SEC Charges Texas-Based Brokerage Firm With Violating Supervisory and Customer Protection Rules

The Securities and Exchange Commission today charged an Irving, Texas-based brokerage firm with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.

H.D. Vest Investment Securities agreed to settle the charges by paying a financial penalty and retaining an independent compliance consultant to improve its supervisory controls.

According to the SEC’s order instituting a settled administrative proceeding, H.D. Vest has more than 4,500 registered representatives typically working as independent contractors who also operate tax businesses outside of their securities businesses.  H.D. Vest failed to have proper policies and procedures in place to monitor ... Read More

Former Company Officer Earns Half-Million Dollar Whistleblower Award for Reporting Fraud Case to SEC

The Securities and Exchange Commission today announced a whistleblower award payout between $475,000 and $575,000 to a former company officer who reported original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.

Officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for an award under the SEC’s whistleblower program.  However, there is an exception to this exclusion that makes an officer eligible if he or she reports the information to the SEC more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue.  This is the first SE... Read More

SEC Suspends Trading in 128 Dormant Shell Companies to Put Them Out of Reach of Microcap Fraudsters

The Securities and Exchange Commission today announced it has suspended trading in 128 inactive penny stock companies to ensure they don’t become a source for pump-and-dump schemes.

The trading suspensions are the latest in a microcap fraud-fighting initiative known as Operation Shell-Expel in which the SEC Enforcement Division’s Office of Market Intelligence utilizes technology to scour the over-the-counter (OTC) marketplace and identify dormant companies ripe for abuse.  The proactive efforts have prevented fraudsters from having the opportunity to manipulate these thinly-traded stocks by pumping the companies’ stock value through false and misleading promotional campaigns and then dumping the stocks after investors buy in.

Since it be... Read More

SEC Halts Ponzi-Like Scheme by Purported Venture Capital Fund Manager in Buffalo

The Securities and Exchange Commission today charged a purported venture capital fund manager in Buffalo, N.Y., with fraudulently using money from three investment funds to pay fictitious returns to investors in a different fund.  The SEC obtained an emergency asset freeze to halt the Ponzi-like scheme.

The SEC alleges that Gregory W. Gray Jr. and his firms Archipel Capital LLC and BIM Management LP solicited money for a fund created to invest in pre-IPO shares of Twitter that would be delivered to investors with profits once the company went public.  Gray raised nearly $5.3 million from investors, which was enough to purchase 230,000 pre-IPO Twitter shares under the terms of the fund’s offering documents.  However, only 80,000 shares were actually purchased befor... Read More

Fee Rate Advisory #4 for Fiscal Year 2015

Pursuant to Section 31(j)(2) of the Securities Exchange Act of 1934, the Commission has determined that a mid-year adjustment to the Section 31 fee rate for fiscal year 2015 is not required.  These adjustments do not directly affect the amount of funding available to the SEC.

The Section 31 fee rate for fiscal 2015 will remain at the current rate of $18.40 per million.  This rate will remain in place until September 30, 2015, or 60 days after the enactment of a regular FY 2016 appropriation, whichever is later.  The Section 31 assessment on round turn transactions in security futures also will remain at $0.0042 per transaction.

The Office of Interpretation and Guidance in the Commission’s Division of Trading and Markets is available for questions on Section 31 at ... Read More

SEC Announces Agenda for March 4 Meeting of the Advisory Committee on Small and Emerging Companies

The Securities and Exchange Commission today announced that the next meeting of its Advisory Committee on Small and Emerging Companies will focus on ways to increase the opportunities for investors in small and emerging companies to resell their shares, a concept referred to as secondary market liquidity.  

“Secondary market liquidity is critical for small business capital formation and for those investing in these businesses,” said SEC Chair Mary Jo White.  “I look forward to the advisory committee’s input on these matters.”

In addition to secondary market liquidity, the committee is expected to vote on recommendations to the Commission regarding the definition of “accredited investor.”  The committee had... Read More

Readout of SEC Chair Mary Jo White’s Meeting with European Union Financial Services Commissioner Jonathan Hill

Securities and Exchange Commission Chair Mary Jo White hosted a meeting this morning with European Union Financial Services Commissioner Jonathan Hill. 

Chair White and Commissioner Hill discussed the importance of international cooperation in regulating global financial markets and a variety of other topics of mutual interest, including market structure, asset management, accounting standards and small business capital formation.  They also discussed Commissioner Hill’s proposal for an EU Capital Markets Union.

SEC Salt Lake Office Director Karen Martinez to Retire From Public Service

The Securities and Exchange Commission today announced that Karen L. Martinez, Regional Director of the Salt Lake office, is leaving the agency and retiring this summer.

Ms. Martinez joined the SEC’s Salt Lake office staff in 2002 as Trial Counsel, and she began supervising the office’s enforcement program in 2010 when she became Assistant Director.  She was promoted to Regional Director in 2013 and has since overseen the office’s examinations and enforcement cases.   Ms. Martinez also has supervised a team within the SEC’s National Exam Program that collects and analyzes data from clearing firms and large broker-dealers throughout the country and uses a risk-based approach to determine which firms are most appropriate for SE... Read More

SEC Charges Goodyear With FCPA Violations

The Securities and Exchange Commission today charged Goodyear Tire & Rubber Company with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries paid bribes to land tire sales in Kenya and Angola. 

Goodyear agreed to pay more than $16 million to settle the SEC’s charges.     

According to the SEC’s order instituting a settled administrative proceeding, Goodyear failed to prevent or detect more than $3.2 million in bribes during a four-year period due to inadequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa.  Bribes were generally paid in cash to employees of private companies or government-owned entities as well as other local authorities such as police or ci... Read More

SEC Charges Brothers-in-Law in Louisiana With Insider Trading

The Securities and Exchange Commission today announced insider trading charges against a former Fortune 500 company executive and his brother-in-law whom he allegedly tipped with nonpublic information ahead of the company’s merger.

The SEC alleges that while serving as vice president of construction operations at Baton Rouge-based The Shaw Group, Scott Zeringue traded company securities based on confidential information he learned on the job about an impending acquisition by Chicago Bridge & Iron Company.  In the weeks leading up to the public announcement of the merger, Zeringue purchased 125 shares of Shaw common stock and asked his brother-in-law Jesse Roberts III, a dentist who lives in Ruston, La., to also purchase Shaw stock on his behalf.&nbs... Read More

SEC Charges New York-Based Brokerage Firm and CEO With Committing Fraud During CDO Liquidation Auctions

The Securities and Exchange Commission today charged a New York City-based brokerage firm and its CEO with fraudulently deceiving other market participants while conducting auctions to liquidate collateralized debt obligations (CDOs).

An SEC investigation found that VCAP Securities and Brett Thomas Graham improperly arranged for a third-party broker-dealer to secretly bid at these same auctions on behalf of their affiliated investment adviser in order to acquire certain bonds to benefit the funds it managed.  Under engagement agreements with the CDO trustees, VCAP and its affiliates were prohibited from bidding while serving as liquidation agent for these auctions.  VCAP had access to all of the confidential bidding information as the liquidation agent, ... Read More

SEC Halts Colorado-Based Pyramid Scheme

The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze against two operators of a Colorado-based pyramid and Ponzi scheme that promises investors extraordinary returns of 700 percent through a purported “triple algorithm” and “3-D matrix.”

In a complaint unsealed yesterday afternoon in federal court in Denver, the SEC alleges that Kristine L. Johnson of Aurora, Colo., and Troy A. Barnes of Riverview, Mich., have raised more than $3.8 million since April 2014 from investors they enticed into buying positions in their company Work With Troy Barnes Inc., which is doing business as “The Achieve Community.”  In Internet videos and other web promotions, investors were pitched “you... Read More