SEC Publicizes 2013 Whistleblower Results

On November 15, 2013, the SEC publicized its 2013 Annual Report on the Dodd-Frank Whistleblower Program.  Although the Whistleblower Program is only in its third year, the SEC trumpeted its results as “historic.”  During Fiscal Year 2013, the program paid just over $14,800,000 in awards.  One whistleblower alone received in excess of $14 million for providing information that allowed the SEC to bring an enforcement action in less than six months and recover a significant amount of money for investors.  Since its inception, the Whistleblower Office has granted awards to six whistleblowers, four of whom received awards in FY2013.

The SEC noted that in FY 2013, it received a total of 3,238 tips, a slight increase from the 3,001 tips received in FY 2012.  Among the tips received, 17.2% were related to corporate disclosures and financials, 17.1% were related to offering fraud, and 16.2% were related to market manipulation.  The tips came in from all 50 states but the majority came from California, Texas, Florida and New York.

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CFTC Settles with MF Global for $1.2 Billion

CFTC v. MF Global, Inc.  et al., Case No. 1:11-cv-07866-VM (S.D.N.Y.).  On November 18, 2013, the CFTC announced a settlement with MF Global Inc. (“MF Global”) requiring it to pay $1.212 billion in restitution to customers and a $100 million civil monetary penalty.  The CFTC charged MF Global and other Defendants in June 2013 with the unlawful use of customer funds.  To settle, MF Global admitted to certain allegations related to its liability.  The CFTC’s litigation continues against the other defendants.  Continue reading

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SEC Charges Mark Megalli with Insider Trading

SEC v. Mark Megalli, (N.D. Ga.).  On November 14, 2013, the SEC announced it filed insider trading charges against Mark Megalli for trading on nonpublic information about clothing company Carter’s Inc.  According to the SEC, Megalli got inside information through a consulting agreement with Eric Martin who had worked at Carter’s but left to start a consulting firm.  Martin got confidential information from a contact at the company.  Continue reading

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SEC Enters into Deferred Prosecution Agreement with Scott Herckis

On November 12, 2013, the SEC announced that it entered into its first deferred prosecution agreement (“DPA”) with an individual.  DPAs are intended to encourage cooperation with the SEC as it investigates wrongdoing.  In return for such cooperation, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings.  Continue reading

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President Obama Nominates Treasury Department Official Timothy Massad to Head the CFTC

On November 12, President Obama announced the nomination of Timothy Massad to replace Gary Gensler as chairman of the CFTC.

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SEC Charges Subsidiary of the Royal Bank of Scotland with Fraud in Connection with Mortgage-Backed Security Offering

SEC v. RBS Securities, Inc., Case No. 3:13-cv-01643 (D. Conn.).  On November 7, 2013, the SEC announced it filed settled fraud charges against RBS Securities Inc., a subsidiary of the Royal Bank of Scotland plc, in connection with a subprime residential mortgage-backed security (“RMBS”) offering.  According to the SEC, RBS claimed that the loans backing the offering “generally” met the lender’s underwriting guidelines.  In reality, almost one-third of the loans did not come close to meeting the guidelines and RBS should not have included them in the offering.  Continue reading

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CFTC Obtains Restraining Order Against Commodity Pool Operator and Trading Advisor AlphaMetrix

CFTC v. AlphaMetrix, LLC, Case No. 1:13-cv-7896 (N.D. Ill.)  On November 6, 2013, the CFTC announced charges against AlphaMetrix, LLC (“AlphaMetrix”), a Commodity Pool Operator and Commodity Trading Advisor.  The CFTC alleges that AlphaMetrix misappropriated funds belonging to commodity pools it operated and sent false or misleading account statements to pool participants.  According to the CFTC, AlphaMetrix operates nearly 100 commodity pools with around $700 million in assets under management.  Continue reading

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SEC Charges Audit Firm Sherb & Co. LLP and Four of its Auditors for Audit Failures of China-based Companies

In the Matter of Sherb & Co., LLP, et al., Admin Proc. No. 3-15609.  On November 6, 2013, the SEC announced the filing of a settled administrative proceeding against Sherb & Co. LLP, and four of its auditors, Steven J. Sherb, Christopher A. Valleau, Mark Mycio, and Steven N. Epstein.  The charges stem from their involvement in the failed audits of three China-based companies publicly traded in the U.S., including China Sky One Medical Inc., which the SEC charged with fraud.  According to the SEC’s order instituting settled administrative proceedings (“OIP”), the flawed audits involved China Sky One Medical, China Education Alliance Inc., and Wowjoint Holdings Ltd.  Sherb, Valleau, Mycio, and Epstein were all involved in audits that they failed to properly plan and execute the audits.  Continue reading

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SEC Files Subpoena Enforcement Action against Anthony Coronati

SEC v. Anthony Coronati, Case No. 1:13-mc-00372-P1.  On November 5, 2013, the SEC announced it filed a subpoena enforcement action against Anthony Coronati and obtained an order directing Coronati to show cause why he should not be ordered to comply with the SEC’s subpoenas.  The SEC is investigating whether Coronati and others have violated or are violating registration, anti-fraud, or other provisions of the federal securities laws in connection with a business known as Continue reading

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SEC Charges Municipal Issuer and the Underwriter and Outside Developer in Connection with a Bond Offering that Financed the Construction of a Regional Events Center and Ice Hockey Arena

In the Matter of the Greater Wenatchee Regional Events Center Public Facilities District, et al., Admin Proc. No. 3-156602; In the Matter of  Piper Jaffray & Co. and Jane Towery, Admin Proc. No. 3-15603.  On November 5, 2013, the SEC announced charges against a municipal issuer in the state of Washington’s for misleading investors in a bond offering that financed the construction of a regional events center and ice hockey arena.  The SEC also charged the underwriter and outside developer of the project and three individuals involved in the offering. Continue reading

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