SEC Announces Charges in Scheme to Secretly Enable Lawbreakers to Run Microcap Company

The Securities and Exchange Commission today announced fraud charges against four individuals and a microcap company for concealing from investors that two lawbreakers ran the company. According to the SEC’s orders instituting administrative proceedings, the mission of Natural Blue Resources Inc. was to create, acquire, or otherwise invest in environmentally-friendly companies, including an initiative to locate, purify, and sell water recovered from underground aquifers in New Mexico and other areas with depleting water resources.  What investors didn’t know was that two individuals with prior law violations – James E. Cohen and Joseph Corazzi – secretly controlled the operational and management decisions of Natural Blue while calling themselves outside “consultants.”  This arrangeme... Read More

SEC Charges Ernst & Young With Violating Auditor Independence Rules in Lobbying Activities

The Securities and Exchange Commission today charged Ernst & Young LLP with violations of auditor independence rules that require firms to maintain their objectivity and impartiality with clients.

Ernst & Young agreed to pay more than $4 million to settle the charges.

The SEC’s order instituting a settled administrative proceeding finds that an Ernst & Young subsidiary lobbied congressional staff on behalf of two audit clients.  Such lobbying activities were impermissible under the SEC’s auditor independence rules because they put the firm in the position of being an advocate for those audit clients.  Despite providing the prohibited legislative advisory services on behalf of the clients, Ernst & Young repeat... Read More

SEC, Massachusetts U.S. Attorney, and FBI Charge Five with Attempted Manipulation of Microcap Company

The Securities and Exchange Commission, the U.S. Attorney for the District of Massachusetts, and the Federal Bureau of Investigation today announced charges against five individuals whose attempt to manipulate shares of Boston-based Amogear Inc. was caught by an FBI undercover operation.

According to the SEC and criminal cases filed in federal court in Boston, the defendants knew that Amogear was a shell company without any real operations, but schemed to boost its price and profit by selling their own shares.  What the parties didn’t know was that the FBI controlled Amogear and used it to obtain evidence of attempted stock manipulation.  To protect investors, the SEC suspended trading in Amogear’s securities on February 10, as the attempted stock manipulation was underway.... Read More

SEC Charges Group of Amateur Golfers in Insider Trading Ring

The Securities and Exchange Commission today charged a group of friends, most of them golfing buddies, who made more than $554,000 of illegal profits from trading on inside information about Massachusetts-based American Superconductor Corporation.

In a complaint filed in federal court in Boston, the SEC alleges that Eric McPhail repeatedly provided non-public information about American Superconductor to six others, most fellow competitive amateur golfers.  McPhail’s source was an American Superconductor executive who belonged to the same country club as McPhail and was a close friend.  According to the complaint, from July 2009 through April 2011, the executive told McPhail about American Superconducter’s expected earnings, contracts, and other major ... Read More

SEC Charges California School District with Misleading Investors

The Securities and Exchange Commission today charged a school district in California with misleading bond investors about its failure to provide contractually required financial information and notices.  The case is the first to be resolved under a new SEC initiative to address materially inaccurate statements in municipal bond offering documents. 

The SEC found that in the course of a 2010 bond offering, Kings Canyon Joint Unified School District affirmed to investors that it had complied with its prior continuing disclosure obligations.  The statement was inaccurate because between at least 2008 and 2010, the school district had failed to submit some required disclosures.  The California school district agreed to settle the charges without admitting t... Read More

SEC Names Thomas J. Krysa as Associate Regional Director in Denver Office

The Securities and Exchange Commission today announced that it has named Thomas J. Krysa as the associate regional director for enforcement in its Denver office, where he will oversee enforcement efforts in seven western states.

Mr. Krysa started in the Denver office in 2003 as a staff attorney, became a trial counsel the following year, and has supervised the office’s trial unit since 2010.  He has litigated matters involving insider trading, financial fraud, offering fraud, broker-dealer and investment adviser misconduct, market timing, market manipulation, and auditor negligence.  Among the cases he has prosecuted was a jury trial against two former CFOs of a database marketing company on fraud and other charges.  After a three-week trial, Read More

SEC Charges Five Traders with Short Selling Violations

The Securities and Exchange Commission today charged five traders for committing short selling violations while trading for themselves and Worldwide Capital Inc., a Long Island, N.Y.-based proprietary firm that earlier this year paid the largest-ever monetary sanction for Rule 105 violations.

Worldwide Capital and its owner Jeffrey W. Lynn agreed to pay $7.2 million to settle SEC charges in March for violating Rule 105, which prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the subsequent purchase of that same security through the offering.

The SEC today instituted settled administra... Read More

James McNamara Named as Deputy Chief Human Capital Officer in the Office of Human Resources

The Securities and Exchange Commission today announced that James McNamara has been selected as the deputy chief human capital officer in its Office of Human Resources.

Mr. McNamara, currently the managing executive for the Division of Trading and Markets, will begin his new position on July 14.  In his new role, he will help to manage programs and policies in areas such as leadership and employee development, recruitment and retention, performance management, compensation and benefits, and labor relations. 

“The SEC promotes a results-oriented workforce committed to the highest standards of expertise and excellence,” said SEC Office of Human Resources’ Chief Human Capital Officer Lacey Dingman.  “Jamey brings a breadth of ex... Read More

SEC Announces New Hires in the Office of Administrative Law Judges

The Securities and Exchange Commission today announced that two new judges and three new attorneys will join the Office of Administrative Law Judges this summer.

James E. Grimes joined the office as an Administrative Law Judge on June 30.  The office also recently hired attorneys Darien S. Capron, William Weihao Miller, and Jessica Neiterman as law clerks.  Another Administrative Law Judge is expected to join the office in August.  These additions will nearly double the size of the office, which received more than 200 assignments to conduct public hearings and issued 34 Initial Decisions in fiscal 2013.

Mr. Grimes previously spent 13 years at the U.S. Department of Justice where he was a senior litigation counsel in its civil division and a member o... Read More

Enforcement Division’s Chief Operating Officer Adam Storch to Leave SEC

The Securities and Exchange Commission today announced that Adam D. Storch, chief operating officer and managing executive of the Enforcement Division, is leaving the agency next month. 

Mr. Storch has served in the position since its creation in 2009 to manage all strategic planning and operational aspects of the Enforcement Division.  He played a key role in the design and implementation of the most significant restructuring in the Enforcement Division’s history, including the creation of specialized units as well as the Office of Market Intelligence and the Office of the Whistleblower to improve the collection and analysis of the tips, complaints, and referrals received by the agency each year.  Mr. Storch also oversaw the recent establishm... Read More

Geoffrey Aronow, Chief Counsel, Office of International Affairs, to Leave SEC

The Securities and Exchange Commission today announced that Geoffrey Aronow, the chief counsel and senior policy advisor in the Office of International Affairs, will leave the agency this month.  Mr. Aronow joined the Commission in January 2013.

During his tenure in the Office of International Affairs, Mr. Aronow provided legal counsel to the director of the office and played a central role in advising and formulating Commission policy in the international arena. 

Mr. Aronow previously served as general counsel under former Chairman Elisse Walter and as senior counsel to Chair Mary Jo White.

Paul Leder, the director of the Office of International Affairs, said, “Geoff is a truly extraordinary lawyer.  He has a wide range of substantiv... Read More

SEC Announces Order for Tick Size Pilot Plan

The Securities and Exchange Commission today announced that it has ordered the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) to act jointly to develop and file with the Commission a national market system plan to implement a targeted 12 month pilot program that will widen minimum quoting and trading increments (tick sizes) for certain small capitalization stocks.  The Commission plans to use the program to assess whether these changes would enhance market quality to the benefit of U.S. investors, issuers, and other market participants.

“A robust pilot program will generate critical data for assessing the impact of wider tick sizes on the securities of smaller issuers,” said SEC Chair Mary Jo White.  &ld... Read More