California-Based Telecommunications Equipment Firm and Two Former Executives Charged in Revenue Recognition Scheme

The Securities and Exchange Commission today announced charges against a Newport Beach, Calif.-based telecommunications equipment company and two former executives accused of improperly recognizing as revenue more than a million dollars’ worth of inventory that was shipped to a Florida warehouse but not actually sold.

They’re also accused of defrauding an investor from whom they secured a $2 million loan for the company based on misstatements and omissions associated with the inventory shipments.

The SEC’s Enforcement Division alleges that AirTouch Communications Inc., former president and CEO Hideyuki Kanakubo, and former CFO Jerome Kaiser orchestrated a fraudulent revenue recognition scheme that violated Generally Accepted Accounting Principles... Read More

Bank of America Admits Disclosure Failures to Settle SEC Charges

The Securities and Exchange Commission today announced a settlement in which Bank of America admits that it failed to inform investors during the financial crisis about known uncertainties to future income from its exposure to repurchase claims on mortgage loans.

Bank of America also is resolving securities fraud charges that the SEC filed last year related to a residential mortgage-backed securities (RMBS) offering.

Bank of America has agreed to settle the two cases by paying $245 million as part of a major global settlement announced today by the U.S. Department of Justice in which Bank of America will pay $16.65 billion to resolve various investigations involv... Read More

Chief Information Officer Thomas Bayer to Leave SEC

The Securities and Exchange Commission today announced that its Chief Information Officer Thomas Bayer is planning to leave the agency in October. Mr. Bayer has led the SEC’s Office of Information Technology (OIT) since October 2010, overseeing strategy, application development, infrastructure operations and engineering, user support, program management, capital planning, information security, and enterprise architecture. Under Mr. Bayer’s leadership, the SEC leveraged cloud-based technologies, enhanced security, standardized its enterprise platforms and dramatically reduced the cost of IT systems while enhancing free public access to the SEC’s more than 21 million corporate filings and other documents. “Tom’s leadership and vision have had a tremendous impact that will continu... Read More

SEC Announces Municipal Advisor Exam Initiative

The Securities and Exchange Commission today announced that its Office of Compliance Inspections and Examinations (OCIE) is launching an examination initiative directed at newly regulated municipal advisors.

SEC rules that took effect on July 1 generally require municipal advisors to register with the SEC through the SEC’s EDGAR system under the final registration process during a four-month phase-in period by October 31.  The examinations are designed to establish a presence with the newly regulated municipal advisors.  Over the next two years, OCIE plans to examine a significant percentage of these advisors using an approach that focuses on identified risks.  Areas targeted for scrutiny may include the municipal advisor’s compliance with its fiduciary duty to it... Read More

SEC Charges Former Bank Executive and Friend With Insider Trading Ahead of Acquisition

The Securities and Exchange Commission today charged a former bank executive in Massachusetts and his friend with insider trading in advance of the bank’s acquisition of another financial institution.

The SEC alleges that Patrick O’Neill, then a senior vice president at Eastern Bank, learned through his job responsibilities that his employer was planning to acquire Wainwright Bank & Trust Company.  O’Neill tipped Robert H. Bray, a fellow golfer with whom he socialized at a local country club.  In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase Wainwright securities.  Bray had never previously purchased Wainwright stock.&nbs... Read More

SEC Announces Charges in Houston-Based Scheme Touting Technology to End Fracking

The Securities and Exchange Commission today announced charges against a Houston-based penny stock company and four individuals behind a pump-and-dump scheme that misled investors to believe the company was on the brink of developing revolutionary technology to enable environmentally friendly oil-and-gas production.

The SEC alleges that Andrew I. Farmer orchestrated the scheme by creating a shell company called Chimera Energy, secretly obtaining control of all shares issued in an initial public offering (IPO) in late 2011, and launching an aggressive promotional campaign midway through 2012 to hype the stock to investors.  Chimera Energy issued around three dozen press releases in a two-month period about its supposed licensing and development of technology t... Read More

SEC Charges N.Y.-Based Brokerage Firm With Overcharging Customers in $18 Million Scheme

The Securities and Exchange Commission today charged New York-based brokerage firm Linkbrokers Derivatives LLC for unlawfully taking secret profits of more than $18 million from customers by adding hidden markups and markdowns to their trades.

According to the SEC’s order instituting administrative proceedings, certain representatives on Linkbrokers’ cash equity desk defrauded customers by purporting to charge them very low commission fees, but in reality extracting fees that in some cases were more than 1,000 percent greater than represented.  These brokers hid the true size of the fees they were collecting by misrepresenting the price at which they had bought or sold securities on behalf of their customers.  The scheme was difficult for customers to... Read More

SEC Charges Atlanta-Based Accountant With Insider Trading on Confidential Information From Client

The Securities and Exchange Commission today announced charges against an accounting firm partner in Atlanta for insider trading in the stock of a restaurant company based on confidential information he learned from a client on the board of directors who came to him for tax advice in advance of a tender offer announcement.

SEC investigators also identified and charged three other traders who traded illegally on tips from the accountant.  The traders were discovered by comparing trading records from stock exchanges with names on the accountant’s client list.

The SEC alleges that Donald S. Toth disregarded his fiduciary duty to a client when he illicitly purchased stock in O’Charley’s Inc. – which operates or franchises... Read More

Robert Keyes, Senior Officer in New York Regional Office, to Retire After Nearly 22 Years of Federal Service

The Securities and Exchange Commission today announced that Robert J. Keyes, a senior officer in the New York Regional Office, will retire at the end of this month following 22 years of federal service, including the past 18 at the SEC.

Mr. Keyes has been serving as the associate regional director and chief of regional office operations in the New York office since 2010, when he was promoted to the newly created position to help improve the efficiency of the office.  He has advised the regional director and other senior officers on a broad range of operational management issues including budgeting, collections and distributions, and the handling of tips, complaints, and referrals.  Mr. Keyes has particularly helped increase the New York office’s ef... Read More

SEC Charges Kansas for Understating Municipal Bond Exposure to Unfunded Pension Liability

The Securities and Exchange Commission today announced securities fraud charges against the state of Kansas stemming from a nationwide review of bond offering documents to determine whether municipalities were properly disclosing material pension liabilities and other risks to investors.  According to the SEC’s cease-and-desist order instituted against Kansas, the state’s offering documents failed to disclose that the state’s pension system was significantly underfunded, and the unfunded pension liability created a repayment risk for investors in those bonds.

Shortly after its nationwide review of municipal bond disclosures began, the SEC brought its first-ever enforcement action aga... Read More

SEC Charges Bahamas-Based Brokerage Firm and President With Facilitating Fraudulent Scheme by Hedge Fund Manager

The Securities and Exchange Commission today charged a Bahamas-based brokerage firm and its president for enabling a fraud that was halted when the SEC charged the hedge fund manager at the center of the scheme.

The SEC alleges that Julian R. Brown and his firm Alliance Investment Management Limited (AIM) purported to be the “custodian” for assets under the management of Nikolai Battoo.  The SEC obtained a court-ordered freeze over Battoo’s assets after charging him in 2012 with defrauding investors around the world by hiding major losses while falsely boasting that their investments were performing remarkably during the financial crisis. 

SEC Announces Charges Against N.Y.-Based Brokerage Firm and Founder Despite Attempts to Mislead Examiners

The Securities and Exchange Commission today announced charges against a New York-based brokerage firm and its founder for allegedly violating net capital requirements and falsifying books and records to conceal the capital deficiencies.

The SEC’s Division of Enforcement alleges that Charles “Chuck” Moore and Crucible Capital Group attempted to disguise the firm’s extensive and repeated net capital insufficiencies by improperly off-loading its liabilities onto the books of an affiliated firm and improperly treating non-marketable stock as an allowable asset.  Moore went so far as to try to hide Crucible’s true financial condition from SEC examiners by providing them doctored invoices that sought to mask the extent of those liabil... Read More