In re Massachusetts Financial Services Company (A.P. Aug. 31, 2018, Settled)

Action against Respondent, an investment adviser, in connection with alleged material misstatements and omissions to certain advisory clients and others concerning hypothetical stock returns associated with Respondent’s blended research stock ratings.  According to the SEC, Respondent advertised that its blended fundamental and quantitative stock ratings could over time yield better returns than either type of ratings alone. The SEC alleged that these advertisements were misleading because the materials failed to disclose that some of the
Continue Reading

United States v. Hoskins (2d Cir. August 31, 2018)

The Second Circuit held that the FCPA’s anti-bribery provisions do not extend to non-U.S. persons absent a U.S. nexus.  The holding specified that a nonresident foreign national cannot be held liable under the provisions under a conspiracy or accomplice theory if they could not otherwise be held liable under the statute.  The Defendant in the case was a U.K. national employed by a U.S. corporation who had never been to the United States.  The holding
Continue Reading

SEC v. Amer Deeba (N.D. Cal. Aug. 30, 2018, Settled)

Action against Defendant, a former Chief Commercial Officer of a cloud security and services company, for alleged insider trading.  According to the SEC, Defendant gifted his brothers shares in the company and later learned that it had missed its internal sales forecast. The SEC alleges that Defendant informed his brothers of the miss and coordinated the sale of their stock with their brokerage firm.  Defendant has agreed to pay a civil penalty of $581,170.

SEC
Continue Reading

SEC v. Grenda Group, LLC, et al. (W.D.N.Y. Aug. 30, 2018, Contested)

Action against Defendants, an advisory firm and its owner, for allegedly misleading clients regarding the firm’s association with a barred investment adviser.  According to the SEC, the barred adviser sold his investment advisory assets to Defendants in anticipation of a negative outcome in an SEC fraud investigation. The SEC alleges that, despite an SEC bar, the adviser continued to associate with Defendants by meeting with a prospective client and current clients in the firm’s offices
Continue Reading

SEC v. Scott Stacy Phelps, et al. (W.D. Ky. Aug. 30, 2018, Contested)

Action against Defendants, two individuals, in connection with alleged fraud of investors in oil-and-gas securities offerings.  According to the SEC, Defendants told investors that the investment proceeds would be used to drill for oil in Kentucky, but spent the majority of investor funds on personal expenses.

SEC Litigation Release
Continue Reading

SEC v. Jason Amada, et al. (S.D.N.Y. Aug. 29, 2018, Contested)

Action against Defendants, an unregistered commodity trading advisor and its owner, in connection with alleged fraudulent solicitation of potential clients to open individually managed trading accounts for off-exchange foreign currency contracts.  According to the CFTC, Defendants misrepresented their forex trading experience and profitability, falsely claimed that they would implement a hedging strategy that would prevent losses of more than one percent, and attempted to conceal mounting losses by transferring commissions into a client’s account. The
Continue Reading

SEC v. Kendricks, et al. (E.D. Pa. Aug. 29, 2018, Contested)

Action against Defendants, a professional athlete and former investment bank analyst, for alleged insider trading.  According to the SEC, Defendant banker shared information regarding upcoming acquisition with Defendant athlete. The SEC alleges that, while in possession of this information, Defendant athlete purchased shares in the companies that were soon to be acquired and sold his positions after the deals were publicly announced.  The SEC further alleges that Defendant athlete rewarded Defendant banker with cash, NFL
Continue Reading

In re Delaney Equity Group LLC, et al. (A.P. Aug. 29, 2018, Settled)

Action against Respondents, a broker-dealer, its CEO, and its former registered representative, in connection with the alleged fraudulent manufacture by three undisclosed control persons of undisclosed blank check companies for sale by a reverse merger.  According to the SEC, Respondents misrepresented the blank check companies as start-up companies managed and operated by a named sole officer, and concealed the fact that the blank check companies had no business purpose other than to be sold as
Continue Reading

In re BNP Paribas Securities Corp. (A.P. Aug. 29, 2018, Settled)

Action against Respondent bank for attempted manipulation of the USD ISDAFIX benchmark.  According to the CFTC, Respondent bid, offered, and executed transactions in interest rate swap spreads in a manner designed to influence the published ISDAFIX in order to benefit Respondent’s derivatives positions.  The CFTC also alleges that Respondent attempted to manipulate and made false reports concerning the ISDAFIX by skewing Respondent’s submissions in order to benefit Respondent at the expense of its derivatives counterparties
Continue Reading

SEC v. Sandy J. Masselli, Jr., et al. (D.N.J. Aug. 28, 2018, Contested)

Action against Defendants, several corporate entities and their Chairman and CEO, in connection with an alleged fraudulent securities offering.  According to the SEC, Defendants sold stock in entities purportedly engaged in online gaming by falsely claiming that the companies were on the verge of a lucrative IPO and would soon be listed on major U.S. stock exchanges.  The SEC alleges that the entities did not have a plan or the capability to conduct an IPO
Continue Reading

In re Moody’s Investors Service, Inc. (A.P. Aug. 28, 2018, Settled)

Action against Respondent, a nationally recognized statistical rating organization, in connection with alleged failure to establish, maintain, enforce, and document policies and procedures reasonably designed to clearly define and apply credit rating symbols.  According to the SEC, Respondent’s definition of structured finance securities called “Combo Notes” did not adequately inform investors regarding what the ratings did and did not address. Respondent has agreed to pay a civil penalty of $1,250,000.

SEC Order  

SEC Press Release
Continue Reading

In re Moody’s Investors Service, Inc. (A.P. Aug. 28, 2018, Settled)

Action against Respondent, a nationally recognized statistical rating organization, for alleged failure to establish, maintain, enforce, and document an effective internal control structure with regard to its use of certain models in connection with its methodology for rating residential mortgage-backed securities (“RMBS”).  According to the SEC, Respondent revised its methodology for rating RMBS by incorporating cash flow waterfall models developed by its corporate affiliate. The SEC alleges that Respondent established policies and procedures that prescribed
Continue Reading

In re Legg Mason, Inc. (A.P. Aug. 27, 2018, Settled)

Action against Respondent, an investment management firm, in connection with alleged violations of the Foreign Corrupt Practices Act.  According to the SEC, Respondent, through its subsidiary, partnered with a global financial services company to solicit business from state-owned financial institutions, in part by paying bribes through an intermediary to obtain investments from the financial institutions.  The SEC also alleged that Respondent lacked appropriate internal accounting controls with respect to the use of introducing brokers and
Continue Reading

In re Kevin A. Giles (A.P. Aug. 27, 2018, Settled)

Action against Respondent, the former director of new initiatives at an investment adviser, for alleged failure to address certain risks identified in an internal audit report.  The SEC alleges that Respondent’s failure to address these risks caused the adviser not to take reasonable steps to ensure that the quantitative models worked as intended, to adopt and implement reasonable controls regarding the testing, approval, and documentation of any changes to its models, and to ensure the
Continue Reading

In re Aegon USA Investment Management, LLC, et al. (A.P. Aug. 27, 2018, Settled)

Action against Respondents, an investment adviser, two of its affiliated investment advisers, and its affiliated broker-dealer, in connection with their alleged use of faulty models to create mutual funds and investment strategies.  According to the SEC, the models were developed solely by a junior analyst, contained errors, and did not work as promised.  The SEC further alleges that, when Respondent adviser and one of its affiliate advisers learned of the errors, they stopped using the
Continue Reading

LexBlog