Rio Tinto, Former Top Executives Charged With Fraud

The Securities and Exchange Commission today charged mining company Rio Tinto and two former top executives with fraud for inflating the value of coal assets acquired for $3.7 billion and sold a few years later for $50 million.

The SEC’s complaint, …

SEC Announces Whistleblower Award of More Than a Million Dollars

The Securities and Exchange Commission today announced that a whistleblower has earned an award of more than $1 million for providing the SEC with new information and substantial corroborating documentation of a securities law violation by a registered entity that impacted retail customers.   

“Today’s award reflects the impact that whistleblower information can have in uncovering violations that harm the retail investor,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “We welcome high-quality information about potential securities-law violations from those in and outside a company.”

More than $162 million has been awarded to 47 whistleblowers.  By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. 

Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money is taken or withheld from harmed investors to pay whistleblower awards.   

For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.

SEC Announces Whistleblower Award of More Than a Million Dollars

The Securities and Exchange Commission today announced that a whistleblower has earned an award of more than $1 million for providing the SEC with new information and substantial corroborating documentation of a securities law violation by a registered entity that impacted retail customers.   

“Today’s award reflects the impact that whistleblower information can have in uncovering violations that harm the retail investor,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “We welcome high-quality information about potential securities-law violations from those in and outside a company.”

More than $162 million has been awarded to 47 whistleblowers.  By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. 

Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money is taken or withheld from harmed investors to pay whistleblower awards.   

For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.

SEC Announces Whistleblower Award of More Than a Million Dollars

The Securities and Exchange Commission today announced that a whistleblower has earned an award of more than $1 million for providing the SEC with new information and substantial corroborating documentation of a securities law violation by a registered…

Lawyers Charged With Assisting a Microcap Fraud Scheme

The Securities and Exchange Commission today charged two lawyers it alleges helped facilitate a microcap fraud scheme involving undisclosed “blank check” companies secretly bound for reverse mergers.

In complaints filed in the U.S. District Court for the Southern District of Florida, the SEC alleges that James M. Schneider of Hillsboro Beach, Florida, and Andrew H. Wilson of Nevada City, California, contributed to a fraud involving at least 22 undisclosed blank check companies. Such companies have no operations, making them attractive targets for those seeking reverse mergers for use in pump-and-dump schemes.  Despite claims of legitimate business plans, separate management, and independent shareholders, the 22 companies and their securities were secretly controlled by Steven Sanders, along with Daniel P. McKelvey or Alvin S. Mirman, and sold in reverse mergers.  The SEC previously filed an enforcement action against Sanders, McKelvey, and Mirman, who were separately convicted of related criminal charges and sentenced to prison.

The U.S. Attorney’s Office for the Southern District of Florida today filed related criminal charges against Schneider.    

“Lawyers are critical gatekeepers when it comes to protecting the integrity of our capital markets,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  “Schneider and Wilson failed as gatekeepers and as our complaints allege, played a crucial role in facilitating a wide-ranging microcap fraud.”

According to the SEC’s complaints, the scheme required the blank check companies to have shares available for sale in the open market.  Schneider and Wilson allegedly provided legal opinion letters falsely stating that the companies’ shares were validly issued or free to be resold publicly.  The SEC alleges that Schneider knowingly prepared at least 40 false opinion letters and referred numerous buyers to the shell companies’ secret owners. The SEC alleges that Wilson provided at least five opinion letters that unlawfully allowed restricted securities of at least three issuers to be sold to the public.  The SEC alleges that Wilson opined that the shares were unrestricted when he knew or should have known that Sanders and McKelvey secretly controlled them.

The SEC alleges that Schneider violated the registration and antifraud provisions of federal securities laws and related SEC rules, and that he aided and abetted the antifraud violations by Sanders, McKelvey, and Mirman.  The SEC charged Wilson with registration violations.   It is seeking to have the defendants return their allegedly ill-gotten gains, pay civil penalties, be barred from the penny-stock business, and other relief.

The SEC’s investigation, which is continuing, has been conducted by Jeffrey T. Cook in the Miami Regional Office.  The case is being supervised by Eric R. Busto, and the SEC’s litigation will be led by Christine Nestor.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation’s Miami Field Office.

Lawyers Charged With Assisting a Microcap Fraud Scheme

The Securities and Exchange Commission today charged two lawyers it alleges helped facilitate a microcap fraud scheme involving undisclosed “blank check” companies secretly bound for reverse mergers.

In complaints filed in the U.S. District Court for …

SEC Files Charges in Snack Company Investment Scam

The Securities and Exchange Commission today charged three individuals who defrauded investors in a company that falsely claimed to be developing a caffeinated chocolate snack and nearing an acquisition by Monster Energy or Coca-Cola Co.

The SEC’s complaint alleges that Lisa Bershan and her husband, Barry Schwartz, together with business associate Joel Margulies, falsely promised investors that after being acquired, Starship Snack Corp. investors would get a one-to-one exchange of Starship shares for Monster or Coca-Cola shares. According to the SEC’s complaint, Bershan and Margulies also falsely claimed that investors had “no down-side risk” and Bershan personally guaranteed that investors could get their investment back with 5 percent interest if the shares failed to appreciate over a year.

According to the SEC’s complaint, Starship had no agreement with Monster Energy or Coca-Cola , and Bershan and Schwartz used investor funds as their own personal piggy bank, spending them to rent and decorate a New York City apartment, and on travel, meals, and other personal expenses.   

“As alleged in our complaint, investors trusted Bershan, Schwartz, and Margulies, but that trust was misplaced,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office.  “The defendants constantly reassured their investors with lies, all the while taking their money and spending it on themselves.” 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against the three defendants.

The SEC’s complaint, filed in federal court in Manhattan, charges Bershan, Margulies, and Schwartz with violating antifraud provisions of the federal securities laws and a related SEC antifraud rule. The SEC is seeking to have the defendants return their allegedly ill-gotten gains plus interest, pay penalties, and be subject to permanent injunctions. 

The SEC’s investigation was conducted by Cynthia A. Matthews, Kerri Palen and Thomas P. Smith Jr., and the litigation will be led by Ms. Matthews and Richard Hong.  The case is being supervised by Ms. Mehraban.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.  

SEC Files Charges in Snack Company Investment Scam

The Securities and Exchange Commission today charged three individuals who defrauded investors in a company that falsely claimed to be developing a caffeinated chocolate snack and nearing an acquisition by Monster Energy or Coca-Cola Co.

The SEC’s com…

SEC Proposes Rules to Implement FAST Act Mandate to Modernize and Simplify Disclosure

The Securities and Exchange Commission today voted to propose amendments to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies and to implement a mandate under the Fixing America’s Surface Transportation (FAST) Act. The proposed amendments would make adjustments to update, streamline or otherwise improve the Commission’s disclosure framework.

“The FAST Act has given the Commission the opportunity to update our rules, simplify our forms, and utilize technology to make disclosure more accessible,” said SEC Chairman Jay Clayton. “An effective disclosure regime provides investors with the information necessary to make informed investment choices without imposing unnecessary burdens of time and money on issuers, and today’s action embodies that goal.”

The proposal reflects changes based on recommendations in the staff’s FAST Act Report and amendments developed as part of a broader review of the Commission’s disclosure system. 

*  *  *

Fact Sheet

FAST Act Modernization and Simplification of Regulation S-K

SEC Open Meeting

October 11, 2017

Action

The Commission will consider whether to propose amendments to modernize and simplify certain disclosure requirements in Regulation S-K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors. The amendments are also intended to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information. 

Highlights

Among other things, the proposed amendments would:

• Revise rules or forms to update, streamline or otherwise improve the Commission’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold;
• Update rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements;
• Simplify disclosure or the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management’s Discussion and Analysis that would allow for flexibility in discussing historical periods; and
• Incorporate technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.

The proposal also includes parallel amendments to several rules and forms applicable to investment companies and investment advisers, including proposed amendments that would require certain investment company filings to include a hyperlink to each exhibit listed in the exhibit index of the filings and be submitted in HyperText Markup Language (HTML) format.

Background

As mandated by the FAST Act, in November 2016 the staff published a report on modernizing and simplifying the disclosure requirements in Regulation S-K.  The report provided specific and detailed recommendations on modernizing and simplifying Regulation S-K in a manner that reduces costs and burdens on companies while still providing all material information.  The FAST Act also requires that the Commission issue a proposal to implement the recommendations in the report.   

What’s next?

If approved, the Commission will seek public comment on the proposed rules for 60 days. 

SEC Proposes Rules to Implement FAST Act Mandate to Modernize and Simplify Disclosure

The Securities and Exchange Commission today voted to propose amendments to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies and to implement a mandate under the Fixing America’s Surface…

Walter Jospin, Regional Director of the SEC’s Atlanta Office, to Leave the Agency

The Securities and Exchange Commission today announced that Walter E. Jospin, Regional Director of the agency’s Atlanta office, is leaving the agency.  Mr. Jospin will remain in his position until his successor is selected.

“Walter and I met many years ago and I was taken with his wisdom, expertise, and care.  He has brought those and many other fine characteristics to the Commission,” said SEC Chairman Jay Clayton.  “We all are grateful that Walter re-entered public service after a distinguished career in the private sector, and his contributions to the Atlanta office and the Commission have been exemplary.”

Since February 2015, Mr. Jospin has led a staff of approximately 100 attorneys, accountants, compliance examiners, and other specialists involved in compliance inspections and the investigation and prosecution of SEC enforcement actions in the Atlanta region.  Under Mr. Jospin’s supervision, the Atlanta office brought charges involving investment advisers, financial and disclosure fraud, insider trading, and those targeting retail investors, including:

• The investment services subsidiary of SunTrust Banks for collecting more than $1.1 million in fees from clients by improperly recommending more expensive mutual fund share classes when cheaper shares of the same funds were available
   
• KPMG LLP and an engagement partner, who agreed to pay more than $6.2 million for failing to properly audit the financial statements of an oil-and-gas company charged with accounting fraud
   
• Four Atlanta-area brokers for fraudulently inducing federal employees to roll over holdings in their federal Thrift Savings Plan (TSP) retirement accounts into higher-fee, variable annuity products
   
• Certain unknown traders who used brokerage accounts in London and Singapore to reap more than $3.6 million in alleged illegal insider trading profits ahead of the announcement that Japan-based Softbank Group Corp. agreed to acquire Fortress Investment Group LLC
   
• A Tennessee-based lawyer who served on the board of directors of Nashville-based Pinnacle Financial Partners for illegal insider trading in the shares of an acquisition target done while board members were meeting to discuss the acquisition
   
• A Nashville, Tenn.-based investment advisory firm and its owner for scheming to collect extra monthly fees from a pair of hedge funds they managed
   
• Fraud charges against 11 former executives and board members at Superior Bank and its holding company for scheming to conceal the extent of loan losses as the bank was faltering in the wake of the financial crisis

Also under Mr. Jospin’s watch, the Atlanta office’s exam staff has increased collaboration with enforcement and generated substantial referrals, including those that led to several of the actions referenced above.

“Walter has been an insightful and innovative leader of the Atlanta office, and the office and the Enforcement Division have benefited from his experience and sound judgment,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.  “He has led the Atlanta office to great success, and he will be sorely missed.”

“Walter’s work to implement positive changes in Atlanta and across the national examination program will have lasting impact,” said Pete Driscoll, Acting Director of the Office of Compliance Inspections and Examinations.  “It has been a privilege to work with Walter.”

Mr. Jospin added, “Serving as Director of the Atlanta Regional Office has been an extraordinary opportunity, second only to working as an SEC enforcement lawyer early in my career.  Both experiences have given me the chance to work with smart, talented people committed to the Commission’s mission.  The SEC is an outstanding agency, and I will miss my wonderful colleagues.  It has indeed been an honor to lead the Atlanta office.”

Mr. Jospin joined the SEC from the law firm of Paul Hastings LLP, where he was a long-time partner in the Atlanta office with a practice focusing on securities enforcement, internal investigations, corporate transactions, and corporate governance.  Mr. Jospin previously worked in the SEC Enforcement Division from 1980 to 1983 in the Atlanta office.  He graduated from the Wharton School at the University of Pennsylvania and from the Emory University School of Law.

Walter Jospin, Regional Director of the SEC’s Atlanta Office, to Leave the Agency

The Securities and Exchange Commission today announced that Walter E. Jospin, Regional Director of the agency’s Atlanta office, is leaving the agency.  Mr. Jospin will remain in his position until his successor is selected.

“Walter and I met many year…