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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.

				

			

			
						
					
			

	
		
		

			

				
				
November 24, 2015

				 Political intelligence firm, Marwood Group Research LLC, will pay a $375,000 penalty for failing to properly inform compliance officers about instances in which analysts obtained potential material nonpublic information from government employees.  According to the SEC’s order, in 2010, Marwood analysts sought and received information about policy issues or pending regulatory approvals before the Centers for Medicare and Medicaid Services (CMS) and the Food and Drug Administration (FDA).  Without bringing this information to the compliance department to be vetted for any material nonpublic information, Marwood drafted research notes based in part on this information and distributed them directly to clients who could have used any material nonpublic information contained therein to inform securities trading decisions.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 20, 2015

				 The SEC announced fraud charges and an asset freeze obtained against Atlanta-based business man Christopher Brogdon, accused of misusing investor funds to purchase and renovate senior living facilities.  The SEC alleges that Brogdon amassed nearly $190 million through dozens of municipal bond offerings and private placement offerings in which investors supposedly earned interest from revenues generated by the nursing home, assisted living facilities, or retirement community project supported by their investment.  But Brogdon commingled the accounts instead of using the funds to finance the project described in the disclosure documents for each offering.  From the commingled accounts, he diverted investor money to other business ventures and personal expenses.  SEC				 					 

						
Tagged in:
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 19, 2015

				 The SEC obtained a court order freezing the assets of Lin Zhong and her company EB5 Asset Manager LLC.  The SEC alleges that Zhong and EB5 raised at least $8.5 million for use in job-creating real estate development projects, but they diverted nearly $1 million to purchase a boat, a BMW, and a Mercedes among other improper personal uses of investor funds.  SEC				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 19, 2015

				 Investment firm Sands Brothers Asset Management LLC and its founders and former chief compliance officer will pay over $1 million to settle charges of violating the custody rule which requires firms to obtain independent verification of assets when they can access or control client money or securities.  Sands Brothers was in trouble twice before with the SEC — in 2010 for violating the custody rule and in 2014 for belatedly providing investors audited financial statements of its private funds.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 17, 2015

				 The SEC announced fraud charges against several alleged perpetrators behind a $78 million pump-and-dump scheme involving the stock of Jammin’ Java, a company that operates as Marley Coffee and uses trademarks of late reggae artist Bob Marley to sell coffee products.  The SEC alleges that Jammin Java’s former CEO Shane Whittle orchestrated the scheme with three others who live abroad and operate entities offshore.  Whittle utilized a reverse merger to secretly gain control of millions of Jammin Java shares, and he spread the stock to the offshore entities controlled by Wayne Weaver of the UK and Canada, Michael Sun of India, and René Berlinger of Switzerland.  The shares were later dumped on the unsuspecting public after the stock price soared following fraudulent promotional campaigns.  SEC				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 16, 2015

				 Investment management firm Virtus Investment Advisers agreed to pay $16.5 million to settle charges that it misled mutual fund investors through advertisements containing false historical performance data about AlphaSector, a major exchange-traded fund (ETF) portfolio strategy.  Virtus publicized a substantially overstated performance track record received from F-Squared, a sub-adviser it had hired for mutual funds and other clients following the AlphaSector strategy.  Virtus accepted F-Squared’s historical performance misrepresentations at face value and ignored red flags that called these claims into question.  During the period in which Virtus used the false and misleading advertisements, its AlphaSector funds’ assets under management grew from $191 million at the end of 2009 to $11.5 billion by 2013.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 5, 2015

				 The SEC filed securities fraud charges against Scottish trader James Alan Craig based on false “tweets” authored by Craig which caused sharp drops in the stock prices of two companies.  Craig created fake twitter accounts designed to look like the twitter accounts of well-known securities research firms.  His false tweets, claiming that the target companies were under investigation, caused the share price of Audience, Inc. to fall 28% and the share price of Sarepta Therapeutics, Inc. to fall 16%.  Craig bought and sold shares of the two companies in a largely unsuccessful attempt to profit from the sharp price swings.  SEC				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 4, 2015

				 The SEC announced a whistleblower award totaling more than $325,000 for a former investment firm employee who tipped the agency with specific information that enabled enforcement staff to open an investigation and uncover the extent of the fraudulent activity.  The whistleblower waited until after leaving the firm to come forward to the SEC, however, and agency officials say the award could have been higher had this whistleblower not hesitated.  SEC				 					 

						
Tagged in:
													  SEC Whistleblower Reward Program, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 3, 2015

				 Private equity firm Fenway Partners and four executives will pay over $10 million to settle SEC charges of failure to disclose conflicts of interest.  An SEC investigation found that Fenway and the charged executives did not fully disclose to a client fund and investors the details of several transactions involving more than $20 million in payments by the client fund or affiliated portfolio companies.  In short, investors were not told that portfolio company fees were rerouted to a Fenway affiliate, allowing Fenway to avoid providing the benefits of those fees to the client in the form of management fee offsets.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 28, 2015

				 The SEC barred two brokers from now-defunct Connecticut brokerage Rochdale Securities.  According to the SEC’s allegations, the two brokers defrauded customers by using their order information to advise two longtime customers to trade ahead of these orders.  As a result, the favored customers profited from the trades, the defrauded customers generally received worse prices than if their orders had been routed directly to the market, and the brokers received double trading commissions.  SEC				 					 

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

					
	
							
	
		
		
	


 			


											

						

								

									
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