Friday, August 14, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

Guggenheim Partners Investment Management LLC Settles Charges it Failed to Disclose Conflict to Clients
August 10, 2015 (Litigation Release No. 162)
The SEC has announced that charges against Guggenheim Partners Investment Management LLC have been settled for $20 million. The charges were over a breach of fiduciary duty in which Guggenheim failed to disclose a $50 million loan that an advisory client had given to a senior Guggenheim executive. The SEC order found that, although several senior Guggenheim officials knew of the loan, Guggenheim’s compliance staff was never informed.

SEC Charges 32 Defendants in Scheme to Trade on Hacked News Releases
August 11, 2015 (Litigation Release No. 163)
The SEC has announced fraud charges against Ukrainian hackers Ivan Turchynov and Oleksandr Ieremenko, and 30 other conspirators for their involvement in an international scheme to reap profits from stolen, non-public corporate earnings announcements taken from newswire services. The SEC alleges that Turchynov and Ieremenko hacked into multiple newswire services and distributed the stolen information to traders in Russia, Cyprus, Ukraine, Malta, France and the United States. Over the course of five years, the scheme is alleged to have generated over $100 million. Criminal charges are being pursued against several conspirators from the U.S. and Ukraine.

SEC Charges ITG With Operating Secret Trading Desk and Misusing Dark Pool Subscriber Trading Information
August 12, 2015 (Litigation Release No. 164)
The SEC has settled charges against ITG Inc. for secretly operating a proprietary trading desk and misusing confidential trading data of their dark pool subscribers. In spite of marketing themselves as an “agency-only” broker, ITG ran an undisclosed trading desk, Project Omega, for over a year. ITG also used confidential trade data of its dark pool subscribers in order to make high-frequency algorithmic trades, some of which were against subscribers in ITG’s own dark pool. The settlement totals $20.3 million, including disgorgement, prejudgment interest, and an $18 million penalty.

SEC Charges Former Software Executive With FCPA Violations
August 12, 2015 (Litigation Release No. 165)
The SEC has announced that former executive Vicente E. Garcia has agreed to settle charges that he violated the Foreign Corrupt Practices Act with a $92,395 settlement. The SEC alleges that Garcia, who was VP of global and strategic accounts for SAP SE, bribed Panamanian government officials in a scheme that went from 2009 to 2013. SAP primarily sold their software through various corporate partners. Garcia arranged for SAP to sell software to their Panamanian partner at heavy discounts for the purpose of securing contracts with the Panamanian government. Those discounts were actually used to create a slush fund used to bribe government officials and give kickbacks to Garcia.

Edward Jones to Pay $20 Million for Overcharging Retail Customers in Municipal Bond Underwritings
August 13, 2015 (Litigation Release No. 166)
The SEC has announced a settlement of fraud charges against brokerage firm Edward Jones and the former head of their municipal underwriting desk Stina R. Wishman. The SEC’s investigation found that, instead of offering newly issued municipal bonds at their offering price, Edward Jones took them into their inventory and sold them to investors at higher prices, sometimes waiting until after secondary market trading had begun. Edward Jones’ customers are estimated to have paid $4.6 million more than they should have. Edward Jones has agreed to settle charges by paying $20 million and Wishman will pay $15,000 and will be barred from working in the securities industry for two years.

Three Maryland Men Settle Charges They Defrauded Investors in Real Estate Investment Company
August 13, 2015 (Litigation Release No. 167)
The SEC has announced an agreement to settle charges with three Maryland men that defrauded investors in real estate company Signator Investors Inc. The SEC alleges that James R. Glover encouraged friends, family, and churchgoers to become his clients at Signator and invest in Colonial Tidewater Realty Income Partners, which he co-managed with Sherman T. Hill. Glover and Hill are alleged to have misled investors about Colonial Tidewaters’ value and financial condition as well as the liquidity of their investments and expected returns. Also, Glover and his business partner at Signator Cory D. Williams failed to inform clients of commissions they received from Colonial Tidewater, a clear conflict of interest. Signator and Gregory J. Mitchell, supervisor of Signator’s Maryland office, are named in another order for failing to identify and prevent Glover and Williams’ fraud.


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