Executives Charged in Connection With Accounting Failures at Government Contractor

The Securities and Exchange Commission today announced charges against two former executives at a government contractor that was the subject of an SEC enforcement action earlier this year and paid a $1.6 million penalty for accounting failures.

The SEC Enforcement Division alleges that David Pruitt, the then-vice president of finance in the Army Sustainment Division of L3 Technologies Inc., circumvented internal accounting controls and caused L3 to improperly recognize $17.9 million in revenue from a contract with the U.S. Army by creating invoices that were not actually delivered at the same time that the revenue was recorded.  The extra revenue allegedly enabled employees in that division to barely satisfy an i... Read More

Broker Charged With Defrauding Customers

The Securities and Exchange Commission today charged a former broker with knowingly or recklessly trading unsuitable investment products in the accounts of five customers and misappropriating more than $170,000 from one of those customers. The SEC’s complaint alleges that Demitrios Hallas repeatedly traded unsuitable investments in his customers’ accounts, exposing customers who were unsophisticated with limited or no investing experience and modest incomes, net worth levels, and assets to a significant degree of volatility and risk.  In a little more than a year, Hallas allegedly traded 179 daily leveraged exchange traded funds (ETFs) and exchange traded notes (ETNs) – products that the SEC alleges are inherently risky, complex and volatile, and only appropriate for sophisticated in... Read More

SEC Awards Nearly $4 Million to Whistleblower

The Securities and Exchange Commission today announced an award of nearly $4 million to a whistleblower who tipped the agency with detailed and specific information about serious misconduct and provided additional assistance during the ensuing investigation, including industry-specific knowledge and expertise.

“Not only did this whistleblower step forward and report suspicious conduct, but continued to help after we opened our investigation,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “Whistleblowers with specialized experience or expertise can help us expend fewer resources in our investigations and bring enforcement actions more efficiently.”

Approximately $153 million has now been awarded to 43 whistleblowers who became eligible for an awar... Read More

Investment Bank VP Charged With Insider Trading

The Securities and Exchange Commission today charged a vice president in the risk management department of a New York-based investment bank with insider trading on confidential information he learned in advance of a private equity firm’s acquisition of a publicly-traded technology company.

The SEC alleges that Avaneesh Krishnamoorthy learned that Golden Gate Capital planned to acquire Neustar Inc., and he then began trading in Neustar securities.  The trading took place in two brokerage accounts that Krishnamoorthy allegedly kept hidden from his employer, which had been approached by Golden Gate Capital to finance the transaction.  According to the SEC’s complaint, Krishnamoorthy made approximately $48,000 in illicit profits.

“As alleged in our complaint, Krishnamoort... Read More

Portfolio Manager Charged With Diverting Nearly $2 Million to Personal Account

The Securities and Exchange Commission today announced fraud charges against a Massachusetts-based portfolio manager accused of diverting at least $1.95 million to his personal brokerage account from a fund over which he had trading authority.

The SEC’s complaint alleges that Kevin J. Amell carried out a fraudulent matched-trades scheme in which he prearranged the purchase or sale of call options between his own account and the brokerage accounts of the fund at prices that were disadvantageous to the fund and advantageous to him.  In one series of trades involving Amazon securities, for example, Amell allegedly generated a $23,000 profit for himself in less than 23 minutes at the fund’s expense.

“As alleged in our complaint, Amell abused his trading authority at least... Read More

Telecom Executives Agree to Pay Penalties For FCPA Violations

The Securities and Exchange Commission today announced that two former executives at Hungarian-based telecommunications company Magyar Telekom have agreed to pay financial penalties and accept officer-and-director bars to settle a previously-filed SEC case alleging they violated the Foreign Corrupt Practices Act (FCPA).

Magyar Telekom paid a $95 million penalty in December 2011 to settle parallel civil and criminal charges that the company bribed officials in Macedonia and Montenegro to win business and shut out competition in the telecommunications industry.  The SEC’s complaint also charged the company’s former CEO Elek Straub and former chief strategy officer Andras Balogh with orchestrating the use of sham con... Read More

SEC Freezes Brokerage Accounts Behind Alleged Insider Trading

The Securities and Exchange Commission today announced an emergency court order to freeze assets in two brokerage accounts used last week to reap more than $1 million in alleged insider trading profits in connection with a merger announcement by telecommunications companies.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, highly suspicious transactions have been detected surrounding last week’s announcement that Liberty Interactive Corp. had agreed to acquire General Communication Inc.  The traders, who are currently unknown, allegedly used foreign brokerage accounts in the United Kingdom and Lebanon to purchase call option contracts through U.S.-based brokerages and on U.S.-based exchanges in the days leading up to the Apr... Read More

SEC: Payments for Bullish Articles on Stocks Must Be Disclosed to Investors

The Securities and Exchange Commission today announced enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes that left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks. SEC investigations uncovered scenarios in which public companies hired promoters or communications firms to generate publicity for their stocks, and the firms subsequently hired writers to publish articles that did not publicly disclose the payments from the companies.  The writers allegedly posted bullish articles about the companies on the internet under the guise of impartiality when in reality they were nothing more than paid advertisements.  ... Read More

SEC Adopts JOBS Act Amendments to Help Entrepreneurs and Investors

The Securities and Exchange Commission today announced that it has adopted amendments to increase the amount of money companies can raise through crowdfunding to adjust for inflation.  It also approved amendments that adjust for inflation a threshold used to determine eligibility for benefits offered to “emerging growth companies” (EGCs) under the Jumpstart Our Business Startups (JOBS) Act.

“Regular updates to the JOBS Act, as prescribed by Congress, ensure that the entrepreneurs and investors who benefit from crowdfunding will continue to do so,” said SEC Acting Chairman Michael S. Piwowar. “Under these amendments, the JOBS Act can continue to create jobs and investment opportunities for the general public.”

The SEC is required to make inflation adjustments to certai... Read More

SEC Charges Muni Bond Underwriter With Gatekeeper Failures

The Securities and Exchange Commission today announced that an Arizona-based brokerage firm, its CEO, and its former underwriter’s counsel have agreed to settle charges related to municipal bond offerings they were underwriting that turned out to be fraudulent.

The SEC’s order finds that Lawson Financial Corporation failed in its role as a gatekeeper to conduct reasonable due diligence when underwriting bond offerings to purchase and renovate nursing homes and senior living facilities.  The offerings were managed by Atlanta-based businessman Christopher F. Brogdon, who was later charged by the SEC with fraud and faces a court order to repay $85 million to investors.  Lawson Financial failed to ensure Brogdon an... Read More

Kara Novaco Brockmeyer, Chief of FCPA Unit, to Leave SEC After 17 Years of Service

The Securities and Exchange Commission today announced that Kara Novaco Brockmeyer, Chief of the Enforcement Division’s Foreign Corrupt Practices Act (FCPA) Unit, is planning to leave the agency later this month. 

Since 2011, Ms. Brockmeyer has led a national unit of 38 attorneys, accountants, and other specialists focusing on violations of the anti-bribery and accounting provisions of the federal securities laws.  In addition, Ms. Brockmeyer has played a leading role in SEC programs, having founded and served as the co-head of the Enforcement Division’s Cross Border Working Group, a proactive risk-based initiative focusing on U.S. companies with substantial foreign operations, and serving as a member of the Enforcement Division’s Cooperation Committee and the Enforcement Adv... Read More

SEC Announces Agenda for April 5 Meeting of the Equity Market Structure Advisory Committee

The Securities and Exchange Commission today announced its Equity Market Structure Advisory Committee will meet on April 5 beginning at 9:30 a.m. ET.  The Commission established the advisory committee to provide a formal mechanism through which the Commission can receive advice and recommendations on equity market structure issues. The meeting will include updates from the four subcommittees, including presentations from the Regulation NMS subcommittee on Rule 611 and the Trading Venues Regulation subcommittee on SRO rule-based limitations of liability and regulatory centralization. The meeting will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public.  It also will be webcast live on the SEC’s website, ... Read More