SEC Action

SEC Focuses on BSA AML Enforcement, Utah’s Alpine Securities Charged with Systematic Violations

July 21, 2017 | Herskovits, PLLC

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The U.S. Securities and Exchange Commission appears to be increasing its scrutiny of broker-dealers who fail to comply with the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) reporting requirements.

Traditionally this type of violations remained off the SEC’s radar, being usually pursued by the DOJ, FinCEN, the IRS, and other federal agencies. After SEC’s former enforcement director said in a statement that the SEC must “pursue stand-alone BSA violations to send a clear message about the need for compliance,” the Commission has, on more than one occasion, charged broker-dealers with failing to file Suspicious Activity Reports.

In line with this trend, the SEC has just filed suit against Salt Lake City broker-dealer Alpine Securities over its failure to report transactions it had flagged as suspicious.

Barclays Reaches $97 Million Settlement with SEC

June 2, 2017 | Herskovits, PLLC

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Barclays Capital has reached a $97 million settlement with the Securities and Exchange Commission to resolve allegations that its Wealth and Investment Management Americas (WIMA) unit overcharged clients by $50 million between 2010 and 2015.

The SEC’s investigation determined that Barclays Capital, which sold its WIMA unit in 2015, incurred violations of multiple sections of the Advisers Act, the Exchange Act, and the Securities Act.

The $97 million penalty to be paid by Barclays includes fines in the amount of $30 million fine and $63.8 million in disgorgement and interest. Another $3.5 million will serve to refund specific clients with underperforming accounts.

AML Regulators Target Capital One’s Check Cashing Businesses

May 12, 2017 | Herskovits, PLLC

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Check cashing businesses are a major focus of anti-money laundering rules and regulations. Investors recently learned that federal and New York prosecutors are currently investigating Capital One Financial Corp.’s anti-money laundering program and “certain check casher clients” from the financial institution’s annual report – offering the perfect opportunity to review the regulatory expectations for check cashing businesses.

Regulators Scrutinize Capital One’s Anti-Money Laundering Program Compliance

Capital One’s annual report released February 23 stated that the U.S. Department of Justice, U.S. Treasury Department’s Financial Crimes Enforcement Network and the Manhattan District Attorney’s office are currently investigating “certain check casher clients” from its commercial banking business and looking into the internal safeguards of its anti-money laundering (AML) program.

SEC Loses in Its Own Court – Charges Dismissed in Radiant Systems Insider Trading Case

April 27, 2017 | Herskovits, PLLC

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The SEC is not used to losing a case in-house, but that is precisely what happened on April 18th, when Judge James Grimes dismissed the insider trading allegations against Charles L. Hill of Atlanta. Hill had made a sizable profit by buying shares of Radiant Systems Inc. right before an acquisition by NCR Corp, and selling them right after the deal was announced.

There has been much criticism of the SEC´s administrative proceedings. Critics believe they are not fair to defendants because there are no juries, the number of depositions is limited, and judges are, after all, on the SEC´s payroll. Considering how rare it is for defendants to win a case against the SEC in-house, Hill´s victory may also be seen as a victory for critics of this practice.

Hill had been litigating for over a year to avoid being pursued through an in-house administrative proceeding, but an Atlanta appeals court had allowed the SEC to move forward with its plan.

Between the Forgotten Investor and CEO Pay Ratio Disclosures – Piwowar’s Vision for the SEC

April 12, 2017 | Herskovits, PLLC

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During the “SEC Speaks” Conference 2017, Acting U.S. Securities and Exchange Commission Chair Michael Piwowar amply discussed the plight of the “forgotten investor.” Citing the work of sociologist William Graham Sumner, who spoke of The Forgotten Man, “the victim of the reformer, social speculator, and philanthropist,” Piwowar questioned disclosure requirements, high corporate penalties and accreditation rules, which, he believes, have had a negative impact on lower-income investors.

“Imagine,” Piwowar said in his speech, “that we lived in a utopian world in which perfect disclosure of all material information about every company simply existed as a natural feature of the market landscape. Securities markets would be perfectly efficient… Investors would have just what they need… to make perfectly informed investment decisions.”

The Acting SEC Chair focused on the problems of disclosure, stating that the “forgotten investor” seldom has all the relevant information in hand in order to make those decisions. He compared lower-income investors to Graham Sumner’s “Forgotten Man,” who “works, he votes… he always pays… All the burdens fall on him, or on her.”

SunTrust Might Face SEC Enforcement Actions Over Alleged Self-Serving Investment Recommendations

March 13, 2017 | Herskovits, PLLC

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The U.S. Securities and Exchange Commission is considering whether it will bring enforcement actions against Atlanta’s $205 billion-asset SunTrust Banks. SunTrust Investment Services, the bank’s broker-dealer arm, allegedly purchased pricey mutual funds on behalf of customers when more affordable alternatives were readily available.

The SEC has made a “preliminary determination to recommend that the SEC bring an enforcement action against [SunTrust].” If these were to materialize, the financial institution could face hefty penalties and extensive losses in connection with its investment business.

Additionally, its fast-track privileges for the issuing of securities might be revoked for three years.

Mexico in Crosshairs Of Precedent Setting 2016 FCPA Enforcement Actions

February 6, 2017 | Herskovits, PLLC

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It may come as no surprise that doing business in China holds a high risk of Foreign Corrupt Practices Act (FCPA) violations. However, the record-setting numbers of FCPA enforcement actions seen in 2016 placed Mexico in a close second.

With increases in multi-jurisdictional anti-corruption enforcement, the FCPA Pilot Program and a number of new Mexican statutes signed into law, those doing business in Latin America may want to take note.

After six years of relatively consistent (and somewhat low) FCPA enforcement numbers, the Department of Justice (DOJ) and Securities Exchange Commission (SEC) have made 2016 a precedent setting year. A combined total of 53 actions – more than double those of the last four years – brought over $2 billion in U.S. corporate fines and billions more in fines by foreign regulators. While 22 of the of 53 FCPA enforcement actions prosecuted in 2016 involved FCPA violations in China, Mexico followed close behind with nearly 17% of the enforcement actions last year.

Avoiding Emerging Cybersecurity Whistleblower Pitfalls

November 15, 2016 | Herskovits, PLLC

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Securities law violations are a major focus of regulatory compliance programs across the industry. Yet not all organizations realize the threat cybersecurity breaches pose to company viability. A new breed of corporate whistleblower is cropping up among marketplace professionals – the cybersecurity whistleblower.

Compliance professionals and executives should familiarize themselves with potential violations and implement a functional internal reporting program before a trusted insider detects and chooses to report misconduct.

SEC Cybersecurity Whistleblowers Pose a Unique Threat

SEC Announces Record Enforcement Actions for FY2016

November 1, 2016 | Herskovits, PLLC

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On October 11, 2016, the U.S. Securities and Exchange Commission (SEC) released its fiscal year 2016 (FY2016) enforcement results, reporting collections totaling over $4 billion in disgorgement and penalties out of a record 868 enforcement actions against executives, companies and gatekeepers.

SEC enforcement proceedings for FY2016 focused largely on cybersecurity compliance, financial reporting deficiencies, insider trading, protecting investor accounts, market structure requirements, micro-cap fraud and municipal offering disclosure failures.

“By every measure the enforcement program continues to be a resounding success holding executives, companies and market participants accountable for their illegal actions,” said SEC Chair Mary Jo White in a statement. “Over the last three years, we have changed the way we do business on the enforcement front by using new data analytics to uncover fraud, enhancing our ability to litigate tough cases, and expanding the playbook bringing novel and significant actions to better protect investors and our markets.”

Andrew Ceresney: SEC Enforcement Expands Focus on Private Equity Broker-Dealer Activities

August 1, 2016 | Herskovits, PLLC

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Maryland private equity fund advisory firm, Blackstreet Capital Management, LLC, and its owner, Murry N. Gunty, have agreed to pay more than $3.1 million to resolve allegations they violated the Securities Exchange and Investment Advisors Acts, the U.S. Securities and Exchange Commission (SEC) announced Wednesday. The enforcement action arose out of SEC allegations that Blackstreet engaged in brokerage activity and charged fees without registering as a broker-dealer, among other alleged violations.

The SEC Asset Management Unit has now brought eight enforcement actions on cases involving private equity advisers. Though advisers may rely on brokers when conducting activities that previously required broker-dealer registration, the SEC has not backed down with respect to private equity funds and continues to enforce regulations surrounding unregistered broker-dealer activity.

SEC Alleges Non-Registered Blackstreet In-House Broker-Dealer Activity