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Thursday, September 30, 2021
SEC.gov | Dan Berkovitz Named SEC General Counsel; John Coates to Leave SEC
The Securities and Exchange Commission today announced that Commodity Futures Trading Commission (CFTC) Commissioner Dan Berkovitz has been named SEC General Counsel, effective Nov. 1. John Coates will leave the agency in October and return to teaching at Harvard University. Michael Conley, currently the SEC's Solicitor, will serve as Acting General Counsel upon Coates's departure until Berkovitz joins the agency.
Dan Berkovitz
Berkovitz has served as a Commissioner of the CFTC since September 2018 after being unanimously confirmed by the U.S. Senate. Prior to his appointment, Berkovitz was a partner and co-chair of the futures and derivatives practice at the law firm of WilmerHale. He also was an Adjunct Professor at Georgetown University Law School and vice-chair of the American Bar Association Committee on Derivatives and Futures Law. He previously served as the CFTC's General Counsel from 2009 to 2013. Earlier in his career, Berkovitz was a senior staff lawyer for the U.S. Senate Permanent Subcommittee on Investigations and Deputy Assistant Secretary in the Department of Energy's Office of Environmental Management. He obtained an A.B. in Physics from Princeton University and a J.D. from the University of California, Hastings College of the Law.
"I had the opportunity to work with Dan at the CFTC, and I'm thrilled to once again work with him on matters essential to our financial markets," said SEC Chair Gary Gensler. "Dan is a dedicated public servant and was instrumental in both informing and implementing the Dodd-Frank Act. As General Counsel, he navigated the CFTC through dozens of rulemakings to enhance regulatory oversight of the swaps markets, and he has remained a steadfast public servant as a Commissioner. He will be invaluable in our work at the SEC."
"I am honored to join the SEC at this critical time for our capital markets," Berkovitz said. "Having worked with the SEC in my roles at the CFTC, I've long admired the dedicated and talented staff of the agency from afar. I'm excited to work again with Chair Gensler on a regulatory agenda that will enhance investor protection, strengthen our capital markets, and facilitate capital formation."
John Coates
Coates was named Acting Director of the Division of Corporation Finance in February 2021 and SEC General Counsel in June. Coates provided counsel on numerous legal and policy issues, including topics on the Commission's ambitious regulatory agenda. He advised and advanced the agency's mission on "meme stock" volatility, special purpose acquisition companies (SPACs), the proxy system, disclosures of climate-related financial risks and human capital, insider trading, and the Treasury market. His work helped lay a foundation for significant rulemaking initiatives, managing through the surge in traditional initial public offerings and SPACs, counseling on the defense of legal challenges to Commission regulations and orders, and advising on enforcement actions.
"I thank John for his many valuable contributions to the SEC," said Chair Gensler. "John has been a remarkable counsel and counselor. He's brought to the job excellent judgment, knowledge of the securities markets, and an ability to connect with colleagues and foster collaboration. I am grateful for his service and wish him well."
"It has been an incredible honor to serve during this transition year with the talented and dedicated SEC staff, under the leadership of two visionary Chairs," said Coates. "I owe Chair Gensler my profound gratitude for his trust, confidence, and boundless energy. I am equally grateful to Commissioner Allison Herren Lee in her role as Acting Chair for inviting me to help build momentum on a range of important initiatives, at a pivotal moment in the evolution of U.S. capital markets, as investors are seeking better information about new financial risks and sources of value. I particularly want to express my appreciation to the many colleagues I had the privilege to meet and work with across the agency. Their expertise and professionalism, courage and commitment, enthusiasm and diligence are and will remain clear in my mind for the rest of my career, and my only regret is that my family commitments currently prevent me from continuing to join them in their crucial endeavors."
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SEC.gov | SEC Proposes to Enhance Proxy Voting Disclosure by Investment Funds and Require Disclosure of “Say-on-Pay” Votes for Institutional Investment Managers
The Securities and Exchange Commission today proposed amendments to Form N-PX to enhance the information mutual funds, exchange-traded funds, and certain other funds report about their proxy votes. The proposed rulemaking would require funds to tie the description of each voting matter to the issuer’s form of proxy and to categorize each matter by type to help investors identify votes of interest and compare voting records. The proposal also would prescribe how funds organize their reports and require them to use a structured data language to make the filings easier to analyze. Funds would also be required to disclose how their securities lending activity impacted their voting.
Further, the rulemaking would require institutional investment managers to disclose how they voted on executive compensation, or so-called “say-on-pay” matters, which would fulfill one of the remaining rulemaking mandates under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Managers generally would be subject to the same Form N-PX reporting requirements as funds with respect to their say-on-pay votes.
“This proposal will make it easier and more efficient for investors to get crucial information about proxy votes from funds,” said SEC Chair Gary Gensler. “I am pleased to support the staff’s recommendations and look forward to putting them out to public comment.”
Since 2003, funds have been required to file Form N-PX reports disclosing how they voted on proxy proposals relating to investments they hold, but investors may face difficulties analyzing these reports. For example, funds may report their votes in an inconsistent manner or in a format that is not machine readable. This can make it more difficult for investors to analyze the reported data. The proposal would make funds’ proxy voting records more usable and easier to analyze, improving investors’ ability to monitor how their funds vote and compare different funds’ voting records.
The proposal will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days after publication in the Federal Register.
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SEC.gov | SEC Charges Investment Bank Compliance Analyst with Insider Trading in Parents’ Accounts and Obtains Asset Freeze
The Securities and Exchange Commission today charged Jose Luis Casero Sanchez, a Spanish national and former Senior Compliance Analyst who worked in the Warsaw, Poland office of an international investment bank, with insider trading in advance of at least 45 corporate events involving the investment bank’s clients. The SEC has obtained an emergency court order to freeze Sanchez’s assets, including certain accounts he used to place the illicit trades.
According to the SEC’s complaint, filed in the United States District Court for the Southern District of New York, Sanchez had broad access to highly sensitive information regarding mergers and other transactions in which his firm was involved, in connection with his work as a compliance analyst. Sanchez had access to this information so that he could assist the firm’s efforts to ensure that employees kept the information confidential and did not engage in insider trading. However, between September 2020 and May 2021, Sanchez allegedly abused that position of trust by trading on at least 45 events involving the investment bank’s clients based on the investment bank’s material, nonpublic information. To avoid detection, Sanchez allegedly traded in multiple U.S.-based brokerage accounts held in the name of one of his parents—Jose Luis Casero Abellan and Maria Isabel Sanchez Gonzalez —and, in most instances, also refrained from placing large trades and made only modest profits. The complaint alleges that Sanchez generated more than $471,000 in ill-gotten gains during the course of the scheme.
“Despite Sanchez’s alleged efforts to avoid detection by limiting the size of his trades and using four different accounts to trade under his parents’ names, the SEC’s keen analysis stitched together this pattern of suspicious trading and exposed gross violations of duty by a compliance professional who exploited the sensitive information he was hired to protect.” said Joseph G. Sansone, Chief of the SEC’s Market Abuse Unit.
The SEC’s complaint charges Sanchez with violating the antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, prejudgment interest, and a civil penalty. The SEC also charged Sanchez’s parents, Abellan and Gonzalez, as relief defendants.
The SEC’s investigation was conducted by David W. Snyder and Christopher M. Colorado with the assistance of John S. Rymas and Patrick A. McCluskey of the Enforcement Division’s Market Abuse Unit. The case was supervised by Assunta Vivolo, Assistant Director in the Philadelphia Regional Office and Mr. Sansone. The litigation will be conducted by Mr. Snyder, Mr. Colorado, and Christopher Kelly of the Philadelphia Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
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Wednesday, September 29, 2021
SEC.gov | SEC Bars Two Individuals from Whistleblower Award Program
The Securities and Exchange Commission today announced that it has barred two individuals from the SEC's whistleblower award program, each of whom filed hundreds of frivolous award applications. The bars were issued pursuant to the 2020 amendments to the Whistleblower Program Rules, which were designed to allow the whistleblower program to operate more effectively and efficiently and to focus on good faith whistleblower submissions.
Over the years, these individuals submitted award applications to the SEC that bore no relation to the underlying enforcement action for which they were applying. The filing of these applications consumed considerable staff time and resources, hindered the efficient operation of the program, and did not contribute to any successful enforcement action. The individuals were repeatedly warned to stop submitting the abusive filings, but refused to do so.
"Frivolous award applications hamper our ability to efficiently process awards to meritorious whistleblowers who come forward with helpful information intended to assist law enforcement," said Emily Pasquinelli, Acting Chief of the SEC's Office of the Whistleblower. "Today's permanent bars send an important message that frivolous award filers will not be tolerated."
Under the SEC's whistleblower program, individuals who voluntary submit high quality information that leads to the success of an enforcement action may apply for an award in that matter. Whistleblowers are encouraged to apply for awards only where there is a connection between their tip and the charges in the enforcement action.
The permanent bars imposed in these matters apply to any pending award application from the individuals at any stage of the review process, as well as to any future award application from the individuals. As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower's identity.
For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.
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SEC.gov | SEC Atlanta Regional Office to Co-Host "Money and Markets: Trends and Risks for Retail Investors"
The Securities and Exchange Commission's Atlanta Regional Office and the University of Georgia School of Law will co-host a panel discussion on "Money and Markets: Trends and Risks for Retail Investors" on Thursday, Oct. 5, 2021, from 5-6:15 p.m. ET.
The virtual event will feature securities regulators and researchers who will discuss emerging trends and risks for retail investors, including investment strategies and related technology, social media's influence on investors, and the growing cryptocurrency market.
Speakers include experts from the SEC, the Commodity Futures Trading Commission, the Financial Industry Regulatory Authority, and the University of Georgia's Terry College of Business.
Additional details and event login information can be found on the SEC’s Upcoming Events page. The virtual event is free and open to the public.
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SEC.gov | SEC Obtains Emergency Relief Against New York Real Estate Developer Charged with EB-5 Securities Fraud
The Securities and Exchange Commission today announced that it filed an emergency action and obtained an asset freeze, among other relief, against Richard Xia (aka Yi Xia) and his company, Fleet New York Metropolitan Regional Center LLC (formerly known as Federal New York Metropolitan Regional Center LLC), for committing securities fraud in connection with two real estate projects in Queens, New York.
The SEC's complaint alleges that from 2010 through late 2017, Xia, through Fleet, fraudulently raised more than $229 million through five EB-5 offerings from more than 450 investors. The funds were allegedly raised for Xia's two real estate development projects – the Eastern Mirage project and the Eastern Emerald project. According to the complaint, the offering materials made material misrepresentations regarding the sources of financing for the projects, the experience of the projects' development and construction team, the scope of the Eastern Emerald project, and the existence of lease agreements among several entities that Xia owns and controls. Additionally, Xia allegedly misappropriated approximately $17 million in Eastern Mirage investor funds, and at least $11.8 million in Eastern Emerald investor funds.
"Developers offering securities in connection with the EB-5 program have the responsibility to be truthful with their investors," said Richard Best, Director of the SEC's New York Regional Office. "As we allege in our complaint, Xia misappropriated millions of dollars in investor funds and misled investors about the financing for the projects and the experience of the projects' development and construction team."
The SEC's complaint, filed in federal district court in Brooklyn, New York, charges Xia and Fleet with violating the anti-fraud provisions of the federal securities laws. The complaint seeks, among other relief, a permanent injunction, disgorgement, prejudgment interest, civil penalties, an asset freeze, and the appointment of a monitor. The complaint also names Xia's wife, Julia Yue (aka JiQing Yue), as a relief defendant and seeks disgorgement and prejudgment interest from her.
The SEC's investigation was conducted by Kim Han, Brenda Wai Ming Chang, Neil Hendelman, David Stoelting, and Judith Weinstock under the supervision of Lara Shalov Mehraban. The examination that led to this investigation was conducted by the NYRO Broker-Dealer Exchange Examination Program. The SEC's litigation is being led by Mr. Stoelting, Kevin McGrath, and Ms. Han.
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Tuesday, September 28, 2021
SEC.gov | SEC Delivers Report to Congress with Recommendations from the 40th Annual Small Business Forum
Today the Office of the Advocate for Small Business Capital Formation delivered a report to Congress on the Securities and Exchange Commission's 40th Annual Small Business Forum. The 2021 Forum took place virtually on May 24–27, 2021, with each session featuring panelists with in-depth knowledge of the issues facing small businesses across the country, spotlighting the following topics:
- Monday, May 24: Finding Your First Dollars: Navigating Your Way to Raise Early Rounds
- Tuesday, May 25: Doing Your Diligence: How Savvy Early-Stage Investors Build Diversified Portfolios
- Wednesday, May 26: Diversifying Capital Allocators: Tools for Emerging and Smaller Funds and Their Managers
- Thursday, May 27: Small Cap Insights: Perspectives on Smaller Public Companies
The report provides a summary of the Forum proceedings, including the recommendations developed by participants for changes needed to the capital raising framework and the Commission’s responses to the recommendations. The report seeks to incorporate the passion conveyed by the talented and thoughtful speakers and participants who spoke openly and candidly about their successes and challenges in capital formation, as well as ways to enable a more inclusive capital formation ecosystem. Video archives of the discussions, including remarks from all five Commissioners, are available online.
The Office of the Advocate for Small Business Capital Formation thanks the speakers, participants, advisory planning group members, and SEC staff members who made this year's Forum a success.
About the Forum: The SEC hosts the annual Government-Business Forum on Small Business Capital Formation pursuant to the Small Business Investment Incentive Act of 1980. The Forum is a unique event where members of the public and private sectors gather to craft suggestions for policy affecting emerging businesses and their investors, from startups to smaller public companies. Following the Forum, the Commission delivers a report to Congress that includes a summary of the proceedings and recommendations for changes to improve capital formation.
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SEC.gov | SEC Charges Florida Payday Lender and CEO with Affinity Fraud Targeting the Venezuelan-American Community
The Securities and Exchange Commission today announced charges against Sky Group USA LLC, a payday loan company based in Miami, and its CEO, Efrain Betancourt, Jr., for fraudulently raising at least $66 million through the sale of promissory notes to more than 500 retail investors, including members of the South Florida Venezuelan-American community.
According to the SEC's complaint, filed in the United States District Court for the Southern District of Florida, Sky Group and Betancourt falsely told investors that Sky Group would use investors' money solely to make payday loans and cover the costs of such loans, when, in reality, Betancourt misappropriated at least $2.9 million for personal use – including for his lavish wedding at a chateau on the French Riviera, vacations to Disney resorts and the Caribbean, costs associated with the purchase of a luxury Miami condominium, and service on his personal Piper airplane – and transferred at least another $3.6 million to friends and family, including his ex-wife, Angelica Betancourt, and to EEB Capital Group LLC, an entity whose bank accounts Betancourt and his current wife control. Sky Group and Betancourt also allegedly used at least $19.2 million of investors' money to make Ponzi-like payments to other investors. Finally, the SEC's complaint alleges that Sky Group and Betancourt misled investors by promising annual returns as high as 120% and representing that Sky Group's business was profitable, even though Sky Group did not generate sufficient revenue to cover principal and interest payments due to investors.
"As alleged in our complaint, Sky Group and Betancourt lured unsuspecting investors, including many members of the South Florida Venezuelan-American community, with false claims and promises of high-return, low-risk investments," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. "We continue to caution investors to be wary of any investment that promises returns that are too good to be true."
The SEC's complaint charges Sky Group and Betancourt with violations of the registration and antifraud provisions of the federal securities laws and additionally charges Betancourt with acting as an unregistered broker. The complaint also names as relief defendants Angelica Betancourt and EEB Capital Group LLC in connection with their illicit receipt of investor funds. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties from each of the defendants; an officer and director bar against Betancourt; and disgorgement with prejudgment interest from the relief defendants.
Many fraudsters take advantage of the trust that having something in common creates, such as a common nationality. The SEC's Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force have issued an Investor Alert with tips on how investors should avoid investment decisions based solely on common ties with someone recommending or selling the investment.
The SEC's continuing investigation is being conducted by Alexander Charap, Cecilia Danger and Crystal Ivory in the Miami Regional Office and supervised by Jessica M. Weissman and Glenn S. Gordon. The SEC's litigation is being led by Robert K. Levenson and supervised by Andrew Schiff. The SEC appreciates the assistance of the Florida Office of Financial Regulation.
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SEC.gov | Erik Gerding joins Division of Corporation Finance as Deputy Director, Legal and Regulatory Policy
The Securities and Exchange Commission today announced that Erik Gerding has been named Deputy Director, Legal and Regulatory Policy, for the Division of Corporation Finance, effective Oct. 4, 2021. Erik comes to the SEC from the University of Colorado Law School, where he has been a Professor of Law and a Wolf-Nichol Fellow. His focus has been in the areas of corporate and securities law and financial regulation.
"I’m delighted to welcome Erik to the division as a Deputy Director," said SEC Corporation Finance Division Director Renee Jones. "He has a distinguished reputation as a securities law expert. Erik brings the ideal combination of experience and technical skill to lead the Legal and Regulatory Policy Offices of our division in many of the areas on the rulemaking agenda, including executive compensation, ESG disclosure, and market transparency and stability."
"I am excited to join the Division of Corporation Finance's team of experienced and dedicated public servants," said Mr. Gerding. "The division plays an essential role in ensuring investors have the information they need to make informed investment decisions. I will work tirelessly to execute our rules and make sound recommendations that will help the SEC realize its mission."
Prior to joining the University of Colorado, Professor Gerding taught at the University of New Mexico School of Law. He also practiced in the New York and Washington, D.C., offices of Cleary Gottlieb Steen & Hamilton LLP, representing clients in the financial services and technology industries in an array of financial transactions and regulatory matters.
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Monday, September 27, 2021
SEC.gov | SEC Charges Two Individuals for Wash Trading Scheme Involving Options of "Meme Stocks"
The Securities and Exchange Commission today charged a Florida resident and his friend for engaging in a fraudulent scheme designed to collect liquidity rebates from exchanges by wash trading put options of certain "meme stocks" in early 2021.
According to the SEC's complaint, filed in the United States District Court for the District of New Jersey, starting in late February 2021, Suyun Gu became aware of the increased market volume and volatility driven by so-called "meme stocks" – stocks that were being actively promoted on social media platforms. Gu allegedly then devised a scheme to take advantage of the "maker-taker" program offered by exchanges by trading options of these stocks with himself.
Under the maker-taker program, a trade order that is sent to an exchange and executes against a subsequently received order makes liquidity and generates a rebate from the exchange. In contrast, an order that immediately executes against a pre-existing order takes liquidity and is charged a fee.
The SEC's complaint alleges that Gu was able to generate illicit profits by using broker-dealer accounts that passed rebates back to their customers to place initial orders on one side of the market, and then using broker-dealer accounts that did not charge fees for taking liquidity for his subsequent orders on the other side of the market. When identifying a product to trade, Gu and his friend and business associate, Yong Lee, selected far out-of-the-money put options on some "meme stocks," which they thought would be easier to trade against themselves because interest in buying the "meme stocks" and related price increases would make put options on those stocks less attractive. After certain broker-dealers closed Gu's and Lee's accounts in early March 2021, Gu was able to continue the scheme through mid-April 2021 by lying to broker-dealers about his trading strategy, using accounts in the names of other people, and accessing these accounts through virtual private networks to hide his activity. The complaint alleges that Gu executed approximately 11,400 trades with himself, netting at least $668,671 in liquidity-rebates, and that Lee executed approximately 2,300 trades with himself, netting $51,334 in liquidity-rebates. In addition to collecting these ill-gotten rebates, the wash trading scheme allegedly impacted the market as it skewed the volume in certain option contracts and induced other traders to place trades in otherwise illiquid option contracts.
"As alleged in our complaint, Gu and Lee engaged in a deceptive wash trading scheme to game the exchanges' maker-taker programs and take advantage of market conditions associated with meme stocks trading," said Joseph G. Sansone, Chief of the SEC's Market Abuse Unit. "This case demonstrates the SEC's ability to quickly investigate and expose complex trading schemes, including those conducted during times of significant market volatility."
The SEC's complaint charges Gu and Lee with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. Without admitting or denying the SEC's allegations, Lee has consented to the entry of a final judgment, subject to court approval, that enjoins him from violating the antifraud provisions and orders him to pay $51,334 in disgorgement, plus $515 in prejudgment interest, and a civil monetary penalty of $25,000. The SEC's litigation against Gu is continuing.
The SEC's investigation was conducted by Andrew McFall, with the assistance of Matthew Koop and Mandy Sturmfelz, of the Market Abuse Unit, and Maxwell Clarke, of the SEC's Division of Economic and Risk Analysis. The case was supervised by Paul Kim and Mr. Sansone. The SEC's litigation is being led by James Connor and Mr. McFall, and is being supervised by Stephan Schlegelmilch. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
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Saturday, September 25, 2021
SEC.gov | SEC Awards Approximately $36 Million to Whistleblower
The Securities and Exchange Commission today announced an award of approximately $36 million to a whistleblower whose information and assistance significantly contributed to the success of an SEC enforcement action as well as actions by another federal agency.
The whistleblower provided crucial information on an illegal scheme to the SEC's and the other agency's staffs, which included multiple meetings and the identification of key documents and witnesses. Under the SEC's whistleblower program, individuals who provide critical information to other agencies may be eligible for a related action award if they are also eligible for an award in the underlying SEC action.
"Today’s whistleblower brought valuable new information to the attention of the SEC and to another federal agency, greatly assisting ongoing investigations," said Emily Pasquinelli, Acting Chief of the SEC's Office of the Whistleblower. "Whistleblowers can act as a springboard for an investigation or, like here, they can propel forward an already existing investigation."
The SEC has awarded approximately $1.1 billion to 214 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million.
As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower's identity.
For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.
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SEC.gov | SEC Charges Two Companies and Their Principals with Misleading Investors in More Than a Dozen Oil and Gas Securities Offerings
The Securities and Exchange Commission today charged Thomas Powell and Stefan Toth, and their entities, Resolute Capital Partners LTD LLC and Homebound Resources LLC, with making material misrepresentations and omissions in connection with more than a dozen unregistered oil and gas securities offerings. Powell and Toth were also charged with acting as unregistered brokers. All respondents have agreed to settle the SEC action.
According to the SEC's order, between 2016 and 2019, the respondents and salespeople acting on their behalf sold debt and equity securities to retail investors in unregistered offerings based on working interests in oil and gas wells. The order finds that the respondents made material misstatements and omitted material facts in both debt and equity offerings. In particular, the respondents provided insufficiently supported projections of future oil production, made statements about potential tax benefits that were unavailable to certain investors, overstated cash reserves, and made incomplete disclosures regarding potential uses of investor funds, including the amount of funds that would be used for payments to prior debt and equity investors. The order further finds that the respondents should have known that their statements and omissions were materially misleading.
"Today's settlements provide important protections for investors, including prohibiting the respondents from participating in any oil and gas offerings for two years and requiring an independent compliance consultant to review policies, procedures, and offering materials for any further offerings for three years," said Carolyn M. Welshhans, Enforcement Division Associate Director. "Investors are entitled to materially accurate disclosures so they can make informed investment decisions."
The SEC's order finds that the respondents violated the antifraud provisions and the registration provisions of the Securities Act of 1933, and further that Powell and Toth acted as unregistered brokers. Without admitting or denying the SEC's findings, the respondents agreed to a cease and desist order and to undertakings that, among other requirements, prohibit them from participating in any unregistered oil and gas related offerings for two years, require them to post a referenced link to the SEC's order on all of their websites for three years, and require an independent compliance consultant for a period of three years. Powell and Toth also consented to collateral and penny stock bars and investment company prohibitions, with a right to apply for re-entry after two years. Finally, Resolute Capital and Homebound Resources each agreed to pay a civil penalty of $225,000, and Powell and Toth each agreed to pay a civil penalty of $75,000.
The SEC's investigation was conducted by Brian Fitzsimons and Brian Vann with assistance from Joshua Braunstein, James Smith, Dean Conway, Jan Folena, Donald Furlano, and Deborah Russell. The investigation was supervised by Brian O. Quinn and Ms. Welshhans. The SEC appreciates the assistance of the Nevada Securities Division, the Securities Division of the Washington State Department of Financial Institutions, and the Financial Industry Regulatory Authority.
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Friday, September 24, 2021
SEC.gov | SEC Charges World's Largest Advertising Group with FCPA Violations
The Securities and Exchange Commission today announced that London-based WPP plc, the world's largest advertising group, has agreed to pay more than $19 million to resolve charges that it violated the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA).
According to the SEC's order, WPP implemented an aggressive business growth strategy that included acquiring majority interests in many localized advertising agencies in high-risk markets. The order finds that WPP failed to ensure that these subsidiaries implemented WPP's internal accounting controls and compliance policies, instead allowing the founders and CEOs of the acquired entities to exercise wide autonomy and outsized influence. The order also finds that, because of structural deficiencies, WPP failed to promptly or adequately respond to repeated warning signs of corruption or control failures at certain subsidiaries. For example, according to the order, a subsidiary in India continued to bribe Indian government officials in return for advertising contracts even though WPP had received seven anonymous complaints touching on the conduct. The order also documents other schemes and internal accounting control deficiencies related to WPP's subsidiaries in China, Brazil, and Peru.
"A company cannot allow a focus on profitability or market share to come at the expense of appropriate controls," said Charles Cain, the SEC's FCPA Unit Chief. "Further, it is essential for companies to identify the root cause of problems when red flags emerge to prevent a pattern of corrupt behavior from taking hold."
Without admitting or denying the SEC's findings, WPP agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and to pay $10.1 million in disgorgement, $1.1 million in prejudgment interest, and an $8 million penalty.
The SEC's investigation was conducted by Samantha Martin and Laura Bennett. The investigation was supervised by David Reece and Charles Cain. The SEC appreciates the assistance of the Securities and Exchange Board of India and Brazil's Comissão de Valores Mobilários.
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SEC.gov | SEC Charges Principals of Subprime Automobile Finance Company with Fraud
The Securities and Exchange Commission today announced fraud charges against two former executives of a subprime automobile finance company for misleading investors about the subprime automobile loans that backed its $100 million offering.
The SEC's complaint, filed in U.S. District Court for the Northern District of Illinois, alleges that James Collins and Robert DiMeo, the former principals of Honor Finance LLC, were responsible for false and misleading statements about, and engaged in deceptive conduct regarding, Honor's servicing practices in connection with the Honor Automobile Trust Securitization 2016-1 (HATS). The complaint alleges that Honor packaged together several thousand automobile loans Honor funded to serve as collateral for the HATS offering, which raised $100 million through the sale of interest-bearing notes to investors. According to the SEC's complaint, Collins and DiMeo took various steps designed to artificially inflate the value of the collateral underlying HATS. Specifically, the complaint alleges that Collins and DiMeo were responsible for, among other things, including loans in the deal that were not eligible to be included in the securitization vehicle, extending loan repayment dates without borrower knowledge, and forgiving payments due from delinquent borrowers. The complaint claims that, because of these improper practices, the servicing and performance information Honor provided to investors at the time of the offering and in later monthly reports was false.
"Investors in asset-backed securities are entitled to the same full and accurate disclosure as investors in other types of securities," said Osman Nawaz, Acting Chief of the SEC's Complex Financial Instruments Unit. "This case reflects our continued and resolute commitment to policing offerings in this space."
"We charge Collins and DiMeo with intentionally misleading investors, the underwriter, and ratings agencies in order to securitize loans that should not have been included in HATS and hide Honor's improper servicing practices," said Jennifer S. Leete, Associate Director of the SEC's Division of Enforcement. "In addition, because of their alleged misconduct, Honor continued to overstate the performance of the deal long after the securitization was issued."
The SEC's complaint charges the defendants with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks permanent injunctions, officer and director bars, disgorgement with prejudgment interest, and civil penalties.
The SEC's investigation was conducted by Jason Anthony and Amy Sumner, with assistance from Daniel Nigro. The investigation was supervised by Laura Metcalfe and Paul Pashkoff. The litigation is being handled by David Nasse and Christopher Martin.
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SEC.gov | SEC Issues Agenda for Sept. 27 Meeting of the Asset Management Advisory Committee
The Securities and Exchange Commission today released the agenda for the Sept. 27 meeting of the Asset Management Advisory Committee (AMAC).
The meeting will include a discussion of matters in the asset management industry relating to: the Private Investments Subcommittee, including its potential recommendations; and the Evolution of Advice and the Small Advisers and Small Funds Subcommittees, including panel discussions.
The meeting will be held by remote means and is open to the public. The meeting will be webcast live on the SEC's website, www.sec.gov, and will be archived on the website for later viewing. Members of the public who wish to provide their views on the matters to be considered by AMAC may submit comments either electronically or on paper, as described below. Please submit comments using one method only. At this time, electronic submissions are preferred. Information that is submitted will become part of the public record of the meeting. All submissions should refer to File Number 265-33, and the file number should be included on the subject line if email is used.
Electronic submissions: Use the SEC's Internet submission form or send an email to rule-comments@sec.gov.
Paper submissions: Send paper submissions to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, D.C. 20549-1090.
* * *
Asset Management Advisory Committee – Agenda for Sept. 27, 2021, Meeting
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9:30 a.m. |
Welcome and Opening Remarks Chair Gensler; Commissioners Peirce, Roisman, and Lee; Sarah ten Siethoff, Acting Director of the Division of Investment Management; and Ed Bernard, Committee Chairman |
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10:00 a.m. |
Recommendations of the Private Investments Subcommittee |
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10:30 a.m. |
Update from the Evolution of Advice Subcommittee |
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11:15 a.m. |
Break |
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11:45 a.m. |
Update from the Small Advisers and Small Funds Subcommittee and Panel Discussion AMAC Panel Moderator: Scot Draeger, R.M. Davis Inc.
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1:45 p.m. |
Break |
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2:00 p.m. |
Summary and Discussion |
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2:30 p.m. |
Adjournment |
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Thursday, September 23, 2021
SEC.gov | SEC Charges Firm and Two Principals in First-Ever Actions Enforcing Rule on Duties of Municipal Advisors
The Securities and Exchange Commission today charged a Texas- and Colorado-based municipal advisor, Choice Advisors LLC, and its two principals, Matthias O'Meara and Paula Permenter, with violating their duties, engaging in unregistered municipal advisory activities, and related misconduct with respect to Choice's charter school clients. The actions are the first-ever SEC cases enforcing Municipal Securities Rulemaking Board Rule G-42 on the duties of non-solicitor municipal advisors.
The SEC's complaint alleges that, in May 2018, O'Meara and Permenter left their employment at a national municipal underwriting firm to start Choice, a new municipal advisor focused on charter schools. According to the SEC's complaint and order, O'Meara and Permenter entered into an impermissible fee-splitting arrangement with their former employer. Such arrangements are prohibited in any offering where the municipal advisor will be providing advice to clients of the underwriter. Moreover, O'Meara and Permenter allegedly did not adequately disclose to their clients the conflicts of interest associated with the illicit arrangement or their relationship with the underwriting firm. The SEC also alleges that Choice, O'Meara, and Permenter unlawfully engaged in municipal advisory activities when they were not registered with the SEC or MSRB.
The SEC's complaint alleges additional misconduct by O'Meara. While still employed at the underwriting firm, O'Meara allegedly improperly operated in a dual capacity, simultaneously serving as a registered representative for the underwriting firm, and also as a municipal advisor where he purported to serve as two clients' fiduciary. As alleged in the complaint, O'Meara took steps to increase the overall fees paid by the clients in a way that would enrich himself and Choice, ultimately costing one school approximately $40,000 in additional fees.
"It is critical that municipal advisors comply with MSRB Rule G-42, which sets forth core standards of conduct, including the disclosure of conflicts," said LeeAnn G. Gaunt, Chief of the SEC Enforcement Division's Public Finance Abuse Unit. "Schools and other municipal entities should be able to trust that municipal advisors are serving their clients' interests and not their own."
The SEC's complaint, filed in U.S. District Court for the Southern District of California, charges Choice and O'Meara with violating the municipal advisor fiduciary duty, deceptive practices, fair dealing, and registration provisions of the federal securities laws, and seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties. Permenter, who agreed to settle with the SEC, consented, without admitting or denying any findings, to the entry of an SEC order finding that she violated rules regarding municipal advisor registration and the duties of non-solicitor municipal advisors, censuring her, ordering her to pay a $26,000 penalty, and requiring that she participate in training on the duties of non-solicitor municipal advisors as well as have her engagement letters reviewed by a third party for a period of one year.
These actions add to a number of recent SEC enforcement actions against municipal advisors who provide services to school clients.
The SEC's investigation was conducted by William T. Salzmann and Joseph Chimienti of the Public Finance Abuse Unit, and was supervised by Jason H. Lee. The SEC's litigation will be led by Andrew Hefty, Sheila O’Callaghan, and Mr. Salzmann. The SEC acknowledges the assistance of the Municipal Securities Rulemaking Board.
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SEC.gov | SEC Charges U.K.-Based Father and Son, and Two Others in Transatlantic Microcap Fraud Scheme
The Securities and Exchange Commission today filed two complaints in the United States District Court for the Eastern District of New York charging four individuals and five entities for their roles in an allegedly fraudulent microcap scheme that generated more than $10 million in unlawful stock sales. The SEC also is seeking an order to freeze the assets of seven of the defendants and one relief defendant.
According to the first of the two complaints, United Kingdom citizen Timothy Page, a recidivist, and his son, U.K. resident Trevor Page, schemed with associates to acquire millions of shares in U.S. publicly traded microcap companies, disguise their control over the companies, and then dump their shares into the public markets in violation of the securities laws. The Pages allegedly used nominee entities, including the five entity defendants, to conceal their holdings in the companies, and then engaged in manipulative trading and hired boiler rooms to generate artificial demand for their stock by making misleading statements to investors.
The SEC's second complaint alleges that two of the Pages' associates, Utah resident William R. Shupe and U.K. resident Daniel Cattlin, used their insider roles as officers or majority shareholders at several of the microcap companies to hide the Pages' control. At the same time, they helped the Pages secretly acquire and then sell millions of the companies' shares. Shupe allegedly enabled the Pages to disguise their control over the companies by, among other things, holding the Pages' securities through a company Shupe formed and by helping the Pages conceal their funding of the microcap companies. Cattlin is alleged to have coordinated with the Pages to provide false and misleading information in response to investigative subpoenas issued by the SEC staff, and during an interview conducted by SEC staff in June 2020.
"As we allege in the complaints, the defendants took elaborate steps to hide their fraudulent conduct," said Paul Levenson, Director of the SEC's Boston Regional Office. "We will continue to pursue bad actors, whether located in the U.S. or abroad, who engage in complex schemes to generate illicit profits at the expense of U.S. investors."
The SEC's complaints charge each of the nine defendants with violating the antifraud provisions of the federal securities laws. Timothy and Trevor Page and three of the entity defendants also are charged with violating the securities laws' registration provisions, and Timothy and Trevor Page and one entity are charged with violating the securities laws' reporting provisions. Timothy Page and Trevor Page also are charged with violating the market manipulation provisions of the federal securities laws. Cattlin and Shupe are charged with aiding and abetting the Pages' violations of the antifraud provisions of the securities laws. Timothy Page's wife, Janan Page, is named as a relief defendant for her alleged receipt of illicit proceeds from the Pages' fraudulent scheme. In addition to seeking an order freezing the assets of Timothy, Trevor, and Janan Page and the five entity defendants, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus interest, and civil penalties against all the defendants. The SEC also seeks penny stock bars against Trevor Page, Cattlin, and Shupe, conduct-based injunctions against the Pages, and officer and director bars against Cattlin and Shupe.
The SEC's cases are being handled by Trevor Donelan, Kathleen Shields, Eric Forni, Rebecca Israel, David Scheffler, and Amy Gwiazda in the Boston Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the British Columbia Securities Commission, the Royal Canadian Mounted Police, the Malta Financial Services Authority, the Mauritius Financial Services Commission, the Hong Kong Securities and Futures Commission, Magyar Nemzeti Bank (The Central Bank of Hungary), and the Monetary Authority of Singapore.
Investors should be aware that it is often easier for fraudsters to manipulate the stock price or trading volume of microcap stocks, which historically have been less liquid and more thinly traded (lower volume) than the stocks of larger companies. Learn more about microcap fraud on Investor.gov.
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SEC.gov | SEC Charges Quant Analyst in Multimillion Dollar Front-Running Scheme
The Securities and Exchange Commission today announced charges against Sergei Polevikov, who worked as a quantitative analyst at two prominent asset management firms, for perpetrating a years-long front-running scheme that generated illicit profits of at least $8.5 million.
According to the SEC's complaint, filed in the United States District Court for the Southern District of New York, from at least January 2014 through October 2019, Polevikov had access to real-time, non-public information about the size and timing of his employers' securities orders and trades, and used that information to secretly trade on, and ahead of, his employers' trades. As alleged, Polevikov, on nearly 3,000 occasions, bought or sold a stock on the same side of the market as his employers before his employers executed trades in the same stock for their fund clients. Polevikov typically would close his positions the same day as he opened them, capitalizing on the price movement caused by his employers' large trades. The SEC alleges that Polevikov concealed his fraudulent scheme by executing the trades in the account of his wife, Maryna Arystava, who uses a different last name.
The investigation originated from the SEC's Market Abuse Unit's Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns, such as improbably successful trading across different securities over time. These capabilities enabled the SEC to spot Polevikov's trading activities which consistently generated small profits that added up to a total of at least $8.5 million over the course of the scheme.
"As alleged in our complaint, Polevikov abused his position as a quantitative analyst and his employers' trust by repeatedly trading ahead of large trades that the firms placed for advisory clients," said Joseph G. Sansone, Chief of the SEC's Market Abuse Unit. "Although Polevikov allegedly tried to hide his misconduct by using his wife's account, SEC analysts were able to uncover this deceptive scheme by identifying a consistent pattern of profitable trading in coordination with the employers’ trades."
In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced related criminal charges against Polevikov.
The SEC's complaint charges Polevikov with violating the antifraud and reporting provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. The complaint also names Arystava as a relief defendant.
The SEC's investigation was conducted by David Bennett of the Market Abuse Unit with the assistance of John Rymas of the Market Abuse Unit's Analysis and Detection Center, who uncovered the suspicious trading, and Maxwell Clarke and Nicolas Lopez of the SEC's Division of Economic and Risk Analysis. The case was supervised by Paul Kim and Mr. Sansone. The SEC's litigation will be led by David Misler and Stephan Schlegelmilch. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.
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Tuesday, September 21, 2021
SEC.gov | SEC Charges Puerto Rican Company and Managing Members with Fraud
The Securities and Exchange Commission today announced charges against Puerto Rico-based Back to Green Mining LLC and its two managing members, José Jiménez Cruz and Manuel Portalatin, for their participation in a fraudulent and unregistered offering in a purported "green" mining venture.
The SEC's complaint alleges that, from August 2016 until at least 2020, Back to Green, Jiménez, and Portalatin offered and sold to retail investors in Puerto Rico and at least five U.S. states the opportunity to share in the profits of a purported Colombian gold mining operation. According to the SEC's complaint, the offering, which was not registered with the Commission, was part of a fraudulent scheme that raised approximately $2.7 million. Jiménez and Back to Green allegedly placed advertisements promising investors exorbitant returns and presented investors with materials that falsely stated that all permits necessary to mine in Colombia had been obtained. Subsequent to the provision of these materials, Portalatin allegedly signed contracts with investors when he knew that they had been misled.
"This case underscores our commitment to protecting retail investors from unregistered and fraudulent securities offerings that promise fantastic returns and mislead investors about the status of their projects," said Carolyn M. Welshhans, Associate Director of the SEC Enforcement Division. "We have alleged that Back to Green and Jiménez represented to investors that they would receive 40% returns per month, commencing within a few months, when the company was years away from selling anything for profit."
The SEC's complaint, filed in United States District Court for the District of Puerto Rico, charges Back to Green, Jiménez, and Portalatin with violating the antifraud provisions of the federal securities laws, as well as with directly offering and selling securities in an unregistered offering. The SEC seeks permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against Back to Green, Jiménez, and Portalatin.
Without admitting or denying the allegations in the SEC's complaint, Portalatin has offered to settle to permanent injunctions from future violations of the charged provisions and from participating in securities offerings not registered with the SEC, and to pay disgorgement of $605,462, plus prejudgment interest thereon in the amount of $64,312.25, and a civil penalty of $160,000. The settlement is subject to the approval of the district court.
The SEC's investigation was conducted by Michelle I. Bougdanos and Elisabeth M. Grimm and supervised by David Frohlich and Ms. Welshhans. The litigation will be led by Paul W. Kisslinger and supervised by Jan M. Folena. The SEC appreciates the assistance of Puerto Rico's Office of the Commissioner of Financial Institutions.
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SEC.gov | Changing Dynamics Pre-IPO and Going Public on the Agenda for the SEC’s Small Business Capital Formation Advisory Committee
The Securities and Exchange Commission's Small Business Capital Formation Advisory Committee will meet virtually on Monday, Sept. 27 to explore the changing dynamics for pre-IPO companies raising capital and the pathways those companies take to becoming public.
During the morning session, the committee will focus on recent trends in "crossover investors"—such as mutual funds and other investors that traditionally focus on public companies—investing in late-stage, pre-IPO funding rounds. The committee will discuss how these investors are changing the dynamics of pre-IPO capital raising and the effects on timing to go public. During the afternoon session, the committee will explore pathways to joining the public markets, discussing how companies and investors are weighing traditional IPOs, direct listings, and the re-emergence of mergers with special purpose acquisition companies (SPAC). The full agenda for the meeting is available online, along with other meeting materials on the committee's webpage.
How to Listen: The committee meeting will take place from 10 a.m. to 2:30 p.m. ET and will be webcast live on SEC.gov. The webcast will be archived on the committee's webpage for later viewing.
About the committee: The committee was established by Congress to provide the Commission with advice and recommendations on Commission rules, regulations, and policy matters relating to small businesses, from privately-held emerging companies to smaller public companies. The committee focuses its activities on pertinent rulemaking and policy priorities as well as emerging trends in capital raising, providing valued feedback into the regulatory process. Additional information on the committee, including its members, is available on the committee webpage.
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Monday, September 20, 2021
SEC.gov | SEC, MSRB, FINRA to Hold Compliance Outreach Program for Municipal Advisors
The Securities and Exchange Commission's Division of Examinations and Office of Municipal Securities (OMS), the Municipal Securities Rulemaking Board (MSRB), and the Financial Industry Regulatory Authority (FINRA) today announced the opening of registration for the 2021 Compliance Outreach Program for Municipal Advisors. The virtual program will be held Thursday, Oct. 7, 2021, from 10 a.m. to 5 p.m. ET. Additional information and program materials, including the agenda are available on the SEC website.
The program will provide municipal advisors and other municipal market participants an opportunity to hear from SEC, MSRB, and FINRA staff on timely regulatory and compliance matters. Topics of discussion include managing conflicts of interest disclosures; operational considerations for registered municipal advisors; municipal advisors’ participation in new issue pricing; preparing for an examination; SEC and FINRA examination processes and common observations; and relevant SEC and FINRA enforcement actions. A tutorial on using the EDGAR system will also be presented.
"OMS is pleased to participate in this event for municipal advisors in the virtual format. We enjoy the opportunity to speak directly to and encourage a dialogue with the municipal advisor community. Our goal with this event is to promote a greater understanding of and compliance with municipal advisor duties under the federal securities laws," said OMS Director Rebecca Olsen.
Daniel Kahl, Acting Director of the SEC's Division of Examinations added, "I am delighted that we are once again holding this important outreach event. This program is one example of the Division's efforts to be transparent when it comes to the examination program and includes panels on common exam findings and how to prepare for an examination. With representatives of the SEC, MSRB, and FINRA, as well as industry participants, the program should provide an excellent learning opportunity for municipal advisors regarding their regulatory obligations from multiple perspectives. The open dialogue I expect at the event should serve to bolster compliance efforts and ultimately enhance investor protection."
MSRB Chief Regulatory Officer Gail Marshall said, "We are pleased to again partner with the SEC and FINRA on a program that allows us to engage with municipal advisors across the country. This program is a great capstone to the series of virtual regional town halls for municipal advisors that the MSRB held during the summer months. Creating opportunities such as this to engage in thoughtful dialogue will better inform our work that is centrally focused on reducing unnecessary costs and burdens for municipal advisors while also finding impactful ways to support compliance."
"The municipal securities market plays an important role in U.S. capital markets, providing opportunities for new and experienced retail investors as governments leverage bonds, complex structured products and financial derivatives to address their infrastructure and capital needs," said Bari Havlik, FINRA's Executive Vice President of Member Supervision. "This program enables municipal advisor firms across the country to hear from regulators about areas of oversight, compliance and obligations that promote a fair and efficient market."
Registration is being administered by FINRA. The program is free and open to all. Register to attend the program here. For those who cannot attend the live virtual program, the recording will be archived on the SEC's Compliance Outreach Program for Municipal Advisors webpage for later viewing. To submit questions in advance of the event, email 2021MAOutreach@sec.gov.
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SEC.gov | SEC Charges Crowdfunding Portal, Issuer, and Related Individuals for Fraudulent Offerings
The Securities and Exchange Commission today charged three individuals and one issuer with conducting a fraudulent scheme to sell nearly $2 million of unregistered securities through two crowdfunding offerings. The SEC also charged the registered funding portal and its CEO, who placed the offerings on the portal’s platform.
According to the SEC's complaint, Robert Shumake, alongside associates Nicole Birch and Willard Jackson, conducted fraudulent and unregistered crowdfunding offerings through two cannabis and hemp companies, Transatlantic Real Estate LLC and 420 Real Estate LLC. Shumake, with assistance from Birch and Jackson, allegedly hid his involvement in the offerings from the public out of concern that his prior criminal conviction could deter prospective investors. The complaint alleges that Shumake and Birch raised $1,020,100 from retail investors through Transatlantic Real Estate, and Shumake and Jackson raised $888,180 through 420 Real Estate. Shumake, Birch, and Jackson allegedly diverted investor funds for personal use rather than using the funds for the purposes disclosed to investors. As alleged, TruCrowd Inc., a registered funding portal, and its CEO, Vincent Petrescu, hosted the Transatlantic Real Estate and 420 Real Estate offerings on TruCrowd's platform. Petrescu allegedly failed to address red flags including Shumake's criminal history and involvement in the crowdfunding offerings, and otherwise failed to reduce the risk of fraud to investors.
"Crowdfunding offerings enable issuers to cast a wide net for potential investors, emphasizing the importance of full and honest disclosure," said Gurbir S. Grewal, Director of the SEC's Division of Enforcement. "As companies continue to raise funds through crowdfunding offerings, we will hold issuers, gatekeepers, and individuals accountable and enforce the protections in place for all investors."
The SEC's complaint, which was filed in the U.S. District Court for the Eastern District of Michigan, charges Shumake, Birch, Jackson, and 420 Real Estate with violating the antifraud and registration provisions of the Securities Act of 1933 and Securities Exchange Act of 1934, and seeks disgorgement plus pre-judgment interest, penalties, permanent injunctions, and officer and director bars. The complaint also charges TruCrowd and Petrescu with violating the crowdfunding rules of the Securities Act and seeks disgorgement plus pre-judgment interest, penalties, and permanent injunctions.
The SEC's Office of Investor Education and Advocacy has issued an investor bulletin on crowdfunding and investor alerts on the red flags of investment fraud. Additional information is available at Investor.gov.
The SEC's investigation was conducted by Jerrold H. Kohn, Dante A. Roldán, Pesach Glaser, and Kristine Rodriguez, and supervised by Ana D. Petrovic, and the litigation will be led by John Birkenheier, all of the Chicago Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
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