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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.

				

			

			
						
					
			

	
		
		

			

				
				
August 30, 2016

				 The SEC announced an award of more than $22 million to a whistleblower whose detailed tip and extensive assistance helped the agency halt a well-hidden fraud where the whistleblower worked.  SEC				 					 

						
Tagged in:
													  SEC Whistleblower Reward Program, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 26, 2016

				 The SEC charged the California-based company Enviro Board Corporation and its two co-chairmen/CEOs Glenn Camp and William Peiffer with using baseless financial projections and other misleading statements to defraud investors in their venture to manufacture environmentally-friendly building materials.  The SEC alleges that the defendants raised approximately $6 million over a four-year period by using documents predicting company earnings of $18 million to $95 million per year.  The SEC alleges that they lacked any reasonable basis for these estimates.  The defendants made additional misstatements and omissions to fraudulently induce investment.  Meanwhile, according to the SEC’s complaint, Camp and Peiffer and their primary salesman, Joshua Mosshart, paid themselves approximately $2.6 million in compensation. Mosshart is charged with selling unregistered securities and acting as an unregistered broker.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 25, 2016

				 The SEC announced penalties against 13 investment advisory firms found to have spread false claims made by investment management firm F-Squared Investments about its flagship product Alphasector.  An SEC sweep found that the 13 firms accepted and negligently relied upon claims by F-Squared that its Alphasector strategy for investing in exchange-traded funds had outperformed the S&P index for several years.  The firms repeated many of F-Squared claims while recommending the investment to their own clients without obtaining sufficient documentation to substantiate the information being advertised.  The penalties assessed against the firms range from $100,000 to a half million based upon the fees earned by each firm related to Alphasector.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 24, 2016

				 The SEC announced enforcement actions against 71 municipal issuers and other obligated parties for violations related to their municipal bond offerings.  The actions were brought under the Municipal Continuing Disclosure Cooperation Initiative which offers favorable settlement terms to municipal bond underwriters, issuers, and obligated persons that self-report certain violations of federal securities laws.  The SEC found that from 2011 through 2014, the 71 issuers and obligated persons sold municipal bonds using offering documents that contained materially false statements or omissions about their compliance with continuing disclosure obligations.  The parties settled the actions and agreed to cease and desist from future violations and to undertake to establish appropriate policies, procedures, and training regarding continuing disclosure obligations.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 23, 2016

				 Four private equity fund advisers affiliated with Apollo Global Management will pay $52.7 million to settle charges related to misleading fund investors about fees and a loan agreement and failing to supervise a senior partner who repeatedly charged personal expenses to the funds.  An SEC investigation found that the Apollo advisers failed to adequately disclose the benefits they received (to the detriment of fund investors) by accelerating payment of future monitoring fees owed by the funds’ portfolio companies upon their IPO or sale.  The lump sum payments received by the Apollo advisers essentially reduced the portfolio companies' value prior to their sale or IPO.  The SEC also found that one of the advisers failed to disclose certain information about interest payments made on a loan between the adviser’s affiliated general partner and five funds.  The purpose of the loan was to defer taxes on the general partner’s carried interest.  The loan agreement obligated the general partner to pay interest to the funds during the course of the loan and the funds’ financial statements disclosed the accruing interest as an asset of the funds.  But the interest was instead ultimately allocated solely to the general partner, making the financial statements misleading.  Finally, according to the SEC’s order, Apollo’s supervisory failures pertain to a then-senior partner at the firm who was twice caught improperly charging personal items to Apollo-advised funds.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 16, 2016

				 The former head trader in residential mortgage-backed securities (RMBS) at Goldman Sachs, Edwin Chin, has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices.  An SEC investigation found that Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various RMBS and then re-selling them at higher prices to the buying customers with Goldman keeping the difference.  On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling RMBS out of Goldman’s inventory.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 16, 2016

				 California-based health insurance provider Health Net Inc. will pay a $340,000 penalty for illegally using severance agreements which required outgoing employees to waive their ability to obtain monetary awards from the SEC’s whistleblower program.  According to the SEC’s order, Health Net violated federal securities laws by requiring departing employees to waive their right to file applications for SEC whistleblower awards in exchange for severance payments and other post-employment benefits.  SEC				 					 

						
Tagged in:
													  Employment Issues, 
													  SEC Whistleblower Reward Program, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 15, 2016

				 The SEC announced fraud charges against New York-based Donald Lathen and his investment advisory firm Eden Arc Capital Management.  The SEC alleges that Lathen used contacts at nursing homes and hospices to identify patients with less than six months to live.  He then recruited at least 60 of them, by paying $10,000 apiece, to use their names on purportedly joint brokerage accounts he could use to purchase investments on behalf of his hedge fund.  When a patient died, Lathen redeemed the investments in the accounts by falsely representing to the issuers that he and the terminally ill individuals were the joint owners of the account and invoking a survivor’s option.  In fact, Lathen’s hedge fund was the true owner of the survivor’s option investments.  Issuers paid out more than $100 million in early redemptions as a result of the alleged misrepresentations and omissions.  The SEC further alleges that this conduct violated the custody rule by failing to properly place the hedge fund’s cash and securities in an account under the fund’s name or in an account containing only clients’ funds and securities under the investment adviser’s name as agent for the client.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 11, 2016

				 The SEC charged stockbroker Paul T. Rampoldi and his friend William Scott Blythe III with insider trading.  Allegedly, an IT executive at pharmaceutical company Ardea Biosciences tipped one of the brokers at Rampoldi’s firm about a cancer drug licensing agreement and an acquisition by AstraZeneca before the company made public announcement of the deals.  The broker in turn tipped two other brokers at his firm, including Rampoldi, who told his friend Blythe.  To evade detection by the compliance department where Rampoldi worked, Blythe agreed to fund the purchase of Ardea call option contracts in a brokerage account he held at a different brokerage firm and divide the profits among the group.  The two other brokers and Ardea employee were charged previously.  SEC				 					 

						
Tagged in:
													  Insider Trading, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 11, 2016

				 The SEC announced fraud charges against San Francisco-based Nicolas M. Mitsakos and his investment advisory firm Matrix Capital Markets.  The SEC alleges that Mitsakos and Matrix solicited investors in a purported hedge fund while falsely marketing themselves as experienced money managers with a highly successful track record.  They claimed assets under management in the millions when in fact they did not manage any client assets at all.  When they were given $2 million in client assets to manage in September 2015, they proceeded to steal approximately $800,000 from the client and used most of it to pay for unauthorized personal and business expenses.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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