SEC Charges Advisory Firm With Fraud for Improperly Retaining Fees

The Securities and Exchange Commission today announced that an investment advisory firm in Philadelphia has agreed to pay more than $21 million to settle charges that it fraudulently retained fees belonging to collateralized debt obligation (CDO) clients.

An SEC investigation found that Taberna Capital Management did not tell CDO clients it was retaining payments known as “exchange fees” in connection with restructuring transactions.   Taberna’s retention of the exchange fees was neither permitted by the CDOs’ governing documents nor disclosed to investors in the CDOs.  The fees rightfully belonged to the CDOs and created conflicts of interest that Taberna failed to disclose.

The SEC also charged Taberna’s former managing director Michael Fralin ... Read More

SEC Halts Ongoing Fraud in Minnesota

The Securities and Exchange Commission today announced fraud charges and an emergency order to halt a Minnesota resident and his company from continuing to raise money from investors under false pretenses while failing to produce the promised returns.

The SEC alleges that James M. Louks of Owatonna, Minn., and FiberPoP Solutions Inc. have defrauded nearly 100 investors by convincing them to invest in notes that would theoretically help fund the company’s operations.  FiberPoP was founded in 2003 to build and operate fiber optic networks and data centers, but still has no operations or employees.  Louks and FiberPoP promised massive returns on the investments – as much as 100 percent – within a very short period of time.  Typically the investments they have been pe... Read More

Fee Rate Advisory #1 for Fiscal Year 2016

The Securities and Exchange Commission announced that in fiscal year 2016 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $100.70 per million dollars.

The securities laws require the Commission to make annual adjustments to the rates for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934.  The Commission must set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts.  The Commission’s projections are calculated using a methodology developed in consultation with the Congressional Budget Office and the Office of Management and Budget... Read More

SEC Charges Former Investment Bank Analyst and Two Others With Insider Trading in Advance of Client Deals

The Securities and Exchange Commission today charged a former investment bank analyst with illegally tipping his close friend with confidential information about clients involved in impending mergers and acquisitions of technology companies.  The SEC also charged his friend and another individual with trading on the inside information.

The SEC alleges that Ashish Aggarwal, who worked in J.P. Morgan’s San Francisco office, gleaned sensitive nonpublic information about two acquisition deals from colleagues who were working on them.  Aggarwal tipped Shahriyar Bolandian, who traded on the basis of the illegal tips in his own accounts as well as accounts belonging to his father and sister.  Bolandian also tipped his friend Kevan Sadigh so he could trade on the confiden... Read More

SEC Announces Asset Freeze Against Alleged EB-5 Fraudster in Seattle Area

The Securities and Exchange Commission today announced an asset freeze obtained against a man in Bellevue, Wash., accused of defrauding Chinese investors seeking U.S. residency through the EB-5 Immigrant Investor Pilot Program by investing in his companies.

The SEC alleges that Lobsang Dargey and his “Path America” companies have raised at least $125 million for two real estate projects: a skyscraper in downtown Seattle and a mixed-use commercial and residential development containing a farmers’ market in Everett, Wash.  But Dargey diverted $14 million for unrelated real estate projects and $3 million for personal use including the purchase of his $2.5 million home and cash withdrawals at casinos.

“We allege that Dargey promised investors their m... Read More

Shelly Luisi Named Associate Director in the Division of Corporation Finance

The Securities and Exchange Commission today announced that Shelly Luisi has been named as an Associate Director in the Division of Corporation Finance.  She begins her new role in September.

Ms. Luisi currently is a Senior Associate Chief Accountant in the SEC’s Office of the Chief Accountant, where she co-leads the staff responsible for the agency’s accounting communications and accounting standard-setter oversight functions.  She succeeds Kyle Moffatt, who recently moved to the senior leadership team of the Division of Corporation Finance’s disclosure review program.

In her new role, Ms. Luisi will oversee the work of the Disclosure Standards Office, established in 2013 to conduct research and assess the Division of Corporation Finance program to selectively re... Read More

SEC Charges Citigroup Global Markets for Compliance and Surveillance Failures

The Securities and Exchange Commission today announced that Citigroup Global Markets has agreed to settle charges that it failed to enforce policies and procedures to prevent and detect securities transactions that could involve the misuse of material, nonpublic information.  The firm also failed to adopt and implement policies and procedures to prevent and detect principal transactions conducted by an affiliate.

Citigroup agreed to pay a $15 million penalty.

Because broker-dealer employees routinely have access to material nonpublic information, the federal securities laws require every firm to take reasonable steps to prevent the misuse of that information.  An SEC investigation found that Citigroup did not review thousands of trades executed b... Read More

SEC Charges BNY Mellon With FCPA Violations

The Securities and Exchange Commission today announced that BNY Mellon has agreed to pay $14.8 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.

An SEC investigation found that BNY Mellon did not evaluate or hire the family members through its existing, highly competitive internship programs that have stringent hiring standards and require a minimum grade point average and multiple interviews.  The family members did not meet the rigorous criteria yet were hired with the knowledge and approval of senior BNY Mellon employees in order to corruptly influence foreign officials and win or r... Read More

SEC Names Shamoil T. Shipchandler as Regional Director of Fort Worth Office

The Securities and Exchange Commission today announced that Shamoil T. Shipchandler has been named Regional Director of its Fort Worth Regional Office.  He will join the agency in early October.

Mr. Shipchandler is presently a partner in the law offices of Bracewell & Guiliani LLP in Dallas, where he has focused on white collar criminal defense, internal investigations and compliance, and related civil litigation in matters involving cybersecurity, public corruption, insider trading, and other statutory and regulatory matters.  Before joining Bracewell, Mr. Shipchandler spent almost 10 years in the U.S. Attorney’s Office for the Eastern District of Texas, where he held positions of increasing authority ending as Deputy Criminal Chief.  He has significant exper... Read More

Citigroup Affiliates to Pay $180 Million to Settle Hedge Fund Fraud Charges

The Securities and Exchange Commission today announced that two Citigroup affiliates have agreed to pay nearly $180 million to settle charges that they defrauded investors in two hedge funds by claiming they were safe, low-risk, and suitable for traditional bond investors.  The funds later crumbled and eventually collapsed during the financial crisis.

Citigroup Global Markets Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI) agreed to bear all costs of distributing the $180 million in settlement funds to harmed investors.

An SEC investigation found that the Citigroup affiliates made false and misleading representations to investors in the ASTA/MAT fund and the Falcon fund, which collectively raised nearly $3 billion in capital from appr... Read More

Three Maryland Men Settle Charges They Defrauded Investors in Real Estate Investment Company

The Securities and Exchange Commission today announced that three Maryland men have agreed to settle charges that they defrauded investors in a company that owns and operates residential and commercial real estate.  Boston-based Signator Investors Inc. and one of its supervisors agreed to settle separate charges that they failed to supervise two of the men who worked in Signator’s Maryland office.

The SEC alleges that James R. Glover orchestrated the fraud by enticing family, friends, and fellow church members to become his clients at Signator and invest in Colonial Tidewater Realty Income Partners, which he co-managed.  Most of Glover’s clients were financially unsophisticated and relied on him for investment guidance.  Some even described him as “another dad” or... Read More

Edward Jones to Pay $20 Million for Overcharging Retail Customers in Municipal Bond Underwritings

The Securities and Exchange Commission today announced that St. Louis-based brokerage firm Edward Jones and the former head of its municipal underwriting desk have agreed to settle charges that they overcharged customers in new municipal bonds sales.  It’s the SEC’s first case against an underwriter for pricing-related fraud in the primary market for municipal securities.  The firm also was charged with separate misconduct related to supervisory failures in its review of certain secondary market municipal bond trades.

Municipal bond underwriters are required to offer new bonds to their customers at what is known as the “initial offering price,” which is negotiated with the issuer of the bonds.  An SEC investigation found that instead of offering bonds to customers... Read More