Friday, May 1, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Announces Award to Whistleblower in First Retaliation Case
April 28, 2015 (Litigation Release No. 75)
The SEC has announced that the whistleblower connected with the SEC’s first retaliation case will receive the maximum allowed award of 30% of amounts collected in relation to the case (~$600,000). Paradigm Capital Management was charged by the SEC for retaliating against said whistleblower once it was discovered they had reported potential conduct to the SEC.

SEC Charges Santa Barbara-Based Hedge Fund Firm, Executives, and Auditor for Improper Expense Allocations
April 29, 2015 (Litigation Release No. 76)
The SEC has charged Alpha Titans LLC (a hedge fud advisory firm), its principal Timothy McCormack and general counsel Kelly Kaeser for allegedly using its clients’ fees to pay for undisclosed operating expenses. Over $450,000 was used to pay office rent, employee salaries and benefit, and similar expenses without approval or complete disclosure from the fund clients. The firm’s outside auditor, Simon Lesser, was also charged for conducting the audit of misleading financial statements. The SEC charges were settled with Alpha Titans and McCormack paying disgorgement of $469,522, prejudgment interest of $28,928 and a penalty of $200,000. McCormack and Kaeser will each be barred from the securities industry for one year and Kaeser will be suspended from practicing as an attorney for an SEC-regulated entity, also for one year. Also, Lesser agreed to pay a penalty of $75,000 and will be suspended from practicing as an accountant on behalf of any entity regulated by the SEC for at least three years.

SEC Proposes Cross-Border Security-Based Swap Rules Regarding Activity in the U.S.
April 29, 2015 (Litigation Release No. 77)
The SEC has proposed cross-border security-based swap rules regarding activity in the U.S. The proposed rules would ensure that both U.S. and non-U.S. dealers fit under certain regulations and requirements in efforts to provide the SEC enhanced oversight and transparency. This means that the proposal would require a non-U.S. company to include any dealing transactions that it arranges, negotiates or executes using its personnel or personnel of its agent located in the United States in order to determine whether it must register with the SEC. Specified transactions would be subjected to external business conduct standards and also be subject to Regulation SBSR reporting requirements. Comments on the proposal will close in 60 days after their publication in the Federal Register. Click here to view the proposed rule.

SEC Proposes Rules to Require Companies to Disclose the Relationship Between Executive Pay and a Company’s Financial Performance
April 29, 2015 (Litigation Release No. 78)
The SEC has proposed rules to require companies to disclose the relationship between executive compensation and the finance performance of a company in order to help shareholders gauge their executives’ pay against performance. The rules would require large and mid-sized companies to provide the disclosures for the past five fiscal years, and smaller companies to offer three fiscal years’ worth of data. Comments on the proposal will close in 60 days after their publication in the Federal Register. Click here to view the proposed rule.

SEC Announces Compliance Outreach Program Seminars for Investment Adviser and Investment Company Senior Officers
April 30, 2015 (Litigation Release No. 79)
The SEC has announced the schedule for Compliance Outreach Program. The regional seminars are specifically for investment adviser and investment company senior officers. The regional seminars will be sponsored in six cities (Miami, New York, Chicago, Denver, Philadelphia and Los Angeles) later this year (from June to September). The seminars will include an overview of the SEC’s National Exam Program, as well as a discussion of current topics of interest for the Division of Investment Management, and the Enforcement Division’s Asset Management Unit. Click here for a link to the SEC’s release which include the dates, location, description and registration link for each seminar. For more information contact: ComplianceOutreach@sec.gov


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