Tag Archives: securities law

SEC Charges Colorado Investment Firm and Its Manager with Fraud

The Securities and Exchange Commission today filed fraud and other charges in the United States District Court for the District of Colorado against Donald J. Lester and his self-described private equity firm Rubicon Alliance, LLC (“Rubicon”). According to the SEC’s complaint, from approximately January 2010 through December 2014, Lester and Rubicon raised over $10 million through the sale of unregistered securities for two investment funds managed by them, CFI Fund, LLC (“CFI”) and NuPower, LLC (“NuPower”). Previously, as alleged in the complaint, Lester was involved in the sale of unregistered securities for a group of investment funds known as Equity Edge, which was struggling to repay investors. Among other things, the SEC’s complaint alleges that Rubicon had guaranteed Equity Edge’s performance, and that Lester devised a fraudulent and undisclosed scheme to use $2.8 million of CFI investor funds to satisfy Rubicon’s repayment obligations to the Equity Edge investors.

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SEC Charges Six Firms for Short Selling Violations in Advance of Stock Offerings

The Securities and Exchange Commission  (“SEC”) announced enforcement actions against six firms, including more than $2.5 million in monetary sanctions and, in the case of one previously sanctioned firm, an order barring the firm from participating in stock offerings for a period of one year as part of its ongoing enforcement initiative focused on violations of Rule 105 of Regulation M. Intended to preserve the independent pricing mechanisms of the securities markets and prevent stock price manipulation, Rule 105 prohibits firms from participating in public stock offerings after selling short those same stocks.Through its Rule 105 Initiative, which was first announced in 2013 as an effort to address violations of the rule in an expedited and streamlined way, the Division of Enforcement has taken action on every Rule 105 violation over a de minimis amount that has come to its attention—promoting a message of zero tolerance for these offenses.  As a result, based on available information, the SEC has seen a dramatic decrease in Rule 105 violations since the Initiative began.  In the first fiscal year after the Initiative was announced, Rule 105 violations, detected through various means available to the SEC, decreased by approximately 90 percent over the previous six years.  Rule 105 violations in fiscal year 2015 were similarly lower than before the Initiative.

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SEC Reaches Settlement With Evercore Insider Trader

Written by: Robert Heim

The U.S. Securities and Exchange Commission reached a $682,000 settlement with a former Evercore Partners Inc. investment banker who was sentenced to 30 months in prison for insider trading.  Under the terms of the deal, Frank Perkins Hixon Jr., formerly a senior managing director in Evercore’s mining and metals group, would pay the sum and be restrained from future securities violations, according to court documents. The settlement has been in the works since September, court filings said.  Hixon pled guilty in April to related criminal charges in New York, admitting that he traded the stocks of Evercore clients based on inside information about upcoming deals in a scam that netted more than $700,000.

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SEC Charges Texas-Based Brokerage Firm With Violating Supervisory and Customer Protection Rules

Written by: Robert Heim

The Securities and Exchange Commission recently charged an Irving, Texas-based brokerage firm with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.  H.D. Vest Investment Securities agreed to settle the charges by paying a financial penalty and retaining an independent compliance consultant to improve its supervisory controls.  According to the SEC’s order instituting a settled administrative proceeding, H.D. Vest has more than 4,500 registered representatives typically working as independent contractors who also operate tax businesses outside of their securities businesses.  H.D. Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, and as a result some representatives used their outside businesses to defraud brokerage customers in such ways as transferring or depositing customer brokerage funds into their outside business accounts.

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SEC Investigating Several Companies Over Whistleblower Treatment

Written by: Robert Heim

The U.S. Securities and Exchange Commission has sent letters to several companies asking for years of nondisclosure agreements, employment contracts and other documents to investigate whether companies are muzzling corporate whistleblowers, the Wall Street Journal reported. The inquiries come as SEC officials have expressed concern about a possible corporate backlash against whistleblowers, the newspaper said.  The 2010 Dodd-Frank Act gave the SEC the power to start a whistleblower program that lets the agency reward people who report misconduct, if that tip leads to the collection of more than $1 million in monetary sanctions.

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SEC Announces Charges Against Standard & Poor’s for Fraudulent Ratings Misconduct

Written by: Robert Heim

On January 21, 2015, the Securities and Exchange Commission announced a series of federal securities law violations by Standard & Poor’s Ratings Services involving fraudulent misconduct in its ratings of certain commercial mortgage-backed securities (CMBS).  S&P agreed to pay more than $58 million to settle the SEC’s charges, plus an additional $19 million to settle parallel cases announced today by the New York Attorney General’s office ($12 million) and the Massachusetts Attorney General’s office ($7 million). The SEC issued three orders instituting settled administrative proceedings against S&P.  One order, in which S&P made certain admissions, addressed S&P’s practices in its conduit fusion CMBS ratings methodology.  The SEC alleged that S&P’s public disclosures affirmatively misrepresented that it was using one approach when it actually used a different methodology in 2011 to rate six conduit fusion CMBS transactions and issue preliminary ratings on two more transactions.  As part of this settlement, S&P agreed to take a one-year timeout from rating conduit fusion CMBS.

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FINRA Wants Barred Brokers Out of Insurance Too

Written by: Robert Heim

FINRA is trying to keep banned registered securities representatives, or brokers, from using a loophole that lets them continue selling financial products to members of the public as authorized insurance agents, The Wall Street Journal reports.  FINRA – the U.S. securities industry’s self-regulatory agency – will “begin providing to state insurance regulators a monthly report of its disciplinary actions against securities brokers,” the newspaper says. For now, FINRA sends the report only to state securities regulators, who don’t always communicate with the insurance watchdogs down the hall.  The Journal says its reporters “recently reviewed securities- and insurance-industry records for 395 brokers who in 2013 were permanently banned by Finra from the securities industry.” From this survey, it found that “at least 13% of the barred brokers still retain their insurance licenses” as of December 1, 2014.

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