Capital Hill continued to debate
market reform this week with the introduction of the Volker Rule bill in the
Senate. SEC enforcement focused on resolving financial fraud and Ponzi scheme
cases, while the appellate section at FINRA reversed a panel decision for a
lack of evidence in a failure to supervise case. In private cases, another
derivative suit based on option backdating claims reached a tentative
resolution. And, in the U.K. the FSA obtained its first insider trading
conviction against a market professional.
The Volker Rule bill was introduced
in the Senate this week. The bill is titled The Protect our Recovery through
Oversight of Proprietary Trading Act or PROP Trading Act. Its focus is on banks
and their holding companies. If enacted, the bill would bar proprietary trading
desks from high risk speculation and impose capital requires and position
limits for non-bank financial institutions engaged in speculative trading.
SEC enforcement actions
Financial fraud: In the Matter of
Robert John Hipple,
Adm. Proc. File No. 3-13543 (Mar. 11, 2010) is an action against the former CEO
and CFO of defunct iWorld Projects & Systems, Inc., a business development
company. Mr. Hipple, according to the Order,
overstated the value of the investment portfolio of the company - its primary
asset - in three of the four quarters in 2005. He also misled the auditors
regarding whether there was an independent evaluation of the worth of the
asset. The Order is based on alleged violations of the antifraud provisions and
Section 57(a)(1) of the Investment Company Act, as well as the certification
provisions of Sarbanes Oxley. Mr. Hipple consented to the entry of a cease and
desist order, a five year officer director bar and an order precluding him from
serving with a registered investment company for five years. He also agreed to
be denied the right to practice before the Commission as an accountant. The
Division of Enforcement was given permission to reopen the proceeding and seek
a financial penalty when the Respondent furnishes accurate and complete
Broker fraud: SEC v. Vianna, Case No. 10 Civ. 1842 (S.D.N.Y.
Filed Mar. 10, 2010) is an action against a former registered representative at
Maxim Group, Jose Vianna. According to the complaint, Mr. Vianna would place
trades for the account of a large institutional client which was a Spanish bank
and Creswell Equities, a British Virgin Islands Company. When the bank trades
were profitable, they were diverted to the Creswell account. Conversely, when a
trade for Creswell was unprofitable it was diverted to the bank. This was done
57 times over a two year period beginning in 2007. The complaint alleges
violations of the antifraud provisions. The case is in litigation. See also
21446 (Mar. 10, 2010).
Financial fraud: SEC v. Lapine, Case No. C-0103650 (N.D. CA. Filed
Sept. 27, 2001) is an action against Jay Lapine, former General Counsel to HBOC
and, after its merger with McKesson to the HBOC division of McKesson HBOC. The
complaint, based on claims centered
in 1998 and 1999, alleges that Mr. Lapine discovered that the company was
falsifying its books by improperly recognizing revenue. Rather than halting the
scheme, he participated in two transactions used to improperly boost earnings
and help the company reach revenue goals. To resolve the case with the
Commission, Mr. Lapine consented to the entry of a permanent injunction
prohibiting future violations of the antifraud and reporting provisions. He
also agreed to the entry of a five year officer/director bar and to pay a
$60,000 civil fine. In 2007 other
officers of the company settled with the SEC. See also Litig. Rel.
21444 (Mar. 10, 2010).
Week In Securities Litigation (March 12, 2010) in its entirety on SECActions.com.