Articles Posted in Securities and Exchange Commission

The Securities and Exchange Commission is expanding the pool of public companies being examined about their compliance with U.S. sanctions against IRan and many other nations on our blacklist of individuals and entities grows. It is increasing its comment letters to companies and requesting more information related to dealings in countries targeted by U.S. sanctions. According to the Wall Street Journal over 42 companies received letters from the SEC regarding activity in areas subject to sanctions enforced by the Treasury Department’s Office of Foreign Assets Control.

T SEC has sent letters to companies such as  PayPalHoldings Inc., Bank of New York Mellon Corp. and Chinese travel-services provider Ctrip.comLtd. with sanctions-related questions. 1,500 individuals or entities were added to the U.S. sanctions list

 

 

A former Walt Disney Co. accountant says she has filed a series of whistleblower tips with the Securities and Exchange Commission alleging the company has materially overstated revenue for years. Sandra Kuba,  a senior financial accountant analyst in Disney’s evenue-operations department who worked for the company for 18 years and says employees working in the parks-and-resorts business segment systematically overstated revenue by billions of dollars by exploiting weaknesses in the company’s accounting software. Ms Kuba says she has met with officials from the SEC on several occasions to discuss the allegations.

The whistleblower filings were reviewed by MarketWatch which reported that they state several ways employees allegedly boosted revenue, including recording fictitious revenue for complimentary golf rounds or for free guest promotions. Another alleged action Kuba described in her SEC filing involved recording revenue for $500 gift cards at their face value even when guests paid a discounted rate of $395.

The Securities and Exchange Commission charged TherapeuticsMD Inc., a pharmaceutical company, with violations for sharing of material, nonpublic information with sell-side research analysts without also disclosing the same information to the public. The SEC’s order says that on two separate occasions in 2017, TherapeuticsMD selectively shared material information with analysts about the company’s interactions with the U.S. Food and Drug Administration (FDA).  As detailed in the SEC’s order, on June 15, 2017, one day after a publicly-announced meeting with the FDA about a new drug approval, TherapeuticsMD sent private messages to sell-side analysts describing the meeting as “very positive and productive.”  TherapeuticsMD’s stock price closed up 19.4 percent on heavy trading volume the next day.  At that time, the company had not issued a press release or made any other market-wide disclosure about the meeting. The whistleblower is represented by Edward Scarvalone of Willens & Scarvalone in New York.

According to the SEC’s order, early in the morning of July 17, 2017, TherapeuticsMD issued a press release announcing that it had submitted additional information to the FDA, but did not yet have a clear path forward regarding its New Drug Application.  TherapeuticsMD’s stock price declined approximately 16 percent in pre-market trading following the issuance of the press release.  The SEC’s order finds that in a call and email to sell-side analysts after the press release was issued but before the market opened, the company selectively shared previously undisclosed details about the June FDA meeting and the information it had subsequently submitted to the FDA.  According to the SEC’s order, all of the analysts published research notes containing these details, and the stock rebounded to close down only 6.6 percent for the day.  The SEC’s order found that at the time of these selective disclosures, TherapeuticsMD did not have policies or procedures regarding compliance with Regulation FD.

“Information about a pharmaceutical company’s interactions with the FDA can be critical to investors.  It is essential that when companies disseminate material, nonpublic information, they do so fairly and appropriately to all investors and not just a select few analysts,” said Carolyn M. Welshhans, Associate Director of the SEC’s Division of Enforcement.

The Securities and Exchange Commission today announced that broker Cantor Fitzgerald & Co. will pay more than $647,000 and broker BMO Capital Markets Corporation will pay over $3.9 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs). With today’s actions, the SEC has charged 13 financial institutions in its ongoing investigation into abusive ADR pre-release practices, which, thus far, has included monetary settlements exceeding $427 million.

ADRs – U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided brokers receiving the ADRs have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADRs represent.

According to the SEC’s orders, both Cantor Fitzgerald and BMO Capital obtained pre-released ADRs when they should have known that the pre-release transactions were not backed by foreign shares. The SEC orders find that both brokers improperly obtained pre-released ADRs indirectly from other broker-dealers, and the order as to Cantor Fitzgerald finds that the firm also improperly obtained pre-released ADRs directly from depositary banks.

 The Securities and Exchange Commission settled charges against a Brighton Massachusetts based blockchain company SimplyVital Health, Inc. for offering and selling approximately $6.3 million of securities to the public in unregistered transactions.

According to the SEC Cease and Desist Order Simply Vital in late 2017, SimplyVital Health, Inc. publicly announced its plan to conduct a token sale-an “Initial Coin Offering” or “ICO”-to raise money to further its development of Health Nexus, a “healthcare-related blockchain ecosystem.” SimplyVital offered a new token called Health Cash, or HLTH, which, it stated, would be used as currency in the Health Nexus. SimplyVital concurrently announced that it would conduct a “pre-sale” of its HLTH tokens, in which it offered investors Simple Agreements for Future Tokens, or SAFTs, under which it sold HLTH tokens that would not be delivered to investors unless and until created by SimplyVital. The order finds that SimplyVital did not file a registration statement with the Commission or qualify for an exemption from registration before offering and selling HLTH to the public through the SAFTs.

According to the SEC’s order, SimplyVital raised approximately $6.3 million from its unregistered sale of securities in between September 2017 and April 2018. After concluding its pre-sale in April 2018, SimplyVital ultimately decided not to offer and sell HLTH during its scheduled ICO. In 2019, SimplyVital voluntarily returned to investors substantially all of the funds raised during its pre-sale. Simply Vital is a new kind of healthcare company which seeks to enhance patient well being through better communication of patient information. Its platform is a bit complicated, so for more information read the following White Paper: Health-Nexus-White-Paper-232x300

The Securities and Exchange Commission today charged 1 Global Capital LLC’s former chief financial officer, Alan G. Heide, with defrauding retail investors. The now bankrupt Florida-based cash advance company allegedly fraudulently raised more than $322 million from 3,600 investors between 2014 and last year. The SEC previously charged 1 Global and former CEO Carl Ruderman with fraud and charged Henry J. “Trae” Wieniewitz, III for his allegedly unlawful sales of 1 Global securities. Ruderman and Wieniewitz have consented to final judgments.

The SEC  complaint said that although 1 Global promised investors profits from its short-term cash advances to businesses, the company used substantial investor funds for other purposes, including paying operating expenses and funding Ruderman’s lavish lifestyle. The SEC alleges that Heide, a certified public accountant, regularly signed investors’ monthly account statements that he knew overstated the value of their accounts and falsely represented that 1 Global had an independent auditor that had endorsed the company’s method of calculating investor returns.

“Heide’s misrepresentations gave false comfort to investors, allowing them to be duped to invest in 1 Global’s securities,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We allege that as 1 Global’s CFO, Heide played a significant role in 1 Global’s fraud by overstating the value of investors’ accounts and their rates of return and falsely representing the role of an auditor.”

Jurors in Atlanta federal court returned a verdict finding a securities broker Raymond J. Pirrello, Jr. liable for insider trading in advance of three merger and acquisition transactions.

The SEC’s evidence at trial revealed that Pirrello received highly confidential nonpublic information about the impending acquisitions of Radiant Systems Inc., Midas Incorporated Inc., and BrightPoint Inc. from Thomas W. Avent, Jr., who performed tax work on each transaction as a partner at an international accounting firm. Pirrello, in turn, tipped his former colleague and long-time friend Lawrence J. Penna, Jr., who traded in the securities of each of the three companies. According to evidence presented during the trial, Penna and his family made at least $107,922 in illicit trading profits, and shared at least $21,500 of these profits with Pirrello.

The jury found Pirrello liable on all counts, finding that he violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder.

Securities violations by financial services company. Financial services settlement with SEC

 Wedbush Securities Inc. will pay more than $8.1 million to settle charges for improper handling of “pre-released” American Depositary Receipts (ADRs). This is the SEC’s 11th action against a bank or broker resulting from the SEC’s ongoing investigation into abusive ADR pre-release practices, which, thus far, has resulted in monetary settlements exceeding $422 million.

ADRs– U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADRs represent.

IMG_0201-300x200The Regulation Best Interest is a new rule proposed by the SEC which requires stockbrokers to disclose any conflicts of interest via a “new relationship summary” form. This regulation also bans any contests between brokers and dealers that offer sales-based rewards.

This rule was proposed by the SEC over a year ago and was finally approved in a 3 to 1 vote earlier this month. Initially, this regulation was opposed by investor advocates who stated that broker innovation and drive may be stifled by the confinement. However, supporters from the broker and dealer side expect the regulation to improve the current process and standards of the industry.

SEC Chairman, Jay Clayton, stated that previous regulations for this industry were not strict enough to protect investors. He also noted that the new rule should not affect innovation in this space. “You do a good job managing money, you should get paid,”, he explained.

AdobeStock_64352337-300x200In an emergency court order, the Securities and Exchange Commission (SEC) announced that they will be freezing all assets in relation to an alleged insider trading case. This case involved the oil-and-gas conglomerate Chevron Corporation and their intentions to acquire Anadarko Petroleum Corporation, which was reported to yield roughly $2.5 million in profits.

Chevron is a multinational energy corporation based in the United States. They announced that they intended to invest in outstanding shares of Anadarko, which is also based in the U.S. and sells petroleum. While the buying of shares warrants no action on its own, Chevron intended to acquire them for $65 per share in cash and stock. This type of investment would represent a 38 percent premium over Anadarko’s closing price pre-announcement.

The SEC complaint filed in the U.S. District Court for the Southern District of New York identified a series of transitions that could be considered suspicious. Days before the announcement, unknown traders allegedly used foreign brokerage accounts in the United Kingdom and Cyprus to purchase out-of-the-money call options through U.S. based brokerage firms and on U.S. based exchanges. After the announcement, Anadarko shares rose in price significantly. Brokerage account customers benefited greatly by either utilizing their right to gain large positions of Anadarko stock at a discount or selling many of the option contracts for profit.