Harbinger’s Former Chief Operating Officer Agrees to Settle Charges for Assisting Hedge Fund Scheme

The Securities and Exchange Commission today announced that the former chief operating officer at Harbinger Capital Partners LLC has agreed to settle charges that he assisted a scheme by the firm and its owner Philip A. Falcone to misappropriate millions of dollars from a hedge fund they managed to pay Falcone’s personal taxes. 

Peter A. Jenson, who was charged along with Falcone and Harbinger in a 2012 enforcement action by the SEC, has agreed to admit wrongdoing and pay a $200,000 penalty.  He also agreed to be prohibited from working in the securities industry for at least two years, and agreed to be suspended for at least two years from practicing as an account... Read More

SEC Charges Smith & Wesson With FCPA Violations

The Securities and Exchange Commission today charged Smith & Wesson Holding Corporation with violating the Foreign Corrupt Practices Act (FCPA) when employees and representatives of the U.S.-based parent company authorized and made improper payments to foreign officials while trying to win contracts to supply firearm products to military and law enforcement overseas.

Smith & Wesson, which profited by more than $100,000 from the one contract that was completed before the unlawful activity was identified, has agreed to pay $2 million to settle the SEC’s charges.  The company must report to the SEC on its FCPA compliance efforts for a period of two years.

According to the SEC’s order instituting a settled administrative proc... Read More

Citigroup Business Unit Charged With Failing to Protect Confidential Subscriber Data While Operating Alternative Trading System

The Securities and Exchange Commission today charged a Citigroup business unit operating an alternative trading system (ATS) with failing to protect the confidential trading data of its subscribers. New York-based LavaFlow Inc. has agreed to pay $5 million to settle the SEC’s charges, including a $2.85 million penalty that is the agency’s largest to date against an ATS. An ATS is a venue that executes stock trades on behalf of broker-dealers and other traders.  LavaFlow operates a type of ATS known as an electronic communications network (ECN), which unlike a dark pool displays some information about pending orders in its system, such as best bid or best offer.  Under federal rules, an ATS must have safeguards to protect the confidential trading information of its subscribers. ... Read More

SEC Charges Florida-Based Transfer Agent and Owner with Defrauding Investors

The Securities and Exchange Commission today announced it has charged a Florida-based transfer agent and its owner with defrauding investors by using aggressive boiler room tactics to peddle worthless securities with promises of high returns or discounted prices. 

Transfer agents are typically used by publicly-traded companies to keep track of the individuals and entities that own their stocks and bonds.  The SEC alleges that Cecil Franklin Speight, whose firm International Stock Transfer Inc. (IST) was a registered transfer agent, abused the transfer agent function by creating and issuing fake securities certificates to both U.S. and international investors.  While investors collectively sent in millions of dollars thinking they were purchasing high-yield i... Read More

SEC Announces Additional Charges in Football-Related Boiler Room Scheme

The Securities and Exchange Commission today announced a second round of charges against individuals behind a boiler room scheme that hyped a company whose new technology was purportedly Super Bowl-bound.

The SEC previously charged the operators of the scheme based in the South Florida and Los Angeles areas.  Seniors and other investors were pressured into purchasing stock in Thought Development Inc. (TDI), an unaffiliated Miami Beach-based company that stated its signature invention is a laser-line system that generates a green line on a football field for a first-down marker visible not only on television but also to players, officials, and fans in the stadium. 

The SE... Read More

Morgan Stanley to Pay $275 Million for Misleading Investors in Subprime RMBS Offerings

The Securities and Exchange Commission today charged three Morgan Stanley entities with misleading investors in a pair of residential mortgage-backed securities (RMBS) securitizations that the firms underwrote, sponsored, and issued.

Morgan Stanley agreed to settle the charges by paying $275 million to be returned to harmed investors.

In an asset-backed securities offering, federal regulations under the securities laws require the disclosure of delinquency information for the mortgage loans serving as collateral.  An SEC investigation found that Morgan Stanley misrepresented the current or historical delinquency status of mortgage loans underlying two subprime RMBS securitizations that came against a backdrop of rising borrower delinquencies and unprecedented... Read More

SEC Adopts Money Market Fund Reform Rules

The Securities and Exchange Commission today adopted amendments to the rules that govern money market mutual funds.  The amendments make structural and operational reforms to address risks of investor runs in money market funds, while preserving the benefits of the funds. Today’s rules build upon the reforms adopted by the Commission in March 2010 that were designed to reduce the interest rate, credit and liquidity risks of money market fund portfolios.  When the Commission adopted the 2010 amendments, it recognized that the 2008 financial crisis raised questions of whether more fundamental changes to money market funds might be warranted. The new rules require a floating net asset value (NAV) for institutional prime money market funds, which allows the daily share prices of these... Read More

SEC Charges Investor Relations Executive With Insider Trading While Preparing Clients’ Press Releases

The Securities and Exchange Commission today charged a partner at a New York-based investor relations firm with insider trading on confidential information he learned about two clients while he helped prepare their press releases. 

The SEC alleges that Kevin McGrath sold his shares in Misonix Inc. upon learning that the company was set to announce disappointing financial results.  The SEC further alleges that McGrath bought stock in Clean Diesel Technologies Inc. when he learned about the company’s impending announcement of positive news, and he profited when its stock price nearly doubled.  McGrath’s illicit profits and avoided losses from insider trading in both companies totaled $11,776. 

McGrath, who lives in B... Read More

Mark J. Flannery Named SEC Chief Economist and Director of Economic and Risk Analysis Division

The Securities and Exchange Commission today announced it has named Mark J. Flannery as its chief economist and director of its Division of Economic and Risk Analysis (DERA), which provides interdisciplinary analysis to help inform the Commission’s policymaking, rulemaking, enforcement, and examinations.

Dr. Flannery, currently a finance professor at the University of Florida’s Warrington School of Business Administration, will begin his new post in September.  He replaces Craig M. Lewis who returned as a professor of finance at Vanderbilt University’s Owen Graduate School of Management.  Since Dr. Lewis left in May, deputy directors Scott Bauguess and Jennifer Marietta-Westberg have acted as co-directors of the division.

“Profess... Read More

SEC Charges Penny Stock Company CEO and Purported Business Partner for Defrauding Investors With False Press Releases

The Securities and Exchange Commission today charged a serial con artist and a penny stock company CEO with misleading investors in a supposed vaccine development company by issuing false press releases portraying it as a successful venture when it was in fact a failing enterprise. The SEC alleges that Christopher Plummer teamed up with the CEO of CytoGenix, Lex M. Cowsert, to defraud investors with extravagant claims about the microcap company’s revenue and other benefits flowing from a “shared revenue agreement” with Franklin Power & Light, an electricity provider supposedly operated by Plummer.  However, Plummer’s entity was a complete sham, CytoGenix had actually lost all of its vaccine patents and other intellectual property in a lawsuit, and Plummer and Cowsert stole procee... Read More

SEC Charges Self-Described Bankers, Dishonest Brokers, and Microcap Company Executive in Pump-And-Dump Scheme

The Securities and Exchange Commission today charged individuals who pocketed millions of dollars running an elaborate pump-and-dump scheme involving shares of a medical education company in Pennsylvania and two other microcap stocks. 

The SEC alleges that the stock market manipulation ring included two self-described bankers, a pair of dishonest brokers, and a corrupt company executive who issued misleading press releases.  The SEC today suspended trading in one of the microcap companies before they could illegally profit further.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, the CEO and president of a p... Read More

SEC Charges Seattle Firm and Owner With Misusing Client Assets for Vacation Home and Vintage Automobile

The Securities and Exchange Commission today charged the owner of a Seattle-based investment advisory firm with fraudulently misusing client assets to make loans to himself to buy a luxury vacation home and refinance a rare vintage automobile.  

An SEC investigation found that Dennis H. Daugs Jr. and Lakeside Capital Management LLC used assets from the portfolio of a senior citizen client to fund $3.1 million in personal loans without telling her or obtaining her consent.  The loans were not in the best interest of the client and significantly favored Daugs, who provided no collateral, had no set pay-off dates, and paid most of the interest at the prime rate (which banks typically provide their most credit-worthy customers).  Daugs also imprope... Read More