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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.

				

			

			
						
					
			

	
		
		

			

				
				
March 15, 2016

				 Kansas-based municipal advisor Central States Capital Markets, its CEO, and two employees will pay about $437,327 collectively to settle charges that they breached their fiduciary duties by failing to disclose a conflict of interest to a municipal client.  According to the SEC’s order, while Central States served as a municipal advisor to a client on municipal bond offerings in 2011, two of its employees, in consultation with the CEO, arranged for the offerings to be underwritten by a broker-dealer where all three worked as registered representatives.  Central States did not inform the client of its relationship to the underwriter or the financial benefit it obtained from serving in dual roles.  In three offerings, Central States received 90 percent of the underwriting fees the client city paid to the broker-dealer.  The case is the SEC’s first to enforce the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act which required these advisors to put their municipal clients’ interests ahead of their own.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 14, 2016

				 The SEC charged microcap company RVPlus Inc. and its CEO, Lee Peterson, with making bogus claims in the company’s public filings and in statements to private investors and with unlawfully distributing RVPlus’ stock.  The SEC alleges that starting in 2012, Peterson filed periodic reports with the SEC claiming that RVPlus had a lucrative relationship with the United Nations and clean energy agreements with governmental bodies in Nigeria, Haiti, and Liberia worth $2.8 billion.  RVPlus had no relationship with the U.N. and the contracts were fictitious.  In addition, the SEC alleges that RVPlus and Peterson gained control of more than 90 percent of RVPlus’ free trading shares and gave them individuals who unlawfully sold them into the market.  SEC				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 14, 2016

				 Three AIG affiliates, Royal Alliance Associates, SagePoint Financial, and FSC Securities Corporation, will pay $9.5 million to settle SEC charges of steering mutual fund clients toward more expensive share classes so the firms could collect more fees.  An SEC investigation found that the firms placed clients in share classes that charged fees for marketing and distribution despite the clients being eligible to buy shares in fund classes without those additional charges.  As a result, the firms collected approximately $2 million in extra fees.  The firms failed to disclose this conflict of interest.  The SEC’s order also alleged that the firms failed to monitor advisory accounts on a quarterly basis to prevent reverse churning.  The firms had compliance policies and procedures to ensure that fee-based advisory accounts that charged an inclusive fee for both advisory services and trading costs remained in the best interest of clients that traded infrequently, but failed to implement those policies and procedures.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 11, 2016

				 The SEC charged California businessman Daniel Nase with raising money from investors through unregistered offerings of common stock in his Bakersfield, California-based company, BIC Real Estate Development Corp., and using the funds for personal expenses.  Nase tried to cover up the theft after learning of the SEC’s investigation by investing stolen assets back into the company to make it appear he was increasing his equity stake in it.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 10, 2016

				 The SEC charged Oregon-based investment group Aequitas Management LLC and four affiliates, along with three top executives, with raising more than $350 million from investors while hiding the group’s rapidly deteriorating financial condition.  Aequitas allegedly defrauded more than 1,500 investors nationwide into believing they were making health care, education, and transportation-related investments when their money was really being used in a last-ditch effort to save the firm, including using some new money to pay earlier investors.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Ponzi Schemes, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 10, 2016

				 Texas-based oil company Magnum Hunter Resources Corporation as well as two former senior officers and two consultants will pay $290,000 collectively to settle charges of deficient evaluation of, and failure to maintain control over, Magnum Hunter’s internal controls over financial reporting (ICFR) between December 2011 and September 2013.  ICFR refers to a company’s process for providing reasonable assurance to the public regarding the reliability of its financial reporting.  SEC rules require company management to evaluate and annually report on the effectiveness of ICFR, including disclosing any identified material weaknesses that create a reasonable possibility that the company will not timely prevent or detect a material misstatement of its financial statements.  According to the SEC’s orders, Magnum Hunter enjoyed rapid growth in 2010 and significant acquisitions in 2010 and 2011 which strained its accounting resources.  Despite assessments that there was inadequate control over the financial reporting process, a material weakness was not reported.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 9, 2016

				 Uni-Pixel Inc., a developer of technologies for touchscreen devices, has agreed to pay $750,000 to settle charges it misled investors about the production status and sales agreements for a key product.  The SEC alleged that Uni-Pixel began publicly touting sales of a touchscreen sensor product  supposedly in speedy high-volume commercial production when in fact only a few samples had been manually completed.  The misrepresentations caused Uni-Pixel’s stock price to more than double, enabling then-CEO Reed Killion and then-CFO Jeffrey Tomz to make more than $2 million in personal profits from selling their own shares of company stock.  Uni-Pixel also announced multi-million dollar sales agreements in 2012 and 2013 that highlighted potential revenues but omitted material conditions the company had to meet to actually receive those revenues.  The SEC also filed charges against Killion and Tomz and entered into a deferred prosecution agreement with Uni-Pixel’s former chairman of the board.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 9, 2016

				 Florida man Jay Y. Fung has agreed to pay $760,000 to settle charges by the SEC that he traded on inside information by purchasing stock and call options in Pharmasset Inc. based on a friend’s tip that it was about to be acquired.  The SEC previously charged Fung’s friend and tipper, Kevin Dowd, who has agreed to pay back the cash kickbacks he received from Fung and has pled guilty in a parallel criminal case.  SEC				 					 

						
Tagged in:
													  Insider Trading, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 9, 2016

				 The SEC charged California’s largest agricultural water district, the Westlands Water District, as well as its general manager and former assistant general manager, with misleading investors about Westlands’ financial condition in connection with a $77 million bond offering.  The SEC’s order instituting settled administrative proceedings alleged that Westlands had agreed to maintain a 1.25 debt service coverage ratio.  But when drought conditions reduced the water supply, preventing it from generating enough revenue to maintain the ratio, Westlands used extraordinary accounting transactions to reclassify funds from reserve accounts to record additional revenue.  When the Westlands issued the $77 million bond offering in 2012 it represented to investors that it met or exceeded the 1.25 ratio for each of the prior five years.  Absent the reclassifications and adjustments, Westlands’ ratio for 2010 would have been .11.  Westlands and the charged managers agreed to pay $195,000 collectively to settle the SEC’s charges.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 9, 2016

				 Cyprus-based company Banc de Binary Ltd., its founder Oren Shabat Laurent, and three affiliates, will pay $11 million to settle charges of illegally selling binary options to U.S. investors.  The SEC’s 2013 complaint alleged that the defendants failed to register the offering before soliciting U.S. customers and failed to register as a broker-dealer before communicating directly with U.S. clients.  Binary options differ from more conventional options contracts because the payout typically depends entirely on whether the price of a particular asset underlying the option will rise above or fall below a specified amount.  The defendants will pay about $9 million to the SEC and $2 million to the CFTC which filed a parallel action.  A fair fund has been established to distribute money to the harmed investors.  SEC

 				 					 

						
Tagged in:
													  Fraud in CFTC-Regulated Markets, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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