Blog Posts Tagged With Financial Institutions and Regulated Entities

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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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In re DLL CPAs, LLC and Debra Lee Lindaman (A.P. Mar. 1, 2019, Settled); In re Arthur Viola (A.P. Mar. 1, 2019, Settled)

Actions against Respondents, an accounting firm, an accountant, and an audit engagement quality reviewer, for allegedly conducting deficient audits in violation of PCAOB standards and Regulation S-X. According to the SEC, in the course of auditing five public companies, Respondent accountant and her firm failed to collect sufficient evidence, adequately review financial information, and properly document the audits, among other deficiencies. The SEC further alleges that Respondent reviewer’s engagement quality reviews failed to comply with
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SEC v. Spartan Securities Group, Ltd., et al. (M.D. Fla. Feb. 20, 2019, Contested)

Action against Defendants, a transfer agent, a broker-dealer, and its principals, for alleged creation and sale of sham companies.  According to the SEC, Defendants broker-dealer and transfer agents manufactured numerous fake public companies which they then sold.  The SEC further alleges that two Defendant principals signed and submitted FINRA and DTC applications that contained false information, and the third Defendant principal failed to acquire sufficient knowledge about the companies and investigate areas of concern raised
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SEC v. Castleberry Financial Services Group, LLC, et al. (S.D. Fla. Feb. 19, 2019, Contested)

Action against Defendants, an investment fund and its principals, for allegedly defrauding investors.  According to the SEC, Defendants made misrepresentations about their investment portfolio and amount of capital.  The SEC further alleges that Defendant principals misappropriated investor funds.

SEC Complaint

SEC Litigation Release

SEC Press Release
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In re Deloitte Touche Tohmatsu, et al. (A.P. Feb. 13, 2019, Settled)

Action against Respondents, an audit firm, its CEO, and its Reputation and Risk Leader, for alleged violations of auditor independence requirements.  According to the SEC, Respondents audited a firm with a banking subsidiary at which the individual Respondents and other audit partners and team members maintained account balances that exceeded amounts insured by the Deposit Insurance Corporation of Japan, which was in violation of Regulation S-X.  Respondent firm has agreed to pay disgorgement of $971,722,
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In re Joseph S. Amundsen, CPA, et al. (A.P. Feb. 8, 2019, Contested)

Action against Respondents, two certified public accountants and their firm, for alleged violations of auditor independence requirements.  According to the SEC, one Respondent accountant, who was previously permanently enjoined from practicing before the SEC, violated independence requirements by performing duties as an Engagement Quality Reviewer on broker-dealer audits for which his daughter was the financial and operations principal.  The SEC alleges that the other Respondent accountant permitted this practice in his capacity as engagement partner
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In re LBB Associates LTD., LLP, and Carlos Lopez, CPA (A.P. Jan. 14, 2018, Contested)

Action against Respondents, an accounting firm and its managing partner, for alleged violations of PCAOB standards while auditing a technology firm.  According to the SEC, Respondents failed to investigate red flags suggesting that undisclosed related-party transactions had occurred, improperly reviewed known related-party transactions, and allowed the same person to serve as both engagement and EQR partner on the audits, contrary to PCAOB standards.

SEC Order
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In re Katz, Sapper & Miller, LLP, and Scott C. Price, CPA (A.P. Jan. 9, 2019, Settled)

Action against Respondents, an accounting firm and one of its partners, for alleged misconduct related to investment fund audits.  According to the SEC, Respondents violated the Advisers Act’s custody rule by auditing the same financial statements that they themselves prepared.  The SEC also alleges that Respondents lacked relevant knowledge, training, and experience, failed to exercise due professional care, and, with respect to Respondent firm, failed to implement sufficient quality control standards.  Respondent firm has agreed
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In re Lightyear Capital LLC (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a registered investment adviser, for alleged violations of the Investment Advisers Act with respect to the management of private equity and employee funds.  According to the SEC, Respondent failed to properly allocate certain expenses to certain of its funds and co-investors and failed to properly offset management fees in connection with fee-sharing agreements and implement policies, including ones consistent with representations to investors.  Respondent has agreed to pay a civil penalty of
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SEC v. Joseph A. Meyer, Jr. and Statim Holdings, Inc. (N.D. Ga. Dec. 26, 2018, Contested)

Action against Defendants, an investment adviser and its principal, for alleged fraud against investors. According to the SEC, Defendants misappropriated funds from the investment fund they managed and falsified the fund’s books to support illusory promises of guaranteed returns and loss protection.

SEC Litigation Release

SEC Complaint
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In re JPMorgan Chase Bank, N.A. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a financial services firms, in connection with an industry-wide sweep into practices related to the pre-release of American Depositary Receipts (ADRs).  According to the SEC, Respondent pre-released ADRs to pre-release brokers pursuant to an agreement which required the broker receiving the pre-released ADRs to represent, among other things, that it beneficially owned the ordinary shares (or an equivalent security) represented by the ADRs.  The SEC alleges that Respondent should have known or
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In re American Portfolios Advisors, Inc. (A.P. Dec. 21, 2018, Settled)

Action against Respondent, an investment adviser, for alleged violations of the antifraud and compliance provisions of the federal securities laws.  According to the SEC, Respondent invested client funds in mutual fund share classes that charged 12b-1 fees when less expensive share classes were available.  The SEC alleges that Respondent failed to disclose conflicts of interest, violated the duty of best execution, and failed to maintain adequate compliance policies.  Respondent has agreed to pay disgorgement of
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In re Crowe Horwath, et al. (A.P. Dec. 21, 2018, Settled)

Action against Respondents, an auditing firm and two of its partners, for alleged audit standard violations.  According to the SEC, Respondents conducted a deficient audit despite known fraud risks and failed to maintain independence due to an ongoing business relationship with the audited company.  Respondent firm and partners have agreed to pay respective civil penalties of $1.5 million, $25,000, and $15,000.  Respondent partners have agreed not to appear or practice as accountants before the SEC.
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In re Wealthfront Advisers, LLC (f/k/a Wealthfront, Inc.) (A.P. Dec. 21, 2018, Settled)

Action against Respondent, a robo-adviser, for alleged false statements to clients.  According to the SEC, Respondent failed to monitor client accounts for transactions that would cause wash sales, despite promising to do so, improperly published client testimonials, improperly paid for client referrals, and failed to implement adequate policies, procedures, and a compliance program.  Respondent has agreed to pay a civil penalty of $250,000.

SEC Order

SEC Press Release
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In re PPS Advisors, Inc., and Lawrence Nicholas Passaretti (A.P. Dec. 21, 2018, Settled)

Action against Respondents, an investment adviser and its CEO, for alleged violations of the antifraud and compliance provisions of the federal securities laws.  According to the SEC, Respondents invested client funds in mutual fund share classes that charged 12b-1 fees when less expensive share classes were available.  The SEC alleges that Respondents failed to disclose conflicts of interest, violated the duty of best execution, and failed to maintain adequate compliance policies.  Respondents have agreed to
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