Articles Posted in SEC whistleblowers

 Two securities exchanges, the EDGA and EDGX echanges have agreed to pay a total $14 million to settle federal charges of giving inaccurate information to trading firms about the buy and sell orders they used. It is the largest penalty it had imposed on a U.S. stock exchange and the first case involving types of trading orders used.

The exchanges gave full information about their ranking of orders by price and other data to some of their trading firm members — including some high-frequency firms — but not to all of their firm members says the SEC . That created a risk that not all investors could understand how the orders worked, the agency said.

High-frequency trading firms,  use computer algorithms to buy and sell stocks in millisecond. This account for a majority of stock trading volume and is the subject of potential laws to prohibit the practices where the high frequency firms get a jump on competitors by using computers to rapidly analyze market data and exploit minuscule price differences.

Computer Sciences Corporation a next generation technology company with over 74,000 employees and which offers an array of analytic services including data analysis, has agreed to pay $190 million to resolve a four-year probe by the Securities and Exchange Commission into CSC’s bookkeeping .The SEC says CSC violated the antifraud, reporting and books-and-records provisions of the U.S. securities laws, according to the filing. The inquiry involved the company’s reporting of margin, which in turn contributed to the amount of profits reported.

The Falls Church company will record a pre-tax charge of about $200 million for the penalty and related expenses in its third quarter of fiscal 2015. The review will be conducted by an independent compliance consultant, according to an SEC administrative enforcement action disclosed Monday by CSC.

In addition to the penalty, CSC will restate its financial statements for fiscal 2012 and its summary financial results for fiscal years 2011 and 2010. The company said that will be immaterial to the company’s current and future financials.

The United States Securities and Exchange Commission (SEC) has ordered F-Squared Investments Inc. the largest U.S. exchange traded funds (ETF) strategist to pay $35 million to settle charges it made false claims about the performance of its flagship investment product.
The SEC had charged F-Squared with touting a seven-year track record in its AlphaSector strategy that was not based on strategies connected to real money, as well as with using faulty calculations to inflate results. F-Squared reported $25 billion in ETF-managed-portfolio assets as of September, according to Morningstar Inc. AlphaSector grew to become one of the most popular  ETF strategies with portfolio managers, who used the funds as building blocks and often promoted them as mitigating the risks of a stock market rout after the 2008 financial crisis.

F-Squared, which also manages a suite of five mutual funds for Virtus Investment Partners Inc., agreed to retain for an additional nine months a compliance consultant hired earlier this year. Virtus (VRTS) shares rose 1.57% in afternoon trading Monday.


The Securities and Exchange Commission is seeking to sanction insurance agents for luring dozens of elderly investors into an investment scheme which promised safe returns but spent their moneys on mortgage payments for the insurance company owner and insurance commissions. The SEC said three of the agents raised approximately $1.5 million for Snisky, promising the investors their money was being invested in safe government-backed bonds. The agents — Kenneth C. Meissner of Fair Oaks Branch, Tex., James Doug Scott of Perkasie, Penn., and Mark S. Tomich of Belmont, Mich. — were paid a total of $90,000 in commissions.
The insurance company called Arete LLC and its owner  Gary Snisky, allegedly targeted elderly annuity holders, the  U.S. Securities and Exchange Commission said.

The fraudulent scheme raised $4.3 million from more than 40 investors in eight states.. Snisky allegedly used much of the money to pay his mortgage and cover the agents’ commissions, the SEC said when it filed charges against him in November.

The SEC said three of the agents raised approximately $1.5 million for Snisky, promising the investors their money was being invested in safe government-backed bonds. The agents — Kenneth C. Meissner of Fair Oaks Branch, Tex., James Doug Scott of Perkasie, Penn., and Mark S. Tomich of Belmont, Mich. — were paid a total of $90,000 in commissions.

Jeffrey Newman represents whistleblowers


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Yesterday, the Securities and Exchange Commission announced its largest award to date to w foreign whistleblower who revealed an ongoing financial fraud which “would have been very difficult to detect,” according to Andrew Ceresney Director of the SEC’s enforcement division.

This came just a week after Attorney General Eric Holder said he wanted to boost payouts to motivate whistleblowers to submit information about financial wrongdoing.

The difference between the SEC program and other whistleblower programs is that the tipster can retain their anonymity and file through their counsel without fear of disclosure. The False Claims Act doesn’t allow for this. It is thought that this will allow whistleblowers to retain their positions within companies violating laws by committing fraud on investors.

Attorney General Eric Holder on Wednesday called on the government to increase rewards for those who blow the whistle on financial crimes, arguing that greater incentives are needed to induce people to come forward with insider information.

 Holder said this week that the maximum payout—$1.6 million—for tips under Financial Institutions Reform, Recovery, and Enforcement Act is a “paltry sum in an industry in which, last year, the collective bonus pool rose above $26 billion, and median executive pay was $15 million and rising.”

In this unique environment, what would—by any normal standard—be considered a windfall of $1.6 million is unlikely to induce an employee to risk his or her lucrative career in the financial sector, he explained

AgFeed, a Tennessee based hog production company, which was based in China, will pay $18 million to settle a Securities and Exhange Commission investigation which alleged that it reported false revenues to boost its stock price the SEC has announced. According to the agency, AgFeed inflated the revenue by $239 million by creating false invoices for the sale of feed and sales of hogs that didn’t actually exist

The case against AgFeed is among more than 20 the SEC has filed against U.S.-traded Chinese companies and their officials over alleged accounting fraud and other issues. Over the past few years, regulators, auditors and investors have raised questions about more than 170 U.S.-traded Chinese companies about their accounting and disclosure practices.

The $18 million settlement will be distributed to victims of the company’s fraud, the SEC said. The settlement is subject to approval by both the Tennessee court where the SEC’s lawsuit was filed and the Delaware court overseeing AgFeed’s bankruptcy.

The Securities and Exchange Commission has issued its first whistleblower award of $300,000 to a compliance auditor for a company. The whistleblower reported financial wrongdoing to the SEC after the company failed to take action after the employee reported it internally.

The Securities and Exchange Commission announced Friday that is has awarded its first whistleblower award to an employee who performed audit and compliance functions.

The employee, who was awarded more than $300,000, reported wrongdoing to the SEC after the company failed to take action when the employee reported it internally.

 The Securities and Exchange Commission today announced a whistleblower award of more than $875,000 to be split evenly between two individuals who provided tips and assistance to help the agency bring an enforcement action.


The SEC’s whistleblower program authorized by the Dodd-Frank Act rewards high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1 million.  Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case. Continue reading

When the Securities and Exchange Commission announced the highest award to date for an S.E.C. whistleblower, 14 million and when the agency refused to reveal his or her name as part of it’s unique secrecy doctrine, the field of play concerning financial fraud was altered immediately. Prior to this award the amounts rendered to whistleblowers were so small it was ridiculous. $50,000 was the top award in August 2012.

Now, individuals working in hedge funds, banks, equity houses, bond trading operations and publicly traded companies know they can reveal large fraud and still retain their positions, not revealing their identities except to their lawyers. That is a big change.

In addition, the awards are expected to increase based on the amounts of fraud detected and the penalties assessed. Whistleblowers can yield up to 30% of the government recovery.