Medical Device Company Charged With Accounting Failures and FCPA Violations

The Securities and Exchange Commission today announced that Texas-based medical device company Orthofix International has agreed to admit wrongdoing and pay more than $14 million to settle charges that it improperly booked revenue in certain instances and made improper payments to doctors at government-owned hospitals in Brazil in order to increase sales.

Four then-executives at Orthofix also agreed to pay penalties to settle cases related to the accounting failures, which according to the SEC’s order involved Orthofix improperly recording certain revenue as soon as a product was shipped despite contingencies requiring certain events to occur in order to receive payment in the transaction.  In other instances, Orthofix immediately recorded revenue when it had provided customers with significant extensions of time to make payments.  The accounting failures caused the company to materially misstate certain financial statements from at least 2011 to the first quarter of 2013.

“Orthofix’s accounting failures were widespread and significant, causing Orthofix to make false statements to the public about its financial condition,” said Antonia Chion, Associate Director in the SEC’s Enforcement Division.

The SEC’s order further finds that Orthofix violated the Foreign Corrupt Practices Act (FCPA) when its subsidiary in Brazil schemed to use high discounts and make improper payments through third-party commercial representatives and distributors to induce doctors under government employment to use Orthofix’s products.  Fake invoices were used for purported services.

Kara N. Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Orthofix did not have adequate internal controls across all its subsidiaries and failed to detect and prevent the improper payments in Brazil that were intended to boost sales.”

Orthofix agreed to pay an $8.25 million penalty to resolve the accounting violations and more than $6 million in disgorgement and penalties to settle the FCPA charges.  The company agreed to retain an independent compliance consultant for one year to review and test its FCPA compliance program.  The SEC’s order noted Orthofix’s cooperation and remedial acts.

Jeff Hammel, a former accounting executive in Orthofix’s largest business segment, agreed to pay a $20,000 penalty and former sales executives Kenneth Mack and Bryan McMillan agreed to pay penalties of $40,000 and $25,000 respectively.  Hammel also agreed to be suspended from appearing or practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.  The SEC’s order permits Hammel to apply for reinstatement after two years.  Orthofix’s former corporate CFO Brian McCollum agreed to pay a $35,000 penalty and reimburse the company $40,885 for bonuses he received during the period when the company committed accounting violations.  The four consented to the SEC’s orders without admitting or denying the findings.

Orthofix’s then-CEO Robert Vaters, who was not charged with wrongdoing, has reimbursed the company $72,886 for cash bonuses and certain stock awards he received during the period when the company committed accounting violations.  Therefore, it wasn’t necessary for the SEC to pursue a Sarbanes-Oxley Section 304(a) clawback action against him. 

The SEC’s investigation into the accounting violations was conducted by Noel Gittens and Richard Haynes with assistance from Gregory Bockin.  It was supervised by Ricky Sachar and Ms. Chion.  The SEC’s investigation into the FCPA violations was conducted by Sana Muttalib and supervised by Ansu N. Banerjee and Ms. Brockmeyer.  The SEC appreciates the assistance of the Comissao de Valores Mobiliarios in Brazil.

SEC Charges Businessman With Misusing EB-5 Investments

The Securities and Exchange Commission today announced fraud charges against an Oakland, Calif.-based businessman accused of misusing money he raised from investors through the EB-5 immigrant investor program intended to create or preserve jobs for U.S. workers.

The SEC alleges that Thomas M. Henderson and his company San Francisco Regional Center LLC falsely claimed to foreign investors that their $500,000 investments would help create at least 10 jobs within several distinct EB-5 related businesses he created, including a nursing facility, call centers, and a dairy operation.  This would qualify the investors for a potential path to permanent U.S. residency through the EB-5 program.

But according to the SEC’s complaint, Henderson jeopardized investors’ residency prospects and combined the $100 million he raised from investors into a general fund from which he allegedly misused at least $9.6 million to purchase his home and personal items and improperly fund several personal business projects such as Bay Area restaurants that were unrelated to the companies he purportedly established to create jobs consistent with EB-5 requirements.  According to the SEC’s complaint, Henderson also improperly used $7.5 million of investor money to pay overseas marketing agents, and he shuffled millions of dollars among the EB-5 businesses to obscure his fraudulent scheme.

“We allege that Henderson exploited a program meant to create employment for Americans and abused the trust of investors seeking residency in the U.S.,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Rather than using investor funds to create jobs and develop communities as promised, Henderson allegedly played a shell game with investor money to buy his home and support personal ventures.”

The SEC is seeking a court order appointing a receiver over San Francisco Regional Center and Henderson’s other businesses involved in the alleged fraud.  The SEC’s complaint, filed in U.S. District Court for the Northern District of California, seeks preliminary injunctions as well as disgorgement of ill-gotten gains plus interest, penalties, and other relief.

The SEC’s investigation was conducted by Thomas Eme and Ellen Chen of the San Francisco office and supervised by Steven Buchholz.  The litigation will be led by Andrew Hefty and Susan LaMarca.  The SEC appreciates the assistance of the U.S. Citizenship and Immigration Services, which administers the EB-5 program.   

Allergan Paying $15 Million Penalty for Disclosure Failures During Merger Talks

The Securities and Exchange Commission today announced that Allergan Inc. has agreed to admit securities law violations and pay a $15 million penalty for disclosure failures in the wake of a hostile takeover bid.

The SEC’s order finds that Allergan failed to disclose in a timely manner its negotiations with potentially friendlier merger partners in the months following a tender offer from Valeant Pharmaceuticals International and co-bidders in June 2014.  Allergan publicly stated in a disclosure filing that the Valeant bid was inadequate and it was not engaging in negotiations that could result in a merger.  It was required to amend the filing if a material change occurred.  According to the SEC’s order, Allergan never publicly disclosed material negotiations it entered with a different company that would have made it more difficult for Valeant to acquire a larger combined entity.  And after those negotiations failed, the investing public wasn’t informed that Allergan entered into merger talks with Actavis, the company that ultimately acquired Allergan, until the announcement that a merger agreement had been executed.

“Allergan failed to fully and timely disclose information about potential merger transactions it was negotiating behind the scenes in response to the Valeant bid,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “As outlined in our order, Allergan was slow to act even after SEC staff reminded the company about its disclosure obligations.”

Allergan, now a wholly owned subsidiary of Allergan plc, admitted the facts in the SEC’s cease-and-desist order finding that the company violated Section 14(d) of the Securities Exchange Act of 1934 and Rule 14d-9. 

The SEC’s investigation was conducted by John Lehmann, Mark Germann, and Charles Riely of the New York office, and the case was supervised by Sanjay Wadhwa.

10 Firms Violated Pay-to-Play Rule By Accepting Pension Fund Fees Following Campaign Contributions

The Securities and Exchange Commission today announced that 10 investment advisory firms have agreed to pay penalties ranging from $35,000 to $100,000 to settle charges that they violated the SEC’s investment adviser pay-to-play rule by receiving compensation from public pension funds within two years after campaign contributions made by the firms’ associates.

According to the SEC’s orders, investment advisers are subject to a two-year timeout from providing compensatory advisory services either directly to a government client or through a pooled investment vehicle after political contributions were made to a candidate who could influence the investment adviser selection process for a public pension fund or appoint someone with such influence.  The SEC’s orders find that these 10 firms violated the two-year timeout by accepting fees from city or state pension funds after their associates made campaign contributions to elected officials or political candidates with the potential to wield influence over those pension funds.

“The two-year timeout is intended to discourage pay-to-play practices in the investment of public money, including public pension funds,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit.  “Advisory firms must be mindful of the restrictions that can arise from campaign contributions made by their associates.” 

Without admitting or denying the findings, the 10 firms consented to the SEC’s orders finding they violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-5.  The firms are censured and must pay the following monetary penalties:

• Adams Capital Management – $45,000
• Aisling Capital – $70,456
• Alta Communications – $35,000
• Commonwealth Venture Management Corporation – $75,000
• Cypress Advisors – $35,000
• FFL Partners – $75,000
• Lime Rock Management – $75,000
• NGN Capital – $100,000
• Pershing Square Capital Management – $75,000
• The Banc Funds Company – $75,000

The SEC’s investigations were coordinated by Louis A. Randazzo, who conducted them along with Kevin B. Currid, Brian Fagel, Natalie G. Garner, William T. Salzmann, and Monique Winkler of the Public Finance Abuse Unit and Kelly Gibson and Benjamin D. Schireson of the Philadelphia Regional Office.  

Chemical and Mining Company in Chile Paying $30 Million to Resolve FCPA Cases

The Securities and Exchange Commission today announced that Chilean-based chemical and mining company Sociedad Quimica y Minera de Chile S.A. (SQM) agreed to pay more than $30 million to resolve parallel civil and criminal cases finding that it violated the Foreign Corrupt Practices Act (FCPA).

According to the SEC’s order, SQM made nearly $15 million in improper payments to Chilean political figures and others connected to them.  Most of the payments were made based on fake documentation submitted to SQM by individuals and entities posing as legitimate vendors.  The payments occurred for at least a seven-year period.

“SQM permitted millions of dollars in payments to local politicians while failing for years to exercise proper oversight over a key discretionary account and internal controls,” said Stephanie Avakian, Acting Director of the SEC Enforcement Division.

SQM agreed to pay a $15 million penalty to settle the SEC’s charges and a $15.5 million penalty as part of a deferred prosecution agreement announced today by the U.S. Department of Justice.  SQM agreed to retain an independent compliance monitor for two years and self-report to the SEC and Justice Department for one year after the monitor’s work is complete.

The SEC’s investigation, which is continuing, is being conducted by William B. McKean.  The SEC appreciates the assistance of the Department of Justice Criminal Division’s Fraud Section.

Morgan Stanley Paying $13 Million Penalty for Overbilling Clients and Violating Custody Rule

The Securities and Exchange Commission today announced that Morgan Stanley Smith Barney has agreed to pay a $13 million penalty to settle charges that it overbilled investment advisory clients due to coding and other billing system errors.  The firm also violated the custody rule pertaining to annual surprise examinations.

The SEC’s order finds that Morgan Stanley overcharged more than 149,000 advisory clients because it failed to adopt and implement compliance policies and procedures reasonably designed to ensure that clients were billed accurately according to the terms of their advisory agreements.  Morgan Stanley also failed to validate billing rates contained in the firm’s billing system against client contracts, fee billing histories, and other documentation.

According to the SEC’s order, Morgan Stanley received more than $16 million in excess fees due to the billing errors that occurred from 2002 to 2016.  Morgan Stanley has reimbursed this full amount plus interest to affected clients.

“Investors must be able to trust that their investment advisers have put appropriate safeguards in place to ensure accurate billing.  The long-running deficiencies in those safeguards at Morgan Stanley resulted in 36 different types of billing errors that caused overcharges to customers,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. 

The SEC’s order further finds that Morgan Stanley failed to comply with the annual surprise custody examination requirements for two consecutive years when it did not provide its independent public accountant with an accurate or complete list of client funds and securities for examination.  Morgan Stanley also failed to maintain and preserve client contracts.

“The custody rule’s surprise examination requirement is designed to provide clients protection against assets being misappropriated or misused,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York office.  “Morgan Stanley failed in consecutive years to do what was required of it to give investment advisory accounts that important protection.”

Without admitting or denying the findings that it violated various provisions of the Investment Advisers Act of 1940 and related rules, Morgan Stanley consented to the SEC’s cease-and-desist order and agreed to the $13 million penalty, a censure, and undertakings related to its fee billing and books and records practices.

The SEC’s investigation was conducted by Ranah Esmaili, Kenneth Gottlieb, Nicholas Pilgrim, and Celeste Chase of the New York office, and the case was supervised by Sanjay Wadhwa.  The examination that led to the investigation was conducted by Heather Palmer, Jennifer Klein, and Anthony Fiduccia.

Michael J. Osnato Jr., Chief of Enforcement Division’s Complex Financial Instruments Unit, to Leave SEC

The Securities and Exchange Commission today announced that Michael J. Osnato Jr., Chief of the Enforcement Division’s Complex Financial Instruments Unit, is planning to leave the agency later this month.

For the past three years, Mr. Osnato led the specialized unit of 45 attorneys and industry experts in offices across the country that investigate potential misconduct related to complex financial products and practices involving sophisticated market participants.  In addition, Mr. Osnato has played a leading role in SEC programs, including the Enforcement Division’s national Cooperation Committee.

“Mike has been an insightful and innovative leader of the Enforcement Division’s unit dedicated to policing complex financial instruments and practices,” said Stephanie Avakian, Acting Director of the SEC’s Enforcement Division.  “As the financial crisis ebbed, Mike proactively refocused the unit toward instruments and practices that disadvantaged retail investors, and put a premium on smart and efficient investigative techniques.  The investing public is safer because of these efforts.”

Mr. Osnato said, “It has been a singular honor to serve alongside the talented staff of the Enforcement Division whose professionalism and commitment to fairness knows no equal.  I am particularly proud of my colleagues in the Complex Financial Instruments Unit, who have helped pave the way for the Division’s use of novel and streamlined investigative techniques and data analytics to root out the most sophisticated forms of misconduct in today’s markets.”

Under Mr. Osnato’s supervision, the SEC has brought enforcement actions that addressed a wide range of sophisticated misconduct:

• The SEC’s first three sets of charges involving issuers of structured notes, a complex financial product that typically consists of a debt security with a derivative tied to the performance of other securities, commodities, currencies, or proprietary indices, against UBS AG, Merrill Lynch, and UBS Financial Services.
• The SEC’s actions against a Big Three credit rating agency against Standard & Poor’s for post-financial crisis misconduct arising from the rating of complex debt instruments.
• The SEC’s fraud charges against a high-frequency trading firm that used algorithmically-generated rapid-fire trades to manipulate the closing prices of thousands of NASDAQ-listed stocks.
• Charges against Merrill Lynch for violating the SEC’s Customer Protection Rule through usage of complex options trades that placed customer funds at risk, the settlement of which involved admissions of wrongdoing and hundreds of millions of dollars in monetary sanctions.  
• Charges against three Morgan Stanley entities for misleading investors in a pair of residential mortgage-backed securities (RMBS) securitizations that the firms underwrote, sponsored, and issued.
• The SEC’s charges against four veteran investment bankers at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

Mr. Osnato joined the SEC’s Enforcement Division in September 2008.  He was promoted to assistant regional director in the SEC’s New York Office in 2010.  Prior to his arrival at the SEC, Mr. Osnato worked at Shearman & Sterling LLP and later at Linklaters LLP in New York.  He earned his bachelor’s degree from Williams College and his law degree from Fordham Law School.

SEC Charges Government Contractor With Inadequate Controls and Books and Records Violations

The Securities and Exchange Commission today announced that L3 Technologies Inc. (formerly known as L-3 Communications Holdings Inc.), a contractor for U.S. and various foreign government agencies, has agreed to pay a $1.6 million penalty to settle charges that it failed to maintain accurate books and records and had inadequate internal accounting controls. 

An SEC investigation found that in December 2013, L3’s Army Sustainment Division (ASD) – part of L3’s Aerospace Systems segment – improperly recorded $17.9 million in revenue from a contract with the U.S. Army by creating invoices associated with unresolved claims against the U.S. Army that were not delivered when the revenue was recorded.  While certain employees immediately reported their concerns to L3’s ethics department, the subsequent ethics review failed to uncover the misconduct due, in part, to a failure by internal investigators to adequately understand the billing process.  In October 2014, following a subsequent investigation conducted by outside advisors, L3 concluded it had material weaknesses in its internal controls over financial reporting for the fiscal year ended Dec. 31, 2013 and for the first quarter of 2014.  L3 revised its financial statements from 2011 to 2014.

“Adequate internal accounting controls function as a critical safeguard against the type of improper revenue recognition that occurred at L3,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “L3 failed to have such controls in place, which rendered inaccurate its books and records.”

According to the SEC’s order, in or around August 2013, ASD executives developed a “Revenue Recovery Initiative” that identified approximately $50 million in work performed under a contract with the U.S. Army that had not been billed.  Because L3 and the U.S. Army had not reached any agreement on payment for the work performed, any revenue recognition for that work would have been improper under relevant accounting rules.  Nonetheless, in December 2013, a senior finance official at ASD requested that 69 invoices be generated – but not delivered – to the U.S. Army, which caused ASD to recognize almost $18 million in revenue.  Because of that revenue, ASD employees barely satisfied an internal target for management incentive bonuses.

The SEC’s order finds that immediately after the 69 invoices were generated, ASD employees internally reported to L3’s ethics department, but a subsequent internal investigation concluded that there was no improper revenue recognition and the issue was not promptly raised to the L3’s Audit Committee.  In June 2014, L3 retained outside advisors to conduct an internal investigation, which concluded that the revenue recognized on the undelivered invoices was improper.  This investigation uncovered additional accounting errors in L3’s Aerospace Systems segment from 2011 to 2014, which combined with the improper accounting associated with the 69 undelivered invoices had the effect of overstating the company’s pre-tax income by $169 million.

Without admitting or denying the findings, L3 agreed to pay the $1.6 million penalty and consented to the entry of the SEC’s cease-and-desist order finding that it violated the books and records and internal controls provisions of the federal securities laws.  

The SEC’s continuing investigation is being conducted by H. Gregory Baker, David Oliwenstein, Christopher Mele, and Steven G. Rawlings of the New York Office, and the case is being supervised by Sanjay Wadhwa.

SEC: Port Authority Omitted Risks to Investors in Roadway Projects

The Securities and Exchange Commission today announced that the Port Authority of New York and New Jersey has agreed to admit wrongdoing and pay a $400,000 penalty to settle charges that it was aware of risks to a series of New Jersey roadway projects but failed to inform investors purchasing the bonds that would fund them.

The SEC’s order finds that the Port Authority offered and sold $2.3 billion worth of bonds to investors despite internal discussions about whether certain projects outlined in offering documents, including the Pulaski Skyway, ventured outside its mandate and potentially weren’t legal to pursue.  One internal memo noted, “There is no clear path to legislative authority to undertake such projects.” Another memo explicitly identified “the risk of a successful challenge by the bondholders and investors” in connection with the funding of the roadway projects.  But the Port Authority omitted any mention in its offering documents about these risks surrounding its ability to fund the projects.  Its offering documents stated that it issued bonds “only for purposes for which the Port Authority is authorized by law to issue bonds.”

“The Port Authority represented to investors that it was authorized to issue bonds while not disclosing significant known risks that its actions were not legally permitted,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Municipal bond issuers must ensure that their disclosures are complete and accurate so that investors can make fully informed decisions about whether to invest.”

The Port Authority is the first municipal issuer to admit wrongdoing in an SEC enforcement action.

The SEC’s order finds that the Port Authority violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.  The SEC’s order acknowledges the Port Authority’s cooperation and prompt remedial acts.  The projects at issue have proceeded as planned.

The SEC’s continuing investigation is being conducted by Osman Nawaz and Celeste Chase of the New York office.  The case is being supervised by Sanjay Wadhwa.     

SEC Charges Two Brokers With Defrauding Customers

The Securities and Exchange Commission today charged two New York-based brokers with fraudulently using an in-and-out trading strategy that was unsuitable for customers in order to generate hefty commissions for themselves.

The SEC’s complaint alleges that Gregory T. Dean and Donald J. Fowler did no reasonable diligence to determine whether their investment strategy involving frequent buying and selling of securities could deliver even a minimal profit for their customers.  Their strategy, which generally involved selling the securities within a week or two of purchase and charging customers a commission for each transaction, allegedly resulted in substantial losses for 27 customers.

“This case marks another chapter in the SEC’s pursuit of brokers who deploy excessive trading as a strategy in customer accounts to enrich themselves at customers’ expense,” 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.  “The allegations in our complaint are based on our examination of trading patterns across more than two dozen customer accounts, and this trading data shows that only the brokers stood to profit from this cost-laden in-and-out strategy.”

The SEC today issued an Investor Alert warning about excessive trading and churning that can occur in brokerage accounts. 

“Investors should be wary of unauthorized trading, frequent sales and purchases, or excessive fees in their brokerage accounts,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “If you do not know why a trade was made or why a fee was charged, ask your broker to explain it to you.”

The SEC’s complaint, filed in federal court in Manhattan, charges Dean and Fowler 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 was conducted by Kristin M. Pauley, David Stoelting, Barry O’Connell, Nathaniel I. Kolodny, Michael P. Fioribello, Leslie Kazon, and Thomas P. Smith Jr. in the New York office.  The litigation will be led by Mr. Stoelting and Ms. Pauley.  The case is being supervised by Sanjay Wadhwa.  The examination that led to the investigation was conducted by Jennifer A. Grumbrecht, Jeffrey Berfond, Glen Riddle, and Margaret Lett.

Chinese Traders Charged With Trading on Hacked Nonpublic Information Stolen From Two Law Firms

The Securities and Exchange Commission today charged three Chinese traders with fraudulently trading on hacked nonpublic market-moving information stolen from two prominent New York-based law firms, racking up almost $3 million in illegal profits.  The SEC also is seeking an asset freeze that prevents the traders from cashing in on their illicit gains.  The enforcement action marks the first time the SEC has charged hacking into a law firm’s computer network.

The SEC’s complaint alleges that Iat Hong, Bo Zheng, and Hung Chin executed a deceptive scheme to hack into the networks of two law firms and steal confidential information pertaining to firm clients that were considering mergers or acquisitions. 

According to the SEC’s complaint, the alleged hacking incidents involved installing malware on the law firms’ networks, compromising accounts that enabled access to all email accounts at the firms, and copying and transmitting dozens of gigabytes of emails to remote internet locations.  Hong and Zheng in particular coveted the emails of attorneys involved in mergers and acquisitions as they exchanged a list of partners who performed the work at one of the law firms prior to the hack at that firm.

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

“We used enhanced trading surveillance and analysis capabilities that we developed over the last few years to identify the broad scope of the defendants’ alleged scheme, including the use of both U.S. and offshore accounts to carry it out,” said Stephanie Avakian, Acting Director of the SEC’s Enforcement Division.  “This action demonstrates our commitment and effectiveness in rooting out cyber-driven schemes no matter how sophisticated.”

“As we allege, the defendants’ ‘hacking to trade’ scheme involved numerous levels of deception as they gained broad access to the nonpublic networks of two law firms, stole confidential information and then used it for substantial personal gain,” said Antonia Chion, Associate Director of the SEC’s Division of Enforcement.  “This action marks the end of their alleged deception and serves as a stark reminder to companies and firms that your networks can be vulnerable targets.”

According to the SEC’s complaint, Hong, Zheng, and Chin used the stolen confidential information contained in emails to purchase shares in at least three public companies ahead of public announcements about entering into merger agreements.  The SEC alleges that they spent approximately $7.5 million in a one-month period buying shares in semiconductor company Altera Inc. in advance of a 2015 report that it was in talks to be acquired by Intel Corporation.  Within 12 hours of emails being extracted from one of the firms, Hong and Chin allegedly began purchasing shares of e-commerce company Borderfree so aggressively that they accounted for at least 25 percent of the company’s trading volume on certain days in advance of the announcement of a 2015 deal.  Hong and Zheng also allegedly traded in advance of a 2014 merger announcement involving InterMune, a pharmaceutical company.

The SEC’s complaint charges Hong, Zheng, and Chin with violating the antifraud provisions of the federal securities laws and related rules.  The SEC seeks a final judgment ordering them to pay penalties and disgorge ill-gotten gains plus interest and permanently enjoining them from violating the federal securities laws.  Hong’s mother is named as a relief defendant in the SEC’s complaint for the purpose of recovering ill-gotten gains in her accounts resulting from her son’s alleged illicit trading.

The SEC’s investigation is continuing, and is being conducted by Jennie B. Krasner, Devon Leppink Staren, and staff in the SEC’s Information Technology Forensics Group with assistance from Wendy Kong.  The case is being supervised by Ricky Sachar and Antonia Chion and the litigation is being led by Britt Biles.  The SEC appreciates the assistance of the U.S. Attorney’s Office for Southern District of New York, Federal Bureau of Investigation, Hong Kong Securities and Futures Commission, and Financial Industry Regulatory Authority.  

SEC Names Timothy Husson Associate Director in the Division of Investment Management’s Risk and Examinations Office

The Securities and Exchange Commission today named Timothy Husson Associate Director in the Division of Investment Management’s Risk and Examinations Office.

As Associate Director, Dr. Husson will oversee the management and operations of key data analysis and examination projects and initiatives related to the asset management industry and provide guidance on complex financial and quantitative issues as he leads the Division of Investment Management’s asset management monitoring program.

“Tim is an accomplished quantitative analyst and an insightful colleague who is focused on enhancing the use of data-driven analysis in policymaking and asset management industry oversight,” said David W. Grim, Director of the Division of Investment Management. “As a quantitative specialist, Tim will be a key and complimentary member of the senior management team in the Division of Investment Management.”

Dr. Husson said, “I look forward to continuing to work with the exceptional staff of the Risk and Examinations Office to implement enhanced data analysis and review and inform policy recommendations that promote a fair, efficient, and effective regulatory regime for investment funds and investment advisers.”

Dr. Husson has been a member of the SEC and Division of Investment Management since 2014, serving as Branch Chief, Quantitative Research Analyst (Financial Engineer) and Financial Analyst Fellow in the Division of Investment Management’s Risk and Examinations Office. Prior to his SEC service, Dr. Husson was a Senior Financial Economist at Securities Litigation & Consulting Group, where he provided quantitative analysis and drafted expert reports for arbitrations, state and federal court hearings, and regulatory proceedings.

Dr. Husson is a certified Financial Risk Manager (FRM) and holds a B.A. (with Honors) and Ph.D. in Computational Neuroscience from the University of Chicago, where his work focused on the development and applications of a novel neural imaging system.