Tag Archives: securities

Final Judgment Entered Against California-Based Unregistered Broker Alleged to Have Fraudulently Offered and Sold Pre-IPO Facebook and Twitter Shares; Defendants Ordered to Pay Over $3 Million in Monetary Relief

The Securities and Exchange Commission announced that on September 29, 2015, a final judgment was entered against Efstratios “Elias” Argyropoulos of Santa Barbara, California, and his solely owned company, Prima Capital Group, Inc., by a United States District Judge in Los Angeles.  In addition to the permanent injunction to which the defendants had previously consented, the Court granted the Commission’s motion for monetary relief, finding the defendants jointly and severally liable for disgorgement of $1,495,657, together with prejudgment interest of $84,239.59 totaling $1,579,896.59, and additionally ordering Argyropoulos to pay a civil penalty of $1,495,697.

On December 23, 2014, the Commission filed the action, alleging that the defendants fraudulently raised nearly $3.5 million from investors purportedly to purchase Facebook and Twitter shares prior to the companies’ initial public offerings (IPOs).  Instead of purchasing the shares in the secondary market as promised, the defendants misappropriated investor funds.  They used the money primarily for day trading of stocks and options as well as to pay off certain investors who complained when they didn’t receive the promised Facebook or Twitter shares.

Argyropoulos and Prima Capital agreed to settle the SEC’s charges and to be barred from working for an investment adviser or broker-dealer when the action was filed, and further agreed that monetary relief would be determined at a later date.

Without admitting or denying the allegations in the SEC’s complaint, Argyropoulos and Prima consented to a judgment permanently enjoining them from violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and the antifraud and broker-dealer registration provisions of Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

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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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Blackstone Group To Pay $39 million to Settle SEC Charges

The SEC last week ordered the $330 billion mega-firm Blackstone Group to pay $39 million to settle charges related to inadequate disclosure of fees charged to portfolio companies. The Blackstone enforcement action represents the SEC’s fourth PE fees and expenses case, with the others involving KKR, Lincolnshire Management and Clean Energy Capital.  The Commission’s enforcement division said it will continue to investigate abuses of fees and expenses by private equity firms. It also cautioned firms that it is better to voluntarily come forward when problems are discovered internally rather than wait for the SEC to find out about them later.

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FINRA Sanctions Three Firms for Inadequate Supervision of Consolidated Reports

Written by: Robert Heim

The Financial Industry Regulatory Authority (FINRA) announced today that it has sanctioned three firms – H. Beck, Inc., LaSalle St. Securities, LLC, and J.P. Turner & Company, LLC – with fines of $425,000, $175,000 and $100,000, respectively, for inadequate supervision of consolidated reports provided to customers and other violations. A consolidated report is a single document that combines information regarding most or all of a customer’s financial holdings, regardless of where those assets are held.

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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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