Andrew Calamari, Regional Director of the SEC’s New York Office, to Leave the Agency After 17 Years of Service

The Securities and Exchange Commission today announced that Andrew M. Calamari, Director of the agency’s New York Regional Office, is planning to leave the agency in October after 17 years of service.

Since late 2012, Mr. Calamari has led a staff of approximately 400 enforcement attorneys, accountants, investigators, and compliance examiners, involved in the investigation and prosecution of enforcement actions and the performance of compliance inspections in the New York region.  The New York office has responsibility for the largest concentration of SEC-registered financial institutions including more than 4,000 investment banks, investment advisers, broker-dealers, mutual funds, and hedge funds.  Mr. Calamari also is one of the inaugural Co-Chairs of the Division’s Broker-Dealer Task Force, a national task force formed in late 2013 to focus on current issues and practices within the broker-dealer community and to develop national initiatives for investigations.

“I have known and respected Andy for many years.  He is a valued colleague and has made countless contributions to the New York Office and the Commission,” said SEC Chairman Jay Clayton.

“For the last 17 years, Andy has demonstrated an unwavering commitment to the Commission’s core mission,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.  “His leadership will be sorely missed.”

“Andy’s tenure as Regional Director of the SEC’s New York office has been marked by significant accomplishments and impactful cases.  We will miss his judgment and counsel,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.

“Andy devoted the majority of his career to the protection of investors through his excellent leadership of the New York Regional Office,” said Pete Driscoll, Acting Director of the Office of Compliance Inspections and Examinations.  “We will miss him greatly.” 

Mr. Calamari said, “It has been the honor of my life to serve as Director of this incredible office, with all of its remarkable people.  I have also been very fortunate to have worked with and learned from so many talented colleagues across the Commission, including all of the great Regional Directors around the country.  I will miss these days very much, and will always be a strong supporter of the Commission’s vital mission.”

During Mr. Calamari’s tenure as Regional Director, the New York office has brought many significant enforcement actions, including charges against:

• National audit firm BDO USA for dismissing red flags and issuing false and misleading unqualified audit opinions about the financial statements of staffing services company General Employment Enterprises
             
• Pharmaceutical company Allergan Inc. for disclosure failures in the wake of a hostile takeover bid
   
• Two Citigroup affiliates for defrauding investors in two hedge funds, which later crumbled and eventually collapsed during the financial crisis, by claiming they were safe, low-risk, and suitable for traditional bond investors
   
• Public accounting firm Ernst & Young LLP for violating auditor independence rules due to a close personal relationship between the firm’s audit partner and his client
   
• New York-based high frequency trading firm Latour Trading LLC and its former chief operating officer for persistent and extensive violations of the net capital rule 
   
• Fraud charges against the town of Ramapo, N.Y., its local development corporation, and four town officials who allegedly hid a deteriorating financial situation from municipal bond investors
   
• Two Merrill Lynch entities for using inaccurate “locate” data in the course of executing thousands of short sale orders

• The founder of Platinum Partners and two of its flagship hedge fund advisory firms for conducting a fraudulent scheme to inflate asset values and illicitly move investor money to cover losses and liquidity problems

Mr. Calamari began his SEC tenure as a staff attorney and rose through the ranks to his leadership position.  In 2003, he received the agency’s Arthur F. Mathews Award, which is awarded annually to an SEC employee who has been consistently creative in applying the federal securities laws for the benefit of investors.  In 2008, Mr. Calamari received the Stanley Sporkin Award, which is one of the SEC’s top awards for its enforcement officials.  In 2004 and 2013, Mr. Calamari received the SEC and NTEU Labor-Management Relations Award, which honors SEC staff who have contributed significantly to labor-management relations.

Prior to his work at the SEC, Mr. Calamari spent nearly 15 years in private law practice, including as a litigation partner at Donovan Leisure Newton & Irvine.  He is a 1985 graduate of Fordham Law School.

Andrew Calamari, Regional Director of the SEC’s New York Office, to Leave the Agency After 17 Years of Service

The Securities and Exchange Commission today announced that Andrew M. Calamari, Director of the agency’s New York Regional Office, is planning to leave the agency in October after 17 years of service.

Since late 2012, Mr. Calamari has led a staff of a…

Medical Manufacturer Settles Accounting Fraud Charges

A Massachusetts-based medical manufacturer has agreed to pay more than $13 million to settle charges that it committed accounting fraud through its subsidiaries to meet revenue targets and made improper payments to foreign officials to increase sales in certain countries.

The Securities and Exchange Commission issued an order finding that the South Korean subsidiary of Alere Inc., which produces and sells diagnostic testing equipment, improperly inflated revenues by prematurely recording sales for products that were still being stored at warehouses or otherwise not yet delivered to the customers.  According to the SEC’s order, Alere also engaged in improper revenue recognition practices at several other subsidiaries.

“Our securities laws give investors the right to a fair picture of public companies’ finances.  For Alere, that picture was distorted by multiple accounting failures and by outright fraud,” said Paul Levenson, Director of the SEC’s Boston Regional Office.

The SEC’s order also finds that Alere subsidiaries in India and Colombia obtained or retained business by using distributors or consultants to make improper payments to officials of government agencies or entities under government control.  Alere failed to maintain adequate internal controls to prevent the payments, and the company inaccurately recorded the payments in its books and records.

In consenting to the SEC’s order without admitting or denying the findings, Alere agreed to pay disgorgement of ill-gotten gains totaling $3,328,689 plus interest of $495,196 and a penalty of $9.2 million. 

The SEC’s investigation was conducted by Alicia Reed, Trevor Donelan, Marc Jones, Asita Obeyesekere, Peter Bryan Moores, and Kevin Currid.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Massachusetts, the Department of Justice, and the Public Company Accounting Oversight Board.

Medical Manufacturer Settles Accounting Fraud Charges

A Massachusetts-based medical manufacturer has agreed to pay more than $13 million to settle charges that it committed accounting fraud through its subsidiaries to meet revenue targets and made improper payments to foreign officials to increase sales i…

Stock Market Analyst Barred for Illegally Cashing In On His Research Reports

The Securities and Exchange Commission today charged a stock market analyst with insider trading prior to the publication of research reports and articles he authored with the false disclaimer that he wasn’t trading in the companies being covered.  He agreed to settle the charges and be barred from trading in penny stocks for the rest of his life.

The SEC alleges that Jason Napodano, who headed a division called Zacks Small Cap Research within a larger investment research firm, misled investors in penny stocks by representing that he wasn’t trading or holding positions in the companies he was writing about while secretly trading the same stocks based on nonpublic information about the publication date of his research.  In an effort to evade detection, Napodano allegedly limited his profits from each illegal trade by taking small positions and closing the positions shortly after his reports and articles were published.

In addition to a permanent penny stock bar, Napodano agreed to pay full disgorgement of his insider trading profits totaling $143,865.48 plus interest of $17,620.87 and a penalty of $143,865.48.  The settlement is subject to court approval.

“Retail investors seek honest rather than conflicted research to help them make decisions about which stocks to buy and trade.  It is unacceptable for analysts to represent they have no stake in the companies they’re writing about while secretly cashing in on trades in those stocks,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.

The SEC’s complaint also charges a pair of investment bankers who, along with Napodano, allegedly traded on nonpublic information that they and Napodano shared about certain small-cap issuers.  According to the SEC’s complaint, Bilal Basrai and Bryce Stirton worked at Chicago-based brokerage firm LBMZ Securities and together with Napodano breached the duties of trust and confidentiality owed to microcap issuers that retained Zacks Small Cap Research to provide sponsored research or LBMZ to act as a financial adviser.

Basrai agreed to settle the charges by paying disgorgement of his insider trading profits of $39,668.37 plus interest of $4,617.89 and a penalty of $39,668.37.  Stirton agreed to settle the charges without admitting or denying the allegations by paying disgorgement of his insider trading profits totaling $2,218.87 plus interest of $257.43 and a penalty of $2,218.87.  Basrai and Stirton also agreed to be barred from trading penny stocks and from working in the securities industry, with Stirton having the right to reapply after five years. 

In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois today announced criminal charges against Napodano and Basrai.

LBMZ Securities separately agreed to be censured and pay a $240,000 penalty without admitting or denying the SEC’s findings that the firm failed to enforce policies and procedures designed to prevent its employees from misusing nonpublic information.  According to the SEC’s order, LBMZ failed to obtain or review complete trading records of many employees, including Basrai, and conducted only a minimal review of employee communications to monitor potential misuse.

The SEC’s investigation was conducted by Jonathan Austin, Elizabeth Doisy, Martin Zerwitz, and Deborah A. Tarasevich and supervised by Robert Cohen and Antonia Chion.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of Illinois, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.

Stock Market Analyst Barred for Illegally Cashing In On His Research Reports

The Securities and Exchange Commission today charged a stock market analyst with insider trading prior to the publication of research reports and articles he authored with the false disclaimer that he wasn’t trading in the companies being covered.  He …

SEC Announces Enforcement Initiatives to Combat Cyber-Based Threats and Protect Retail Investors

The Securities and Exchange Commission today announced two new initiatives that will build on its Enforcement Division’s ongoing efforts to address cyber-based threats and protect retail investors. The creation of a Cyber Unit that will focus on targeting cyber-related misconduct and the establishment of a retail strategy task force that will implement initiatives that directly affect retail investors reflect SEC Chairman Jay Clayton’s priorities in these important areas.

Cyber Unit

The Cyber Unit will focus the Enforcement Division’s substantial cyber-related expertise on targeting cyber-related misconduct, such as:

• Market manipulation schemes involving false information spread through electronic and social media
• Hacking to obtain material nonpublic information
• Violations involving distributed ledger technology and initial coin offerings
• Misconduct perpetrated using the dark web
• Intrusions into retail brokerage accounts
• Cyber-related threats to trading platforms and other critical market infrastructure

The unit, which has been in the planning stages for months, complements the Chairman’s initiatives to implement an internal cybersecurity risk profile and create a cybersecurity working group to coordinate information sharing, risk monitoring, and incident response efforts throughout the agency.

“Cyber-related threats and misconduct are among the greatest risks facing investors and the securities industry,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.  “The Cyber Unit will enhance our ability to detect and investigate cyber threats through increasing expertise in an area of critical national importance.”

Over the past several years, the Enforcement Division has developed substantial expertise in the detection and pursuit of fraudulent conduct in an increasingly technological and data-driven landscape.  The Cyber Unit will consolidate and advance these efforts, and include staff from across the Enforcement Division.

Robert A. Cohen has been appointed Chief of the Cyber Unit.  Since 2015, he and Joseph Sansone have been Co-Chiefs of the Market Abuse Unit.  Mr. Sansone will continue to lead the Market Abuse Unit as its Chief.

Retail Strategy Task Force

The Retail Strategy Task Force will develop proactive, targeted initiatives to identify misconduct impacting retail investors.  The Enforcement Division has a long and successful history of bringing cases involving fraud targeting retail investors, from everything involving the sale of unsuitable structured products to microcap pump-and-dump schemes. 

This task force will apply the lessons learned from those cases and leverage data analytics and technology to identify large-scale misconduct affecting retail investors.  The task force will include enforcement personnel from around the country and will work with staff across the SEC, including from the SEC’s National Exam Program and the Office of Investor Education and Advocacy.

“Protecting the welfare of the Main Street investor has long been a priority for the Commission,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.  “By dedicating additional resources and expertise to developing strategies to address misconduct that victimizes retail investors, the division will better protect our most vulnerable market participants.”

Statement from Chairman Clayton

“When Stephanie and Steve approached me with these initiatives, I endorsed them wholeheartedly.  They reflect the division’s continual efforts to pursue new forms of misconduct while keeping a watchful eye out for our Main Street investors,” said SEC Chairman Jay Clayton.

SEC Announces Enforcement Initiatives to Combat Cyber-Based Threats and Protect Retail Investors

The Securities and Exchange Commission today announced two new initiatives that will build on its Enforcement Division’s ongoing efforts to address cyber-based threats and protect retail investors. The creation of a Cyber Unit that will focus on target…

Pharmaceutical Company Paying Penalty for Misleading Investors About Sales Metric

The Securities and Exchange Commission today filed fraud charges against a Massachusetts-based biopharmaceutical company that exaggerated how many new patients actually filled prescriptions for an expensive drug that was its sole source of revenue.

Ae…

SEC Announces Agenda for October 12 Investor Advisory Committee Meeting

The Securities and Exchange Commission today announced the agenda for the October 12 meeting of its Investor Advisory Committee.  The meeting will begin at 10 a.m. in the Multipurpose Room at SEC headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public.  The meeting will be webcast live and archived on the committee’s webpage for later viewing.

The committee will hold three panel discussions covering blockchain technology and implications for securities markets, law school clinic advocacy efforts on behalf of retail investors, and electronic delivery of information to retail investors, which may include a Recommendation of the Investor as Purchaser Subcommittee.

The committee welcomes new members Allison A. Bennington, a Partner and General Counsel at ValueAct Capital, and Mina Nguyen, a Managing Director at AQR Capital Management.  Members of the committee represent a wide variety of investor interests, including those of individual and institutional investors, senior citizens, and state securities commissions.  For a full list of committee members, see the committee’s webpage.

The Investor Advisory Committee was established under Section 911 of the Dodd-Frank Act to advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.  The Dodd-Frank Act authorizes the committee to submit findings and recommendations to the Commission.

SEC Announces Agenda for October 12 Investor Advisory Committee Meeting

The Securities and Exchange Commission today announced the agenda for the October 12 meeting of its Investor Advisory Committee.  The meeting will begin at 10 a.m. in the Multipurpose Room at SEC headquarters at 100 F Street, N.E., Washington, D.C., an…

SEC Suspends Trading in Company Purporting Involvement in Hurricane Harvey Relief Efforts

The Securities and Exchange Commission today suspended trading in a company amid questions surrounding its statements about sending response teams and equipment to help with Hurricane Harvey disaster recovery efforts in Houston and surrounding areas.

The SEC’s trading suspension order says that a recent press release issued by Texas-based Grupo Resilient International claimed that the company added a “FEMA approved contractor” to the board of its subsidiary and was deploying workers and preparing to deploy a network of mobile broadband trailers to assist in relief efforts.

The SEC’s order also says there are questions regarding the adequacy and accuracy of statements made by the company on other matters in prior press releases.  Grupo was previously known as Paradise Ridge Hydrocarbons and trades under the ticker symbol GRUI.

Earlier this month, the SEC issued an alert that warned investors to be vigilant for investment scams related to Hurricanes Harvey and Irma, noting that scam artists often exploit the latest crisis in the news cycle to lure investors into supposedly promising investment opportunities.

“This is further reminder of the need for vigilance when investing in penny stock companies, especially when they are being touted in connection with humanitarian aid during a natural disaster such as Hurricane Harvey.  Investors are reminded to keep on the lookout for schemes that seek to attract people who are eager to invest with companies that genuinely provide assistance to those in need,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement.

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.

The SEC appreciates the assistance of the Financial Industry Regulatory Authority.