SEC Approves Pilot to Assess Tick Size Impact for Smaller Companies

The Securities and Exchange Commission today approved a proposal by the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) for a two-year pilot program that would widen the minimum quoting and trading increments–or tick sizes–for stocks of some smaller companies.  The SEC plans to use the pilot program to assess whether wider tick sizes enhance the market quality of these stocks for the benefit of issuers and investors.

“The data generated by this important market structure initiative will deepen our understanding of the impact of tick sizes on market quality and help us consider new policy initiatives that can improve trading in the securities of smaller-cap issuers,” said SEC Chair Mary Jo White.

The SEC modified several provis... Read More

SEC Charges Four Former Officers of Delaware Bank Holding Company With Disclosure Fraud

The Securities and Exchange Commission today filed fraud charges against four former officers of Wilmington Trust for intentionally understating past due bank loans during the financial crisis.  The former Delaware-based bank holding company was acquired by M&T Bank in May 2011 and paid $18.5 million in September 2014 to settle related SEC charges of improper accounting and disclosure fraud.

The SEC’s complaint, filed in federal district court in Wilmington, Delaware, alleges the four took part in a scheme to mask the impact of real estate market declines on the bank’s portfolio of commercial real estate loans.  According to the SEC’s complaint, the former officials improperly excluded... Read More

SEC Announces Outreach Programs to Help Firms Comply With Regulation Systems Compliance and Integrity

The Securities and Exchange Commission today announced it has opened registration for outreach programs to help firms comply with an SEC rule that aims to protect investors by strengthening the technology underpinning U.S. securities markets.

The Commission adopted Regulation Systems Compliance and Integrity, or Regulation SCI, in November 2014 and compliance with many of its requirements begins this fall.  Those subject to Regulation SCI are required to have comprehensive policies and procedures for their technological systems, conduct business continuity testing, annually review their automated systems and take appropriate corrective action when system issues occur.

The SEC’s Office of Compliance Inspections and Examinations (OCIE) Technology Controls Program, i... Read More

SEC Announces Compliance Outreach Program Seminars for Investment Adviser and Investment Company Senior Officers

The Securities and Exchange Commission today announced the schedule for Compliance Outreach Program regional seminars it is sponsoring in six cities later this year. 

The seminars are jointly sponsored by the SEC’s Office of Compliance Inspections and Examinations, Division of Investment Management, and Division of Enforcement’s Asset Management Unit. The events provide an opportunity for SEC staff to share information about risks, priorities, and deficiencies observed in examinations or investigations and to discuss how senior executives and compliance professionals have addressed such matters.

The 2015 regional seminars will include an overview of the SEC’s National Examination Program as well as a discussion of current topics of particular interest for the... Read More

SEC Proposes Rules to Require Companies to Disclose the Relationship Between Executive Pay and a Company’s Financial Performance

The Securities and Exchange Commission today voted to propose rules to require companies to disclose the relationship between executive compensation and the financial performance of a company.  The proposed rules, which would implement a requirement mandated by the Dodd-Frank Act, would provide greater transparency and allow shareholders to be better informed when they vote to elect directors and in connection with advisory votes on executive compensation.

“These proposed rules would better inform shareholders and give them a new metric for assessing a company’s executive compensation relative to its financial performance,” said SEC Chair Mary Jo White.  “The proposal would require enhanced disclosure that can be compared across companies.”

The proposed rule would... Read More

SEC Proposes Cross-Border Security-Based Swap Rules Regarding Activity in the U.S.

The Securities and Exchange Commission today voted to propose rules governing the application of certain requirements to security-based swap transactions connected with a non-U.S. person’s dealing activity in the United States.  The rules require a non-U.S. company that uses U.S. personnel to arrange, negotiate, or execute a transaction in connection with its dealing activity to include that transaction in determining whether it is required to register as a security-based swap dealer. 

“These proposed rules are critical for the SEC’s oversight responsibilities,” said SEC Chair Mary Jo White.  “The rules will help ensure that both U.S. and non-U.S. dealers are subject to our registration, reporting, public dissemination and business conduct requirements when they engage in ... Read More

SEC Charges Santa Barbara-Based Hedge Fund Firm, Executives, and Auditor for Improper Expense Allocations

The Securities and Exchange Commission today announced charges against a Santa Barbara, Calif.-based hedge fund advisory firm and two executives involved in improper allocations of fund assets to pay undisclosed operating expenses.  The SEC also charged an accountant who conducted the outside audit of misleading financial statements that the firm sent to investors.

An SEC investigation found that Alpha Titans LLC, its principal Timothy P. McCormack, and general counsel Kelly D. Kaeser used assets of two affiliated private funds to pay more than $450,000 in office rent, employee salaries and benefits, and similar expenses without clear authorization from fund clients and without accurate and complete disclosures that fund assets were being used for these purposes.  The firm... Read More

SEC Announces Award to Whistleblower in First Retaliation Case

The Securities and Exchange Commission today announced a maximum whistleblower award payment of 30 percent of amounts collected in connection with In the Matter of Paradigm Capital Management, Inc. and Candace King Weir, File No. 3-15930 (June 16, 2014), the SEC’s first retaliation case.  The whistleblower will receive over $600,000 for providing key original information that led to the successful SEC enforcement action.  The whistleblower in this matter suffered unique hardships, including retaliation, as a result of reporting to the Commission. 

The SEC charged Paradigm with retaliating against the whistleblower after the firm learned that the whistleblower reported potential misconduct to the Commission.  Paradigm immediately engaged in ... Read More

SEC Charges Issuer for Failing to Make Public Filings

The Securities and Exchange Commission today charged W2007 Grace Acquisition I Inc., a real estate investment firm, with failing to make required public filings.  W2007 Grace, which is indirectly owned by one or more private equity funds affiliated with The Goldman Sachs Group Inc., has agreed to pay $640,000 to settle the SEC’s charges relating to eight missed filings.

According to the SEC’s order instituting administrative proceedings, W2007 Grace went “dark” in November 2007, after its reporting obligations for its class B and class C preferred shares were suspended upon its filing with the Commission a notice of suspension of its duty to file public reports pursuant to Section 15(d) of the Securities Exchange Act of 1934.  At the time, W2007 Grace had fewer th... Read More

SEC Announces Million-Dollar Whistleblower Award to Compliance Officer

The Securities and Exchange Commission today announced an award of more than a million dollars to a compliance professional who provided information that assisted the SEC in an enforcement action against the whistleblower’s company. 

The award involves a compliance officer who had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors. 

“When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “This compliance officer reported misconduct after responsible man... Read More

Fort Worth Regional Director David Woodcock to Leave SEC

The Securities and Exchange Commission today announced that David Woodcock, Regional Director of the Fort Worth office and leader of the Enforcement Division’s nationwide Financial Reporting and Audit Task Force, is leaving the SEC later this spring. 

As the regional director of the Fort Worth office since 2011, Mr. Woodcock has overseen a staff of attorneys, accountants, examiners, and other professionals responsible for conducting investigations, litigation, and examinations in a region that includes Texas, Oklahoma, Arkansas, and Kansas.  He helped form and lead the Financial Reporting and Audit Task Force that comprises a group of accountants and attorneys using innovative methods and technology to prevent, detect, and investigate potential fraud in financial ... Read More

SEC Charges BlackRock Advisors With Failing to Disclose Conflict of Interest to Clients and Fund Boards

The Securities and Exchange Commission today charged BlackRock Advisors LLC with breaching its fiduciary duty by failing to disclose a conflict of interest created by the outside business activity of a top-performing portfolio manager. 

BlackRock agreed to settle the charges and pay a $12 million penalty.  The firm also must engage an independent compliance consultant to conduct an internal review.

According to the SEC’s order instituting a settled administrative proceeding, Daniel J. Rice III was managing energy-focused funds and separately managed accounts at BlackRock when he founded Rice Energy, a family-owned and operated oil-and-natural gas company.  Rice was the general partner of Rice Energy and personally invested approximately $50 milli... Read More