Securities

    • 11 Dec 2015

    Morgan Stanley To Pay $225M To Settle State, Federal Securities Law Claims

    ALEXANDRIA, Va. — (Mealey’s) Morgan Stanley & Co. will pay $225 million to settle claims in two federal lawsuits alleging that it misrepresented the investment quality of certain residential mortgage-backed securities (RMBS) it and certain of its subsidiaries underwrote to several credit unions during the subprime mortgage crisis, according to a press release issued by the National Credit Union Administration...
    • 16 Nov 2015

    This Week In Securities Litigation (Week ending November 13, 2015)

    The New York AG may have launched a new trend this week. Using the Martin Act, he filed a settled action against the largest coal producer in the nation alleging false statements regarding the firm’s ability to project the impact of climate change on its future business operations. Many of the statements were in filings made by the firm with the SEC. At the same time Exxon acknowledged receiving a subpoena from...
    • 12 Nov 2015

    A New Trend? NY AG Settles First Climate Change Disclosure Case

    New York Attorney General Eric T. Schneiderman may be leading the way again. In the past the office has lead ground breaking investigations using New York’s Martin Act that presaged significant SEC investigations and actions. Now the NY AG has filed a “first-of-its-kind” settlement with the world’s largest coal producer, Peabody Energy Corporation. Using the Martin Act and statements made by the...
    • 11 Nov 2015

    SEC, DOJ Charge Author of False Stock Tweets

    “What could you arrest them for?” asked the Scottish tweeter who just made $97 total manipulating two stocks. “@dunragit are you serious? Did you read my post? It’s called securities fraud.” It would be difficult to find the people since they did not use their real name replied the Scottish tweeter. Not so much. SEC v. Craig, Civil Action No. 3:15-cv-05076 (N.D. Cal. Filed Nov. 5, 2015)....
    • 9 Nov 2015

    This Week In Securities Litigation (Week ending November 6, 2015)

    Conflicts and investment fund fraud cases were the focus this week. The SEC brought two actions in each category. In addition, a settled insider trading action was filed. SEC Remarks: Andrew Cheresney, Director, Division of Enforcement addressed the 2015 National Society of Compliance Professional National Conference (Nov. 4, 2015). His remarks discussed the Division’s prospective on compliance officers, select...
    • 5 Nov 2015

    SEC Brings Actions Against Ponzi Schemer, Client

    Ponzi scheme cases have, of course, become a staple of SEC enforcement since the discovery of Madoff’s unprecedented scheme. While there seems to be a virtually endless number of these cases centered on the proverbial “too good to be true” scheme, the agency may have uncovered a new wrinkle: The client who not only loses his investment but then joins the schemer and fleeces others. SEC v. Apostelos,...
    • 4 Nov 2015

    SEC, Adviser Settle Proceeding Centered on Conflicts

    Conflicts of interest and a failure to disclose related party transactions continue to be key themes in Commission actions involving investment advisers. Undisclosed conflicts, as well as a failure to disclose related party transactions, were at the center of a proceeding brought against a registered investment adviser and its affiliates. In the Matter of Fenway Partners, LLC, Adm. Proc. File No. 3-16938 (November 3,...
    • 2 Nov 2015

    SEC’s Crowdfunding Rules

    Crowdfunding is a popular and controversial form of selling securities using the internet. Prior to the passage of the JOBS Act, which was designed to facilitate capital formation for small companies, such sales generally would have been required to comply with the registration provisions of the securities laws. Many see the form of financing as an inexpensive capital formation process which will boost small business...
    • 30 Oct 2015

    This Week in Securities Litigation (Week ending October 30, 2015)

    The SEC’s apparent preference for administrative proceedings as a venue for its enforcement actions continues to draw criticism. H.R. 3798 is now pending in the House of Representatives. The bill is tilted the “Due Process Restoration Act of 2015.” It would give a Respondent in a cease and desist proceeding where a penalty may be imposed the right to have the SEC dismiss the action. The Commission could...
    • 29 Oct 2015

    New SEC Enforcement Action Database from NYU and Cornerstone Research

    On October 27, 2015, Cornerstone Research in conjunction with the New York University Pollock Center for Law & Business and the Leonard N. Stern School of Business to launch the Securities Enforcement Database (SEED). As described in the organizations’ joint October 27, 2015 press release ( here ), the database will track record and information relating to SEC enforcement actions filed against public companies...
    • 29 Oct 2015

    SEC Sanctions Brokers For Not Obtaining Best Execution

    Rochdale Securities LLC, at one time a small Commission registered broker-dealer based in Stamford, Connecticut, is perhaps best known as the firm where a registered representative and his customer placed orders for over 1.6 million shares of Apple stock. The plan was to keep the stock if it went up and break the trades if it went down. When the stock went down the $1 billion in trades were disavowed leaving the firm...
    • 28 Oct 2015

    SEC Cites Firm’s Inadequate Books For Delaying Investigation

    The SEC took the unusual step of citing the inadequacy of the books and records of the firm for “adversely impacting” its investigation and “causing unreasonably prolonged uncertainty concerning” the company’s historic accounting. The company was a major Florida real estate developer and the records related to the impairment testing of its properties. In the Matter of The St. Joe Company...
    • 27 Oct 2015

    SEC Files Record Number of Independent Enforcement Actions in Fiscal 2015

    According to the agency’s recently released enforcement activity statics, the SEC’s overall enforcement activity and the number of independent enforcement actions both increased in the fiscal year 2015 (which just ended on September 30) compared to prior years. More specifically, during fiscal 2015, the agency filed a record number of independent actions for violations of the federal securities laws. The agency’s...
    • 27 Oct 2015

    SEC Sanctions Another Entity for Not Following Its Own Procedures

    A continuing focus of SEC enforcement is compliance by entities with their disclosed procedures. The Commission’s latest action in this regard resulted in the payment of nearly $6 million by a Credit Rating Agency that not only failed to comply with its disclosed procedures but lacked the required personnel. In the Matter of DBRS, Inc., Adm. Proc. File No. 3-16922 (October 26, 2015). DBRS has been a registered...
    • 26 Oct 2015

    SEC – Broker From Grand Central Insider Trading Scheme Settle

    The scheme was perfect . Broker Vladimir Eydelman of Oppenheimer & Co. would place the trades; law school graduate Steven Metro, a clerk at Simpson Thatcher, would misappropriate the inside information; mortgage broker Frank Tamayo, a law school class mate of Mr. Metro would be the go-between – information source Metro would not meet with trader Eydelman. The scheme was profitable . Beginning in February...
    • 23 Oct 2015

    This Week in Securities Litigation (Week ending October 23, 2015)

    The Manhattan U.S. Attorney announced the filing of motions to dismiss the insider trading conviction of Michael Steinberg, formerly a portfolio manager at SAC Capitol, and six others in the wake of the Second Circuit’s decision in Newman. SEC released its enforcement statistics for the last fiscal year. The release highlights cases in a number of categories. It also breaks out the number of cases filed for the...
    • 22 Oct 2015

    Supremes Refuse Insider Trading Case- Prosecutions Now Tougher

    Earlier this month, the US Supreme Court said it would not hear a case in which the appeals court overturned two insider trading convictions. By refusing to hear the case, they effectively let stand the decision below, which many say will make it much tougher to prosecute insider trading cases. As is the norm, the Supremes don’t say why they choose not to grant “certiorari” and hear a case. The appeals...
    • 22 Oct 2015

    Investment Advisor Admits Theft to Settle SEC Fraud Charges

    The Commission filed another action in which admissions were required as part of the settlement. The action centers on an investment adviser who misappropriated just under $2 million from his clients. As part of the settlement he admitted the theft. SEC v. Donnelly, Civil Action No. 15 6873 (E.D. Pa. Filed October 19, 2015). Michael Donnelly has been a registered investment adviser and registered representative since...
    • 21 Oct 2015

    SEC Sanctions Advisers For Not Disclosing Shift in Investment Strategy

    The SEC brought another enforcement action predicated on the failure of the firm to comply with its operating documents. In this instance the advisers to a fund failed to inform investors that it effectively changed the investment strategy by altering the composition and risk of its portfolio. In the Matter of UBS Willow Management L.L.C., Adm. Proc. File No. 3-16909 (October 16, 2015). UBS Willow Management, which...
    • 16 Oct 2015

    This Week In Securities Litigation (Week ending October 16, 2015)

    The SEC prevailed on two summary judgment motions. One centered on a manipulation action. The other was against an attorney who facilitated a prime bank fraud. The Commission also filed: An action against UBS tied to its failure to disclose certain factors which negatively impacted the value of structured notes marketed and sold by the firm; an insider trading case; six Rule 105 actions; and a financial fraud action...
    • 15 Oct 2015

    FINRA Requires BrokerCheck Link on Websites

    The Financial Industry Regulatory Authority (FINRA) regulates US broker-dealers, a “self-regulatory organization” run by the brokers themselves and overseen by the SEC. A very popular online resource is called BrokerCheck, which lets you pretty easily check the regulatory history and licenses held by broker-dealers and individuals who are licensed brokers in those companies. Frankly, I use it quite a lot....
    • 15 Oct 2015

    Broken Windows: SEC Files Six Settled Rule 105 Actions

    Broken Windows – the SEC initiative cloned from the NYC Police Department which prosecutes every case large and small based on the a deterrence theory – is alive and well in the form of the Rule 105 Initiative. This week the Commission announced the filing of six settled actions based on alleged violations of the Rule. See, e.g. In the Matter of Auriga Global Investors Sociedad de Valores S.A., Adm. Proc....
    • 14 Oct 2015

    UBS Settles Structured Note Case with SEC

    The Commission brought its first case tied to inadequate disclosure regarding structured notes. The complex instruments, a debt security linked to a derivative tied to the performance of other products, are frequently marketed to relatively unsophisticated retail investors. In the Matter of UBS AG, Adm. Proc. File No. 3-16891 (October 13, 2015). In the wake of the financial crisis UBS, a financial institution based...
    • 13 Oct 2015

    SEC Wins Summary Judgment in Two Fraud Actions

    The SEC prevailed on summary judgment motions in two fraud actions. One is a pump-and-dump manipulation scheme. The other is a prime bank fraud. First, SEC v. Farmer, Civil Action No. 4:14-cv-02345 (S.D. Tx. Filed August 14, 2014) is an action against Andrew Farmer, Charles Grob, Jr., Carolyn Austin, Baldemar Rios and Chimera Energy Corporation. The complaint alleged that from August 2011 through November 2012 the defendants...
    • 9 Oct 2015

    This Week in Securities Litigation (Week ending October 9, 2015)

    The PCAOB filed a settled action involving an auditing firm in which the consent order of settlement was based on admissions of facts. The approach is similar to the one adopted by the SEC in which the Commission requires admissions of fact in select cases. This week the SEC filed a settled FCPA action against Bristol-Myers and an action against two Blackstone affiliates based on disclosure violations. The SEC also...