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SEC Enforcement Actions

					
The  Securities and Exchange Commission (SEC) is the United States agency with primary responsibility for enforcing federal securities laws. Whistleblowers with knowledge of violations of the federal securities laws can submit a claim to the SEC under the SEC Whistleblower Reward Program, and may be eligible to receive  monetary rewards and protection against retaliation by employers.


Below are summaries of recent SEC settlements or successful prosecutions. If you believe you have information about fraud which could give  rise to an SEC enforcement action and claim under the SEC Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

				

			

			
						
					
			

	
		
		

			

				
				
July 16, 2014

				 The SEC charged Natural Blue Resources Inc. with concealing from investors that two lawbreakers actually ran the company.  According to the SEC, the company was to create, acquire, or otherwise invest in environmentally-friendly companies.  What investors didn’t know was that two individuals with prior fraud violations — James E. Cohen and Joseph Corazzi — secretly controlled the operational and management decisions of Natural Blue while calling themselves outside “consultants.”  SEC				 					 

						
Tagged in:
													  Environmental Fraud, 
													  Misrepresentations, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
July 14, 2014

				 Ernst & Young agreed to pay more than $4M to settle charges of violating auditor independence rules that require firms to maintain their objectivity and impartiality with clients.  The SEC found that an Ernst & Young subsidiary lobbied congressional staff on behalf of two audit clients.  Such lobbying activities were impermissible under the SEC’s auditor independence rules because they put the firm in the position of being an advocate for those audit clients.  Despite providing the prohibited legislative advisory services on behalf of the clients, Ernst & Young repeatedly represented that it was “independent” in audit reports issued on the clients’ financial statements.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Regulatory Violations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
July 2, 2014

				 The SEC charged five traders for committing short selling violations while trading for themselves and Worldwide Capital Inc.  This is the Long Island, N.Y.-based proprietary firm that in March paid $7.2M, the largest-ever monetary sanction, for Rule 105 violations.  Rule 105 prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the subsequent purchase of that same security through the offering.  SEC				 					 

						
Tagged in:
													  Market Manipulation and Trading Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 25, 2014

				 The SEC announced fraud charges against three former senior managers of Regions Bank for intentionally misclassifying loans that should have been recorded as impaired for accounting purposes.  As a result, the bank’s publicly-traded holding company overstated its income and earnings per share in its financial reporting.  Regions will pay a total of $51M to resolve parallel actions by the SEC, Federal Reserve Board, and Alabama Department of Banking.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 25, 2014

				 The SEC announced it has charged two additional brokers with trading on inside information ahead of the $1.2B acquisition of SPSS Inc. in 2009 by IBM Corporation.  The SEC alleged that former brokers Benjamin Durant III and Daryl M. Payton illegally traded on a tip about the acquisition from Thomas C. Conradt, a friend and fellow broker in the New York office of a Connecticut-based broker-dealer.  SEC				 					 

						
Tagged in:
													  Insider Trading, 
													  Market Manipulation and Trading Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 23, 2014

				 The SEC charged hedge fund advisory firm Weston Capital Asset Management LLC and its founder and president Albert Hallac with illegally draining more than $17M from a hedge fund they managed and transferred the money to a consulting and investment firm known as Swartz IP Services Group Inc.  The transaction went against the hedge fund’s stated investment strategy and wasn’t disclosed to investors, who received account statements falsely portraying that their investment was performing as well or even better than before.  Weston Capital and Hallac agreed to settle the SEC’s charges with monetary sanctions to be determined at a later date.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 16, 2014

				 Albany, N.Y.-based hedge fund advisory firm Paradigm Capital Management and owner Candace King Weir agreed to pay $2.2M to settle charges of engaging in prohibited principal transactions and then retaliating against the employee who reported the trading activity to the SEC.  This is the first time the SEC has filed a whistleblower retaliation case under its new authority to bring such enforcement actions under the Dodd-Frank Act.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Retaliation, 
													  SEC Whistleblower Reward Program, 
													  Securities Fraud, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 13, 2014

				 The SEC charged four Northern California residents with insider trading in Ross Stores stock options based on nonpublic information about monthly sales results leaked by one of the retailer’s employees.  The agency alleged that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the Ross Stores finance department and used confidential information to illegally trade on more than 40 occasions ahead of the company’s public release of financial results.  Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information.  The insider trading resulted in collective profits of more than $12M.  SEC				 					 

						
Tagged in:
													  Insider Trading, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 6, 2014

				 The SEC announced charges against LA-based market access provider Wedbush Securities and two officials accused of violating the agency’s market access rule that requires firms to have adequate risk controls in place before providing customers with access to the market.  The SEC’s Enforcement Division alleges the company, which has consistently ranked as one of the five largest firms by trading volume on NASDAQ, failed to maintain direct and exclusive control over settings in trading platforms used by its customers to send orders to the markets.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 3, 2014

				 The SEC filed an emergency enforcement action to halt an ongoing fraud by Scott Valente and his Albany-based firm, the ELIV Group.  The SEC alleges that Valente and his company have fraudulently raised more than $8.8M from approximately 80 clients by falsely claiming they achieve outsized positive returns when in fact ELIV Group has earned no positive results at all, instead sustaining consistent investment losses for the past three years.  Meanwhile, Valente has been making substantial cash withdrawals of client funds and spending their money on his home improvements and mortgage payments as well as jewelry and a vacation condominium.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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