SEC Announces Fraud Charges Against Three Former Regions Bank Executives in Accounting Scheme

The Securities and Exchange Commission today announced fraud charges against three former senior managers of Regions Bank for intentionally misclassifying loans that should have been recorded as impaired for accounting purposes.  As a result, the bank’s publicly-traded holding company overstated its income and earnings per share in its financial reporting.

The SEC also entered into a deferred prosecution agreement with Regions Financial Corp., which substantially cooperated with the agency’s investigation and undertook extensive remedial actions.  Regions will pay a total of $51 million to resolve parallel actions by the SEC, Federal Reserve Board, and Alabama Department of Banking. 

According to the SEC’s orders ... Read More

SEC Charges Former Brokers with Trading Ahead of IBM-SPSS Acquisition

The Securities and Exchange Commission today announced it has charged two additional brokers with trading on inside information ahead of the $1.2 billion acquisition of SPSS Inc. in 2009 by IBM Corporation. 

The SEC alleged that former brokers Benjamin Durant III and Daryl M. Payton illegally traded on a tip about the acquisition from Thomas C. Conradt, a friend and fellow broker in the New York office of a Connecticut-based broker-dealer.  The SEC complaint, filed in federal court in Manhattan, seeks return of alleged ill-gotten trading gains of approximately $300,000, with interest, financial penalties, and permanent injunctions.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charge... Read More

SEC Adopts Cross-Border Security-Based Swap Rules

The Securities and Exchange Commission today adopted the first of a series of rules and guidance on cross-border security-based swap activities for market participants.  The new rules will be key to finalizing the remaining proposals. 

The rules and guidance explain when a cross-border transaction must be counted toward the requirement to register as a security-based swap dealer or major security-based swap participant.  The rules also address the scope of the SEC’s cross-border anti-fraud authority. 

The SEC also adopted a procedural rule regarding the submission of “substituted compliance” requests.  This rule represents a first step in the SEC’s efforts to establish a framework to address the po... Read More

SEC Obtains Court Order to Halt Fraudulent Bond Offering by City of Harvey, Ill.

The Securities and Exchange Commission today obtained an emergency court order against a Chicago suburb and its comptroller to stop a fraudulent bond offering that the city has been marketing to potential investors.

The SEC has filed fraud charges in U.S. District Court for the Northern District of Illinois against the city of Harvey, Ill., and Joseph T. Letke alleging that they have been engaging in a scheme for the past several years to divert bond proceeds for improper, undisclosed uses.  The SEC’s complaint alleges that the purported purpose of prior bond offerings was to fund the development and construction of a Holiday Inn hotel in Harvey.  However without informing investors, Harvey officials diverted at least $1.7 million of bond proceeds ... Read More

SEC Charges Hedge Fund Advisory Firm and Others in South Florida-Based Scheme to Misuse Investor Proceeds

The Securities and Exchange Commission today charged a West Palm Beach, Fla.-based hedge fund advisory firm and its founder with fraudulently shifting money from one investment to another without informing investors.  The firm’s founder and another individual later pocketed some of the transferred investor proceeds to enrich themselves.

The SEC alleges that Weston Capital Asset Management LLC and its founder and president Albert Hallac illegally drained more than $17 million from a hedge fund they managed and transferred the money to a consulting and investment firm known as Swartz IP Services Group Inc.  The transaction went against the hedge fund’s stated investment strategy and wasn’t disclosed to investors, who received account statements fa... Read More

SEC Charges Private Equity Firm With Pay-to-Play Violations Involving Political Campaign Contributions in Pennsylvania

The Securities and Exchange Commission today charged a Philadelphia-area private equity firm with violating “pay-to-play” rules by continuing to receive advisory fees from the city and state pension funds following campaign contributions made by an associate in 2011 to the governor of Pennsylvania and a candidate for mayor of Philadelphia.

In the SEC’s first case under pay-to-play rules for investment advisers, TL Ventures Inc. agreed to settle the charges by paying nearly $300,000.

Pay-to-play rules adopted in 2010 prohibit investment advisers from providing compensatory advisory services – either directly to a government client or through a pooled investment vehicle – for two years following a campaign contribution... Read More

Cicely LaMothe Named Associate Director in the Division of Corporation Finance

The Securities and Exchange Commission today announced that Cicely LaMothe has been named as an associate director in the agency's Division of Corporation Finance. 

In her new position, Ms. LaMothe will join associate directors Paul Belvin, James Daly, Karen Garnett, and Barry Summer in overseeing the division’s disclosure program under the leadership of deputy director Shelley Parratt.

“I am delighted to welcome Cicely to the division’s senior leadership team.  Her experience and skills as an accountant will enhance our oversight of corporate disclosure,” said Keith Higgins, director of the Division of Corporation Finance.

Ms. LaMothe joined the division in 2002 and has served since November 2013 as the acting assis... Read More

SEC Charges Hedge Fund Adviser With Conducting Conflicted Transactions and Retaliating Against Whistleblower

The Securities and Exchange Commission today charged an Albany, N.Y.-based hedge fund advisory firm with engaging in prohibited principal transactions and then retaliating against the employee who reported the trading activity to the SEC.   This is the first time the SEC has filed a case under its new authority to bring anti-retaliation enforcement actions.  The SEC also charged the firm’s owner with causing the improper principal transactions. 

Paradigm Capital Management and owner Candace King Weir agreed to pay $2.2 million to settle the charges.

According to the SEC’s order instituting a settled administrative proceeding, Weir conducted transactions between Paradigm and a broker-dealer that she also owns while ... Read More

SEC Charges Four California Residents in $12 Million Insider Trading Scheme

The Securities and Exchange Commission today charged four Northern California residents with insider trading in Ross Stores stock options based on nonpublic information about monthly sales results leaked by one of the retailer’s employees.

The SEC alleges that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in Dublin, Calif.  Khan used the confidential information to illegally trade on more than 40 occasions ahead of the company’s public release of financial results.  Besides trading in his own brokerage account, Khan traded in his brother-in-law’s account as well as an account belonging to another acquaintance.  Khan also tipped his work colleagu... Read More

Chicago-Area Attorney Charged After SEC Exam Spots Fraud in Real Estate Investment Offering

The Securities and Exchange Commission today charged the founder of an investment advisory firm located in suburban Chicago with defrauding investors in connection with a real estate venture for which his firm offered securities.

After an SEC examination of Kenilworth Asset Management LLC detected potential misconduct that was referred to the agency’s Enforcement Division, the ensuing investigation found that Robert C. Acri misled clients in the offer and sale of promissory notes issued for the redevelopment of a retail shopping center near Hammond, Ind.  Despite saying the investments would specifically be used for this project and secured by a security interest in real estate, Acri misappropriated $41,250 of the proceeds for other uses and took no act... Read More

SEC Announces Charges Against Wedbush Securities and Two Officials for Market Access Violations

The Securities and Exchange Commission today announced charges against a Los Angeles-based market access provider and two officials accused of violating the agency’s market access rule that requires firms to have adequate risk controls in place before providing customers with access to the market.

The SEC’s Enforcement Division alleges that Wedbush Securities Inc., which has consistently ranked as one of the five largest firms by trading volume on NASDAQ, failed to maintain direct and exclusive control over settings in trading platforms used by its customers to send orders to the markets.  Wedbush did not have the required pre-trade controls, failed to restrict trading access to people whom the firm preapproved and authorized, and did not conduct ... Read More

SEC Charges New York-Based Dark Pool Operator With Failing to Safeguard Confidential Trading Information

The Securities and Exchange Commission today charged a New York-based brokerage firm that operates a dark pool alternative trading system with improperly using subscribers’ confidential trading information in marketing its services.

Regulations require an alternative trading system (ATS) to establish and enforce safeguards and procedures to protect the confidential trading information of its subscribers.  Among them is limiting access to subscribers’ data to employees who operate the ATS or have a direct compliance role. 

An SEC investigation found that Liquidnet Inc. violated its regulatory obligations and its own promises to its ATS subscribers during a nearly three-year period when it improperly allowed a business unit ou... Read More