SEC Charges State Street for Pay-to-Play Scheme

The Securities and Exchange Commission today announced that State Street Bank and Trust Company agreed to pay $12 million to settle charges that it conducted a pay-to-play scheme through its then-senior vice president and a hired lobbyist to win contracts to service Ohio pension funds.

An SEC investigation found that Vincent DeBaggis, who headed State Street’s public funds group responsible for serving as custodians or sub-custodians to public retirement funds, entered into an agreement with Ohio’s then-deputy treasurer to make illicit cash payments and political campaign contributions.  In exchange, State Street received three lucrative sub-custodian contracts to safeguard certain funds’ investment assets and effect the settlement of their securities transactions... Read More

SEC Charges 11 Bank Officers and Directors With Fraud

The Securities and Exchange Commission today announced fraud charges against 11 former executives and board members at Superior Bank and its holding company involved in various schemes to conceal the extent of loan losses as the bank was faltering in the wake of the financial crisis.

The SEC alleges the high-ranking officers and directors schemed to mislead investors and bank regulators by propping up Superior Bank’s financial condition through straw borrowers, bogus appraisals, and insider deals.  Specifically they improperly extended, renewed, and rolled over bad loans to avoid impairment and the need to report ever-increasing allowances for loan and lease losses (ALLL) in its financial accounting.  As a result, Superior Bank overstated its net income in public ... Read More

SEC Adopts Rules Implementing FAST Act Provisions

The Securities and Exchange Commission today announced that it approved interim final rules implementing two provisions of the Fixing America’s Surface Transportation (FAST) Act, adopted by Congress in December, that revise financial reporting forms for emerging growth companies and smaller reporting companies.     

The Congressionally mandated rules revise Forms S-1 and F-1 to provide that as long as emerging growth companies’ registration statements include all required financial information at the time of the offering, they will be allowed to omit certain historical period financial information prior to the offering.  In addition, the rules revise Form S-1 to allow smaller reporting companies to use incorporation by reference for future filings the companies make under ... Read More

Julie M. Riewe, Co-Chief of Asset Management Unit, to Leave SEC After 10 Years of Service

The Securities and Exchange Commission today announced that Julie M. Riewe, Co-Chief of the Enforcement Division’s Asset Management Unit, is planning to leave the agency next month. 

As co-head of the unit for the past two-and-a-half years, Ms. Riewe has overseen a staff of nearly 80 attorneys, industry experts, and other professionals responsible for conducting investigations into investment advisers, investment companies, and private funds.  Co-Chief Marshall Sprung will continue to lead the unit following Ms. Riewe’s departure.

“Julie is incredibly intelligent, tenacious, and skilled at developing cases,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “She has helped our asset management enforcement unit to grow in it... Read More

SEC Announces 2016 Examination Priorities

The Securities and Exchange Commission today announced its Office of Compliance Inspections and Examinations’ (OCIE) 2016 priorities.  New areas of focus include liquidity controls, public pension advisers, product promotion, and two popular investment products – exchange-traded funds and variable annuities.  The priorities also reflect a continuing focus on protecting investors in ongoing risk areas such as cybersecurity, microcap fraud, fee selection, and reverse churning.

“These new areas of focus are extremely important to investors and financial institutions across the spectrum,” said SEC Chair Mary Jo White.  “Through information sharing and conducting comprehensive examinations, OCIE continues to promote compliance with the federal securities laws to better protect ... Read More

Steven A. Cohen Barred From Supervisory Hedge Fund Role

The Securities and Exchange Commission today announced that hedge fund manager Steven A. Cohen will be prohibited from supervising funds that manage outside money until 2018 in order to settle charges for failing to supervise a former portfolio manager who engaged in insider trading while employed at his firm.  In addition, Cohen’s family office firms will be subject to SEC examinations and the firms must retain an independent consultant to conduct periodic reviews of their activities to ensure compliance with securities laws.

“Before Cohen can handle outside money again, an independent consultant will ensure there are legally sufficient policies, procedures, and supervision mechanisms in place to detect and deter any insider trading,” said Andrew J. Ceresney, Dir... Read More

Fee Rate Advisory #3 for Fiscal Year 2016

The Securities and Exchange Commission today announced that starting on Feb. 16, 2016, the fee rates applicable to most securities transactions will be set at $21.80 per million dollars. 

Consequently, each SRO will continue to pay the Commission a rate of $18.40 per million for covered sales occurring on charge dates through Feb. 15, 2016, and a rate of $21.80 per million for covered sales occurring on charge dates on or after Feb. 16, 2016. 

For more information on the term “charge date,” please refer to Rule 31(a)(3) and Exchange Act Release No. 49928 at http://www.sec.gov/rules/final/34-49928.htm.

The assessment on security futures transactions will remain unchanged a... Read More

SEC: J.P. Morgan Misled Customers on Broker Compensation

The Securities and Exchange Commission today announced that J.P. Morgan’s brokerage business agreed to pay $4 million to settle charges that it falsely stated on its private banking website and in marketing materials that advisors are compensated “based on our clients’ performance; no one is paid on commission.”

An SEC investigation found that although J.P. Morgan Securities LLC (JPMS) did not pay commissions to registered representatives in its U.S. Private Bank, compensation was not based on client performance.  Advisors were instead paid a salary and a discretionary bonus based on a number of other factors.

“JPMS misled customers into believing their brokers had skin in the game and were being compensated based on the success of customer portf... Read More

Traders in China and Hong Kong Paying $920,000 to Settle Insider Trading Case

The Securities and Exchange Commission today announced that two traders in China and Hong Kong have agreed to pay more than $920,000 to settle an insider trading case against them.

Cousins and business associates Zhichen Zhou and Yannan Liu, whose assets were frozen by an emergency court order when the SEC’s complaint was filed against them last month, must disgorge their entire ill-gotten profits of $306,929.59 plus pay penalties of $306,929.59 each. The court approved the settlement today.

The SEC’s complaint alleged that Zhou and Liu traded two health care company stocks (MedAssets Inc. and Chindex International) based on nonpublic information about their impending acqui... Read More

SEC Issues Annual Staff Reports on Credit Rating Agencies

The Securities and Exchange Commission today issued its two annual staff reports on credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs).  The reports show that NRSROs have made operational improvements and have enhanced process accountability, controls and governance, and that smaller NRSROs have made competitive inroads in certain rating categories.

“These reports demonstrate the SEC’s vigilant oversight of the credit rating industry,” said Chair Mary Jo White.  “The staff’s continued efforts are yielding valuable results as we are seeing improvements in the overall compliance cultures at many of the credit rating agencies."

The annual examination report summarizes the staff’s findings from the examinations of each... Read More

SEC Seeks Public Comment on Transfer Agent Rules

The Securities and Exchange Commission today voted to issue an advanced notice of proposed rulemaking (ANPR) for new requirements for transfer agents, together with a concept release requesting public comment on the Commission’s broader review of transfer agent regulation.

The ANPR and concept release provide a summary of the history of the national clearance and settlement system, the role of transfer agents within that system, and the origins and current status of the Commission’s transfer agent rules.

The Commission also identifies in the ANPR certain areas in which it intends to propose specific rules or rule amendments, including registration and annual reporting requirements, safeguarding of funds and securities, antifraud requirements in connection with the... Read More

Morgan Stanley Settles Charges in “Parking” Scheme

The Securities and Exchange Commission today announced that Morgan Stanley Investment Management has agreed to pay $8.8 million to settle charges that one of its portfolio managers unlawfully conducted prearranged trading known as “parking” that favored certain advisory client accounts over others.

The portfolio manager and a brokerage firm trader who assisted the schemes agreed to be barred from the securities industry and pay penalties in the settlement.  The brokerage firm, SG Americas, agreed to pay more than $1 million to settle the SEC’s charges.

An SEC investigation found that while managing accounts that needed to liquidate certain positions, Sheila Huang arranged sales of mortgage-backed securities to SG Americas trader Yimin Ge at prede... Read More