SEC Obtains Asset Freeze in Case of Investor Funds Stolen for Shopping Sprees

The Securities and Exchange Commission today announced an asset freeze it has obtained against three men who aren’t registered to sell investments and allegedly went on lavish shopping sprees with more than $5 million raised from investors to purportedly develop a resort.

In an emergency action filed in federal court in Atlanta, the SEC alleges that Matthew E. White, Rodney A. Zehner, and Daniel J. Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own and claimed the money would be used to fund the resort project.  But they never came close to raising the funds necessary to start the project, and meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Pr... Read More

SEC: State Street Misled Custody Clients About Prices for Foreign Currency Exchange Trades

The Securities and Exchange Commission today announced that State Street Bank and Trust Company has agreed to pay $382.4 million in a global settlement for misleading mutual funds and other custody clients by applying hidden markups to foreign currency exchange trades. 

As part of its custody bank line of business, State Street safeguards clients’ financial assets and offers such services as indirect foreign currency exchange trading (Indirect FX) for clients to buy and sell foreign currencies as needed to settle their transactions involving foreign securities.  An SEC investigation found that State Street realized substantial revenues by misleading custody clients about Indirect FX, telling some clients that it guaranteed the most competitive rates available on their foreign... Read More

LAN Airlines Settles FCPA Charges

The Securities and Exchange Commission today announced that South American-based LAN Airlines has agreed to pay more than $22 million to settle parallel civil and criminal cases related to improper payments it authorized during a dispute between the airline and its union employees in Argentina.

An SEC investigation found that when LAN encountered problems negotiating labor agreements with the unions, it was contacted by a consultant from Argentina who offered to negotiate on the company’s behalf.  The consultant made clear that he would expect compensation for such negotiations, and that payments would be made to third parties who had influence over the unions.  LAN’s CEO approved $1.15 million in payments to the consultant through a sham contract for a purported study of e... Read More

Vincente L. Martinez, Chief of Office of Market Intelligence, to Leave SEC

The Securities and Exchange Commission today announced that Vincente L. Martinez, Chief of the SEC’s Office of Market Intelligence is planning to leave the agency in early August.

Mr. Martinez began working in the SEC’s Enforcement Division in 2003 as a staff attorney and senior counsel.  He became one of the first Assistant Directors in the Office of Market Intelligence when it was formed in 2010 as part of a major restructuring of the Enforcement Division.  Mr. Martinez left the SEC in 2011 to become the first Director of the Whistleblower Office at the Commodity Futures Trading Commission, and he returned to the SEC in 2013 to begin serving as Chief of the Office of Market Intelligence.

“Under Vince’s lea... Read More

Deputy Chief Accountant Brian T. Croteau to Leave SEC

The Securities and Exchange Commission today announced that Brian T. Croteau, Deputy Chief Accountant, is planning to leave the agency.

Since he was appointed Deputy Chief Accountant in 2010, Mr. Croteau has managed the activities of the Office of Chief Accountant’s Professional Practice group.  In this position, Mr. Croteau has played a key role in the Commission’s work related to overseeing the activities of the Public Company Accounting Oversight Board (PCAOB), managing the resolution of auditor independence matters, monitoring and addressing matters related to requirements for internal control over financial reporting (ICFR), and monitoring audit and independence standard-setting internationally.

“It has been a pleasure and honor to work with Brian for nearly two ... Read More

SEC Halts Ongoing Fraudulent Stock Scheme

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The Securities and Exchange Commission today announced it has won a court-ordered asset freeze to halt an ongoing fraud by two former brokers with disciplinary histories who allegedly raised more than $5 million from investors without using the money as promised.

In an emergency action filed in federal court in Chattanooga, Tenn., the SEC allege... Read More

Accountant Suspended for Failing to Spot Fraud in Company Audit

The Securities and Exchange Commission today suspended an accountant for conducting a faulty audit of the financial statements of a public company that was committing fraud, and the firm where he was a partner at the time has been prohibited from accepting new public company clients for one year.

New York-based accounting firm EFP Rotenberg LLP also agreed to pay a $100,000 penalty to settle the SEC’s charges, and it can only begin accepting new public company clients again next year after an independent consultant certifies that the firm has corrected the causes of its audit failures.  The accountant, Nicholas Bottini, agreed to pay a $25,000 penalty in addition to being permanently suspended from appearing and practicing before the SEC as an accountant, which includes not p... Read More

Wesley R. Bricker Named Interim Chief Accountant

The Securities and Exchange Commission today announced that Wesley R. Bricker has been named the Commission’s Interim Chief Accountant responsible for the activities of the Office of the Chief Accountant as James V. Schnurr, current Chief Accountant, recovers from a serious bicycle accident.

Mr. Bricker, as Interim Chief Accountant, will serve as the principal advisor to the Commission on accounting and auditing matters. He will also consult with registrants, auditors and other industry representatives, and be responsible for the oversight of the Financial Accounting Standards Board (FASB) and the Public Company Accounting Oversight Board (PCAOB), and carry out the other duties of the Chief Accountant.

“Wes’ expert knowledge, leadership and analytic skills and Jim’s e... Read More

Kurt Gottschall Named Associate Regional Director in the SEC’s Denver Regional Office

The Securities and Exchange Commission today announced that Kurt L. Gottschall has been named the Associate Regional Director for enforcement in the Denver office.

Mr. Gottschall began working as a staff attorney in the Denver office’s Division of Enforcement in 2000, before becoming a Branch Chief in 2003, and an Assistant Regional Director in 2010. Since 2012, he worked in the Asset Management Unit, which focuses on misconduct by investment advisers and investment companies. During his career with the SEC, Mr. Gottschall has investigated or supervised dozens of enforcement matters involving a variety of securities law violations, including:

• Charges against an alternative fund manager for overchargin... Read More

SEC Announces Agenda for July 19 Meeting of the Advisory Committee on Small and Emerging Companies

The Securities and Exchange Commission today announced the agenda for the July 19 meeting of its Advisory Committee on Small and Emerging Companies.  The Committee will focus on the first year of Regulation A+, recommendations related to the definition of an “accredited investor,” and the Commission’s recent proposal to amend the definition of “smaller reporting company.”

The meeting on July 19 will begin at 9:30 a.m. in the multipurpose room at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public.  It will be webcast live on the SEC’s website and archived on the website for later viewing. 

The committee provides a formal mechanism for the SEC to receive advice an... Read More

SEC Charges Investment Adviser With Failing to Clearly Disclose Additional Costs to Investors

The Securities and Exchange Commission today announced an enforcement action against an investment advisory firm that failed to properly prepare clients for additional transaction costs beyond the “wrap fees” they pay to cover the cost of several services bundled together.

In wrap fee programs, subadvisers typically use a sponsoring brokerage firm to execute their trades on behalf of clients, and the costs of those trades are included in the annual wrap fee that each client pays. 

An SEC investigation found that Richmond, Va.-based RiverFront Investment Group disclosed to investors in Forms ADV that client trades were typically executed through the sponsoring broker so the wrap fee would cover the transaction costs.  But RiverFront actually used br... Read More

SEC Adopts Amendments to Rules of Practice for Administrative Proceedings

The Securities and Exchange Commission today adopted amendments updating its rules of practice governing its administrative proceedings.

“The amendments to the Commission’s rules of practice provide parties with additional opportunities to conduct depositions and add flexibility to the timelines of our administrative proceedings, while continuing to promote the fair and timely resolution of the proceedings,” said SEC Chair Mary Jo White.

In September 2015, the Commission proposed for comment amendments to its rules of practice. 

After careful consideration of the comments received, the Commission adopted final amendments that, among other things:

• Extend the potential length of the prehearing period from the current ... Read More