Blog Posts Tagged With SEC

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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In re Fresenius Medical Care AG & Co. KGaA (A.P. Mar. 29, 2019, Settled)

Action against Respondent, a German medical products and services company, for alleged violations of the FCPA’s anti-bribery, books and records, and internal accounting provisions. According to the SEC, Respondent made improper payments in a number of different countries to obtain business and failed to maintain adequate accounting controls and compliance measures. Respondent has agreed to pay disgorgement of $135 million and prejudgment interest of $12 million. The SEC did not impose a penalty due to
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SEC v. Keith Borge (S.D.N.Y. Mar. 28, 2019, Contested)

Action against Defendant, a former controller of a not-for-profit college, for alleged fraud related to the state of the college’s finances. The SEC alleges that Defendant falsified financial records, failed to file certain tax submissions, and failed to determine the likelihood that pledged donations would still be received in an effort to hide the school’s worsening financial performance from municipal bond investors.

SEC Complaint

SEC Press Release
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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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SEC v. Carol Ann Pedersen (C.D. Cal Mar. 20, 2019, Contested)

Action against Defendant, a former CPA and unregistered investment adviser, for an alleged Ponzi scheme. According to the SEC, Defendant falsely represented to investors that their funds would be invested in “federally guaranteed” securities and falsified account statements. The SEC alleges that Defendant misappropriated investor funds for payments to other investors and for personal use. Defendant has pleaded guilty in a parallel criminal action.

SEC Complaint

SEC Litigation Release
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SEC v. Timothy W. Crawford, et al. (S.D. Ohio Mar. 19, 2019, Contested)

Action against Defendants, an oil-and-gas penny stock company and its former CEO, for allegedly concealing in financial reports the loss of the company’s major revenue source. According to the SEC, after losing control over two oil-and-gas leases, Defendants made misrepresentations to investors in quarterly reports to conceal that development. The SEC also alleges that Defendants raised additional money from investors while improperly withholding information about the loss of revenue source, misreported the CEO’s stock ownership,
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SEC v. Kent R.E. direct, et al. (C.D. Cal Mar. 18, 2019, Contested)

Action against Defendants, two pastors, their church, and a related asset management company, for an alleged Ponzi scheme. According to the SEC, Defendants fraudulently solicited investments through radio and television advertisements, misappropriated funds, and made Ponzi-like payments to pay returns to investors.

SEC Complaint

SEC Litigation Release
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SEC v. Dale M. Walker (M.D. Ga. Mar. 15, 2019, Settled)

Action against Defendant, a former county manager, for an alleged conflict of interest in connection with a public pension fund. According to the SEC, Defendant, who was involved in the pension fund’s selection of an investment adviser, gave an unfair competitive advantage to an investment adviser due to his undisclosed relationship with a person associated with the adviser. The SEC alleges that Defendant gave confidential proposals to this adviser to review and falsely represented that
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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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Senators Propose Doubling SEC Deadline for Recovering Investor Money from Fraudsters (Mar. 14, 2019)

Two members of the Senate Banking Committee introduced the Securities Fraud Enforcement and Investor Compensation Act in the Senate. The bill seeks to amend the Exchange Act to give the SEC ten years to seek restitution for investors from fraudulent actors while maintaining the five-year limitation on SEC disgorgement actions set forth in the Supreme Court’s 2017 decision in Kokesh v. SEC.

Law360 Coverage
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SEC v. Volkswagen Aktiengesellschaft, et al. (N.D. Cal. Mar. 14, 2019, Contested)

Action against Defendants, an auto manufacturer, two of its subsidiaries, and its former CEO, for alleged fraud in connection with misstatements made about vehicle emissions. According to the SEC, Defendants knew that some of their vehicles exceeded legal emissions limits and passed emissions tests due only to a device installed on the cars. The SEC alleges that Defendants made false and misleading statements to investors and underwriters to conceal this information while issuing over $13
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Congressman Proposes Requiring Public Companies to Disclose Board Members’ Cybersecurity Expertise (Mar. 13, 2019)

A member of the House Intelligence Committee has reintroduced the Cybersecurity Disclosure Act of 2019 that would require the SEC to issue a set of rules making publicly traded companies disclose whether any of their board members have cybersecurity expertise, and if not, to justify the skills gap. A companion bill is pending in the Senate.
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SEC v. Diane D. Dalmy (D. Colo. Mar. 13, 2019, Contested)

Action against Defendant, an attorney, for alleged fraud related to the preparation of opinion letters regarding microcap securities. According to the SEC, Defendant continued to draft letters after a major microcap quotation and trading system banned Defendant from providing legal opinion letters. The SEC alleges that Defendant hired another attorney to sign the letters without performing additional due diligence.

SEC Complaint 

SEC Litigation Release
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In re Kiarash (Kia) Jam (A.P. Mar. 12, 2019, Settled)

Action against Respondent, a film producer, for alleged offering frauds. According to the SEC, Respondent falsely informed investors that he was raising money to take an auction site private and to spin off a separate business unit from that site. The SEC alleges that Respondent misappropriated investor funds and misrepresented information, including the amount of money raised, the number of shares for sale, and the purported involvement of a broker-dealer. Respondent has agreed to pay
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In re Lumber Liquidators Holdings, LLC (A.P. Mar. 12, 2019, Settled)

Action against Respondent, a flooring retailer, for alleged fraud on investors. According to the SEC, Respondent falsely informed investors that its products complied with environmental regulations. Respondent has agreed to pay disgorgement of $6,037,838 and prejudgment interest of $59,660. The SEC did not impose a civil penalty due to Respondent’s agreement to pay $33 million in criminal fines and forfeiture, less disgorgement paid to the SEC, in a parallel criminal action.

SEC Order

SEC Press
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SEC v. River North Equity LLC, et al. (N.D. Ill. Mar. 11, 2019, Contested)

Action against Defendants, a securities trading company, two microcap entertainment companies, and six individuals, for alleged market manipulation and unlawful stock offerings. According to the SEC, Defendants operated a scheme involving falsified financial statements and fraudulent statements on social media to sell the microcap companies’ unregistered stock to the public.

SEC Complaint

SEC Litigation Release
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SEC Announces Settled Charges with 79 Investment Advisers in Share Class Selection Disclosure Initiative (Mar. 11, 2019)

Actions against Respondents, 79 investment advisers, for alleged violations of the antifraud and compliance provisions of the Advisers Act. According to the SEC, Respondents invested client funds in mutual fund share classes that charged 12b-1 fees directly or indirectly received by Respondents when less expensive share classes were available and failed to properly disclose this conflict of interest to their clients. The settlements stem from the SEC’s Share Class Selection Disclosure Initiative, which generally offered
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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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SEC v. William Neil “Doc” Gallagher, et al. (N.D. Tex. Mar. 7, 2019, Contested)

Action against Defendants, a radio host and his two companies, for an alleged Ponzi scheme. According to the SEC, Defendant host used his radio shows to solicit investors in his fund, falsely stating that he was a licensed investment adviser and falsely claiming that his fund offered certain guaranteed returns. The SEC alleges that Defendants misappropriated investor funds for personal expenses and to pay other investors and that Defendant host sent investors falsified statements.

SEC
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