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September 28, 2015

Credit Suisse Securities (USA) LLC will pay a $4.25 million penalty to settle charges by the SEC that over a two-year period, it made at least 593 deficient “blue sheet” submissions to the SEC, omitting more than 553,400 reportable trades representing 1.3 billion shares.  Broker-dealers like Credit Suisse are required to provide the SEC with information about trades by its customers, commonly referred to as “blue sheet data,” which the agency can use to identify and analyze trades in the course of investigations and other work.  As part of the settlement, Credit Suisse also has admitted it violated the recordkeeping and reporting provisions of the federal securities laws.  SEC

September 22, 2015

R.T. Jones Capital Equities Management, a St. Louis-based investment adviser, will pay a $75,000 penalty to settle charges that it failed to establish required cybersecurity policies and procedures reasonably designed to protect customer records and information, in advance of a breach that compromised the personally identifiable information of approximately 100,000 individuals, including thousands of the firm’s clients.  SEC

September 21, 2015

Investment advisor Eagle Investment Management and its affiliated distributor FEF Distributors will pay $40 million to settle SEC charges of improperly using mutual fund assets to pay for the marketing and distribution of fund shares.  This settles the first case brought by the SEC under its “Distribution-in-Guise” Initiative which protects mutual fund shareholders.  The money will be returned to the accounts of affected shareholders.  SEC

September 2, 2015

Investment advisory firm Taberna Capital Management will pay $21 million to settle charges that it fraudulently retained fees belonging to collateralized debt obligation (CDO) clients.  An SEC investigation found that Taberna did not inform CDO clients that it was retaining payments known as “exchange fees” obtained in connection with restructuring transactions.  Retention of the exchange fees was not permitted by the CDO’s governing documents or disclosed to investors in the CDOs. SEC

August 25, 2015

The SEC obtained court authorization to freeze the assets of Mr. Lobsang Fargey, a Bellevue, Washington man accused of defrauding Chinese investors seeking U.S. residency through the EB-5 program.  The SEC alleged that Dargey and his “Path America” companies raised at least $125 million for two Washington-based real estate projects, but Dargey diverted $14 million for unrelated real estate projects and $3 million for personal use.  The court’s order also restrains Dargey from soliciting additional investors and requires him to repatriate funds transferred to overseas bank accounts.  SEC

August 19, 2015

Citigroup Global Markets will pay a $15 million penalty to settle SEC charges that it failed to enforce policies to prevent transactions that involved misuse of material, nonpublic information.  Broker-dealer employees routinely have access to material nonpublic information.  Therefore, federal securities laws require firms to take reasonable steps to prevent misuse of such information.  An SEC investigation found that between 2002 and 2012, Citigroup’s monitoring for such abuse was inadequate because it failed to review thousands of trades executed by its trading desks.  Additionally, the SEC found that Citigroup inadvertently routed more than 467,000 transactions on behalf of advisory clients to an affiliated market maker which executed the transactions as principal at or near prevailing market prices.  SEC

August 18, 2015

BNY Mellon will pay $14.8 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.  An SEC investigation found that students related to foreign officials were given preferential treatment in that they were not required to meet the normally rigorous criteria of BNY Mellon’s highly competitive internship programs.  This was done to win or retain contracts to manage and service the assets of the sovereign wealth fund the foreign officials were affiliated with.  BNY’s $14.8 million payment includes $8.3 million in disgorgement and a $5 million penalty.  SEC

August 13, 2015

Brokerage firm Edward Jones and the former head of its municipal underwriting desk, Stina Wishman, agreed to settle charges that they overcharged customers in new municipal bonds sales.  This was the SEC’s first case against an underwriter for pricing-related fraud in the primary market for municipal securities.  The SEC’s investigation found that rather than offering customers municipal bonds at their “initial offering price,” Edward Jones and Wishman improperly offered the bonds at higher prices.  This resulted in customers being overcharged by at least $4.6 million.  The SEC also charged Edward Jones with failing to properly supervise dealer markups on secondary market trades that involved the firm purchasing municipal bonds from customers, placing them into its inventory, and selling them to other customers.  The SEC found that Edward Jones’ supervisory system was not designed to monitor whether the markups on these trades were reasonable.  Edward Jones will pay more than $20 million to settle the SEC’s charges, including nearly $5.2 million in disgorgement and prejudgment interest that will be distributed to customers who were overcharged.  SEC

August 10, 2015

Guggenheim Partners Investment Management LLC, a subsidiary of global financial services firm Guggenheim Partners LLC, has agreed to pay a $20 million penalty to settle charges by the SEC.  The SEC’s order found that Guggenheim breached its fiduciary duties by failing to disclose a $50 million loan that one of its senior executives received from an advisory client.  Guggenheim failed to disclose the loan, or the potential conflict of interest created by the executive’s receipt of it, to other clients involved in the transactions.  In addition, the SEC’s order found that Guggenheim inadvertently categorized certain investments as managed assets, leading to a client being inappropriately charged approximately $6.5 million in asset management fees.  Despite identifying the error, Guggenheim did not return the fees for almost two years.  Finally, the SEC’s order found Guggenheim’s compliance program was not reasonably designed to prevent violations of the federal securities laws and that the company failed to enforce its code of ethics.  SEC

July 23, 2015

Three former employees of broker-dealer Oppenheimer settled charges stemming from the unregistered sales of billions of shares of penny stocks on behalf of a customer.  This action relates to a previously settled enforcement action against Oppenheimer in which the broker-dealer admitted wrong-doing and paid $20 million to the SEC and the Treasury Department’s Financial Crimes Enforcement Network.  According to the SEC’s order, the former employees failed to make reasonable inquiries or provide appropriate oversight in the face of red flags indicating that their customer’s stock sales were not exempt from registration.  SEC
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