is used.
9:30 a.m. – Welcoming Remarks by Chair White, Commissioners, and Director of Trading and Markets, Steve Luparello
10 a.m. – Market Quality Subcommittee Recommendations to the Committee
10:10 a.m. – Consideration and Discussion of Recommendations Relating to Market Quality
10:50 a.m. – Customer Issues Subcommittee Recommendations to the Committee
11 a.m. – Consideration and Discussion of Recommendations Relating to Customer Issues
11:40 a.m. – Regulation NMS Subcommittee Status Report to the Committee
12 p.m. – Trading Venues Regulation Subcommittee Status Report to the Committee
12:20 p.m. – Discussion of Next Steps
12:30 p.m. – Adjournment
Tue, 22 Nov 2016 10:00:00 -0500
The Securities and Exchange Commission today announced that Wesley R. Bricker will become the Chief Accountant and succeeds James Schnurr who plans to retire from the agency.
Mr. Bricker has served as Deputy Chief Accountant for the accounting group since 2015 and Interim Chief Accountant since July 2016. As Chief Accountant, Mr. Bricker will serve as the principal advisor to the Commission on accounting and auditing matters and lead the Commission’s Office of the Chief Accountant. He also will be responsible for assisting the Commission with discharging its oversight of the Financial Accounting Standards Board and the Public Company Accounting Oversight Board.
“I am very pleased to appoint Wes as the Chief Accountant,” said SEC Chair Mary Jo White. “He has demonstrated excellent leadership and analytic skills in leading the work of the office, and we are very fortunate to continue to have him serve this critical role at the agency.”
“It is an honor to continue to work on behalf of investors and to lead the talented and dedicated staff of the Office of the Chief Accountant and work together with the accounting and auditing standard setters’ boards and staff,” said Mr. Bricker. “I look forward to continuing to promote improvements to financial reporting, including monitoring that the objectives of existing and new accounting and auditing standards meet the needs of investors for useful and reliable financial reporting information.”
Mr. Bricker joined the SEC in 2015 from PricewaterhouseCoopers LLP, where he was a partner responsible for audit engagements in the banking, capital markets, financial technology, and investment management sectors. He had previously served as a professional accounting fellow in Office of the Chief Accountant from 2009 to 2011. Mr. Bricker received a B.S. in accounting from Elizabethtown College and a law degree from American University. He is licensed as a certified public accountant and is a member of the New York State Bar Association.
The Commission’s Office of the Chief Accountant is responsible for establishing and enforcing accounting and auditing policy as well as improving the professional performance of public company auditors. The office works to enhance the transparency and relevancy of financial reporting and ensure that financial statements are presented fairly and have credibility for the benefit of all investors.
Tue, 22 Nov 2016 09:55:00 -0500
The Securities and Exchange Commission today announced that Chief Accountant James Schnurr intends to retire from the agency. Mr. Schnurr began his tenure as the SEC’s chief accountant in October 2014.
During his tenure, Mr. Schnurr was committed to establishing and enforcing accounting and auditing policy as well as to improving the professional performance of public company auditors. Under his leadership, the Office of the Chief Accountant has worked to enhance the transparency and relevancy of financial reporting and has worked to ensure that financial statements are credible and presented fairly.
Among other accomplishments, Mr. Schnurr:
“Jim’s extensive accounting and auditing expertise has been invaluable to the Commission,” said SEC Chair Mary Jo White. “Jim has been a strong leader--encouraging improvement in audit quality and working to facilitate other important goals, including consistent implementation and application of new accounting standards. I am deeply grateful to Jim for his service as the agency’s Chief Accountant. We all wish him the very best as he focuses full-time on his rehabilitation.”
“It has been a true honor to have served as the Chief Accountant and to have the opportunity to work with the talented and dedicated professionals at the SEC,” said Mr. Schnurr. “In particular, I want to thank Chair White for her leadership on important financial reporting issues.”
In April 2016, Mr. Schnurr was in a serious bicycle accident and is continuing his rehabilitation from his injuries. Before joining the SEC staff, Mr. Schnurr had retired from Deloitte LLP, where he was vice chairman and senior professional practice director and specialized in financial and SEC reporting for public companies. He began his career at Deloitte in 1975 and became a partner in 1985. He was a senior partner for mergers and acquisition services from 1994 to 2002 and a deputy managing partner of the firm’s professional practice from 2002 to 2009 where he was responsible for quality control and risk management of the firm’s audit and advisory services.
Mr. Schnurr received his undergraduate degree from the College of the Holy Cross and his MBA from Rutgers University.
Mon, 21 Nov 2016 16:47:00 -0500The Securities and Exchange Commission today announced that Stephen Luparello, Director of the Division of Trading and Markets, will leave the agency by the first of the year. He was named director of the office in February 2014. Mr. Luparello played a key role in enhancing the transparency and strengthening the integrity of our nation’s markets, including the operation of trading platforms, clearing agencies, and broker-dealers that investors rely on every day. “We set an ambitious agenda to enhance our market structure,” said SEC Chair Mary Jo White. “Steve was at the forefront of that effort, and his leadership and expertise have helped produce both important new protections for investors today and a strong foundation from which the Commission can continue to further strengthen our markets for years to come. The agency is extremely fortunate to have the benefit of Steve’s deep knowledge and commitment to the markets.” “It has been an honor to work with Chair White, the Commissioners and the incredible Trading and Markets team, whose dedication and hard work have greatly enhanced the Commission’s oversight of the equity, fixed income and derivatives markets,” said Mr. Luparello. “I know they will continue to make great progress in these important areas on behalf of investors and our markets.” During Mr. Luparello’s tenure, the Commission adopted Regulation Systems Compliance and Integrity (Reg SCI), which established new controls to strengthen crucial technological systems, providing greater transparency, accountability and resilience. He also played a key role in the Commission’s efforts to enhance operational transparency and regulatory oversight of alternate trading systems (ATSs) that trade stocks listed on a national securities exchange, including dark pools. Additionally, he oversaw proposed rules that for the first time would require broker-dealers to disclose the handling of institutional orders to customers. With Mr. Luparello’s leadership, the Commission also approved a plan to create a comprehensive database that allows regulators to track trading activity in the U.S. equity and options markets. The database, known as the consolidated audit trail (CAT), will greatly enhance regulators’ ability to monitor market behavior and reconstruct market events. Mr. Luparello was instrumental in the creation of the Commission’s first Equity Market Structure Advisory Committee, and as the Committee’s designated federal officer, he facilitated significant discussions on the structure and operations of the U.S. equities markets. Mr. Luparello also acted as the principal liaison for the Commission staff in discussions regarding the U.S. Treasury market in the wake of the events of Oct. 15, 2014. Under his direction, the Commission approved a Financial Industry Regulatory Authority (FINRA) rule proposal that would require its members to report U.S. Treasury securities transactions, that for the first time gives regulators enhanced oversight in the U.S. Treasury market. Mr. Luparello has provided strong leadership on the adoption of many Dodd-Frank Title VII rules that provided a new regulatory regime for security-based swaps, involving cross-border rules for security-based swap (SBS) entities, rules for SBS data repositories, new business conduct standards, and enhanced SBS transactions reporting and recordkeeping. In addition, the Commission approved Division recommendations to approve heightened standards for critical central counterparties, and to propose a rule to shorten the clearance and settlement cycle. Prior to his arrival at the Commission, Mr. Luparello was a partner at WilmerHale, in its Washington, D.C. office. Previous to that, he spent 16 years at FINRA and its predecessor, the Natio[...]
Mon, 21 Nov 2016 16:20:00 -0500
The Securities and Exchange Commission today announced that Matthew C. Solomon, the Chief Litigation Counsel for the SEC’s Enforcement Division, will leave the agency early next month.
Mr. Solomon has led the Enforcement Division’s litigation program since September 2013, managing cases pending both in federal courts and administrative proceedings at the Commission. The trial unit has 48 attorneys at the SEC’s Washington headquarters as well as more than 100 additional litigators throughout the agency’s 11 regional offices.
During Mr. Solomon’s tenure as Chief Litigation Counsel, the agency received favorable verdicts in 22 federal jury trials, including the SEC’s cases against two brothers accused of violating the laws governing ownership and trading of securities by corporate insiders, its insider trading cases against two brokerage employees and a pharmaceutical executive and a U.K. resident, and a first-ever case against a recidivist municipality and one of its city officials. The agency also enjoyed strong successes in administrative proceedings before the SEC’s administrative law judges.
“Matt has won the respect of every trial and investigative attorney in the Enforcement Division with his keen intellect, strong strategic sense, and outstanding trial skills,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division. “He has bolstered our already strong litigation program, and been an important reason for our success at trial over the last few years.”
Mr. Solomon said, “Our enforcement program has been built on a strong partnership between investigative staff and litigators who are prepared to go the distance at trial. I am proud of the strong record we have built over the last few years litigating some of the Enforcement Division’s most complex and challenging cases.”
Mr. Solomon joined the SEC in June 2012 as the Enforcement Division’s Deputy Chief Litigation Counsel. Before joining the SEC, Mr. Solomon served as an Assistant U.S. Attorney in the U.S. Attorney’s Office for the District of Columbia and was later elevated to chief of that office’s fraud unit, where he supervised 25 prosecutors handling hundreds of white-collar criminal matters, including securities fraud offenses. Prior to his work in the U.S. Attorney’s Office, Mr. Solomon was a trial attorney in the public integrity section of the criminal division of the U.S. Department of Justice and, before that, he served as a counsel to the U.S. Senate Judiciary Committee. He began his legal career as a law clerk to Judge James Robertson of the U.S. District Court for the District of Columbia and then as a law clerk for Judge Dennis Jacobs of the U.S. Court of Appeals for the Second Circuit. Mr. Solomon received his B.A. magna cum laude from Wesleyan University, and his J.D. magna cum laude from Georgetown University Law Center, where he was notes & comments editor of the Georgetown Law Journal.
Following Mr. Solomon’s departure, David Gottesman, the Enforcement Division’s Deputy Chief Litigation Counsel, and Bridget Fitzpatrick, a supervisory trial counsel in the Enforcement Division, will serve as acting Co-Chief Litigation Counsels.
Mon, 21 Nov 2016 12:59:00 -0500The Securities and Exchange Commission today announced the agenda for the December 8 meeting of its Investor Advisory Commitee. The meeting will commence at 9:30 a.m. in the Multipurpose Room at SEC headquarters at 100 F Street, N.E., Washington, D.C. and is open to the public. The meeting will be webcast live and archived on the Committee’s website for later viewing. Among other items, the Committee will discuss investor protection priorities for the New Year. It also will hear an update on the Commission’s response to the rulemaking mandate of the Fixing America’s Surface Transportation Act concerning public company disclosure requirements. In addition, the Committee welcomes new member Anne Simpson, Investment Director, Sustainability, at the California Public Employees’ Retirement System. Members of the Committee represent a wide variety of investor interests, including those of individual and institutional investors, senior citizens, and state securities regulators. For a full list of Committee members and resources for the upcoming meeting, see the Committee’s website. The Investor Advisory Committee was established under Section 911 of the Dodd-Frank Act to advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace. The Dodd-Frank Act authorizes the Committee to submit findings and recommendations to the Commission. AGENDA 9:30—10:00 a.m. Networking Session and Continental Breakfast 10:00—10:25 a.m. Welcome Remarks 10:25—10:30 a.m. Approval of Minutes of Previous Meeting 10:30—12:00 p.m. Discussion Regarding Investor Protection Priorities for the New Year 12:00—1:30 p.m. Lunch/Non-Public Administrative Session 1:30—1:35 p.m. Announcement of Election Results for Open Officer Positions 1:35—2:45 p.m. Update on the Commission’s Response to the Rulemaking Mandate of the Fixing America’s Surface Transportation (FAST) Act Concerning Public Company Disclosure Requirements 2:45—3:00 p.m. Closing Comments 3:00 p.m. Adjourn [...]
Thu, 17 Nov 2016 16:25:00 -0500
The Securities and Exchange Commission today filed fraud charges against four individuals and others who allegedly profited by defrauding investors in a cash-strapped California-based renewable energy company.
Patrick Carter, the founder and CEO of 808 Renewable Energy Corp. was charged along with the company, chief operating officer Peter Kirkbride, sales representatives Martin Kinchloe and Thomas Flowers, and three other firms: 808 Investments LLC, West Coast Commodities LLC, and T.A. Flowers LLC. The complaint alleges that the fraud began in 2009 and lasted at least five years, raising more than $30 million from hundreds of investors.
According to the SEC’s complaint, filed in U.S. District Court for the Central District of California, the defendants misled investors, falsely claiming their funds would be used to acquire new equipment and expand 808 Renewable. Instead, the complaint alleges that Carter paid millions for “consulting fees” by 808 Investments LLC, a company he owned and controlled, and diverted millions more to support his lavish lifestyle, to pay commissions to sales representatives, and to make Ponzi-like payments to investors. The SEC also alleges that in 2013 Carter falsely announced that the New York Stock Exchange had preliminarily approved 808 Renewable’s stock for trading on the AMEX, and sold millions of his own shares to investors.
“We allege that Patrick Carter orchestrated a fraudulent scheme using 808 Renewable Energy Corporation to raise millions,” said Michele Wein Layne, Director of the SEC’s Los Angeles Office. “While telling investors their funds would be used for the benefit of the company, Carter and his associates looted 808 Renewable.”
The SEC’s complaint charges Carter, 808 Renewable, Kirkbride, Kinchloe, Flowers, 808 Investments, LLC, West Coast Commodities LLC and T.A. Flowers LLC with violating federal antifraud laws and related SEC rules. The SEC seeks disgorgement of allegedly ill-gotten gains plus prejudgment interest and penalties, permanent injunctive relief, and penny-stock bars against the defendants, as well as officer and director bars against Carter and Kirkbride.
Flowers and T.A. Flowers LLC have offered to settle the SEC’s action without admitting or denying the allegations against them. Under the settlement, which is subject to court approval, they will agree to full injunctive relief, disgorgement plus prejudgment interest of $1.4 million, penny-stock bars, and a $160,000 penalty assessed against Flowers.
The SEC’s investigation has been conducted by Yolanda Ochoa, Christopher M. Conte, Finola H. Manvelian, and John W. Berry of the Los Angeles office. The SEC’s litigation will be led by David Van Havermaat.
Thu, 17 Nov 2016 10:30:00 -0500
The Securities and Exchange Commission today announced that JPMorgan Chase & Co. has agreed to pay more than $130 million to settle SEC charges that it won business from clients and corruptly influenced government officials in the Asia-Pacific region by giving jobs and internships to their relatives and friends in violation of the Foreign Corrupt Practices Act (FCPA).
JPMorgan also is expected to pay $72 million to the Justice Department and $61.9 million to the Federal Reserve Board of Governors for a total of more than $264 million in sanctions resulting from the firm’s referral hiring practices.
According to an SEC order issued today, investment bankers at JPMorgan’s subsidiary in Asia created a client referral hiring program that bypassed the firm’s normal hiring process and rewarded job candidates referred by client executives and influential government officials with well-paying, career-building JPMorgan employment. During a seven-year period, JPMorgan hired approximately 100 interns and full-time employees at the request of foreign government officials, enabling the firm to win or retain business resulting in more than $100 million in revenues to JPMorgan.
“JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favored referrals who were typically unqualified for the positions on their own merit,” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “JPMorgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative.”
Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “The misconduct was so blatant that JPMorgan investment bankers created ‘Referral Hires vs Revenue’ spreadsheets to track the money flow from clients whose referrals were rewarded with jobs. The firm’s internal controls were so weak that not a single referral hire request was denied.”
The SEC’s order finds that JPMorgan violated the anti-bribery, books and records, and internal controls provisions of the Securities Exchange Act of 1934. JPMorgan agreed to pay $105,507,668 in disgorgement plus $25,083,737 in interest to settle the SEC’s case. The SEC considered the company’s remedial acts and its cooperation with the investigation when determining the settlement.
The SEC’s continuing investigation is being conducted by Neil Smith and Paul Block of the FCPA Unit and Rory Alex and Martin Healey of the Boston Regional Office. The SEC appreciates the assistance of the Fraud Section of the U.S. Department of Justice, the U.S. Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, and the Federal Reserve Board of Governors.
Tue, 15 Nov 2016 16:25:00 -0500The Securities and Exchange Commission today voted to approve a national market system (NMS) plan to create a single, comprehensive database known as the consolidated audit trail (CAT) that will enable regulators to more efficiently and thoroughly track all trading activity in the U.S. equity and options markets. “With the approval and ultimate implementation of CAT, the Commission’s regulatory capacity strongly embraces 21st century technology, enabling the Commission and the SROs to harness data and technology to more effectively oversee market participants,” said SEC Chair Mary Jo White. “Through the CAT, regulators will have more timely access to a comprehensive set of trading data, enabling us to more efficiently and effectively conduct research, reconstruct market events, monitor market behavior, and identify and investigate misconduct.” The NMS plan details the methods by which SROs and broker-dealers will record and report information, including the identity of the customer, resulting in a range of data elements that together provide the complete lifecycle of all orders and transactions in the U.S. equity and options markets. The NMS plan also sets forth how the data in the CAT will be maintained to ensure its accuracy, integrity and security. The Commission modified several provisions of the NMS plan in response to public comments and recommendations from the SROs. For example: The Commission strengthened several of the data security requirements of the NMS plan, including with respect to personally identifiable information. Tightened the clock synchronization standards for SROs to within 100 microseconds of the time maintained by the National Institute of Standards and Technology to enable regulators to better sequence order events across multiple exchanges and required the SROs to assess industry standards for clock synchronization based on the type of market participant or system, rather than the industry as a whole, and reflect that refined assessment annually in a report submitted to the Commission. Enhanced the CAT plan governance by expanding the membership of the advisory committee to include an additional institutional investor representative and a representative of a service bureau that provides CAT reporting services. Accelerated the deadline for the SROs to submit proposals to retire regulatory data reporting systems that will be rendered obsolete by CAT, to reduce the burden on broker-dealers of reporting to multiple systems. Within two months of the approval of the NMS plan the SROs must select a plan processor to build and operate the CAT. SROs will be required to begin reporting to the CAT within one year of approval, with large broker-dealers following the next year and small broker-dealers the year after. * * * FACT SHEET Approval of a National Market System Plan to Create a Consolidated Audit Trail SEC Open Meeting Nov. 15, 2016 Action The Securities and Exchange Commission approved a national market system (NMS) plan to create a single, comprehensive database – a consolidated audit trail (CAT) – that would enable regulators to more efficiently and accurately track trading in equity and option securities throughout the U.S. markets. The plan, submitted jointly by the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) to the Commission, would increase the effectiveness of market research and monitoring, event reconstruction, and the ability to identify and investigate market misconduct. The Commission made modifications to the original plan that would include strengthening security requirem[...]
Tue, 15 Nov 2016 13:30:00 -0500
The Securities and Exchange Commission today announced the agenda and panelists for the 35th Annual Government-Business Forum on Small Business Capital Formation.
The November 17 event will begin at 9 a.m. and include a morning panel discussion that will explore how capital formation options are working for small businesses after the implementation of the JOBS Act. Panelists will include representatives of issuers and intermediaries involved with registered and exempt offerings by smaller companies.
Following the morning panel discussion, participants 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, offerings by smaller reporting companies, and the secondary marketplace for securities of small businesses.
The small business forum, held annually at the agency’s Washington, D.C. headquarters at 100 F Street, N.E., is open to the public and the morning panel discussion will be webcast live at www.sec.gov. The webcast will not include the breakout group sessions, but the breakout group sessions will be open to the public and accessible by phone to anyone who pre-registers online. More information, including forum materials, will be made available on the small business forum webpage.
Mon, 14 Nov 2016 16:55:00 -0500SEC Chair Mary Jo White, after nearly four years as the agency’s head, today announced that she intends to leave at the end of the Obama Administration. Under Chair White’s leadership, the Commission strengthened protections for investors and the markets through transformative rulemakings that addressed major issues highlighted by the financial crisis. The Commission also instituted a new approach to enforcement that has resulted in greater accountability and record actions through, among other things, the use of admissions of wrongdoing and enhanced data analytics and technology. Chair White, who became the 31st Chair of the SEC in April 2013, will be one of the SEC’s longest serving Chairs. “It has been a tremendous honor to work alongside the incredibly talented and dedicated SEC staff members who do so much every day to protect investors and our markets,” said Chair White. “I am very proud of our three consecutive years of record enforcement actions, dozens of fundamental reforms through our rulemakings that have strengthened investor protections and market stability, and that the job satisfaction of our phenomenal staff has climbed in each of the last three years. I also want to express my appreciation for the engagement and dedication of my fellow Commissioners and my financial regulator colleagues, past and present.” In addition to completing the vast majority of the agency’s mandates under the Dodd-Frank Act and all of its mandates under the JOBS Act, Chair White’s leadership has advanced the agency’s mission through other critical rulemakings and built robust and effective frameworks for the SEC’s regulatory regimes going forward. “My duty has been to ensure that the Commission implemented strong investor and market protections, and to establish an enduring foundation for future progress in the most critical areas - asset management regulation, equity market structure and disclosure effectiveness,” said Chair White. “Thanks to the hard work and dedication of the SEC’s staff, we have accomplished both.” Chair White drove many important rules and other policy measures to completion. Under her leadership, the Commission advanced more than 50 significant rulemaking initiatives, including: Fundamental reforms to the money market fund industry and unprecedented new disclosures and protections for mutual fund investors in a major initiative to strengthen regulation of the $67 trillion asset management industry Enhanced equity market structure oversight, including wide-ranging new controls on how key market participants handle technology and systems issues A comprehensive framework for enhancing the effectiveness of corporate disclosure for investors Extensive new safeguards for the financial system and for investors in the more than $7 trillion security-based swap market New ways for smaller companies to raise capital needed to grow their businesses New post-crisis restrictions on proprietary trading and investments by broker-dealers and other financial institutions through the Volcker rule Major enhancements to transparency and risk management for asset-backed securities, which were a significant contributor to the financial crisis Strong operating standards for the clearing agencies that stand at the center of our financial system Extensive reforms to the regulation of credit rating agencies and how they address conflicts of interest that can harm investors First-ever regulatory framework for municipal advisors who are critical to the capital raising activities of thousands of local governments Mod[...]
Mon, 14 Nov 2016 12:30:00 -0500
The Securities and Exchange Commission today announced an award of more than $20 million to a whistleblower who promptly came forward with valuable information that enabled the SEC to move quickly and initiate an enforcement action against wrongdoers before they could squander the money.
The $20 million award is the third-highest since the SEC’s whistleblower program issued its first award in 2012. The program has now awarded more than $130 million to whistleblowers who voluntarily provided the SEC with unique and useful information that led to a successful enforcement action.
By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.
“This whistleblower alerted us with a valuable tip that led to a near total recovery of investor funds. Sizeable awards like this one should encourage whistleblowers everywhere that there are real financial incentives to promptly reporting potential securities law violations to the SEC,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.
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 through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.
For more information about the whistleblower program and how to report a tip: http://www.sec.gov/whistleblower.
For a list of the SEC’s top 10 whistleblower awards and more information about how the whistleblower award process works: https://www.sec.gov/page/whistleblower-100million
Thu, 10 Nov 2016 15:45:00 -0500The Securities and Exchange Commission today announced that an Israeli-based firm must pay more than $1.7 million for misleading investors into trading binary options over the internet, and the agency warned that other firms may be out there actively trying to do the same thing. Binary options generally have an all-or-nothing payout structure in which investors bet on the increase or decrease in value of a company stock or other securities serving as the underlying asset. The options contract expires after a fixed time period, and if an investor’s prediction was wrong then all of the investment can be lost. According to the SEC’s order issued today against EZTD Inc., not only did the firm fail to register the binary options or register as a broker-dealer to legally sell the investment to U.S. investors in the first place, but it failed to disclose on its trading platforms that there was significantly greater potential for investors to lose rather than earn money. EZTD instead made statements that extolled the profitability of trading binary options, calling it a “highly profitable trading platform” and “an extremely lucrative avenue for individuals who are looking to see an increase in income.” The SEC’s order finds that less than 3 percent of the approximately 4,000 U.S. investors who opened accounts with EZTD actually made any profit on their investment. “EZTD’s revenues were largely derived from customer trading losses, yet EZTD emphasized the profitability of trading in binary options,” said Stephanie Avakian, Deputy Director of the SEC’s Division of Enforcement. “Companies dealing in binary options must disclose more than general statements about investment risk so investors in these instruments understand that the odds are stacked against them.” The SEC today issued an investor alert detailing red flags that signal binary options fraud and warning investors to never put in more money in an attempt to win back money they lost, which was not an issue in the EZTD matter. The alert reminds investors that they may not have the full protection of the U.S. securities laws when they purchase binary options from an unregistered firm that isn’t subject to SEC oversight. Investors can quickly and easily check the credentials of people selling investments and determine whether they are registered by using the SEC’s investor.gov website. “We continue to receive numerous investor complaints involving binary options websites,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. “If you have trouble withdrawing your money from an online binary options trading platform, be aware that you may be the victim of a scam and should not give the platform any more money.” The SEC’s order against EZTD finds that it violated Sections 5(a), 5(c) and 17(a)(2) of the Securities Act of 1933 and Section 15(a)(1) of the Securities Exchange Act of 1934. Without admitting or denying the findings, EZTD agreed to forfeit approximately $1.5 million in revenues obtained from U.S. customers and pay a $200,000 penalty. EZTD no longer sells binary options in the U.S. market. The SEC’s investigation was conducted by Deborah R. Maisel with assistance from Stuart Jackson in the agency’s Division of Economic and Risk Analysis. The investigation was supervised by Jennifer S. Leete.[...]
Wed, 09 Nov 2016 14:40:00 -0500
The Securities and Exchange Commission today charged a former movie producer and self-proclaimed private equity executive with defrauding investors in hedge funds and using the money he stole to support his extravagant lifestyle.
According to the SEC’s complaint, David R. Bergstein of Hidden Hills, California, stole millions from investors in 2011 and 2012 and used the money for purchases with a firearms dealer, an antique watch and jewelry retailer, and a bonsai tree nursery. The SEC’s complaint alleges that the scheme relied on a series of intricate transactions by Weston Capital Asset Management, then a registered investment adviser, with two of its unregistered hedge funds, Weston Capital Partners Master Fund II Ltd. and the Wimbledon Fund SPC Class TT Segregated Portfolio.
In one transaction, the SEC alleges that Bergstein misappropriated at least $2.3 million of money that was purportedly meant for investments in medical-billing businesses and helped Weston Capital Asset Management conceal the true nature of the transaction from Weston investors. In a second allegedly fraudulent transaction, Bergstein stole more than $3.5 million of funds also purportedly meant, in part, for investments in medical-billing businesses.
“The use of elaborate corporate transactions to mask old-fashioned theft of investor monies will not prevent the SEC from enforcing the federal securities laws and protecting investors,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Violators will be held to account no matter the artifice used to perpetrate their frauds.”
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Bergstein and Keith D. Wellner, who was formerly Weston Capital Asset Management’s general counsel, chief compliance officer, and chief operating officer. Wellner previously settled SEC charges filed in federal district court in Florida and has been barred from working in the securities industry.
The SEC’s complaint charges Bergstein with violating Section 10(b) of the Securities Exchange Act and Rules 10b-5(a) and (c) and aiding and abetting violations by Weston Capital Asset Management of Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8. The SEC is seeking injunctions, the return of allegedly ill-gotten gains, and monetary penalties.
The SEC’s investigation was conducted by Joseph P. Ceglio, John O. Enright, Christopher Ferrante, and Sheldon L. Pollock, and the case was supervised by Lara Shalov Mehraban of the New York office. The litigation will be led by Kevin McGrath, Mr. Enright, and Mr. Ceglio. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Internal Revenue Service.
Thu, 03 Nov 2016 13:19:00 -0400The Securities and Exchange Commission today announced the agenda and panelists for its Nov. 14 forum to discuss fintech innovation in the financial services industry. The Fintech Forum, announced in September, will begin at 9 a.m. ET, and will be divided into four panels. Participants on the first panel will discuss the impact of recent innovation in investment advisory services. The second panel will discuss the impact of recent innovation on trading, settlements, and clearance activities. Participants on the third panel will discuss the impact of recent innovation in capital formation. The final panel will discuss investor protection in the fintech era. The Fintech Forum will be held at the SEC’s headquarters in Washington, D.C., and is open to the public on a first-come, first-served basis. While the forum will begin at 9 a.m. ET, doors will open at 7:45 a.m. ET. Guests attending should bring photo identification and are encouraged to time their arrival with the understanding that they will be screened by security before entering the Fintech Forum. No registration is required to attend the event. For members of the public interested in the Fintech Forum, but unable to attend in-person, a live webcast will be available through the SEC’s Fintech Spotlight page. The webcast will also be archived for later viewing. The public is encouraged to follow the SEC on Twitter at @SEC_News and live-tweet the Fintech Forum using the hashtag #SECfintech. Agenda and Panelists (All times Eastern, Panelists as scheduled to appear) 7:45 a.m. Doors open 9 a.m. Opening Remarks by Chair White, Commissioner Stein and Commissioner Piwowar 9:15 a.m. Panel 1: Impact of Recent Innovation in Investment Advisory Services Moderator: Kristin Snyder, Co-Head of the Investment Advisor/Investment Company program in the SEC Office of Compliance Inspections and Examinations Panelists: Ben Alden, General Counsel of Betterment Bo Lu, Co-Founder and CEO of Future Advisor at Blackrock Mark Goines, Vice Chairman of Personal Capital Jim Allen, Head of Capital Markets Policy Group, CFA Institute 10:30 a.m. Break 10:45 a.m. Panel 2: Impact of Recent Innovation on Trading, Settlement, and Clearance Activities Moderator: Valerie Szczepanik, Head of the SEC Distributed Ledger Technology Working Group; Assistant Director, SEC Division of Enforcement Panelists: Brad Peterson, Executive Vice President and Chief Information Officer/Chief Technology Officer at Nasdaq Chris Church, Chief Business Development Officer, Digital Asset Holdings Mark Wetjen, Head of Global Public Policy at DTCC Professor Emin Gun Sirer, Cornell University Grainne McNamara, Principal in the Capital Markets team at PricewaterhouseCoopers 12:15 p.m. Lunch Break 1:30 p.m. Panel 3: Impact of Recent Innovation in Capital Formation Moderator: Sebastian Gomez Abero, Head of the Office of Small Business Policy, SEC Division of Corporation Finance Panelists: Matt Burton, CEO and Co-Founder of Orchard Platform Conor French, General Counsel of Funding Circle and Co-Founder of the Marketplace Lending Association Javier Saade, Managing Director at Fenway Summer Ventures Sara Hanks, Co-Founder and CEO of CrowdCheck Michael Pieciak, Commissioner of the Vermont Department of Financial Regulation and Chief of the NASAA Corporate Finance Section Karen Mills, Senior Fellow at Harvard Business School Ram [...]
Wed, 02 Nov 2016 10:05:20 -0400
The Securities and Exchange Commission today announced the appointment of Marc A. Panucci as a Deputy Chief Accountant in the Office of the Chief Accountant.
As Deputy Chief Accountant, Mr. Panucci will lead the activities of the office’s professional practice group, which includes understanding investor and audit committee perspectives and consulting with registrants and auditors on the application of internal control over financial reporting obligations, independence requirements and auditing standards. Mr. Panucci will also assist the Commission in its oversight responsibility for the activities of the Public Company Accounting Oversight Board (PCAOB). Mr. Panucci, who previously worked at the SEC from 2007 to 2010, is expected to begin his new position later this month and will replace Brian T. Croteau.
“I am very appreciative and excited that Marc has agreed to return to the Office of the Chief Accountant to oversee the professional practice group,” said SEC Interim Chief Accountant Wesley R. Bricker. “Marc’s prior experience as an SEC senior associate chief accountant as well as his expertise and wealth of experience in public accounting will provide critical service to investors, companies and the Commission.”
“I am honored for this opportunity,” said Mr. Panucci. “As someone who has previously served in the professional practice group, I have seen the talent and dedication of the group’s staff in addressing internal control over financial reporting, independence, and audit issues related to investor protection, and I look forward to continuing to build on the group’s many successes.”
Mr. Panucci has more than 22 years of public accounting, standard-setting, and regulatory experience. He will join the SEC from PricewaterhouseCoopers LLP, where he is a partner in PwC’s national professional services group. Mr. Panucci is a member of the American Institute of Certified Public Accountant’s Auditing Standards Board, which develops, updates, and communicates auditing, attestation, and quality control standards for audit and attestation services to non issuers.
Mr. Panucci received his undergraduate degree in accounting from Robert Morris College. He is a Certified Public Accountant in Pennsylvania and New Jersey.
Tue, 01 Nov 2016 17:05:46 -0400
Securities and Exchange Commission staff today made available additional economic analysis related to the Commission’s proposed rule regarding the use of derivatives by registered funds and business development companies.
The analysis is posted on the SEC’s website as part of the comment file for a rule proposed by the Commission in December 2015 that is designed to enhance the regulation of the use of derivatives by registered investment companies, including mutual funds, exchange-traded funds (ETFs) and closed-end funds, as well as business development companies. The proposed rule would limit funds’ use of derivatives and require them to put risk management measures in place, which would result in better investor protections.
The staff believes that the analysis will be informative for evaluating comments on the proposed rule that suggests its portfolio limitations should be based on risk-adjusted gross notional exposure, and that its asset segregation requirement should permit certain liquid assets other than cash or cash equivalents to be segregated against a fund’s derivatives exposures, subject to appropriate haircuts.
Commenters suggest using risk-adjustment and haircut schedules that were originally developed for other regulatory purposes. The analysis evaluates the internal consistency of these schedules across asset classes and categories for purposes of risk-adjustment and risk-weighting with respect to the rule. The staff is making the analysis available to allow the public to consider this supplemental information.
Interested parties may provide comments. Comments may be submitted to the comment file (File No. S7-24-15) for the proposed rule.
Mon, 31 Oct 2016 14:50:00 -0400The Securities and Exchange Commission today charged the co-founder of a Minnesota-based energy company with manipulating its stock price and concealing his control of the company to attain lucrative financial payouts. The company’s other co-founder agreed to pay nearly $8 million to settle separate charges against him. Three others also are charged in the case. The SEC filed a complaint against Ryan Gilbertson, who allegedly hatched and orchestrated the elaborate scheme to secretly siphon millions of dollars from Dakota Plains Holdings, which operates an oil-shipping rail facility in North Dakota. Gilbertson founded the company with Michael Reger. According to the SEC’s complaint, Gilbertson and Reger installed their fathers as figurehead executives so they could secretly wield control of the company and issue millions of shares of stock to themselves, family, and friends. They later hired one of their friends as CEO. They allegedly caused the company to enter into an agreement to borrow money from them under generous terms that included extra bonus payments to Gilbertson, Reger, and other lenders based on the price of Dakota Plains stock after 20 days of trading following a reverse merger into a company with publicly-traded shares. According to the SEC’s complaint, Gilbertson enlisted friends and associates including Douglas Hoskins and Thomas Howells to choreograph extensive sales and purchases of Dakota Plains stock and cause the price to skyrocket from 30 cents to more than $11 per share during that 20-day period. The inflated stock price obligated Dakota Plains to make bonus payments totaling $32 million to Gilbertson, Reger, and others. After meeting his target to receive the bonus payments, Gilbertson ceased his alleged manipulation efforts. The stock price then steadily declined to pennies per share and was delisted a few months ago. Hoskins and Howells are charged in the SEC’s complaint along with Gilbertson for allegedly participating in his stock manipulation activities. “As alleged in our complaint, Gilbertson enriched himself by more than $16 million through his secret control of the company while he and his associates defrauded shareholders and manipulated the stock price,” said David Glockner, Director of the SEC’s Chicago Regional Office. “Corporate insiders must fully disclose their stock ownership and trading activities and cannot abuse their power in order to secretly reward themselves.” Reger consented to an SEC order finding that he obtained illicit payments and skirted public disclosure requirements by spreading his Dakota Plains stock holdings among 10 accounts in different names to conceal that he owned more than one-fifth of the company’s shares and reaped millions of dollars in bonus payments. Without admitting or denying the findings, Reger agreed to pay $6.5 million in disgorgement, $669,365.85 in interest, and a $750,000 penalty. Minnesota-based stockbroker Nicholas Shermeta also consented to an SEC order finding that he solicited investors for Dakota Plains and recommended the stock to his clients at the registered brokerage firm where he worked, but improperly brokered the sales through his unregistered firm Napa Properties rather than through his employer. Without admitting or denying the findings, Shermeta and Napa Properties agreed to pay $75,000 in disgorgement, $11,075.49 in interest, and[...]