Auditor Charged With Insider Trading on Client’s Nonpublic Information

The Securities and Exchange Commission today announced that an auditor based in the Silicon Valley has agreed to settle charges that he traded on inside information about a client on the verge of a merger.

The SEC’s order finds that through his work at an independent audit firm, Nima Hedayati learned that Fremont, Calif.-based Lam Research Corporation was making preparations to acquire Milpitas, Calif.-based KLA-Tencor Corporation.  The two companies manufacture equipment used in the creation of semiconductors. 

According to the SEC’s order, Hedayati proceeded to purchase out-of-the money call options in KLA common stock in his brokerage account as well as his fiancée’s brokerage account, and he also encouraged his mother to purchase KLA common stock.  After merger plans were publicly announced, KLA’s stock price increased nearly 20 percent, and Hedayati and his mother collectively profited by more than $43,000 from the illegal trades.  Hedayati’s employer terminated him when it discovered his misconduct.

“Hedayati abused his important position of trust and responsibility by illicitly trading on an audit client’s nonpublic information in a quest for an easy profit, and it wound up costing him a lot more in the end,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.

Without admitting or denying the SEC’s findings, Hedayati agreed to pay disgorgement of $43,027.59 plus $1,269.70 in interest and a $43,027.59 penalty for a total of more than $87,000.  Hedayati agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.  The SEC’s order permits him to apply for reinstatement after five years.

The SEC’s investigation was conducted by Matthew Meyerhofer and supervised by Tracy L. Davis in the San Francisco office.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

SEC, National Bank of Belgium Agree to Enhanced Cooperation and Information Sharing Regarding Euroclear

The Securities and Exchange Commission today announced that it has entered into an arrangement with the National Bank of Belgium to enhance cooperation and information sharing regarding expanded services by Euroclear Bank, which provides clearance and settlement through its operation of the Euroclear System.

Brussels-based Euroclear Bank is subject to prudential supervision and oversight by the National Bank of Belgium as a credit institution and as a clearing agency.  The SEC granted Euroclear’s predecessor an exemption from registration as a clearing agency in 1998, allowing it to provide clearing services for U.S. government securities.  On Dec. 16, 2016, the SEC approved Euroclear’s application to modify its exemption from registration, enabling it to also provide limited clearing agency services for U.S. equity securities.

On March 9, 2017, the SEC and the National Bank of Belgium added an addendum to their 2001 Understanding Regarding An Application of Euroclear Bank for an Exemption under U.S. Federal Securities Laws regarding Euroclear’s clearing activities in the U.S., enhancing their ability to exchange information about Euroclear’s new services.

“This addendum will expand the signatories’ ability to cooperate and exchange information related to Euroclear Bank and augment the SEC’s oversight of Euroclear Bank’s activities under its exemption order,” said Paul A. Leder, Director of the SEC’s Office of International Affairs.

SEC, National Bank of Belgium Agree to Enhanced Cooperation and Information Sharing Regarding Euroclear

The Securities and Exchange Commission today announced that it has entered into an arrangement with the National Bank of Belgium to enhance cooperation and information sharing regarding expanded services by Euroclear Bank, which provides clearance and settlement through its operation of the Euroclear System.

Brussels-based Euroclear Bank is subject to prudential supervision and oversight by the National Bank of Belgium as a credit institution and as a clearing agency.  The SEC granted Euroclear’s predecessor an exemption from registration as a clearing agency in 1998, allowing it to provide clearing services for U.S. government securities.  On Dec. 16, 2016, the SEC approved Euroclear’s application to modify its exemption from registration, enabling it to also provide limited clearing agency services for U.S. equity securities.

On March 9, 2017, the SEC and the National Bank of Belgium added an addendum to their 2001 Understanding Regarding An Application of Euroclear Bank for an Exemption under U.S. Federal Securities Laws regarding Euroclear’s clearing activities in the U.S., enhancing their ability to exchange information about Euroclear’s new services.

“This addendum will expand the signatories’ ability to cooperate and exchange information related to Euroclear Bank and augment the SEC’s oversight of Euroclear Bank’s activities under its exemption order,” said Paul A. Leder, Director of the SEC’s Office of International Affairs.

Auditor Charged With Insider Trading on Client’s Nonpublic Information

The Securities and Exchange Commission today announced that an auditor based in the Silicon Valley has agreed to settle charges that he traded on inside information about a client on the verge of a merger.

The SEC’s order finds that through his work at an independent audit firm, Nima Hedayati learned that Fremont, Calif.-based Lam Research Corporation was making preparations to acquire Milpitas, Calif.-based KLA-Tencor Corporation.  The two companies manufacture equipment used in the creation of semiconductors. 

According to the SEC’s order, Hedayati proceeded to purchase out-of-the money call options in KLA common stock in his brokerage account as well as his fiancée’s brokerage account, and he also encouraged his mother to purchase KLA common stock.  After merger plans were publicly announced, KLA’s stock price increased nearly 20 percent, and Hedayati and his mother collectively profited by more than $43,000 from the illegal trades.  Hedayati’s employer terminated him when it discovered his misconduct.

“Hedayati abused his important position of trust and responsibility by illicitly trading on an audit client’s nonpublic information in a quest for an easy profit, and it wound up costing him a lot more in the end,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.

Without admitting or denying the SEC’s findings, Hedayati agreed to pay disgorgement of $43,027.59 plus $1,269.70 in interest and a $43,027.59 penalty for a total of more than $87,000.  Hedayati agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.  The SEC’s order permits him to apply for reinstatement after five years.

The SEC’s investigation was conducted by Matthew Meyerhofer and supervised by Tracy L. Davis in the San Francisco office.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

Auditor Charged With Insider Trading on Client’s Nonpublic Information

The Securities and Exchange Commission today announced that an auditor based in the Silicon Valley has agreed to settle charges that he traded on inside information about a client on the verge of a merger.

The SEC’s order finds that through his work at an independent audit firm, Nima Hedayati learned that Fremont, Calif.-based Lam Research Corporation was making preparations to acquire Milpitas, Calif.-based KLA-Tencor Corporation.  The two companies manufacture equipment used in the creation of semiconductors. 

According to the SEC’s order, Hedayati proceeded to purchase out-of-the money call options in KLA common stock in his brokerage account as well as his fiancée’s brokerage account, and he also encouraged his mother to purchase KLA common stock.  After merger plans were publicly announced, KLA’s stock price increased nearly 20 percent, and Hedayati and his mother collectively profited by more than $43,000 from the illegal trades.  Hedayati’s employer terminated him when it discovered his misconduct.

“Hedayati abused his important position of trust and responsibility by illicitly trading on an audit client’s nonpublic information in a quest for an easy profit, and it wound up costing him a lot more in the end,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.

Without admitting or denying the SEC’s findings, Hedayati agreed to pay disgorgement of $43,027.59 plus $1,269.70 in interest and a $43,027.59 penalty for a total of more than $87,000.  Hedayati agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.  The SEC’s order permits him to apply for reinstatement after five years.

The SEC’s investigation was conducted by Matthew Meyerhofer and supervised by Tracy L. Davis in the San Francisco office.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

SEC FOIA Office Receives Award for Exceptional Service

The Securities and Exchange Commission today announced that its Office of Freedom of Information Act (FOIA) Services was recognized by the U.S. Department of Justice for “exceptional service” by FOIA professionals. 

The award to a team of 28 professionals recognized their work in handling a growing volume of FOIA requests while reducing the office’s backlog. Between fiscal 2010 and fiscal 2016, FOIA requests to the SEC rose by 38 percent while the number of completed requests in that period increased by 40 percent. 

“This award is a well-deserved recognition of the SEC’s FOIA team for their efforts to keep our agency open and accountable to the American people by building one of the best FOIA programs in the Federal Government,” said SEC Acting Chairman Michael Piwowar. “We depend on the trust of the public to serve on their behalf, and it is our responsibility to earn that trust by ensuring the freedom of information.”

Despite being a medium-sized agency, the SEC processes FOIA requests at a level received at much larger federal agencies, averaging nearly 15,000 per year in each of the last four years. In addition to increased volume, the FOIA requests to the agency have become increasingly complex. While many requests previously involved minimal time and effort to process, they now often entail multiple records over a span of years, resulting in hundreds or thousands of pages that require line-by-line reviews.

The Department of Justice award for exceptional service by a FOIA professional or team of FOIA professionals was presented at a ceremony at the Department of Justice to kickoff Sunshine Week, an annual event to highlight the importance of open government. 

The SEC’s Office of FOIA Services promotes transparency in government by making SEC records available to the public to the greatest extent possible under the Freedom of Information Act. The office is committed to providing a timely and efficient response to each of the requests for SEC documents and records it receives each year.

SEC FOIA Office Receives Award for Exceptional Service

The Securities and Exchange Commission today announced that its Office of Freedom of Information Act (FOIA) Services was recognized by the U.S. Department of Justice for “exceptional service” by FOIA professionals. 

The award to a team of 28 professionals recognized their work in handling a growing volume of FOIA requests while reducing the office’s backlog. Between fiscal 2010 and fiscal 2016, FOIA requests to the SEC rose by 38 percent while the number of completed requests in that period increased by 40 percent. 

“This award is a well-deserved recognition of the SEC’s FOIA team for their efforts to keep our agency open and accountable to the American people by building one of the best FOIA programs in the Federal Government,” said SEC Acting Chairman Michael Piwowar. “We depend on the trust of the public to serve on their behalf, and it is our responsibility to earn that trust by ensuring the freedom of information.”

Despite being a medium-sized agency, the SEC processes FOIA requests at a level received at much larger federal agencies, averaging nearly 15,000 per year in each of the last four years. In addition to increased volume, the FOIA requests to the agency have become increasingly complex. While many requests previously involved minimal time and effort to process, they now often entail multiple records over a span of years, resulting in hundreds or thousands of pages that require line-by-line reviews.

The Department of Justice award for exceptional service by a FOIA professional or team of FOIA professionals was presented at a ceremony at the Department of Justice to kickoff Sunshine Week, an annual event to highlight the importance of open government. 

The SEC’s Office of FOIA Services promotes transparency in government by making SEC records available to the public to the greatest extent possible under the Freedom of Information Act. The office is committed to providing a timely and efficient response to each of the requests for SEC documents and records it receives each year.

SEC FOIA Office Receives Award for Exceptional Service

The Securities and Exchange Commission today announced that its Office of Freedom of Information Act (FOIA) Services was recognized by the U.S. Department of Justice for “exceptional service” by FOIA professionals. 

The award to a team of 28 professionals recognized their work in handling a growing volume of FOIA requests while reducing the office’s backlog. Between fiscal 2010 and fiscal 2016, FOIA requests to the SEC rose by 38 percent while the number of completed requests in that period increased by 40 percent. 

“This award is a well-deserved recognition of the SEC’s FOIA team for their efforts to keep our agency open and accountable to the American people by building one of the best FOIA programs in the Federal Government,” said SEC Acting Chairman Michael Piwowar. “We depend on the trust of the public to serve on their behalf, and it is our responsibility to earn that trust by ensuring the freedom of information.”

Despite being a medium-sized agency, the SEC processes FOIA requests at a level received at much larger federal agencies, averaging nearly 15,000 per year in each of the last four years. In addition to increased volume, the FOIA requests to the agency have become increasingly complex. While many requests previously involved minimal time and effort to process, they now often entail multiple records over a span of years, resulting in hundreds or thousands of pages that require line-by-line reviews.

The Department of Justice award for exceptional service by a FOIA professional or team of FOIA professionals was presented at a ceremony at the Department of Justice to kickoff Sunshine Week, an annual event to highlight the importance of open government. 

The SEC’s Office of FOIA Services promotes transparency in government by making SEC records available to the public to the greatest extent possible under the Freedom of Information Act. The office is committed to providing a timely and efficient response to each of the requests for SEC documents and records it receives each year.

Executives Charged With Manipulating Company’s Accounting Systems to Steal Money

The Securities and Exchange Commission today charged two former executives at a credit card processing company with masterminding a fraudulent scheme to steal millions of dollars through phony expense reimbursements, inflated invoices, and other improper accounting tactics.

The SEC’s complaint alleges that iPayment’s then-senior vice president of sales and marketing Nasir N. Shakouri and then-executive vice president and chief operating officer Robert S. Torino routinely reimbursed themselves for payments that were never actually made to third-party vendors using their personal credit cards.  They also allegedly conspired with vendors to inflate invoices and receive kickbacks from the overpayments, and claimed improper commissions and bonuses related to other corporate funds they improperly diverted in various ways.

The SEC’s complaint also charges three other iPayment executives – Bronson L. Quon, John S. Hong, and Jonathan K. Skarie – with participating in the scheme and helping Shakouri and Torino falsify books and records to hide the thefts of corporate funds.  Quon, Hong, and Skarie were allegedly rewarded for their assistance with misappropriated iPayment funds.

“As alleged in our complaint, these executives manipulated iPayment’s internal accounting systems, lied to the external auditor, and caused approximately $11.6 million in losses to the company,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office.

In a parallel action, the U.S. Attorney’s Office for the Central District of California today announced criminal charges against Shakouri and Torino. 

The SEC is seeking disgorgement of ill-gotten gains plus interest and penalties as well as officer-and-director bars.

The SEC’s investigation has been conducted by Kristin M. Pauley, Melissa A. Coppola, Maureen P. King, Roseann Daniello, Diego Brucculeri, Richard Hong, Nicholas Pilgrim, Scott B. York, and Valerie A. Szczepanik in the New York office.  The litigation will be led by Mr. Hong and Ms. Pauley along with John Bulgozdy, who works in the Los Angeles office.  The case is being supervised by Mr. Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, and the Internal Revenue Service.

Executives Charged With Manipulating Company’s Accounting Systems to Steal Money

The Securities and Exchange Commission today charged two former executives at a credit card processing company with masterminding a fraudulent scheme to steal millions of dollars through phony expense reimbursements, inflated invoices, and other improper accounting tactics.

The SEC’s complaint alleges that iPayment’s then-senior vice president of sales and marketing Nasir N. Shakouri and then-executive vice president and chief operating officer Robert S. Torino routinely reimbursed themselves for payments that were never actually made to third-party vendors using their personal credit cards.  They also allegedly conspired with vendors to inflate invoices and receive kickbacks from the overpayments, and claimed improper commissions and bonuses related to other corporate funds they improperly diverted in various ways.

The SEC’s complaint also charges three other iPayment executives – Bronson L. Quon, John S. Hong, and Jonathan K. Skarie – with participating in the scheme and helping Shakouri and Torino falsify books and records to hide the thefts of corporate funds.  Quon, Hong, and Skarie were allegedly rewarded for their assistance with misappropriated iPayment funds.

“As alleged in our complaint, these executives manipulated iPayment’s internal accounting systems, lied to the external auditor, and caused approximately $11.6 million in losses to the company,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office.

In a parallel action, the U.S. Attorney’s Office for the Central District of California today announced criminal charges against Shakouri and Torino. 

The SEC is seeking disgorgement of ill-gotten gains plus interest and penalties as well as officer-and-director bars.

The SEC’s investigation has been conducted by Kristin M. Pauley, Melissa A. Coppola, Maureen P. King, Roseann Daniello, Diego Brucculeri, Richard Hong, Nicholas Pilgrim, Scott B. York, and Valerie A. Szczepanik in the New York office.  The litigation will be led by Mr. Hong and Ms. Pauley along with John Bulgozdy, who works in the Los Angeles office.  The case is being supervised by Mr. Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, and the Internal Revenue Service.

SEC Charges Firms Involved in Layering, Manipulation Schemes

The Securities and Exchange Commission today announced fraud charges against a Ukraine-based trading firm accused of manipulating the U.S. markets hundreds of thousands of times and the New York-based brokerage firm and CEO who allegedly helped make it possible.

The SEC’s complaint alleges that Avalon FA Ltd touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits.  Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period.  According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices.  Avalon allegedly used traders in Eastern Europe and Asia to conduct its trading, and the firm kept a portion of the profits and collected commissions from the traders.

The SEC’s complaint also describes fraud charges against Avalon’s named owner Nathan Fayyer and Sergey Pustelnik, who allegedly kept his controlling interest in Avalon undisclosed and embedded himself at Lek Securities as a registered representative, using his position to facilitate the schemes.

The SEC further alleges that Lek Securities and its owner Samuel Lek made the schemes possible by providing Avalon with access to the U.S. markets, approving the cross-market trading scheme, and improving its trading technology to assist Avalon’s trading.  According to the SEC’s complaint, Lek Securities also relaxed its layering controls after Avalon complained.  Avalon was the highest-producing customer for Lek Securities in terms of trading commissions, fees, and rebates generated.

“As alleged in our complaint, Avalon openly marketed itself as a destination for manipulative trading, and Lek Securities opened the gate to allow the schemes into the U.S. markets despite repeated warnings that its customer was manipulating the market,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement. 

After filing its complaint in U.S. District Court for the Southern District of New York, the SEC obtained an emergency court order freezing Avalon’s assets held in its account at Lek Securities as well as freezing and repatriating funds that Avalon has transferred overseas.

The SEC’s investigation was conducted by Sarah S. Nilson along with Owen A. Granke and Carolyn Welshhans of the Market Abuse Unit.  The case was supervised by Melissa Hodgman, Antonia Chion, and Robert A. Cohen.  The litigation will be led by David J. Gottesman, Olivia S. Choe, and Ms. Nilson.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

SEC Charges Firms Involved in Layering, Manipulation Schemes

The Securities and Exchange Commission today announced fraud charges against a Ukraine-based trading firm accused of manipulating the U.S. markets hundreds of thousands of times and the New York-based brokerage firm and CEO who allegedly helped make it possible.

The SEC’s complaint alleges that Avalon FA Ltd touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits.  Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period.  According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices.  Avalon allegedly used traders in Eastern Europe and Asia to conduct its trading, and the firm kept a portion of the profits and collected commissions from the traders.

The SEC’s complaint also describes fraud charges against Avalon’s named owner Nathan Fayyer and Sergey Pustelnik, who allegedly kept his controlling interest in Avalon undisclosed and embedded himself at Lek Securities as a registered representative, using his position to facilitate the schemes.

The SEC further alleges that Lek Securities and its owner Samuel Lek made the schemes possible by providing Avalon with access to the U.S. markets, approving the cross-market trading scheme, and improving its trading technology to assist Avalon’s trading.  According to the SEC’s complaint, Lek Securities also relaxed its layering controls after Avalon complained.  Avalon was the highest-producing customer for Lek Securities in terms of trading commissions, fees, and rebates generated.

“As alleged in our complaint, Avalon openly marketed itself as a destination for manipulative trading, and Lek Securities opened the gate to allow the schemes into the U.S. markets despite repeated warnings that its customer was manipulating the market,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement. 

After filing its complaint in U.S. District Court for the Southern District of New York, the SEC obtained an emergency court order freezing Avalon’s assets held in its account at Lek Securities as well as freezing and repatriating funds that Avalon has transferred overseas.

The SEC’s investigation was conducted by Sarah S. Nilson, Owen A. Granke, and Carolyn Welshhans, and the case was supervised by Melissa Hodgman, Antonia Chion, and Robert A. Cohen.  The litigation will be led by David J. Gottesman, Olivia S. Choe, and Ms. Nilson.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.