Archive

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 28, 2015

Two traders in China and Hong Kong, Zhichen Zhou and Yannan Liu, will pay more than $920,000 to settle charges of insider trading.  The traders’ assets were frozen last month when the SEC’s complaint was filed against them.  They will disgorge the entirety of their ill-gotten profits and pay additional penalties.  The SEC’s complaint alleged that Zhou and Liu traded in two healthcare company stocks, MedAssets Inc. and Chindex International, based on nonpublic information about their impending acquisitions by private equity firms.  Liu was an associate at TPG Capital which had ties to both of the deals.  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 21, 2015

The SEC charged Donald Toomer, a Las Vegas-based financial advisor, in connection with previously filed fraud charges against Samuel DelPresto.  The SEC alleges that Toomer, to assist DelPresto in demonstrating liquidity and market demand for his microcap stocks, agreed to buy shares of three microcap stocks in client accounts in exchange for hundreds of thousands of dollars in kickbacks.  In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Toomer.  SEC

December 18, 2015

The SEC charged known securities fraudster, Edward Durante, with defrauding investors by selling shares of a shell company he secretly controlled and falsely telling them stock sale proceeds would be used to fund the company’s operations when they were actually tapped for other purposes including Durante’s personal use.  Durante served a 10-year prison term following a previous securities fraud conviction in 2001.  An SEC investigation revealed that he has again been soliciting investors under aliases and between 2012 and 2014 defrauded at least 50 relatively inexperienced investors through at least $11 million in sales of stock in his shell company VGTel.  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 17, 2015

The SEC charged Martin Shkreli, former CEO of pharmaceutical company Retrophin, with committing fraud during a five-year period when he was also working as a hedge fund manager.  The SEC alleges that Shkreli misappropriated money from two hedge funds he founded and made material misrepresentations to investors among other widespread misconduct, including fraudulently inducing Retrophin to issue stock and make cash payments to certain disgruntled investors in Shkreli’s hedge funds who were threatening legal action.  The SEC also charged Retrophin’s former outside counsel and corporate secretary Evan Greebel with aiding and abetting certain aspects of Shkreli’s alleged fraud.  In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against Shkreli and Greebel.  SEC

December 16, 2015

The SEC barred hedge fund adviser Owen Li from the securities industry and censured his associated firm Canarsie Capital LLC after Li made a series of false statements to investors and ultimately caused a fund’s collapse.  In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Li.  Monetary sanctions are expected to be ordered in this parallel criminal proceeding.  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 15, 2015

The SEC charged New Jersey resident Samuel DelPresto and his company MLF Group, Inc. with illicitly pocketing $13 million from an elaborate pump-and-dump scheme.  The SEC alleges that DelPresto teamed with others to secretly obtain control of substantially all available stock in four microcap companies,BioNeutral Group, NXT Nutritionals Holdings, Mesa Energy Holdings, and Clear-Lite Holdings, and facilitate coordinated trading that created the appearance of liquidity and market demand for the stocks.  After unwitting investors were enticed through promotional campaigns to buy the stock at inflated prices, DelPresto dumped his shares on the market.  In a parallel action, the U.S. Attorney’s Office for the District of new Jersey announced criminal charges against DelPresto.  SEC