Friday, March 6, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Suspends Trading in 128 Dormant Shell Companies to Put Them Out of Reach of Microcap Fraudsters
March 2, 2015 (Litigation Release No. 44)
The SEC has announced the suspension of trading in 128 inactive penny stock companies in order to avoid pump-and-dump schemes from microcap fraudsters. The SEC uses Operation Shell-Expel, a microcap fraud-fighting initiative which began in 2012, to search the over-the-counter marketplace in order to prevent microcap fraudsters from manipulating thinly-traded stocks. Operation Shell-Expel has resulted in trading suspension greater than 800 microcap stocks.

Former Company Officer Earns Half-Million Dollar Whistleblower Award for Reporting Fraud Case to SEC
March 2, 2015 (Litigation Release No. 45)
The SEC announced a whistleblower payout to a former company officer for reporting securities fraud that led to an SEC enforcement action which sanctioned more than $1 million. The whistleblower award amounted around $475,000 to $575,000. This was the first whistleblower payout paid to an officer under the circumstances that the information was reported to the SEC after other responsible compliance personal, who possessed the information, failed to address the issue. Information about the whistleblower program and reporting can be found at www.sec.gov/whistleblower.

SEC Charges Texas-Based Brokerage Firm With Violating Supervisory and Customer Protection Rules
March 4, 2015 (Litigation Release No. 46)
H.D. Vest Investment Securities was charged by the SEC for violating key customer protection rules. H.D. Vest failed to have standard rules and procedures in order to supervise registered representatives’ outside business activities which resulted in the representatives misappropriating customer funds by transferring or depositing customer brokerage funds into their outside business accounts. Investment Securities settled the SEC’s charges by paying a $225,000 penalty and to have an independent compliance consultant to improve its supervisory roles.


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