The SEC and Rating Agencies

The SEC examined all 10 firms registered Nationally Recognized Statistical Rating Organization (.pdf 23 pages) and found all 10 had "apparent failures". The SEC has requested remediation plans from each of the agencies within 30 days and is continuing its investigation. The issues found...

Cadwalader Clients & Friends Memo: The SEC Approves Final Version of Form PF

The Securities and Exchange Commission (the " SEC ") held an open meeting on Wednesday, October 26, 2011, regarding the adoption of a rule requiring certain registered investment advisers to hedge funds and other private funds to report information on Form PF for use by the Financial Stability...

Former Madoff Employee Pleads Guilty, Agrees to Settle with SEC

The continuing saga of the Madoff Ponzi scheme has yielded another guilty plea and another Commission compliant. This time criminal and civil charges were brought against David Kugel, a longtime employee of Bernard L. Madoff Investment Securities LLC who is alleged to have participated in the fraud...

SEC’s Whistleblower Annual Report

Dodd-Frank added Exchange Act Section 21F(g)(5) and requires that SEC's Office of the Whistleblower to report to Congress annually on the whistleblower program. It's due each October 30. I'm sure the SEC wanted to be in compliance, so they released the first annual report on the Dodd...

THE STAKES GET HIGHER

Judge Rakoff, in a December 27, 2011 order, denied the Commission's request for a stay of his order directing SEC v. Citigroup Global Markets, Inc., Case No. 11 Civ 7387 (S.D.N.Y.) to trial. That order, which followed the refusal of the District Court to enter a proposed settlement agreed to by the...

Charges Brought in Social Media Scam

The Securities and Exchange Commission charged an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn. The SEC also issued two alerts to highlight the risks investors and advisory firms face when using social media. The SEC's Division of Enforcement alleges...

SEC Charges Three More in $16 Million Ponzi Scheme That Targeted Mormons

The SEC announced it had brought civil enforcement actions against three additional individuals for their role in a $16 million Ponzi scheme whose victims were primarily members of the Church of Jesus Christ of Latter-Day Saints. Kevin J. Wilcox, Jennifer E. Thoennes, and Eric R. Nelson were each charged...

THREE EXECUTIVES CHARGED WITH INSIDER TRADING AND FRAUD

The Commission brought fraud and insider trading charges against three executives who are alleged to have implemented a massive financial fraud and then sold millions of shares through 10b-5 plans. SEC v. Farha, Civil Action No. 8/12-cv-00047 (M.D. Fla. Filed Jan. 9. 2012). The complaint names as defendants...

A Split Decision for the SEC on Its SIPC Application

The SEC partially prevailed in a proceeding brought against the Securities Investor Protection Corporation or SIPC. The Court agreed with the Commission that the appropriate manner in which to seek an order compelling SIPC to file an application for a protective decree is by a summary application...

SEC’s National Exam Program Overview

The SEC's Office of Compliance Inspections and Examinations ("OCIE") mission is to protect investors through its nationwide examination and inspection program. Examiners in Washington DC and in the SEC's 11 regional offices conduct examinations of the nation's registered entities...

Hot Topics for SEC Exams

As part of the SEC's new National Exam Program Overview , OCIE highlights six areas of focus for Investment Advisers: "[T]he Program has identified specific strategic areas on which to focus when examining firms.... In FY2012, focus areas include the following priorities, among others...

The SEC’S New Approach to Economic Analysis in Rule Writing

Economic analysis in rule making has become a critical issue for the SEC. The D.C. Circuit has rejected two Commission rules in recent years, expressing concern about the level of analysis. The Office of the Inspector General issued a report earlier this year which considers cost benefit analysis...

SEC - Where is the Public Good?

Jesse Eisinger posted a very good piece on the SEC and ratings agencies today ( SEC keeps the Ratings Game Rigged ). He writes about the Egan-Jones case, "This is your S.E.C., folks. It courageously assails tiny firms, and at the pace of a three-toed sloth. And when it goes after its prey, it's...

Court Dismisses SEC Bid to Force SIPC to Cover Stanford Victim Losses

A federal judge has denied an attempt by the Securities and Exchange Commission ("SEC") to force an industry-funded nonprofit to institute a claims process for the victims of R. Allen Stanford's $7 billion Ponzi scheme. United States District Judge Robert Wilkins issued an order today finding...

SEC and CFTC Propose Identity Theft Red Flag Rules

by Andras P. Teleki This EIA focuses on the SEC version of the Red Flag Rules. The SEC version of the Red Flag Rules will be known as Regulation S-ID and would be added after Regulations S-P and S-AM when codified. Excerpt: On March 6, 2012, the SEC and CFTC jointly proposed rules (the "Proposal"...

SEC Shuts Down Zeek Rewards, Alleges It Was $600 Million "Massive Ponzi Scheme" On Verge Of Collapse

"Unbeknownst to its investors, ZeekRewards is, in reality, a massive Ponzi and pyramid scheme. " -SEC The Securities and Exchange Commission ("SEC") announced late Friday that it had filed suit against ZeekRewards, alleging it operated a $600 million Ponzi scheme that had gained...

SEC Taking Up Reg D End of Ban on General Solicitation Next Week

The SEC's published agenda for its August 22, 2012 open meeting includes, as item 3, the following: Item 3: The Commission will consider rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 of Regulation...

Analysis of New Reg D End of Solicitation Ban Rules: Parts I-III

With unusual speed, the SEC released its proposed rules on ending the ban on general solicitation and advertising in Regulation D Rule 506 offerings to accredited investors yesterday, the same day as the SEC hearing on the subject. I have scoured pretty much all of it and thought I would jot down some...

Two Brokers Charged With Defrauding Institutional Investors

Two Brazilian public pension funds and a Colombian institutional investor paid about $36 million in excessive mark ups in the latest fraudulent scheme uncovered by the SEC. Fabrizio Neves and Jose Luna, both registered representatives at now defunct Florida broker LatAm Investments, Inc. were the culprits...

The SEC Action Against the NYSE: The Need to Ensure Fair Markets

When corporations selectively disseminate material non-public information to one group prior to making it publically available is a violation of Regulation FD, the selective disclosure unfairly disadvantages the investing public. When a corporate executive furnishes his or her friends with the material...

SEC Chairman Schapiro Resigns, Leaving a Legacy of Achievement

Mary L Schapiro, one of the longest serving SEC Chairman, announced her resignation, effective December 14, 2012. Ms. Schapiro's action has been long rumored. The White House immediately appointed Commissioner Elisse Walter as Chairman, a position she can hold over the next year until the President...

The New SEC Chair Charts a Course for the Agency

Commentators have speculated since the appointment of Mary Jo White as SEC Chair that there would be a new emphasis on enforcement. Ms. White's remarks during her Senate confirmation hearings about unrelenting enforcement bolstered that view. Yet her recent remarks suggest perhaps another focus...

Could the SEC Become Irrelevant?

New SEC Chair Mary Jo White many well be facing an early test of her leadership. The battle ground could be money market reform. The stakes are high - the SEC could find itself becoming less than relevant in a critical corner of the markets. Treasury Secretary Jacob Lew testified regarding the...

The Stature of the SEC is Rising, But Business Ethics are Sinking

Another survey presents significant questions regarding the state of ethics on Wall Street and, in particular, the financial services industry. A significant number of those who responded to a new survey stated that the rules might have to be broken to be successful, that their company may have engaged...

The SEC Commissioners Speak: Part I

The SEC Speaks conference has traditionally been a forum in which the agency reviewed significant recent undertakings and indicated its future direction. This year was no different. Four of the five Commissioners addressed conference participants, discussing recent significant undertakings and sketching...