SEC Charges New Orleans-Based Energy Company and Executives With Fraudulent Stock Manipulation

The Securities and Exchange Commission today charged a New Orleans-based oil-and-gas company and five executives with running a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the price of the company’s stock as they illegally sold restricted shares to the public.

The SEC also charged a Houston-based attorney with facilitating the scheme by issuing false legal opinion letters that allowed free trading of the restricted company stock.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Treaty Energy Corporation issued deceptive press releases touting drilling successes in Belize and Texas to induce investor demand for its unregistered stock, whi... Read More

SEC Charges Massachusetts-Based Scientific Instruments Manufacturer with FCPA Violations

The Securities and Exchange Commission today charged a Billerica, Mass.-based global manufacturer of scientific instruments with violating the Foreign Corrupt Practices Act (FCPA) by providing non-business related travel and improper payments to various Chinese government officials in an effort to win business.

An SEC investigation found that Bruker Corporation lacked sufficient internal controls to prevent and detect approximately $230,000 in improper payments out of its China-based offices that falsely recorded them in books and records as legitimate business and marketing expenses.  The payments enabled Bruker to realize approximately $1.7 million in profits from sales contracts with state-owned entities in China whose officials received the improper payments.

SEC Charges Manhattan-Based Attorney With Conducting Ponzi Scheme

The Securities and Exchange Commission today charged a Manhattan-based attorney with conducting a Ponzi scheme that defrauded some of his legal clients as well as close family members and friends.

The SEC alleges that Charles A. Bennett raised approximately $5 million by selling purported investments in what he described as a pool of funds that invested in joint ventures with a Wyoming-based investment fund to which he claimed to have a close connection.  Bennett told investors their money would largely be used to fund investments in European real estate mortgage-backed securities yielding lucrative rates of return ranging anywhere from 6 to 25 percent over short periods of time.  He stated that prominent individuals including a former governor of New Yo... Read More

SEC Files Securities Fraud Charges Against Owner of Home Restoration Business in Upstate New York

The Securities and Exchange Commission today announced securities fraud charges against the owner of a home restoration business in upstate New York who sold unsecured notes to investors to finance his real estate operations.

The SEC alleges that David Fleet misrepresented or failed to disclose a number of key facts to investors in Cornerstone Homes Inc., which was in the business of buying and restoring distressed single family homes to sell or rent to low-income customers.  For example, investors were told that the company did not use bank financing during time periods when Fleet was heavily reliant on mortgaging to banks virtually all of the homes that Cornerstone was purchasing with investor money. 

The SEC further alleges that as t... Read More

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

table { border:none; } The Securities and Exchange Commission today announced the agenda for the December 17 meeting of its Advisory Committee on Small and Emerging Companies. The meeting will focus on the definition of “accredited investor.”  Under the federal securities laws, certain securities offerings are exempt from registration only if the securities are sold to persons who are accredited investors.  The Advisory Committee will hear presentations on issues surrounding the accredited investor definition from David M. Certner, Legislative Counsel and Legislative Policy Director, AARP, and Marianne Hudson, Executive Director, Angel Capital Association. The meeting will begin at 9:30 in the multipurpose room ... Read More

SEC Names Karol Pollock to Lead Exam Program in Los Angeles Office

The Securities and Exchange Commission today announced that Karol L.K. Pollock has been named the new leader of the examination program in the Los Angeles Regional Office.

Ms. Pollock has nearly 25 years of experience in securities enforcement and examination regulation at the SEC, FINRA, and New Mexico Securities Division as well as in the private sector.  She has worked in the SEC’s Los Angeles office for the past 10 years, starting as a staff attorney in the Enforcement Division and later serving as a branch chief.  In 2009, she became Assistant Director of the exam program, and was named Deputy Associate Director last year.

In her new role as Associate Director of the exam program in the Los Angeles office, Ms. Pollock will ov... Read More

SEC Announces Fraud Charges Against Buffalo-Based Firm and Co-Owners Accused of Misleading Investors in Hedge Fund

The Securities and Exchange Commission today announced fraud charges against a Buffalo, N.Y.-based investment advisory firm and two co-owners accused of making false and misleading statements to clients when recommending investments in a risky hedge fund.  The hedge fund’s portfolio manager agreed to settle similar charges.

The SEC’s Enforcement Division alleges that Timothy S. Dembski and Walter F. Grenda Jr. steered their clients at Reliance Financial Advisors to invest in a hedge fund managed by Scott M. Stephan, whose experience in the securities industry was greatly exaggerated in offering materials they disseminated.  Dembski and Grenda allegedly knew that Stephan had virtually no hedge fund investing experience at all, and spent the ma... Read More

SEC Penalizes Morgan Stanley for Violating Market Access Rule

The Securities and Exchange Commission today penalized Morgan Stanley & Co. LLC for violating the market access rule when it failed to uphold credit limits for a customer firm with a rogue trader who engaged in fraudulent trading of Apple stock.

The market access rule requires broker-dealers to have adequate risk controls in place before providing customers with access to the markets.  An SEC investigation found that Morgan Stanley, which offers institutional customers direct market access through an electronic trading desk, did not have the risk management controls necessary to prevent the rogue trader from entering orders that exceeded pre-set trading thresholds.  The trader exploited the market access and, without Morgan Stanley’s knowledge,... Read More

SEC Sanctions Operator of Bitcoin-Related Stock Exchange for Registration Violations

The Securities and Exchange Commission today sanctioned a computer programmer for operating two online venues that traded securities using virtual currencies Bitcoin or Litecoin without registering the venues as broker-dealers or stock exchanges. The programmer, Ethan Burnside, also was sanctioned for conducting unregistered offerings.  He significantly cooperated with the SEC’s investigation and agreed to settle the case by paying more than $68,000 comprising his profits from the unregistered venues plus interest and a penalty.  He also is barred from the securities industry. According to the SEC’s order instituting a settled administrative proceeding, Burnside and his company BTC Trading Corp. operated two online enterprises – BTC Virtual Stock Exchange and LTC-Global Virtual St... Read More

SEC Sanctions Eight Audit Firms for Violating Auditor Independence Rules

The Securities and Exchange Commission today sanctioned eight firms for violating auditor independence rules when they prepared the financial statements of brokerage firms that were their audit clients.

SEC investigations found that the audit firms, which agreed to settle the cases, generally took data from financial documents provided by clients during audits and used it to prepare their financial statements and notes to the financial statements.  Under auditor independence rules, firms cannot jeopardize their objectivity and impartiality in the auditing process by providing such non-audit services to audit clients.  By preparing the financial statements, these particular firms essentially put themselves in the position of auditing their own work, and t... Read More

SEC Charges Virginia Beach-Based Bank Holding Company With Accounting Violations

The Securities and Exchange Commission today charged a Virginia Beach-based bank holding company and its former chief financial officer with violating the federal securities laws by improperly accounting for a deferred tax asset (DTA) that was not fully realizable due to the company’s deteriorating loan portfolio and financial condition.

Hampton Roads Bankshares, which is the holding company for the Bank of Hampton Roads and Shore Bank, agreed to pay a $200,000 penalty to settle the SEC’s charges.  Former CFO Neal Petrovich agreed to pay $25,000 to settle the charges against him.

A DTA is an asset on a company’s balance sheet representing a right to offset a future tax obligation.  According to the SEC’s orders i... Read More

SEC Charges Montana Man in Pump-and-Dump Scheme Involving Virginia-Based Penny Stock Company

The Securities and Exchange Commission today charged a penny stock promoter in Montana with orchestrating a fraudulent pump-and-dump scheme involving the stock of a Northern Virginia-based company that claims to be in the airport security business. 

The SEC alleges that Matthew Carley, who lives in Bozeman, Mont., engineered a reverse merger and gained control of free-trading shares of Red Branch Technologies located in Ashburn, Va.  Carley then orchestrated two blast e-mail campaigns promoting Red Branch stock, and he timed the e-mails to coincide with the dissemination of materially false and misleading company press releases touting technology related to airport security and homeland security.  However as Carley well knew, Red Branch had no true ... Read More