Monday, January 26, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Announces Charges against Standard & Poor’s for Fraudulent Ratings Misconduct
January 21, 2015 (Litigation Release No. 10)
The rating agency Standard & Poor’s violated a series of federal securities laws, according to an SEC investigation. Standard & Poor’s Rating Services loosened its rating criteria on certain commercial mortgage-backed securities in order to attract business. Additionally, Standard & Poor’s misrepresented their rating criteria on commercial mortgage-backed securities with a false publication outlying their new conservative rating criteria. Standard & Poor’s has agreed to settle the SEC’s charges for $58 million, with an additional $19 million in related cases by the New York Attorney General’s office and the Massachusetts Attorney General’s office. Standard & Poor’s also agreed to stop rating commercial mortgage-backed securities for a year.

Investment Management Director Norm Champ to Leave SEC
January 21, 2015 (Litigation Release No. 11)
Norm Champ, Director of the Division of Investment Management, will leave the SEC this month to become a Visiting Scholar at Harvard Law School, where he also lectures a course on investment management law. Mr. Champ has spent five years in senior leadership positions at the SEC. Some of his highlights at the SEC include adopting money market mutual fund reforms, approving the first actively managed exchange traded product that is a hybrid of a mutual fund and an exchange traded fund, and adopting rules requiring asset managers to better protect against identity theft.

SEC Charges Investment Adviser and Manager in South Florida-Based Fraud
January 21, 2015 (Litigation Release No. 12)
The SEC filed a complaint against Elm Tree Investment Advisors LLC in Fort Lauderdale, its manager, Frederic Elm, and three related funds. The unregistered investment advisory firm appears to have been running a Ponzi scheme as Elm misled investors and used their money to purchase a personal home, luxury cars, and jewelry. The SEC was granted a temporary restraining order and a temporary asset freeze against the firm, Frederic Elm, and his wife, Amada Elm. A court hearing is set for January 29.

SEC Charges Former Executive at Tampa-Based Engineering Firm with FCPA Violations
January 22, 2015 (Litigation Release No. 13)
The SEC charged Walid Hatoum with violating the Foreign Corrupt Practices Act (FCPA). Hatoum offered to funnel nearly $1.4 million in bribes to a local company owned by a foreign official to secure government contracts for a hotel resort project in Morocco and a light rail project in Qatar. The SEC also announced a deferred prosecution agreement against Hatoum’s employer, PBSJ Corporation, which requires PBSJ to return all illicit profits with interest and a penalty of $375,000. PBSJ ignored multiple red flags, but once they discovered the scheme, the company self-reported the illegal activity and fully cooperated with the SEC.


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