Scottrade Agrees to Pay $2.5 Million and Admits Providing Flawed “Blue Sheet” Trading Data

The Securities and Exchange Commission today charged Scottrade with failing to provide the agency with complete and accurate information about trades done by the firm and its customers, which is commonly called “blue sheet” data.

Scottrade, which is headquartered in St. Louis, agreed to settle the charges by paying a $2.5 million penalty and admitting it violated the recordkeeping provisions of the federal securities laws.

According to the SEC’s order instituting settled administrative proceedings, broker-dealers like Scottrade are required upon request to electronically provide the SEC with blue sheet data so the agency can use it to identify and analyze trades in the course of investigations and other work.  Blue sheets contain the details of e... Read More

SEC Charges Chicago-Based Accountant With Insider Trading in Wife’s Account

The Securities and Exchange Commission today announced charges against the former director of internal audit at a Chicago-based health care information technology company for insider trading ahead of the release of its financial results and making more than a quarter-million dollars in illicit profits.

The SEC alleges that certified public accountant Steven M. Dombrowski confidentially learned through his job at Allscripts Healthcare Solutions that first quarter 2012 financial results were much worse than expected and the company would miss its earnings target.  Despite a company-imposed blackout period on trading its securities, Dombrowski secretly used his wife’s account to trade Allscripts securities ahead of the bad news and profit on the nonpublic information... Read More

Barbara Lorenzen Named to Senior Position in National Exam Program

The Securities and Exchange Commission today announced that Barbara S. Lorenzen has been promoted to a senior position in the agency’s Office of Compliance Inspections and Examinations (OCIE), which conducts the national examination program.

Ms. Lorenzen has been named the national associate director for OCIE’s Clearance and Settlement Program, which is responsible for examining clearing agencies and coordinating with regional offices to oversee approximately 450 transfer agents in the U.S. 

Since arriving at the SEC in 2009, Ms. Lorenzen has worked in the Chicago Regional Office and coordinated the oversight of broker-dealer and transfer agent examinations in a nine-state Midwest region.  She has been serving as acting director for the Clearance... Read More

SEC Issues Risk Alert on Investment Advisers’ Due Diligence Processes for Selecting Alternative Investments

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) today issued a Risk Alert on the due diligence processes that investment advisers use when they recommend or place clients’ assets in alternative investments such as hedge funds, private equity funds, or funds of private funds.  

“Money continues to flow into alternative investments.  We thought it was important to assess advisers’ due diligence processes and to promote compliance with existing legal requirements, including the duty to ensure that such investments or recommendations are consistent with client objectives,” said OCIE Director Drew Bowden.  

The alert describes current industry trends and practices in advisers’ due diligence. Compared to observations fro... Read More

SEC Charges Legg Mason Affiliate With Defrauding Clients

The Securities and Exchange Commission today announced sanctions against a California-based investment adviser for concealing investor losses that resulted from a coding error and engaging in cross trading that favored some clients over others.

Western Asset Management Company, which is a subsidiary of Legg Mason, agreed to pay more than $21 million to settle the SEC’s charges as well as a related matter announced today by the U.S. Department of Labor.

According to an SEC order instituting settled administrative proceedings, Western Asset serves as an investment manager primarily to institutional clients, many of which are ERISA plans.  Western Asset breached its fiduciary duty by failing to disclose and promptly correct a coding error that cause... Read More

SEC Charges KPMG With Violating Auditor Independence Rules

The Securities and Exchange Commission today charged public accounting firm KPMG with violating rules that require auditors to remain independent from the public companies they’re auditing to ensure they maintain their objectivity and impartiality. The SEC issued a separate report about the scope of the independence rules, cautioning audit firms that they’re not permitted to loan their staff to audit clients in a manner that results in the staff acting as employees of those companies. An SEC investigation found that KPMG broke auditor independence rules by providing prohibited non-audit services such as bookkeeping and expert services to affiliates of companies whose books they were auditing.  Some KPMG personne... Read More

Former Oppenheimer Fund Manager Agrees to Settle Fraud Charges

The Securities and Exchange Commission today announced that a former Oppenheimer & Co. portfolio manager has agreed to be barred from the securities industry and pay a $100,000 penalty for making misrepresentations about the valuation of a fund consisting of other private equity funds. 

The SEC announced administrative proceedings against Brian Williamson last August based on allegations that he disseminated information falsely claiming that the reported value of the fund’s largest investment came from the portfolio manager of the underlying fund.  Williamson, who managed the fund of funds, actually had valued the investment himself at a significant markup to the value estimat... Read More

SEC Obtains Settlements in Penny Stock “Shell Packaging” Case

The Securities and Exchange Commission today announced nearly $300,000 in settlements against a Virginia-based “shell packaging” company and its CEO who were charged with facilitating a penny stock scheme as well as a Bronx, N.Y.-based stock promoter who received proceeds from the fraud.

Virginia-based Belmont Partners LLC and its CEO Joseph Meuse are in the business of identifying and selling public shell companies for use in reverse mergers.  In an enforcement action in late 2011, the SEC alleged that Meuse and his firm aided and abetted a New York-based company that fraudulently issued and sold unregistered shares of its common stock.  The SEC separately named Thomas Russo as a relief defendant in th... Read More

Agencies Approve Interim Final Rule Authorizing Retention of Interests in and Sponsorship of Collateralized Debt Obligations Backed Primarily by Bank-Issued Trust Preferred Securities

Five federal agencies on Tuesday approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) from the investment prohibitions of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Volcker rule.

Under the interim final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities if the following qualifications are met:

• the TruPS CDO was established, and the interest was issued, before May 19, 2010;
• the banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying Tru... Read More

SEC Announces New Date for Compliance with Final Municipal Advisor Registration Rules

The Securities and Exchange Commission today announced that compliance with the final municipal advisor registration rules will not be required until July 1, 2014, the date on which the first set of municipal advisors will be required to register under the final rules.  

The Commission, while balancing the goals of enhancing the quality of municipal securities advice and protecting investors and municipalities in the municipal securities market, took this action to give market participants additional time to analyze, implement, and comply with the final rules.

The Commission approved the final rules last year under the Dodd-Frank Act to provide an effective municipal advisor registration regime. The rules require municipal advisors to register with the Commission ... Read More

Interpretive Guidance on Municipal Advisor Registration Rules

The Securities and Exchange Commission today announced that its Office of Municipal Securities has issued interpretive guidance to address questions from market participants regarding the implementation of new final SEC rules requiring municipal advisors to register with the SEC.

The staff guidance, in the form of answers to frequently asked questions, or FAQs, covers topics including:

• the advice standard, including the general information exclusion and the treatment of business promotional materials used by underwriters
• the request for proposals-request for qualifications exemption
• the exemption for independent municipal advisors
• the exclusion for registered investment advisers
• the underwriter exclusion,... Read More

Myron Marlin, Director of Communications, to Leave SEC

The Securities and Exchange Commission today announced that Myron Marlin will be leaving the SEC after nearly five years as communications director, serving under chairs Mary Jo White, Elisse B. Walter, and Mary L. Schapiro.

Since joining the SEC in March 2009, Mr. Marlin coordinated communications strategy on a range of significant issues including the agency’s landmark policy of seeking admissions in certain enforcement settlements and major rulemakings stemming from the Dodd-Frank Act and the JOBS Act.

“Myron is an extraordinary professional and advisor,” said Chair White.  “His substantial knowledge of the agency, judgment, and keen sense of effective communications have been invaluable to me.  I will miss him and his counsel greatly.”