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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Cato Institute v. SEC, et al. (D.D.C. Jan. 9, 2019)

The Cato Institute has sued the SEC under the Free Speech Clause of the First Amendment. The suit is a facial challenge to 17 C.F.R. § 202.5(e), under which a defendant or respondent in an SEC enforcement action must agree not to deny the SEC’s allegations as a condition of settlement.  According to Cato, the regulation is an unconstitutional content-based restriction on free speech.  The Institute’s complaint states that it is seeking to publish a
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Emulex Corp., et al. v. Gary Varjabedian, et al. (U.S. Supreme Court, Jan. 4, 2019)

The Supreme Court has granted a petition for writ of certiorari asking whether the proper liability standard in cases brought under Section 14(e) of the Exchange Act, which prohibits material misstatements or omissions in connection with a tender offer, is negligence instead of intent or scienter.  The Plaintiffs in this putative class action allege that Defendants failed to disclose unfavorable information about a proposed merger.  The district court granted Defendants’ motion to dismiss, finding that
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In re Hertz Global Holdings, Inc., and The Hertz Corporation (A.P. Dec. 31, 2018, Settled)

Action against Respondents, a rental car company and its holding company, for alleged financial misstatements.  According to the SEC, Respondents misstated pretax income, failed to disclose material facts to investors, issued earnings guidance that was inaccurate based on internal analyses, and failed to maintain adequate accounting controls.  Respondents have agreed to pay a civil penalty of $16 million.

SEC Order
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In re Polycom, Inc. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a communication product company, for alleged violations of the FCPA’s books and records and internal accounting controls provisions.  According to the SEC, Respondent’s subsidiary provided discounts to distributors and resellers with the understanding that the discounts would be used to make cash payments to government officials who had influence over purchasing decisions.  The SEC further alleges that Respondent failed to maintain adequate accounting controls and lacked an effective anti-corruption compliance program with
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In re Centrais Elétricas Brasileiras S.A. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a partially state-owned Brazilian energy company, for alleged violations of the FCPA’s books and records and internal accounting controls provisions.  According to the SEC, officers of Respondent’s subsidiary engaged in a scheme to rig construction bids, inflate contract prices, and pay bribes to government officials.  The SEC further alleges that Respondent’s accounting controls were inadequate.  Respondent has agreed to pay a civil penalty of $2.5 million.

SEC Order

SEC Administrative Summary
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In re Nutriband, Inc., et al. (A.P. Dec. 26, 2018, Settled)

Action against Respondents, a nutritional patch manufacturer and two of its directors, for alleged filing of misleading statements.  According to the SEC, Respondents misrepresented the FDA’s jurisdiction over the company’s products and failed to disclose that the products required FDA approval.  Respondent directors have agreed to pay civil penalties of $25,000 each.

SEC Order
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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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In re ADT Inc. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a home security firm, for failure to comply with disclosure requirements with respect to non-GAAP financial measures.  According to the SEC, Respondent used non-GAAP metrics in its financial statements and failed to give equal or greater prominence to comparable GAAP metrics.  Respondent has agreed to pay a civil penalty of $100,000.

SEC Order
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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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