Robert Evans III Named Chief of the Office of International Corporate Finance in SEC’s Division of Corporation Finance

The Securities and Exchange Commission today announced that Robert Evans III has been named Chief of the Office of International Corporate Finance in the agency’s Division of Corporation Finance.  The office spearheads the division’s outreach to non-U.S. issuers that access the U.S. capital markets.  Mr. Evans recently joined the Division of Corporation Finance after many years of advising public and private companies on a broad range of matters. 

SEC Chairman Jay Clayton noted that “Rob’s appointment reflects the importance of facilitating capital formation in the United States for non-U.S. issuers and increasing investment opportunities for America’s investors.”

“I am pleased that Rob will focus his efforts at the agency on working with companies from outside the U.S. that are considering registering offerings in the U.S. and listing on U.S. stock exchanges,”  Corporation Finance Division Director Bill Hinman said.  “I look forward to working with him as we support Chairman Clayton’s goal of facilitating a broader range of investment opportunities for Main Street investors.

Mr. Evans said, “I thank Bill for this exciting opportunity and look forward to working with my colleagues in the Division on this effort to engage with companies and regulators around the world.”

Mr. Evans received his bachelor’s degree from Harvard College and law degree from Boston University School of Law, both cum laude.

Robert Evans III Named Chief of the Office of International Corporate Finance in SEC’s Division of Corporation Finance

The Securities and Exchange Commission today announced that Robert Evans III has been named Chief of the Office of International Corporate Finance in the agency’s Division of Corporation Finance.  The office spearheads the division’s outreach to non-U….

Investment Adviser Charged in Multi-Million Dollar Options Trading Scheme

The Securities and Exchange Commission today charged a Westchester, New York-based investment adviser with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme.

The SEC alleges that, starting in approximately 2010, Michael Scronic began to raise money from at least 42 friends and acquaintances, many of whom were from his suburban community, in order to invest in a risky options trading strategy. He allegedly lured investors by informing them that he had a long and impressive track record of proven returns. He also allegedly lied to investors about the liquidity of investments, telling one investor that “what’s cool about my fund is that i’m [sic] only in publicly traded options and cash so any redemptions are met within 2 business days so if you do need to withdraw for your business needs it will be quick and painless.” However, the SEC alleges that Scronic was actually hemorrhaging investor money through massive trading losses, with at least $15 million in investment losses since April 2010. For the period ending June 30, 2017, Scronic allegedly reported to investors total assets of at least $21,837,475 while the balance in his brokerage account on June 30, 2017 was just under $27,500.

According to the SEC’s complaint, when certain investors attempted to redeem their investments, Scronic did not disclose his inability to repay them. Rather, he allegedly provided investors with a steady stream of implausible excuses for why he could not pay them back. In other instances, Scronic sought to obtain additional investment funds from new and existing investors in order to satisfy redemption requests from other investors.

“Scronic’s alleged scheme is just another example of a so-called investment professional acting as fiduciary, but failing to deal honestly with his investors for his own financial benefit,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office. “Investors should be wary anytime they are promised high or consistently positive returns in a complex, hard to understand investment strategy.”

The SEC also alleges that Scronic began identifying himself as an investment adviser to a fictitious hedge fund in which he purported to sell interests, or “shares.” The SEC encourages investors to check the backgrounds of people selling investments by using the SEC’s Investor.gov website to quickly identify whether they are registered professionals and confirm their identity.

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

The SEC’s complaint charges Scronic with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC seeks a permanent injunction, disgorgement, and penalties against Scronic.

The SEC’s investigation was conducted by Lindsay S. Moilanen, Daphne Downes, and Sheldon L. Pollock, and the case was supervised by Ms. Mehraban. The litigation will be led by Nancy A. Brown and Ms. Moilanen. 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.

Investment Adviser Charged in Multi-Million Dollar Options Trading Scheme

The Securities and Exchange Commission today charged a Westchester, New York-based investment adviser with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme.

The SEC alleges that, starting in approximately 2010, Michael Scronic began to raise money from at least 42 friends and acquaintances, many of whom were from his suburban community, in order to invest in a risky options trading strategy. He allegedly lured investors by informing them that he had a long and impressive track record of proven returns. He also allegedly lied to investors about the liquidity of investments, telling one investor that “what’s cool about my fund is that i’m [sic] only in publicly traded options and cash so any redemptions are met within 2 business days so if you do need to withdraw for your business needs it will be quick and painless.” However, the SEC alleges that Scronic was actually hemorrhaging investor money through massive trading losses, with at least $15 million in investment losses since April 2010. For the period ending June 30, 2017, Scronic allegedly reported to investors total assets of at least $21,837,475 while the balance in his brokerage account on June 30, 2017 was just under $27,500.

According to the SEC’s complaint, when certain investors attempted to redeem their investments, Scronic did not disclose his inability to repay them. Rather, he allegedly provided investors with a steady stream of implausible excuses for why he could not pay them back. In other instances, Scronic sought to obtain additional investment funds from new and existing investors in order to satisfy redemption requests from other investors.

“Scronic’s alleged scheme is just another example of a so-called investment professional acting as fiduciary, but failing to deal honestly with his investors for his own financial benefit,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office. “Investors should be wary anytime they are promised high or consistently positive returns in a complex, hard to understand investment strategy.”

The SEC also alleges that Scronic began identifying himself as an investment adviser to a fictitious hedge fund in which he purported to sell interests, or “shares.” The SEC encourages investors to check the backgrounds of people selling investments by using the SEC’s Investor.gov website to quickly identify whether they are registered professionals and confirm their identity.

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

The SEC’s complaint charges Scronic with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC seeks a permanent injunction, disgorgement, and penalties against Scronic.

The SEC’s investigation was conducted by Lindsay S. Moilanen, Daphne Downes, and Sheldon L. Pollock, and the case was supervised by Ms. Mehraban. The litigation will be led by Nancy A. Brown and Ms. Moilanen. 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.

Investment Adviser Charged in Multi-Million Dollar Options Trading Scheme

The Securities and Exchange Commission today charged a Westchester, New York-based investment adviser with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme.

The SEC alleges that, starting in appr…

SEC Charges Penny-Stock Operators in Push to Crack Down on Repeat Offenders

The Securities and Exchange Commission today charged two individuals with defrauding investors in penny stock companies that claimed to have valuable patents.  One of those charged had been barred from the penny stock business based on his role in another securities scheme and neither he nor his companies had ever been issued any patents by the U.S. Patent and Trademark Office, the SEC alleged.

The SEC’s complaint, filed in U.S. District Court for the Southern District of Florida, charged Rockey “Roc” G. Hatfield, of Safety Harbor, Florida, Steve E. Lovern, of Atlanta, Belize-based N1 Technologies Inc., and Wyoming-based NanoSave Technologies Inc.  Hatfield is a repeat offender whose prior securities schemes resulted in a criminal conviction, injunctions, a contempt of court finding, and broker-dealer, investment adviser, and penny-stock bars.  The SEC’s complaint alleges Hatfield controlled the two companies but concealed his role in them by having his wife and Lovern named as corporate officers and directors.

The U.S. Attorney’s Office for the Southern District of Florida today filed related criminal charges against Hatfield, Lovern, and others, and the SEC announced a trading suspension in NanoSave Technologies (NNSV).

According to the SEC’s complaint, the defendants hired unregistered brokers to cold call investors and pitch investments in “patent units,” using scripts written by Hatfield, including one that falsely claimed N1 Technologies had patented a cure for staph infections.  Investors were told that purchasing an $80,000 unit could yield as much as $1 million based on sales of similar patents, the SEC alleged.  The SEC alleged that although investors were told that their money would help fund further research and development, the defendants used most of it for personal expenditures and to pay sales commissions of up to 40 percent.

“As alleged in our complaint, Hatfield is a recidivist who fraudulently raised money by selling investors interests in non-existent patents,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  “This action is part of the Miami Regional Office’s Recidivist Initiative and the Commission’s efforts to pursue recidivist violators and hold them accountable.”

The SEC is seeking return of the defendants’ allegedly ill-gotten gains, with interest, a civil monetary penalty, a court injunction, and other relief.

The SEC’s investigation, which is continuing, is being conducted by Jordan A. Cortez and Mark Dee in the Miami Regional Office.  The case is being supervised by Eric. R. Busto and the SEC’s litigation is being led by Alejandro Soto.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation’s Miami Field Office, and the Financial Industry Regulatory Authority.

SEC Charges Penny-Stock Operators in Push to Crack Down on Repeat Offenders

The Securities and Exchange Commission today charged two individuals with defrauding investors in penny stock companies that claimed to have valuable patents.  One of those charged had been barred from the penny stock business based on his role in another securities scheme and neither he nor his companies had ever been issued any patents by the U.S. Patent and Trademark Office, the SEC alleged.

The SEC’s complaint, filed in U.S. District Court for the Southern District of Florida, charged Rockey “Roc” G. Hatfield, of Safety Harbor, Florida, Steve E. Lovern, of Atlanta, Belize-based N1 Technologies Inc., and Wyoming-based NanoSave Technologies Inc.  Hatfield is a repeat offender whose prior securities schemes resulted in a criminal conviction, injunctions, a contempt of court finding, and broker-dealer, investment adviser, and penny-stock bars.  The SEC’s complaint alleges Hatfield controlled the two companies but concealed his role in them by having his wife and Lovern named as corporate officers and directors.

The U.S. Attorney’s Office for the Southern District of Florida today filed related criminal charges against Hatfield, Lovern, and others, and the SEC announced a trading suspension in NanoSave Technologies (NNSV).

According to the SEC’s complaint, the defendants hired unregistered brokers to cold call investors and pitch investments in “patent units,” using scripts written by Hatfield, including one that falsely claimed N1 Technologies had patented a cure for staph infections.  Investors were told that purchasing an $80,000 unit could yield as much as $1 million based on sales of similar patents, the SEC alleged.  The SEC alleged that although investors were told that their money would help fund further research and development, the defendants used most of it for personal expenditures and to pay sales commissions of up to 40 percent.

“As alleged in our complaint, Hatfield is a recidivist who fraudulently raised money by selling investors interests in non-existent patents,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  “This action is part of the Miami Regional Office’s Recidivist Initiative and the Commission’s efforts to pursue recidivist violators and hold them accountable.”

The SEC is seeking return of the defendants’ allegedly ill-gotten gains, with interest, a civil monetary penalty, a court injunction, and other relief.

The SEC’s investigation, which is continuing, is being conducted by Jordan A. Cortez and Mark Dee in the Miami Regional Office.  The case is being supervised by Eric. R. Busto and the SEC’s litigation is being led by Alejandro Soto.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation’s Miami Field Office, and the Financial Industry Regulatory Authority.

SEC Charges Penny-Stock Operators in Push to Crack Down on Repeat Offenders

The Securities and Exchange Commission today charged two individuals with defrauding investors in penny stock companies that claimed to have valuable patents.  One of those charged had been barred from the penny stock business based on his role in anot…

World Investor Week Brings Together Securities Regulators on Six Continents to Promote Investor Education and Protection

The Securities and Exchange Commission, along with the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA), is leading efforts in the U.S. to raise awareness about the importance of investor education and protection as part of a global effort. World Investor Week, promoted by the International Organization of Securities Commissions (IOSCO), takes place October 2-8, 2017, marking the first time securities regulators on six continents are joining together to highlight what it means to be a smart investor as well as ways to avoid fraud.

During World Investor Week, SEC staff is participating in events around the country amplifying vital messages to investors, such as:

• Going to Investor.gov before investing
• Doing a background check on an  investment professional
• Conducting research on products before investing
• Knowing the risks and fees associated with all investments
• Recognizing the importance of diversification and the power of compound interest
• Setting investment goals
• Learning how to avoid fraud

In addition, the SEC’s Office of Investor Education and Advocacy today issued a joint investor bulletin with the CFTC, FINRA, and the North American Securities Administrators Association (NASAA) to promote these key messages.

“The best way to protect Main Street investors from becoming victims of fraud is to educate them. We want investors to ask smart questions. It’s good for them and it’s good for our markets,” said SEC Chairman Jay Clayton. “The SEC remains committed to helping all Americans reach their investment goals and protect their hard-earned money, and that’s why events like World Investor Week and the continued efforts of the Office of Investor Education and Advocacy are instrumental to the mission of this agency.”

“I see first-hand the positive impact of our investor education efforts, whether it’s our outreach team conducting in-person events, online resources on Investor.gov and public service campaigns or our assistance team that handles investor complaints and solves problems on a daily basis,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. “This week-long global effort reinforces the importance of what we and others do every day on behalf of America’s investors.” 

SEC staff outreach events include: an information session with seniors answering questions on investing, retirement and ways to protect against fraud, a Twitter chat about the various issues surrounding investing with robo-advisers, a Thrift Savings Plan (TSP) program for federal employees covering TSP distribution options, withdrawals, fees and how to avoid scams, and numerous saving and investing presentations for students and military service members.

For a list of other SEC outreach activities or to learn more about this global effort to promote investor education and protection and how investors can get involved, visit Investor.gov.

World Investor Week Brings Together Securities Regulators on Six Continents to Promote Investor Education and Protection

The Securities and Exchange Commission, along with the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA), is leading efforts in the U.S. to raise awareness about the importance of investor education and protection as part of a global effort. World Investor Week, promoted by the International Organization of Securities Commissions (IOSCO), takes place October 2-8, 2017, marking the first time securities regulators on six continents are joining together to highlight what it means to be a smart investor as well as ways to avoid fraud.

During World Investor Week, SEC staff is participating in events around the country amplifying vital messages to investors, such as:

• Going to Investor.gov before investing
• Doing a background check on an  investment professional
• Conducting research on products before investing
• Knowing the risks and fees associated with all investments
• Recognizing the importance of diversification and the power of compound interest
• Setting investment goals
• Learning how to avoid fraud

In addition, the SEC’s Office of Investor Education and Advocacy today issued a joint investor bulletin with the CFTC, FINRA, and the North American Securities Administrators Association (NASAA) to promote these key messages.

“The best way to protect Main Street investors from becoming victims of fraud is to educate them. We want investors to ask smart questions. It’s good for them and it’s good for our markets,” said SEC Chairman Jay Clayton. “The SEC remains committed to helping all Americans reach their investment goals and protect their hard-earned money, and that’s why events like World Investor Week and the continued efforts of the Office of Investor Education and Advocacy are instrumental to the mission of this agency.”

“I see first-hand the positive impact of our investor education efforts, whether it’s our outreach team conducting in-person events, online resources on Investor.gov and public service campaigns or our assistance team that handles investor complaints and solves problems on a daily basis,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. “This week-long global effort reinforces the importance of what we and others do every day on behalf of America’s investors.” 

SEC staff outreach events include: an information session with seniors answering questions on investing, retirement and ways to protect against fraud, a Twitter chat about the various issues surrounding investing with robo-advisers, a Thrift Savings Plan (TSP) program for federal employees covering TSP distribution options, withdrawals, fees and how to avoid scams, and numerous saving and investing presentations for students and military service members.

For a list of other SEC outreach activities or to learn more about this global effort to promote investor education and protection and how investors can get involved, visit Investor.gov.

World Investor Week Brings Together Securities Regulators on Six Continents to Promote Investor Education and Protection

The Securities and Exchange Commission, along with the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA), is leading efforts in the U.S. to raise awareness about the importance of investor educatio…

Chairman Clayton Provides Update on Review of 2016 Cyber Intrusion Involving EDGAR System

SEC Chairman Jay Clayton today provided an update on the status of the agency’s review and investigation of the 2016 intrusion into the EDGAR system.  In addition to updating previous disclosures, today’s announcement also includes additional information on the agency’s efforts to strengthen its cybersecurity risk profile going forward.

The ongoing staff investigation of the 2016 intrusion has now determined that an EDGAR test filing accessed by third parties as a result of that intrusion contained the names, dates of birth and social security numbers of two individuals.  This determination is based on forensic data analysis conducted since the agency’s Sept. 20th disclosure of the intrusion which relied on the latest information available at that time.

Chairman Clayton was informed by staff of this new information this past Friday, and staff are reaching out to the two individuals to notify them and offer to provide them with identity theft protection and monitoring services.  Should the agency’s review uncover additional such individuals whose sensitive information may have been accessed, the staff will contact them and offer them identity protection and monitoring as well.

“The 2016 intrusion and its ramifications concern me deeply.  I am focused on getting to the bottom of the matter and, importantly, lifting our cybersecurity efforts moving forward,” said Chairman Clayton.  “While our review and remediation efforts are ongoing and may take substantial time to complete, I believe it is important to provide new information regarding the scope of the 2016 intrusion and provide an update on the steps we are taking to assess and improve the cybersecurity risk profile of our EDGAR system and of the agency’s systems more broadly.”

The agency’s efforts going forward are organized into five principal work streams:

1)    The review of the 2016 EDGAR intrusion by the Office of Inspector General.  Staff have been instructed to provide their full cooperation with this effort

2)    The investigation by the Division of Enforcement into the potential illicit trading resulting from the 2016 EDGAR intrusion

3)    A focused review of and, as necessary or appropriate, uplift of the EDGAR system. The EDGAR system has been undergoing modernization efforts.  The agency has added, and expects to continue to add, additional resources to these efforts, which are expected to include outside consultants, and will increase the focus on cybersecurity matters

4)    The more general assessment and uplift of the agency’s cybersecurity risk profile and efforts that were initiated shortly after the Chairman’s arrival at the Commission this past May, including, without limitation, the identification and review of all systems, current and planned (e.g., the Consolidated Audit Trail or CAT), that hold market sensitive data or personally identifiable information

5)    The agency’s internal review of the 2016 EDGAR intrusion to determine, among other things, the procedures followed in response to the intrusion. This review is being overseen by the Office of the General Counsel and has an interdisciplinary investigative team that includes personnel from regional offices and will involve outside technology consultants

Each of these efforts is moving forward and, as is the nature of matters of this type, will require substantial time and effort to complete.  Chairman Clayton has pledged to keep Congress informed of the ultimate findings and conclusions of the agency’s internal review into the 2016 intrusion.

Looking forward, and to further the efforts discussed above, Chairman Clayton has authorized the immediate hiring of additional staff and outside technology consultants to aid in the agency’s efforts to protect the security of its network, systems and data.  Chairman Clayton also has directed the staff to take a number of steps designed to strengthen the agency’s cybersecurity risk profile, with an initial focus on EDGAR.  This effort includes assessing the types of data the SEC takes in through the EDGAR system, and whether EDGAR is the appropriate mechanism to obtain that data.  Another part of this effort includes reviewing the security systems, processes and controls in place to protect data submitted through EDGAR. 

The staff also will conduct similar reviews of other systems in use at the SEC, assessing the types of data the agency keeps and the related security systems, processes and controls.  The staff also will work to enhance escalation protocols for cybersecurity incidents in order to enable greater agency-wide visibility and understanding of potential cyber vulnerabilities and attacks. 

More broadly, the agency is evaluating its cybersecurity risk governance structure, which has included the establishment of a senior-level cybersecurity working group and may include additional enhancements to promote the management and oversight of cybersecurity across the SEC’s divisions and offices.

Other initiatives resulting from the general cybersecurity assessment Chairman Clayton initiated in May are ongoing or will commence shortly.  These include internal, Commission-level incident response exercises and continued interaction on cybersecurity efforts with other government agencies and committees, including the Department of Homeland Security, the Government Accountability Office and the Financial and Banking Information Infrastructure Committee.

This update also is being included as part of Chairman Clayton’s written testimony submitted to the U.S. House of Representatives Committee on Financial Services in connection with the Committee’s upcoming hearing titled “Examining the SEC’s Agenda, Operations, and Budget.”