Archive

June 16, 2016

Private fund administrator Apex Fund Services (US) Inc. will pay more than $350,000 to settle charges it failed to heed red flags and correct faulty accounting by two clients. SEC investigations found that Apex missed or ignored clear indications of fraud while contracted to keep records and prepare financial statements and investor account statements for funds managed by ClearPath Wealth Management and EquityStar Capital Management, both of which have since been charged with fraud by the SEC.  SEC

June 15, 2016

The SEC charged hedge fund manager Christopher Plaford with trading on inside information received from Sanjay Valvani regarding anticipated drug approvals and from a former CMS official about impending cuts to Medicare reimbursement for certain home health services.  Plaford allegedly made $300,000 by trading based on insider information in hedge funds he managed.  Separately, the SEC charged Stefan Lumiere and Plaford with falsely inflating the value of securities held by a hedge fund managed by their firm.  Over an 18-month period, Lumiere used sham broker quotes to mismark as many as 28 securities per month, surreptitiously passing along his desired prices to brokers via his personal cell phone or a flash drive delivered by courier.  The fund consequently reported artificially inflated returns and monthly net asset values and paid out more than $5.9 million in inflated management and performance fees to its investment adviser.  SEC

June 15, 2016

The SEC charged hedge fund manager Sanjay Valvani with reaping unlawful profits of nearly $32 million for hedge funds he managed by investing in health care securities based on inside information he received from consultant Gordon Johnston.  Johnston, who worked at the FDA for a dozen years, remained in close contact with former friends and colleagues while working for a trade association representing generic drug manufacturers and distributors.  Johnston concealed his separate role as a hedge fund consultant and obtained confidential information about anticipated FDA approvals for companies to produce enoxaparin, a generic drug that helps prevent the formation of blood clots.  The SEC alleges Johnston funneled the details of his conversations with FDA personnel to Valvani who then traded in advance of public announcements concerning FDA approvals for such companies as Momenta Pharmaceuticals, Watson Pharmaceuticals, and Amphastar Pharmaceuticals.  The SEC further alleges that Valvani in turn tipped fellow hedge fund manager Christopher Plaford.  SEC

June 13, 2016

Two California-based municipal advisory firms, School Business Consulting (SBC) and Keygent LLC, along with several of their top executives, will collectively pay $200,000 to settle charges that they used deceptive practices when soliciting the business of five California school districts.  SBC was advising the five school districts on their hiring of financial professionals.  At the same time, SBC was retained by Keygent which was seeking the business of these five school districts.  SBC shared the confidential information of the school districts with Keygent, including questions to be asked in Keygent’s interviews with the school districts and the details of competitors’ proposals.  The school districts were unaware that Keygent had the benefit of these confidential details through the hiring process.  SEC

June 10, 2016

The SEC announced fraud charges and an asset freeze obtained against Thomas J. Connerton, a Connecticut man accused of misleading people into investing in his company and then taking their money for personal use.  The SEC alleges that Connerton told investors that his company, Safety Technologies LLC, was developing a material to make surgical gloves better resistant to cuts or punctures.  He claimed that several major glove manufacturers wanted the technology and his company was on the brink of imminent deals that would result in large payouts for investors in his company.  No such deals were ever close to materializing and Connerton emptied the company’s bank account by writing a series of checks to himself and using investor funds for his own expenses.  Of more than 50 investors in Safety Technologies, six were women Connerton met through online dating services, and fourteen were friends or family of those women.  SEC

June 9, 2016

Guolin Ma, former consultant to two China-based private equity firms, will pay more than $756,000 to settle insider trading charges.  According to the SEC’s complaint, Ma traded on confidential information he obtained while advising two firms as they pursued a buyout of Silicon Valley-based OmniVision Technologies.  Ma attended key meetings and performed technical due diligence related to the potential acquisition and received timeline and strategy documents from the firms.  Through a series of purchases in April and May 2014, Ma stockpiled over 39,000 shares of OmniVision.  When the proposed acquisition was publicly announced in August 2014, OmniVision’s stock price rose 15% allowing Ma to generate over $367,000 in illegal profits.  SEC

June 9, 2016

The SEC announced a whistleblower award of more than $17 million to “a former company employee whose detailed tip substantially advanced the agency’s investigation and ultimate enforcement action.”  The award is the second-largest issued by the SEC since the inception of its whistleblower program.  SEC

June 8, 2016

Ethiopia’s electric utility, Ethiopian Electric Power, will pay almost $6.5 million to settle charges that it violated U.S. securities laws by failing to register bonds it offered and sold to U.S. residents of Ethiopian descent.  According to the SEC’s order, EEP conducted an unregistered bond offering to help finance construction of a hydroelectric dam on the Abay River in Ethiopia.  EEP held a series of road shows in major cities across the U.S., marketed the bonds on the website of the U.S. Embassy of Ethiopia, and through radio and television advertising aimed at Ethiopians living in the U.S.  EEP raised approximately $5.8 million from more than 3,100 U.S. residents between 2011 and 2014 without ever registering the bond offering with the SEC.  SEC

June 8, 2016

Morgan Stanley Smith Barney LLC will pay a $1 million penalty to settle charges related to its failures to protect customer information, some of which was hacked and offered for sale online.  As a result of failures to adopt policies and procedures reasonably designed to protect customer data, from 2011 to 2014, a then-employee impermissibly accessed and transferred data regarding approximately 730,000 accounts to his personal server which was ultimately hacked by third parties.  SEC

June 8, 2016

New York-based electronics company IEC Electronics Corp. will pay $200,000 to settle charges that it overstated the company’s profits in financial statements by using false inventory accounting.  An SEC investigation found the false accounting to have been orchestrated by IEC’s then-executive vice president of operations Donald Doody and the controller of one of IEC’s subsidiaries, Ronald Years.  Doody and Years collectively will pay about $94,000 to settle the SEC’s charges.  In addition, Doody has been barred from serving as an officer or director of a public company for five years and Years is permanently suspended from appearing and practicing before the SEC as an accountant.  SEC