Saturday, September 5, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Halts Ongoing Fraud in Minnesota
September 2, 2015 (Litigation Release No. 176)
James M. Louks and FiberPop Solutions Inc. are being charged with fraud and are being ordered to stop raising money from investors. Fiberpop was founded in 2003 as a builder and operator of fiber optic networks and data centers. The SEC alleges that although almost 100 investors were convinced to purchase notes to fund the company’s business, Fiberpop has no operators or employees. Louks and Fiberpop have agreed to comply with the SEC’s order.

SEC Charges Advisory Firm With Fraud for Improperly Retaining Fees
September 2, 2015 (Litigation Release No. 177)
Philadelphia investment advisory firm Taberna Capital Management have agreed to settle charges with the SEC by paying over $21 million. Taberna was found to be retaining fees from collateralized debt obligation (CDO) clients that were not disclosed or allowed by CDO documents. The fees were charged for restructuring transactions, causing a conflict of interest as Taberna had an incentive to guide clients to restructure. Taberna labeled these exchange fees as “third party cost incurred” in order to disguise them and, from 2009 to 2012, retained millions in exchange fees.

SEC Charges Seattle-Area Hedge Fund Adviser With Taking Unearned Management Fees
September 4, 2015 (Litigation Release No. 178)
Chris Yoo and his investment advisory firms Summit Asset Strategies Investment Management and Summit Asset Strategies Wealth Management have agreed to settle fraud charges for a combined $1.3 million. According to the SEC, Yoo and Summit Asset Strategies Investment Management manipulated the assets of the Summit Stable Value Fund so that nearly $900,000 of purported fees could be withdrawn. It is also alleged that Yoo and Summit Asset Strategies Wealth Management did not disclose significant fees they withdrew for referring clients to invest in Summit Stable Value Fund. Summit Stable Value Fund’s external auditors, Raymon Holmdahl and Kanako Matsumoto, were found to have inadequately performed their duties, allowing the fraud to continue, and have agreed to settle their charges by being barred for three years from serving as accountants for any entity regulated by the SEC.


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