Two Former Wells Fargo Employees Charged With Insider Trading in Advance of Research Reports Containing Ratings Changes

The Securities and Exchange Commission today announced insider trading charges against two former Wells Fargo employees involved in an alleged scheme to profit by buying or short selling a stock before research analyst reports were published containing a ratings change.

Research analysts typically produce reports with a recommendation or rating of a stock or other security they’ve reviewed.  When an analyst alters a prior view on the prospects of a security, a new report is issued with a ratings change.  The SEC’s Enforcement Division alleges that while Gregory T. Bolan Jr. worked as a research analyst at Wells Fargo, he tipped a trader at the firm, Joseph C. Ruggieri, in advance of several market-moving ratings upgrades or downgrades that he made in certain secur... Read More

SEC Charges Bank of America With Securities Laws Violations in Connection With Regulatory Capital Overstatements

The Securities and Exchange Commission today charged Bank of America Corporation with violating internal controls and recordkeeping provisions of the federal securities laws after it assumed a large portfolio of structured notes and other financial instruments as part of its acquisition of Merrill Lynch.

Bank of America agreed to pay a $7.65 million penalty to settle the charges stemming from regulatory capital overstatements that it made due to its internal accounting control deficiencies and books and records failures.

Regulatory capital refers to the amount of capital that a bank must hold under applicable rules, and it is intended to provide a buffer against adverse market conditions.  According to the SEC’s order instituting a settled admini... Read More

SEC Charges Two Florida Men With Defrauding Investors in Purported Television Network

The Securities and Exchange Commission today announced charges against two Florida men for defrauding investors in a purported startup television network and production company by providing false information about its revenues and future prospects, including that former basketball star Michael Jordan planned to invest in the company.

The SEC alleges that Vision Broadcast Network’s then-CEO Erick Laszlo Mathe with assistance from consultant Ashif Jiwa raised at least $5.7 million in startup capital from approximately 100 investors nationwide through the sale of the company’s common stock and convertible debentures.  Mathe and Jiwa misrepresented to investors that Vision Broadcast owned low-power television stations as well as 70 broadcast licenses to operate additi... Read More

SEC Charges Four Insurance Agents in Securities Fraud Targeting Elderly Investors

The Securities and Exchange Commission today announced charges against four insurance agents for unlawfully selling securities in what turned out to be a multi-million dollar offering fraud targeting elderly investors.

The SEC previously charged a Colorado man who allegedly orchestrated the scheme and recruited active insurance agents to help him solicit investors in Colorado and several other states.  The scheme raised approximately $4.3 million during a nearly 18-month period.  The SEC’s investigation further found that the four insurance agents charged today solicited funds without registering with the SEC as a broker-dealer as required under the federal securities laws.

“When ... Read More

SEC Announces Cases Targeting International Pyramid Scheme Operators

The Securities and Exchange Commission today announced charges against the operators of an international pyramid scheme that raised more than $129 million from investors worldwide, primarily in the U.S., China, and Taiwan.  The case follows another against a separate pyramid scheme that lured investors in the U.S., China, and Korea with seminars, webinars, and YouTube videos. The newest case, filed in federal court in San Francisco, charges Hong Kong-based eAdGear Holdings Limited and California-based eAdGear, Inc., along with operators Charles S. Wang and Qian Cathy Zhang, of Warren, N.J., and Francis Y. Yuen, of Dublin, Calif.  According to the SEC complaint, even though eAdGear claimed to be a successful Internet marketing company, nearly all of its revenue was generated by invest... Read More

SEC Charges Arizona-Based Software Company for Inadequate Internal Accounting Controls Over Its Financial Reporting

The Securities and Exchange Commission today sanctioned a Scottsdale, Ariz.-based software company for having inadequate internal accounting controls over its financial reporting, which resulted in misstated revenues in public filings.

An SEC investigation found that JDA Software Group Inc. failed to properly recognize and report revenue from certain software license agreements it sold to customers because its internal accounting controls failed to consider information needed for determining a critical component of revenue recognition for software companies.  If companies are unable to demonstrate this component – known as vendor specific objective evidence of fair value (VSOE) – when determining the fair value of certain services related to a software license agr... Read More

SEC Suspends Trading in Nine Penny Stocks in Ongoing Initiative to Combat Microcap Fraud

The Securities and Exchange Commission today announced suspensions in trading for nine different penny stocks as part of an ongoing enforcement initiative to combat microcap fraud.

Trading suspensions provide the SEC with a means to immediately neutralize potential threats to investors when questions have arisen pertaining to the accuracy and adequacy of information about publicly traded companies.

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.  More information about the trading suspension process is available in Read More

SEC Charges Software Company in Silicon Valley and Two Former Executives Behind Fraudulent Accounting Scheme

The Securities and Exchange Commission today charged a Silicon Valley-based software company and two former executives behind an accounting fraud in which timesheets were falsified to hit quarterly financial targets.

An SEC investigation found that company vice presidents Patrick Farrell and Sajeev Menon were atop a scheme at Saba Software in which managers based in the U.S. directed consultants in India to either falsely record time that they had not yet worked, or purposely fail to record hours worked during certain pay periods to conceal budget overruns from management and finance divisions.  The improper time-reporting practices enabled Saba Software to achieve its quarterly revenue and margin targets by improperly accelerating and misstating virtually all of ... Read More

SEC Charges Two Florida-Based Attorneys for Roles in Offering Fraud by Transfer Agent

The Securities and Exchange Commission today charged two Florida-based attorneys for their roles in an offering fraud conducted by a transfer agent that was the subject of an SEC enforcement action two months ago.

The SEC alleges that Jonathan P. Flom and James L. Schmidt II were designated to receive wire transfers of funds from investors who were solicited by cold callers using boiler room tactics to convince them their investments would yield high rates of return.  Wiring the money to a licensed attorney bolstered the appearance of safety in the investment opportunity and concealed from investors how the money was really being spent after Flom or Schmidt received the funds.  Flom and Schmidt merely kept 2 percent of the funds they received from investors and transferred... Read More

SEC Charges Purported Health Food Company and CEO with Issuing False Press Releases in Microcap Fraud

The Securities and Exchange Commission today charged a Florida-based penny stock company and its CEO with defrauding investors by issuing false and misleading press releases proclaiming large sales and fantastic revenue projections while the purported health food company actually was a failing enterprise.  

The SEC alleges that Heathrow Natural Food & Beverage Inc. touted sales of natural health food products that the company had not even manufactured as well as non-existent distribution agreements with major retail chains.  Meanwhile, its CEO Michael S. Pagnano was prompting the illegal, unregistered distribution of billions of shares of company stock to several people or entities, including himself.  Pagnano profited by more than $150,000 by selling 877 million of hi... Read More

SEC Charges Barclays Capital with Systemic Compliance Failures After Acquiring Lehman’s Advisory Business

The Securities and Exchange Commission today charged Barclays Capital Inc. with failing to maintain an adequate internal compliance system to ensure the firm did not run afoul of any federal securities laws after its wealth management business in the U.S. acquired the advisory business of Lehman Brothers in September 2008. 

Investment advisers are required to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Investment Advisers Act and its rules.  An SEC examination and subsequent investigation found that Barclays failed to enhance its compliance infrastructure to integrate and support the acquisition and rapid growth of the advisory business from Lehman.  The deficiencies in its compliance systems contributed t... Read More

SEC Names Liban Jama as Director of Atlanta Regional Office

The Securities and Exchange Commission today announced the appointment of Liban Jama as director of the Atlanta Regional Office, where he will oversee enforcement and examinations in a region covering five states.

Mr. Jama currently serves as senior advisor to SEC Chair Mary Jo White, and before that he served as counsel to Commissioner Luis Aguilar.  In those capacities, he provided advice and counsel on many major regulatory and enforcement matters before the Commission.  

From 2005 to 2011, Mr. Jama served as senior counsel in the Enforcement Division, where he handled enforcement investigations in a variety of areas ranging from insider trading to disclosure fraud, and was a member of the division’s specialized unit devoted to the Foreign Corrupt Practices Act... Read More