SEC Announces Charges Against Four Former Officials at Clearing Firm Penson Financial Services for Regulation SHO Violations

The Securities and Exchange Commission today announced charges against four former officials at clearing firm Penson Financial Services for their roles in Regulation SHO violations.

An SEC investigation found that Penson’s securities lending practices intentionally and systematically violated Rule 204 under Reg. SHO.  The SEC’s Enforcement Division alleges that Penson’s chief compliance officer Thomas R. Delaney II had direct knowledge that the firm’s procedures for sales of customer margin securities were resulting in rule violations, yet he didn’t take steps to bring Penson into compliance and instead affirmatively assisted the violations.  Penson’s president and CEO Charles W. Yancey ignored significant red flags ab... Read More

SEC Charges Two Clinical Drug Trial Doctors With Insider Trading

The Securities and Exchange Commission today charged two California-based doctors with illegally trading on inside knowledge that the Food and Drug Administration (FDA) had halted the clinical trials of a new prostate cancer drug developed by biopharmaceutical company GTx Inc. 

The SEC alleges that Dr. Franklin M. Chu and Dr. Daniel J. Lama were medical investigators in the drug trials of Capesaris and avoided significant trading losses by selling their GTx stock after being informed by the company that the FDA had halted the trials due to patient safety concerns.  After GTx publicly announced the negative development a few days later, its stock dropped more than 36 percent. 

Dr. Chu and Dr. Lama, who practice at the San Bernardino... Read More

SEC Warns Investors About Marijuana-Related Investments Amid Recent Trading Suspensions

The Securities and Exchange Commission today cautioned investors about the potential for fraud in microcap companies that claim their operations relate to the marijuana industry after the agency suspended trading in the fifth such company within the past two months.

The SEC issued an investor alert warning about possible scams involving marijuana-related investments, noting that fraudsters often exploit the latest growth industry to lure investors with the promise of high returns.  “For marijuana-related companies that are not required to report with the SEC, investors may have limited information about the company’s management, products, ser... Read More

SEC Charges Unregistered Securities Salesman for Selling Millions of Dollars in Oil-and-Gas Investments

The Securities and Exchange Commission today charged a Tiburon, Calif.-based securities salesman for selling millions of dollars in oil-and-gas investments without being registered with the SEC as a broker-dealer or associated with a registered broker-dealer. 

Behrooz Sarafraz has agreed to settle the SEC’s charges by paying disgorgement of his commissions, prejudgment interest, and a penalty for a total of more than $22 million. 

“By failing to become associated with a registered broker-dealer, Sarafraz denied investors the protections of regulatory oversight and firm supervision,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.  “The SEC is committed to holding such unregi... Read More

SEC Charges Rafferty Capital Markets With Illegally Facilitating Trades for Unregistered Firm

The Securities and Exchange Commission today charged New York-based Rafferty Capital Markets with illegally facilitating trades for another firm that wasn’t registered as a broker-dealer as required under the federal securities laws.

Rafferty agreed to settle the SEC’s charges by disgorging all of the profits it received in the arrangement with the unregistered firm plus interest and a penalty for a total of nearly $850,000.  The SEC’s investigation is continuing.

According to the SEC’s order instituting settled administrative proceedings, Rafferty agreed to serve as the broker-dealer of record in name only for approximately 100 trades in asset-backed securities that were actually introduced by the unregistered firm.&... Read More

Chief Accountant Paul Beswick to Leave SEC

The Securities and Exchange Commission today announced that Chief Accountant Paul A. Beswick is leaving the agency to return to the private sector.  He will remain for a transitional period to help ensure continuity in the agency’s Office of the Chief Accountant (OCA).

Mr. Beswick has served as the SEC’s chief accountant since 2012.  He joined the SEC staff in September 2007 as senior advisor to the chief accountant and later was named deputy chief accountant of OCA’s accounting group, which is responsible for resolving accounting practice issues, rulemaking, and oversight of private sector standard-setting.  Mr. Beswick also served as deputy chief accountant for OCA’s professional practice group, which has lead responsibility for aud... Read More

SEC Names Gina Talamona as Communications Director

The Securities and Exchange Commission today announced that Gina Talamona has been named communications director.  Ms. Talamona, who will report to Chair Mary Jo White, will provide strategic advice on a variety of communications issues relating to the SEC’s mission to protect investors, facilitate capital formation, and maintain the integrity of the nation’s markets.

“Gina has dedicated her professional life to public service and brings a wealth of communications expertise,” said Chair White.  “We are very fortunate to have her join us in our efforts to keep investors and the American public informed about the important work of the Commission.”

Ms. Talamona said, “I look forward to a new chapte... Read More

SEC Charges Three Sales Managers With Insider Trading Ahead of Major Acquisition

The Securities and Exchange Commission today charged three former sales managers at San Diego-based Qualcomm Inc. with insider trading ahead of a major acquisition announcement.

The SEC alleges that Derek Cohen, Robert Herman, and Michael Fleischli learned through work e-mails that Qualcomm was planning a big announcement.  A sales meeting later revealed that Qualcomm was negotiating an acquisition of Atheros Communications. Armed with the nonpublic information, all three sales managers purchased Atheros securities while exchanging a series of suspiciously-timed phone calls.  As news leaked about the impending acquisition and the two companies subsequently announced it in a joint news release, Atheros’ stock price jumped 20 percent.  Cohen, He... Read More

Three Software Company Founders to Pay $5.8 Million to Settle Charges of Insider Trading Ahead of Sale

The Securities and Exchange Commission today filed insider trading charges against three software company founders for taking unfair advantage of incorrect media speculation and analyst reports about the company’s acquisition.

They agreed to pay nearly $5.8 million to settle the SEC’s charges.

The SEC alleges that Lawson Software’s co-chairman Herbert Richard Lawson tipped his brother William Lawson and family friend John Cerullo with nonpublic information about the status of the company’s 2011 merger discussions with Infor Global Solutions, a privately-held software provider.  Lawson Software’s stock price had begun to climb following media and analyst reports that the company was considering a sale and multiple bidders were possible.  However, Richard Lawson kne... Read More

SEC Announces Charges and Asset Freeze Against Hedge Fund Advisory Firm Distributing Falsified Performance Results

The Securities and Exchange Commission today announced fraud charges and an asset freeze against a New York-based investment advisory firm and two executives for distributing falsified performance results to prospective investors in two hedge funds they managed. 

The SEC alleges that Aphelion Fund Management’s chief investment officer Vineet Kalucha fraudulently altered an outside audit firm’s report reviewing the performance of an investment account he managed.  Aphelion’s chief financial officer George Palathinkal allegedly learned about Kalucha’s falsifications, which essentially changed an investment loss into a major investment gain in the account.  Nevertheless, the falsified report showing the phony gain instead of the... Read More

SEC Charges Toronto-Based Consultant and Four Others in Reverse Merger Schemes Involving China-Based Companies

The Securities and Exchange Commission today charged a Toronto-based consultant and four associates with conducting illegal reverse merger schemes to bring a pair of China-based companies into the U.S. markets so they could manipulate trading and reap millions of dollars in illicit profits.

The SEC alleges that S. Paul Kelley and three of the associates acquired controlling interests in two U.S. public shell companies in order to orchestrate reverse mergers with China Auto Logistics Inc. and Guanwei Recycling Corp.  They then hired stock promoter Shawn A. Becker of Overland Park, Kan., and others to tout the two companies’ unregistered stock to investors.  Kelley and his associates engaged in various forms of manipulative trading in order to furthe... Read More

SEC Charges Ohio-Based Investment Adviser and President for Fraudulently Hiding Account Shortfall

The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Columbus, Ohio-based investment advisory firm and its president for repeatedly hiding a shortfall of more than $700,000 in client assets. 

According to the SEC’s complaint filed in U.S. District Court for the Southern District of Ohio, a shortfall in a money market fund account managed by Professional Investment Management (PIM) was discovered when the SEC conducted an examination of the firm to verify the existence of client assets.  PIM reported in account statements sent to clients that the firm held a total of approximately $7.7 million in a particular money market fund when in fact the account reflecting these investments held less than $7 million.