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January 14, 2016

Goldman, Sachs & Co. will pay $15 million to settle charges that its securities lending practices violating federal regulations.  The SEC’s order found that Goldman violated Regulation SHO by improperly providing “locates” — representations that the firm believes it can obtain a security necessary to settle a short sale — when it had failed to perform an adequate review of the securities to be located.  Specifically, Goldman employees routinely processed customer locate requests by relying on a function of Goldman’s order management system which allowed orders to be placed based on the start-of-day inventory reported to Goldman by large financial institutions.  However, this function allowed locates to be provided even when the automated system had already deemed the inventory depleted based on locate requests placed earlier in the day.  Additionally, when questioned about the firm’s lending practices by SEC examiners, Goldman Sachs provided incomplete responses that adversely affected and unnecessarily prolonged the SEC’s examination.  SEC

January 13, 2016

Nine of eleven high-ranking executives and board members of Superior Bank and its holding company have settled charged by the SEC based on their alleged involvement in various schemes designed to conceal the extent of loan losses experienced as the bank was faltering in the wake of the financial crisis.  The defendants propped up Superior’s financial condition through straw borrowers, bogus appraisals, and insider deals, allowing the bank to avoid impairment and the reporting of ever-increasing allowances for loan and lease losses.  As a result, Superior overstated its net income in public filings by 99 percent for 2009 and 50 percent for 2010.  The settling defendants will pay at least $2.8 million collectively and are all permanently barred from serving as officers or directors of a public company.  SEC

January 8, 2016

Steven Cohen, founder and manager of hedge fund S.A.C. Capital Advisors LLC, will be prohibited from supervising funds that manage outside money until 2018.  The SEC found that Cohen ignored red flags of insider trading and failed to supervise a former portfolio manager, Mathew Martoma, who engaged in insider trading in 2008 while employed at C.R. Intrinsic Investors, an investment advisory firm that was a wholly-owned subsidiary of S.A.C. Capital Advisors.  C.R. Intrinsic previously paid more than $600 million to settle SEC charges of insider trading.  Several of Cohen’s entities, including C.R. Intrinsic and S.A.C. Capital Advisors, previously paid $1.2 billion to resolve related criminal charges brought by the U.S. Attorney’s Office for the S.D.N.Y.  SEC

January 6, 2016

J.P. Morgan’s brokerage business will pay $4 million to settle charges that it falsely claimed that its advisors were compensated “based on our clients’ performance.”  An SEC investigation found that J.P. Morgan Securities LLCdid not pay representatives based on client performance.  Rather, advisors were paid a salary and a discretionary bonus based on a number of factors, none of which were tied to portfolio performance.  SEC

December 22, 2015

Morgan Stanley Investment Management will pay $8.8 million to settle charges that one of its portfolio managers, Sheila Huang, unlawfully conducted prearranged trading known as “parking” that favored certain advisory client accounts over others.  An SEC investigation found that Huang arranged sales of mortgage-backed securities to brokerage firm SG Americas at predetermined prices that would enable her to buy back the positions at a small markup into other accounts advised by Morgan Stanley.  Huang also sold additional bonds at above-market prices to avoid incurring losses in certain accounts, but repurchased them at unfavorable prices in a fund that she managed without disclosing it to the disadvantaged fund client.  SG Americas also agreed to pay more than $1 million to settle SEC charges related to its role in these transactions.  SEC

December 18, 2015

J.P. Morgan wealth management subsidiaries, J.P. MorganSecurities LLC and JPMorgan Chase Bank N.A., will pay $267 million to settle charges that they failed to disclose conflicts of interest to clients.  An SEC investigation found that the businesses preferred to invest clients in the firm’s own proprietary investment products without properly disclosing this preference.  This preference impacted fundamental aspects of money management — asset allocation and selection of fund managers.  In a parallel action, JP Morgan Chase Bank will pay an additional $40 million penalty to the Commodity Futures Trading Commission.  SEC

December 15, 2015

The SEC announced fraud charges against Connecticut-based investment advisory firm Atlantic Asset Management LLC for investing clients in certain bonds with a hidden financial benefit to the broker-dealer connected to the firm.  The SEC alleges that Atlantic invested more than $43 million of client funds in illiquid bonds issued by a native American tribal corporation without disclosing the conflict of interest that the bond sales generated a private placement fee for the broker-dealer, whose parent company partially owns Atlantic.  SEC

December 7, 2015

The SEC announced a series of enforcement actions against lawyers across the country charged with offering EB-5 investments while not registered to act as brokers.  The SEC settled administrative proceedings against at least seven immigration law firms and/or attorneys, who agreed to cease and desist from acting as unregistered brokers, and collectively will pay over $700,000 in disgorgement, penalties, and prejudgment interest.  The SEC also filed a complaint in federal district court in Los Angeles alleging that immigration attorney Hui Feng and the Law Office of Feng & Associates not only acted as unregistered brokers by selling EB-5 investments to more than 100 investors, but also defrauded their clients by failing to disclose their receipt of commissions on the investments in breach of their fiduciary and legal duties. SEC

November 30, 2015

Standard Bank will pay $4.2 million to settle SEC charges that it failed to disclose certain payments made in connection with debt issued by the Government of Tanzania in 2013.  The bank acted as a lead manager for the offering but failed to disclose that its affiliate, Stanbic Bank Tanzania Limited, would pay $6 million of the proceeds of the $600 million offering to a private Tanzanian firm that performed no substantive role in the transaction.  A representative of the Government of Tanzania was a director of the private firm and the offering was not finalized until Standard and Stanbic agreed to pay the firm a percentage of the proceeds of the offering.  The payment is part of a global coordinated settlement with the United Kingdom’s Serious Fraud Office under which Standard Bank will pay a total of $36.9 million.  SEC

November 24, 2015

Political intelligence firm, Marwood Group Research LLC, will pay a $375,000 penalty for failing to properly inform compliance officers about instances in which analysts obtained potential material nonpublic information from government employees.  According to the SEC’s order, in 2010, Marwood analysts sought and received information about policy issues or pending regulatory approvals before the Centers for Medicare and Medicaid Services (CMS) and the Food and Drug Administration (FDA).  Without bringing this information to the compliance department to be vetted for any material nonpublic information, Marwood drafted research notes based in part on this information and distributed them directly to clients who could have used any material nonpublic information contained therein to inform securities trading decisions.  SEC
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