Blog Posts Tagged With Financial Institutions and Regulated Entities

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In re Wilson-Davis & Co., Inc. (A.P. May 15, 2019, Settled)

Action against Respondent, a broker-dealer, for alleged failure to file Suspicious Activity Reports (SARs).  According to the SEC, Respondents failed to file SARs for certain penny stock transactions that involved suspicious trading patterns.  Respondent has agreed to pay a civil penalty of $300,000.

SEC Order

SEC Administrative Summary
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In re Corinthian Capital Group, LLC, et al. (A.P. May 6, 2019, Settled)

Action against Respondents, an investment adviser, its co-founder and CEO, and its former CFO, for alleged misuse of client funds.  According to the SEC, Respondents failed to apply a fee offset owed to a private equity client, improperly paid for internal operations with the client’s funds, and caused the client to overpay organizational expenses.  The SEC further alleges that Respondents failed to timely issue audited financial statements for the client.  Respondent investment adviser, Respondent CEO,
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Robare Group v. SEC (D.C. Cir. Apr. 30, 2019)

The D.C. Circuit held that while a defendant investment adviser’s failure to disclose conflicts of interests on registration applications was sufficient to support the SEC’s finding of a violation of § 206 of the Investment Advisers Act, which imposes a negligence standard, the evidence was insufficient to support the SEC’s finding of a violation of § 207 of the Act, which imposes a willfulness standard. According to the court, in order to prove willfulness, the
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SEC v. Christopher D. Dougherty, et al. (S.D. Cal. Apr. 26, 2019, Contested)

Action against Defendants, an investment adviser and his three companies, for an alleged Ponzi scheme. According to the SEC, Defendants solicited investment advisory clients to invest in various entities under Defendant adviser’s control but instead misappropriated client funds for personal expenses and to pay off existing investors.

SEC Complaint 

SEC Litigation Release
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In re Deutsche Bank Trust Company Americas (A.P. Apr. 25, 2019, Settled)

Action against Respondent, a commercial bank, for alleged material omissions in marketing materials and other documents related to Respondent’s hedge fund selection process.  According to the SEC, Respondent failed to disclose that its research group limited its evaluation of hedge funds to funds that would agree to share management fees with Respondent.  Respondent has agreed to pay a civil penalty of $500,000.

SEC Order
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In re Charter Capital Management, LLC, and Steven Morris Bruce (A.P. Apr. 23, 2019, Settled)

Action against Respondents, an investment adviser and its founder and CEO, for alleged failure to disclose conflicts of interest and misrepresentations to investors.  The SEC alleges that Respondent adviser made a loan on behalf of its funds to a Norwegian individual and his company, which was never fully repaid, and that Respondent CEO made a personal loan to the same company shortly afterward.  According to the SEC, Respondents failed to disclose this conflict of interest
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In re Michael F. Cronin, CPA (A.P. Apr. 23, 2019, Settled)

Action against Respondent, an accountant, for alleged violation of a PCAOB order that barred him from practicing at a registered public accounting firm for a three-year period. According to the SEC, Respondent continued to practice accounting after this order was issued. Respondent agreed to a bar and to pay disgorgement of $95,630, prejudgment interest of $12,446, and civil penalties of $42,918.

SEC Order
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SEC v. Eric D. Lyons, et al. (D. Mass. Apr. 22, 2019, Contested)

Action against Defendant, an investment adviser and hedge fund manager, for alleged misappropriation of client assets and securities fraud.  According to the SEC, Defendant caused the hedge fund he managed to transfer client funds to his own account and subsequently used those funds on personal expenses.  The SEC also alleges that Defendant obtained funds from investors based on false and misleading statements.

SEC Complaint

SEC Litigation Release
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In re Dov Zaidman, CPA, and ZBS Group LLP (A.P. Apr. 22, 2019, Settled)

Action against Respondents, an audit firm and its managing partner, for their roles in a scheme to avoid registration and reporting requirements through the creation of “blank check” shell companies. According to the SEC, Respondents performed audits on the “blank check” companies that deviated from PCAOB standards. The SEC alleges that Respondents performed the deficient audits to avoid SEC registration and reporting requirements for the sale of the companies. Respondents have agreed to five-year bars
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In re Matthew R. Rossi and SJL Capital, LLC (A.P. Apr. 17, 2019, Settled)

Action against Respondents, an investment adviser company and its owner, for alleged fraud on investors.  According to the SEC, Respondents represented that they would invest client funds in a well-diversified portfolio but instead engaged in unhedged options trading.  The SEC alleges that Respondents concealed losses from investors and misrepresented their financial performance.  Respondents have agreed to officer-and-director and associational bars.

SEC Order
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In re Clear Scope Advisors, Inc. (A.P. Apr. 11, 2019, Settled)

Action against Respondent, a registered municipal adviser, for alleged failure to meet professional qualification standards.  According to the SEC, Respondent advised two municipal entities at a time when it was unqualified to do so because none of its employees had passed the requisite Municipal Securities Rulemaking Board exam.  Respondent has agreed to pay disgorgement of $20,000, prejudgment interest of $678.64, and a civil penalty of $5,000.

SEC Order
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SEC v. Arif M. Naqvi and Abraaj Investment Management Ltd. (S.D.N.Y. Apr. 11, 2019, Contested)

Action against Defendants, an investment adviser and one of its owners, for alleged misappropriation and comingling of client funds.  According to the SEC, Defendants promised to invest in the emerging market healthcare sector but instead used client funds to cover financial shortfalls of Defendant investment adviser and its parent company.

SEC Complaint

SEC Litigation Release
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In re KLJ & Associates, LLP et al. (A.P. Apr. 5, 2019, Settled)

Action against Respondents, an accounting firm and two of its partners, for alleged deficient audits and improper professional conduct.  According to the SEC, Respondents failed to obtain sufficient evidence in support of their audit reports, adequately document their procedures, and comply with engagement quality review requirements, among other deficiencies.  Respondents have agreed to a five-year bar with the right to apply for reinstatement.

SEC Administrative Release

SEC Order
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In re Omar Zaki (A.P. Apr. 1, 2019, Settled)

Action against Respondent, co-founder of an investment adviser, for alleged fraud.  According to the SEC, Respondent issued prospectuses to investors that contained false statements related to, for example, fund performance and fund management.  Respondent has agreed to pay a civil penalty of $25,000 and to officer and director and associational bars with the right to apply for reinstatement after three years.

SEC Order
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In re Vision Financial Markets LLC (A.P. Mar. 29, 2019, Settled)

Action against Respondent, a clearing broker, for alleged failure to file Suspicious Activity Reports (SARs). According to the SEC, Respondent cleared a large number of penny stock transactions that involved suspicious trading patterns without filing SARs. Respondent has agreed to pay a penalty of $625,000.

SEC Order

SEC Administrative Summary
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SEC v. Richard T. Diver (S.D.N.Y. Mar. 28, 2019, Contested)

Action against Defendant, a former COO of an investment adviser, for alleged fraud on investors. According to the SEC, Defendant managed payroll and billing systems at his firm and caused the firm to overbill several hundred clients. The SEC alleges that Defendant used this additional revenue to inflate his own salary.

SEC Complaint

SEC Litigation Release 

SEC Press Release
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SEC v. Dennis Gibb and Sweetwater Investments, Inc. (A.P. Mar. 28, 2019, Settled)

Action against Respondents, an investment adviser and its founder and sole owner, for alleged misappropriation of investor funds. According to the SEC, Respondent owner used investor funds to pay for personal expenses and falsified expense statements to conceal his actions. The SEC also alleges that Respondents made false statements in SEC filings. Respondents have agreed to pay, jointly and severally, disgorgement of $1,144,000 and prejudgment interest of $20,747.40. Respondent founder also agreed to a lifetime
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Lorenzo v. SEC (U.S. Sup. Ct. Mar. 27, 2019)

The Supreme Court ruled in favor of the SEC in a 6-2 decision, holding that an investment banker had violated Rules 10b-5(a) and (c), Section 10(b) of the Exchange Act, and Section 17(a)(1) of the Securities Act by knowingly disseminating false information to prospective investors at the direction of his boss. The investment banker signed and forwarded two emails that were drafted by his boss to investors that contained false and misleading statements. The Supreme
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SEC v. James K. McKillop (D.D.C. Mar. 26, 2019, Settled); In re Tiber Creek Corp. and James M. Cassidy (A.P. Mar. 26, 2019, Settled)

Actions against Respondents, a business that assisted companies in going private and its president and sole shareholder, and Defendant, a business associate of Respondent president, for alleged failure to register as brokers and file beneficial ownership reports. According to the SEC, Respondent company created registered public shell companies through which Respondent president and Defendant performed securities transactions without registering as brokers. Respondents have agreed to pay, jointly and severally, disgorgement of $117,000, prejudgment interest of
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SEC v. Direct Lending Investments, LLC (C.D. Cal Mar. 22, 2019, Contested)

Action against Defendant, a registered investment adviser, for an alleged scheme to overcharge investors and inflate fund returns. According to the SEC, Defendant’s owner and then-CEO arranged, with a lending platform in which the funds invested, to falsify financial performance records and inflate the value of certain loans. The SEC alleges that Defendant collected excess management and performance fees because of the lending platform’s overstated valuation.

SEC Complaint

SEC Litigation Release
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In re Merrill Lynch, Pierce, Fenner & Smith Incorporated (A.P. Mar. 22, 2019, Settled)

Action against Respondent, a financial services firm, in connection with an industry-wide sweep into practices related to the pre-release of American Depositary Receipts (ADRs). According to the SEC, Respondent obtained ADRs from other brokers when Respondent should have known that the brokers did not own the requisite number of ordinary shares underlying the ADRs. The SEC further alleges that Respondent failed to implement adequate policies, procedures, and supervision related to the pre-release of ADRs. Respondent
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In re Talimco, LLC (A.P. Mar. 15, 2019, Settled); In re Grant Gardner Rogers (A.P. Mar. 15, 2019, Settled)

Action against Respondents, an investment adviser and its chief operating officer, for alleged fraud in connection with the auction of real estate from one client to another. According to the SEC, Respondents allegedly rigged an auction of one client’s real estate to benefit another client who purchased the real estate and resold it at a profit. Respondent investment adviser has agreed to pay disgorgement of $74,000, prejudgment interest of $8,758.80, and a civil penalty of
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In re Ascension Asset Management, LLC and Grenville M. Gooder, Jr. (A.P. Mar. 7, 2019, Contested)

Action against Respondents, an investment adviser and its principal, for alleged violations of the Advisers Act compliance, custody, and books and records rules. According to the SEC, Respondents made material misstatements on their annual Forms ADV, including that Respondent adviser did not have custody of client assets and had chief compliance officers in place. The SEC further alleges that Respondent violated the Advisers Act custody rule by failing to retain an independent CPA and failing
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In re BB&T Securities, LLC (A.P. Mar. 5, 2019, Settled)

Action against Respondent, a dually registered broker-dealer and investment adviser, for alleged misrepresentations to clients. According to the SEC, Respondent’s predecessor in interest made misstatements in Form ADV filings and client contracts about services and prices offered by its in-house broker. The SEC alleges that Respondent’s predecessor in interest failed to disclose to clients that it benefitted financially when clients selected this broker. Respondent has agreed to pay disgorgement of $4,712,366, prejudgment interest of $497,387,
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