SEC Charges IT Employee at Law Firm With Insider Trading Ahead of Merger Announcements

The Securities and Exchange Commission today charged an employee in an international law firm’s IT department with insider trading ahead of several mergers and acquisitions involving firm clients being advised on the deals. The SEC alleges that Dimitry Braverman, a senior information technology professional at Wilson Sonsini Goodrich & Rosati, had access to nonpublic information in the firm’s client-related databases and garnered more than $300,000 in illicit profits by trading in advance of merger announcements.  Braverman began by insider trading in accounts in his own name, but shifted course when a lawyer at his firm was charged by the SEC and criminal authorities in an entirely separate insider trading scheme.  Aft... Read More

SEC and SBA to Partner on Events on Small Business Capital Raising Under the Jumpstart Our Business Startups (JOBS) Act

The Securities and Exchange Commission, in partnership with the U.S. Small Business Administration, announced today they will jointly host events to inform small business owners and entrepreneurs about new options that are and will become available for capital raising under the Jumpstart Our Business Startups (JOBS) Act.

The events are designed for existing and aspiring small businesses, including those that are minority-owned, women-owned, and veteran-owned, and will discuss the JOBS Act, which expands the options that businesses may use to raise capital.  One change already in place gives firms the ability to advertise certain private offerings; a second that is pending will allow firms to offer and sell securities through crowdfunding. The SEC is actively developing ... Read More

SEC Sanctions 19 Firms and Individual Trader for Short Selling Violations in Advance of Stock Offerings

The Securities and Exchange Commission today announced the latest sanctions in a continuing enforcement initiative uncovering certain hedge fund advisers and private equity firms that have illegally participated in an offering of a stock after short selling it during a restricted period.

The SEC last year announced the initiative to enhance enforcement of Rule 105 of Regulation M, which is designed to preserve the independent pricing mechanisms of the securities markets and prevent stock price manipulation.  Rule 105 typically prohibits firms or individuals from short selling a stock within five business days of participating in an offering for that same stock.  Such dual activity... Read More

Tennessee-Based Animal Feed Company Agrees to Pay $18 Million to Settle Accounting Fraud Case

The Securities and Exchange Commission today announced that a Tennessee-based animal feed company has agreed to pay back $18 million in illicit profits from an accounting fraud that resulted in an SEC enforcement action earlier this year.

AgFeed Industries, which is currently in Chapter 11 bankruptcy, was charged by the SEC in March along with top company executives for repeatedly reporting fake revenues from the company’s China operations in order to meet financial targets and prop up AgFeed’s stock price.  The company obtained illicit gains in stock offerings to investors at the inflated prices resulting from the accounting scheme.  The SEC also alleged that U.S. managers learne... Read More

SEC Announces Creation of New Office Within its Division of Economic and Risk Analysis

The Securities and Exchange Commission today announced the creation of a new office within the Division of Economic and Risk Analysis (DERA) that will coordinate efforts to provide data-driven risk assessment tools and models to support a wide range of SEC activities. 

Since its creation in 2009, DERA has collaborated with market experts throughout the SEC to develop risk assessment tools.  One example, the Aberrational Performance Inquiry, launched in 2009 to proactively identify atypical hedge fund performance, led to eight enforcement actions and is one of the tools used by the Division of Enforcement to assess private funds.  Similarly, DERA developed a broker-dealer risk assessment tool that helps SEC examiners allocate resources by assessing a broker-dealer’s compara... Read More

SEC Charges Bank Holding Company in Delaware with Improper Accounting and Disclosure of Past Due Loans

The Securities and Exchange Commission today announced accounting and disclosure fraud charges against a Delaware-based bank holding company for failing to report the true volume of its loans at least 90 days past due as they substantially increased in number during the financial crisis.

An SEC investigation found that as the real estate market declined in 2009 and 2010 and its construction loans began to mature without repayment or completion of the underlying project, Wilmington Trust Company did not renew, extend, or take other appropriate action for 90 days or more on a material amount of its matured loans.  Instead of fully and accurately disclosing the amount of these accruing loans as required by accounting guidance, Wilmington Trust improperly excluded the matured ... Read More

SEC Announces Fraud Charges Against Biotech Company and Former Executive Who Failed to Report Insider Stock Sales

The Securities and Exchange Commission today charged a Massachusetts-based biotech company and its former CEO with defrauding investors by failing to report his sales of company stock.

The federal securities laws require certain corporate executives to report their transactions in the company’s stock in order to give investors the opportunity to evaluate whether the purchases and sales by an insider could be indicative of the prospects of the company.  An SEC investigation found that after Gary H. Rabin became CEO, CFO, and chairman of Advanced Cell Technology (ACT) in 2010, he repeatedly failed to report his sales of company stock for the next few years.  Subsequently, ACT’s annual reports and proxy statements during that period were inaccurate because they faile... Read More

SEC Announces Charges Against Corporate Insiders for Violating Laws Requiring Prompt Reporting of Transactions and Holdings

The Securities and Exchange Commission today announced charges against 28 officers, directors, or major shareholders for violating federal securities laws requiring them to promptly report information about their holdings and transactions in company stock.  Six publicly-traded companies were charged for contributing to filing failures by insiders or failing to report their insiders’ filing delinquencies.

The charges stem from an SEC enforcement initiative focusing on two types of ownership reports that give investors the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects.  Form 4 is a report that corporate officers, directors, and certain beneficial owners of more than 10 percent ... Read More

SEC Charges Offshore Business and Two Individuals Behind Scheme to Conceal Ownership of Microcap Stocks

The Securities and Exchange Commission today charged two individuals managing an offshore business intended to help clients evade U.S. securities laws with concealing the ownership of certain microcap stocks as part of a larger money laundering scheme alleged by criminal authorities.

Under the federal securities laws, beneficial owners of more than 5 percent of certain stocks are required to report their acquisition and ownership of those stocks to the SEC and the investing public.  The SEC alleges that Belize residents Robert Bandfield and Andrew Godfrey through a company called IPC Corporate Services have helped clients who own significant amounts of thinly-traded microcap stocks avoid these reporting requirements.  They created associated companies through whic... Read More

SEC Names Victor Valdez As Enforcement Division’s Chief Operating Officer

The Securities and Exchange Commission today announced that Victor J. Valdez has been named Chief Operating Officer and Managing Executive of the agency’s Enforcement Division, where he will oversee project management, information technology, human capital strategy, and risk management among other functions.

Mr. Valdez comes to the SEC from the Federal Deposit Insurance Corporation (FDIC), where he is the Deputy Director of Strategic Planning and Corporate Programs for FDIC’s Corporate University.  He previously served as the Deputy Director of Strategic Planning and Resource Management in FDIC’s Division of Risk Management Supervision.  He will begin his new post on September 22.

“Vic brings an impressive breadth of management and planning exper... Read More

SEC Charges Minneapolis-Based Hedge Fund Manager With Bilking Investors and Portfolio Pumping

The Securities and Exchange Commission today charged a Minneapolis-based hedge fund manager, his investment advisory firm, and an accomplice with bilking investors in two hedge funds out of more than $1 million under the guise of research expenses and fees. 

The SEC alleges that as the management fees earned by Archer Advisors LLC were shrinking due to the funds’ worsening performance, the firm’s owner Steven R. Markusen and an employee Jay C. Cope implemented a scheme to enrich themselves at the expense of investors in the funds.  Markusen routinely caused the funds to reimburse Archer for fake research expenses, and he eventually routed much of that money to his personal checking account and spent it on country club dues, boarding school tuition, and a Lexus amo... Read More

Tracey L. McNeil Named as SEC’s First Ombudsman

The Securities and Exchange Commission today announced that Tracey L. McNeil has been selected as the first ombudsman for the agency. 

Ms. McNeil will begin her new post on September 22.  She currently is a senior counsel in the SEC’s Office of Minority and Women Inclusion (OMWI), an office created by the 2010 Dodd-Frank Act.  In this position, she has advised the director of OMWI in establishing the office and has worked to ensure the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency.  Prior to joining OMWI in 2011, Ms. McNeil spent three years in the Division of Corporation Finance, where she worked to ensure that investors were given adequate disclosure as required by law.