SEC Provides Regulatory Relief and Assistance for Hurricane Victims

The Securities and Exchange Commission today announced that it is providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, municipal advisors and others affected by Hurricane Harvey, Hurricane Irma, and Hurricane Maria.  The loss of property, power, transportation, and mail delivery due to the hurricanes poses challenges for some individuals and entities that are required to provide information to the SEC and shareholders. 

To address compliance issues caused by Hurricane Harvey, Hurricane Irma, and Hurricane Maria, the Commission issued an order that conditionally exempts affected persons from certain requirements of the federal securities laws for periods following the weather events. 

The Commission also adopted interim final temporary rules that extend the filing deadlines for specified reports and forms that companies must file pursuant to Regulation Crowdfunding and Regulation A.

The exemptive relief and rules are structured for a broad class of companies and others affected by the hurricanes and their respective aftermaths.  Some companies and other affected persons may require additional or different assistance in their efforts to comply with the requirements of the federal securities laws. The Commission staff will address these and any disclosure-related issues on a case-by-case basis in light of their fact-specific nature.  Those affected by the hurricanes that require additional assistance are encouraged to contact Commission staff for individual relief or interpretive guidance.  

* * *

ADDITIONAL INFORMATION

In connection with the relief, issued in an order and interim final temporary rules, the Commission staff will take the following positions under the Exchange Act, the Securities Act, and the Investment Advisers Act:

• For purposes of eligibility to use Form S-3 (and for well-known seasoned issuer status, which is based in part on Form S-3 eligibility), a company relying on the exemptive order will be considered current and timely in its Exchange Act filing requirements during the applicable relief period if it was current and timely as of the first day of the applicable relief period.  After the applicable relief period, a company will continue to be considered current and timely if it files any required report on or before Oct. 10, 2017 for those relying on the exemptive order due to Hurricane Harvey, Oct. 19, 2017 for those relying on the exemptive order due to Hurricane Irma, and Nov. 2, 2017 for those relying on the exemptive order due to Hurricane Maria

• For purposes of the Form S-8 eligibility requirements and the current public information eligibility requirements of Rule 144(c), a company relying on the exemptive order will be considered current in its Exchange Act filing requirements during the applicable relief period if it was current as of the first day of the applicable relief period.  After the applicable relief period, a company will continue to be considered current if it files any required report on or before Oct. 10, 2017 for those relying on the exemptive order due to Hurricane Harvey, Oct. 19, 2017 for those relying on the exemptive order due to Hurricane Irma, and Nov. 2, 2017 for those relying on the exemptive order due to Hurricane Maria

• Companies that receive an extension on filing Exchange Act annual reports or quarterly reports pursuant to the order will be considered to have a due date of Oct. 10, 2017 for those relying on the exemptive order due to Hurricane Harvey, Oct. 19, 2017 for those relying on the exemptive order due to Hurricane Irma, and Nov. 2, 2017 for those relying on the exemptive order due to Hurricane Maria for those reports for purposes of Exchange Act Rule 12b-25.  As such, those companies will be permitted to rely on Rule 12b-25 where they are unable to file the required reports on or before the applicable due date.

• During the period from Aug. 25, 2017 to Nov. 1, 2017, a registered open-end investment company and a registered unit investment trust will be considered to have satisfied the requirements of Section 5(b)(2) of the Securities Act to deliver a summary or a statutory prospectus, as applicable, to an investor, provided that:  (1) the sale of shares to the investor was not an initial purchase by the investor of shares of the company or unit investment trust; (2) the investor’s mailing address for delivery, as listed in the records of the company or unit investment trust, has a ZIP code for which the common carrier has suspended mail service, as a result of Hurricane Harvey, Hurricane Irma, or Hurricane Maria, of the type or class customarily used by the company or unit investment trust, to deliver summary or statutory prospectuses; and (3) the company, or unit investment trust, or other person promptly delivers the summary or statutory prospectus, as applicable either (a) if requested by the investor, or (b) by the earlier (i) of Nov. 2, 2017 or (ii) the resumption of the applicable mail service.

• A registered investment adviser will be considered to have satisfied Form ADV filing requirements under Section 204(a) of the Advisers Act and Rule 204-1 thereunder, if:  (1) the registrant’s Form ADV filing deadline falls within the period from Aug. 25, 2017 to Oct. 6, 2017; (2) the registrant was or is not able to meet its filing deadline due to Hurricane Harvey; and (3) the registrant makes the required Form ADV filing by Oct. 10, 2017. 

• A registered investment adviser will be considered to have satisfied Form ADV filing requirements under Section 204(a) of the Advisers Act and Rule 204-1 thereunder, if:  (1) the registrant’s Form ADV filing deadline falls within the period from Sept. 6, 2017 to Oct. 18, 2017; (2) the registrant was or is not able to meet its filing deadline due to Hurricane Irma; and (3) the registrant makes the required Form ADV filing by Oct. 19, 2017.

• A registered investment adviser will be considered to have satisfied Form ADV filing requirements under Section 204(a) of the Advisers Act and Rule 204-1 thereunder, if:  (1) the registrant’s Form ADV filing deadline falls within the period from Sept. 20, 2017 to Nov. 1, 2017; (2) the registrant was or is not able to meet its filing deadline due to Hurricane Maria; and (3) the registrant makes the required Form ADV filing by Nov. 2, 2017. 

• During the period from Aug. 25, 2017 to Nov. 1, 2017, a registered investment adviser will be considered to have satisfied the requirements of Section 204 of the Advisers Act and Rule 204-3(b) thereunder to deliver the written disclosure statements required thereunder to its advisory client, provided that:  (1) the client’s mailing address for delivery, as listed in the records of the investment adviser, has a ZIP code for which the common carrier has suspended mail service, as a result of Hurricane Harvey, Hurricane Irma, or Hurricane Maria, of the type or class customarily used by the adviser to deliver written disclosure statements; and (2) the investment adviser or other person promptly delivers the written disclosure statement either (a) if requested by the client, or (b) at the earlier of (i) Nov. 2, 2017 or (ii) the resumption of the applicable mail service.

SEC Provides Regulatory Relief and Assistance for Hurricane Victims

The Securities and Exchange Commission today announced that it is providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, municipal advisors and others affected by Hurricane Harvey, Hurricane Irma, …

SEC Detects Brokers Defrauding Customers

The Securities and Exchange Commission today charged three New York-based brokers with making unsuitable recommendations that resulted in substantial losses to customers and hefty commissions for the brokers.  One of the brokers agreed to pay more than $400,000 to settle the charges.

Brokers must make recommendations that are compatible with their customers’ financial needs, investment objectives, and risk tolerances.  An SEC examination of the firm Alexander Capital L.P. detected potential misconduct among certain brokers, and the ensuing investigation has led to the filing of an SEC complaint against William C. Gennity and Rocco Roveccio.  The SEC also issued an order against Laurence M. Torres.

The SEC’s complaint alleges that Gennity and Roveccio recommended investments that involved frequent buying and selling of securities without any reasonable basis to believe their customers would profit.  According to the complaint, since customers incur costs with every transaction, the price of the security must increase significantly during the brief period it is held in an account for even a minimal profit to be realized. 

The SEC further alleges that Gennity and Roveccio churned customer accounts, engaged in unauthorized trading, and concealed material information from their customers – namely that the transaction costs associated with their recommendations (commissions, markups, markdowns, postage, fees, and margin interest) would almost certainly outstrip any potential monetary gains in the accounts.  According to the SEC’s complaint, customer losses totaled $683,038 while Gennity and Roveccio received approximately $280,000 and $206,000, respectively, in commissions and fees.

“We have no tolerance for unscrupulous brokers, and our examiners and enforcement investigators are working together to proactively catch insidious practices before they spread and impact even more customer accounts,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office and Co-Chair of the Enforcement Division’s Broker-Dealer Task Force. 

“As alleged in our complaint, Gennity and Roveccio each misled several customers by touting their ability to outperform the market while concealing that the cost to customers for this excessive in-and-out trading doomed any realistic possibility of these brokers making money for anyone other than themselves,” Mr. Calamari added.

The SEC’s order against Torres finds that he had no reasonable basis to believe it was suitable to recommend a high-cost pattern of frequent trading that gave his customers virtually no chance of making even a minimal profit.  Torres also engaged in churning and made unauthorized trades.  Without admitting or denying the findings, Torres agreed to be barred from the securities industry and penny stock trading, and he must pay $225,359.36 in disgorgement plus $25,748.02 in interest, and a $160,000 penalty.

The SEC’s litigation against Gennity and Roveccio will proceed in federal district court in Manhattan, with the complaint charging them with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. 

The SEC’s investigation, which is continuing, has been conducted by David Oliwenstein, David Stoelting, Roseann Daniello, and Steven G. Rawlings.  The litigation will be led by Mr. Stoelting and Mr. Oliwenstein, and the case is being supervised by Sanjay Wadhwa.  The examination that led to the investigation was conducted by Shereion Clarke, Margaret Lett, and Jennifer Grumbrecht.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority and the Office of Montana State Auditor, Commissioner of Securities and Insurance.    

SEC Detects Brokers Defrauding Customers

The Securities and Exchange Commission today charged three New York-based brokers with making unsuitable recommendations that resulted in substantial losses to customers and hefty commissions for the brokers.  One of the brokers agreed to pay more than $400,000 to settle the charges.

Brokers must make recommendations that are compatible with their customers’ financial needs, investment objectives, and risk tolerances.  An SEC examination of the firm Alexander Capital L.P. detected potential misconduct among certain brokers, and the ensuing investigation has led to the filing of an SEC complaint against William C. Gennity and Rocco Roveccio.  The SEC also issued an order against Laurence M. Torres.

The SEC’s complaint alleges that Gennity and Roveccio recommended investments that involved frequent buying and selling of securities without any reasonable basis to believe their customers would profit.  According to the complaint, since customers incur costs with every transaction, the price of the security must increase significantly during the brief period it is held in an account for even a minimal profit to be realized. 

The SEC further alleges that Gennity and Roveccio churned customer accounts, engaged in unauthorized trading, and concealed material information from their customers – namely that the transaction costs associated with their recommendations (commissions, markups, markdowns, postage, fees, and margin interest) would almost certainly outstrip any potential monetary gains in the accounts.  According to the SEC’s complaint, customer losses totaled $683,038 while Gennity and Roveccio received approximately $280,000 and $206,000, respectively, in commissions and fees.

“We have no tolerance for unscrupulous brokers, and our examiners and enforcement investigators are working together to proactively catch insidious practices before they spread and impact even more customer accounts,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office and Co-Chair of the Enforcement Division’s Broker-Dealer Task Force. 

“As alleged in our complaint, Gennity and Roveccio each misled several customers by touting their ability to outperform the market while concealing that the cost to customers for this excessive in-and-out trading doomed any realistic possibility of these brokers making money for anyone other than themselves,” Mr. Calamari added.

The SEC’s order against Torres finds that he had no reasonable basis to believe it was suitable to recommend a high-cost pattern of frequent trading that gave his customers virtually no chance of making even a minimal profit.  Torres also engaged in churning and made unauthorized trades.  Without admitting or denying the findings, Torres agreed to be barred from the securities industry and penny stock trading, and he must pay $225,359.36 in disgorgement plus $25,748.02 in interest, and a $160,000 penalty.

The SEC’s litigation against Gennity and Roveccio will proceed in federal district court in Manhattan, with the complaint charging them with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. 

The SEC’s investigation, which is continuing, has been conducted by David Oliwenstein, David Stoelting, Roseann Daniello, and Steven G. Rawlings.  The litigation will be led by Mr. Stoelting and Mr. Oliwenstein, and the case is being supervised by Sanjay Wadhwa.  The examination that led to the investigation was conducted by Shereion Clarke, Margaret Lett, and Jennifer Grumbrecht.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority and the Office of Montana State Auditor, Commissioner of Securities and Insurance.    

SEC Detects Brokers Defrauding Customers

The Securities and Exchange Commission today charged three New York-based brokers with making unsuitable recommendations that resulted in substantial losses to customers and hefty commissions for the brokers.  One of the brokers agreed to pay more than…

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 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 …

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.