SEC Issues $4 Million Whistleblower Award

The Securities and Exchange Commission today announced an award of more than $4 million to a whistleblower whose original information alerted the agency to a fraud.

The SEC’s whistleblower program has awarded more than $111 million to 34 whistleblowers since its inception in 2011.

“Our program continues to incentivize whistleblowers to come forward with solid information that helps us bring violators to justice before more wrongdoing can occur,” said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

Whistleb... Read More

Ernst & Young, Former Partners Charged With Violating Auditor Independence Rules

The Securities and Exchange Commission today announced that public accounting firm Ernst & Young has agreed to pay $9.3 million to settle charges that two of the firm’s audit partners got too close to their clients on a personal level and violated rules that ensure firms maintain their objectivity and impartiality during audits.

SEC investigations found that the senior partner on an engagement team for the audit of a New York-based public company maintained an improperly close friendship with its chief financial officer, and a different partner serving on an engagement team for the audit of another public company was romantically involved with its chief accounting officer.  Ernst & Young misrepresented in audit reports issued with the companies’ financial statements t... Read More

Marijuana-Related Company Charged with Scheming Investors

The Securities and Exchange Commission today announced fraud charges in a scheme involving illegal stock sales and false financial filings of a company that makes containers for growing marijuana.

An SEC investigation found that William J. Sears orchestrated the scheme along with his brother-in-law Scott M. Dittman, who was the CEO and sole officer at Fusion Pharm Inc. while Sears concealed his control from behind the scenes.  Sears and Dittman hired Cliffe R. Bodden to help them create fraudulent corporate documents that enabled Fusion Pharm to issue common stock to three other companies controlled by Sears, who then illegally sold the restricted stock into the market for $12.2 million in profits while hiding the companies’ connection to Fusion Pharm.  Sears transferred some... Read More

Jennifer Marietta-Westberg, Deputy Director and Deputy Chief Economist of the Division of Economic and Risk Analysis, to Leave SEC after Ten Years of Service

The Securities and Exchange Commission announced today that Jennifer Marietta-Westberg, Deputy Chief Economist and Deputy Director of the SEC’s Division of Economic and Risk Analysis, is planning to leave the agency after 10 years of public service.

Dr. Marietta-Westberg joined the SEC as a Visiting Scholar in 2006. She became an Assistant Director in 2010 and was appointed Deputy Chief Economist and Deputy Director in 2013. Dr. Marietta-Westberg oversees the provision of economic analysis in support of Commission policy and rulemaking in the areas of asset management, broker-dealers, credit rating agencies, and market microstructure. She was elected as the Chair of the International Organization of Securities Commissions’ Committee on Emerging Risks in 2015, and she oversees... Read More

“Stock Trading Whiz Kid” to Pay $1.5 Million to Settle Stock Newsletter Fraud Charges

The Securities and Exchange Commission today announced that a self-proclaimed “stock trading whiz kid” and his stock newsletter company in Los Angeles have agreed to pay nearly $1.5 million to settle charges that they defrauded subscribers through false statements and misrepresentations.

According to the SEC’s complaint, Manuel E. Jesus and his newsletter company Wealthpire Inc. used advertising materials and websites touting him as “the untutored prodigy of stock investing” under the alias Manny Backus.  A self-purported “math whiz” who boasted a “skyscraping” IQ and training as a professional chess player, Backus claimed to be actively trading in the stock market with “real money” by age 19.  The SEC’s complaint also states that Wealthpire materials claimed that Backus made... Read More

SEC: Company Failed to Disclose Credit Risk in Investments

The Securities and Exchange Commission today announced that a Portuguese-based telecommunications company has agreed to pay a $1.25 million penalty for its failure to properly disclose the nature and extent of credit risk involved in its investments in debt instruments issued by companies of Portuguese conglomerate Grupo Espirito Santo.

An SEC investigation found that Portugal Telecom SGPS S.A.’s 2013 financial statements had multiple disclosure failures.  As a result of these failures, Portugal Telecom’s investors were unable to form an overall picture of the risks arising from the company’s investment in Grupo Espirito Santo debt instruments.  The Grupo Espirito Santo investments constituted 82 percent of Portugal Telecom’s short-term investments.  The SEC further found tha... Read More

BOK Financial, Senior Executive Charged With Turning Blind Eye to Investment Scheme

The Securities and Exchange Commission today announced that a subsidiary of Oklahoma-based BOK Financial Corporation has agreed to pay more than $1.6 million to settle charges that it concealed numerous problems and red flags from investors in municipal bond offerings to purchase and renovate senior living facilities. 

The agency also filed a complaint in federal court against a former senior vice president at the bank, Marrien Neilson, who allegedly was chiefly responsible for the failures of the bank’s corporate trust department while overseeing what turned out to be fraudulent bond offerings managed by Christopher F. Brogdon, an Atlanta-based businessman.  Brogdon has since been charged with fraud and ordere... Read More

Two Firms Charged With Compliance Failures in Wrap Fee Programs

The Securities and Exchange Commission today announced that two investment advisory firms are settling charges related to compliance failures within their wrap fee programs.

SEC investigations found that St. Petersburg, Fla.-based Raymond James & Associates and Milwaukee-based Robert W. Baird & Co. failed to establish policies and procedures necessary to determine the amount of commissions their clients were being charged when sub-advisers “traded away” with a broker-dealer outside the wrap fee programs.  Without this information, the firms’ financial advisors were unable to provide the magnitude of these costs to clients and did not consider these commissions when determining whether the sub-advisers or the wrap fee programs were suitable for clients, leaving certain... Read More

Executives Charged With Inflating Performance of Real Estate Investment Trust

The Securities and Exchange Commission today charged two former accounting executives with overstating the financial performance of a large publicly-traded real estate investment trust (REIT) then known as American Realty Capital Properties (ARCP) by purposely inflating a key metric used by analysts and investors to assess the company.

According to the SEC’s complaint, then-chief financial officer Brian S. Block and then-chief accounting officer Lisa P. McAlister devised a scheme to manipulate the calculation of ARCP’s adjusted funds from operations (AFFO), a non-GAAP measure used when the company provided earnings guidance.  After warnings from internal accounting staff that an incorrect method was used to calculate AFFO in ARCP’s 2014 first quarter financial results, Block ... Read More

SEC Names Sarah G. ten Siethoff Deputy Associate Director in the Division of Investment Management’s Rulemaking Office

The Securities and Exchange Commission today announced that Sarah G. ten Siethoff has been named Deputy Associate Director in the Division of Investment Management’s Rulemaking Office. As Deputy Associate Director, Ms. ten Siethoff will develop recommendations for rulemaking and other policy initiatives under the Investment Company and Investment Advisers Acts of 1940. Ms. ten Siethoff also will oversee management of key rulemaking projects related to funds and investment advisers.

Ms. ten Siethoff has been a member of the Division of Investment Management since 2008, serving as Assistant Director, Senior Special Counsel and Senior Counsel in the Division’s Rulemaking Office. Prior to her SEC service, Ms. ten Siethoff was an Associate with Cleary Gottlieb Steen and Hamilton L... Read More

SEC Charges CEO and Paid Promoter With Fraudulently Promoting Stock of Las Vegas Health Products Company

The Securities and Exchange Commission today charged the CEO of a sexual health products retailer and a paid promoter with orchestrating fraudulent promotional campaigns to tout the company’s stock.

The SEC alleges that Scott S. Fraser, who also was a major shareholder in Las Vegas-based Empowered Products Inc., separately ran a newsletter publishing business and hired Nathan Yeung to secretly help him promote Empowered Products through online newsletter articles purportedly authored by independent writers.  But Fraser and Yeung actually authored, authorized, and distributed the rosy articles about Empowered Products themselves, working under such pseudonyms as “Charlie Buck” and then hiring other promoters to disseminate the promotions to their respective subscribe... Read More