Showing posts with label DISGORGEMENT. Show all posts
Showing posts with label DISGORGEMENT. Show all posts

Thursday, December 19, 2013

SEC ANNOUNCES ENFORCEMENT ACTION RESULTS FOR FISCAL 2013

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
The Securities and Exchange Commission today announced that the agency’s enforcement actions in fiscal year 2013 resulted in a record $3.4 billion in monetary sanctions ordered against wrongdoers.

The SEC filed 686 enforcement actions in the fiscal year that ended in September.  The $3.4 billion in disgorgement and penalties resulting from those actions is 10 percent higher than FY 2012 and 22 percent higher than FY 2011, when the SEC filed the most actions in agency history.

“A strong enforcement program helps produce financial markets that operate with integrity and transparency, and reassures investors that they can invest with confidence,” said Mary Jo White, Chair of the SEC.  “I am incredibly proud of the dedicated and talented women and men of the Enforcement Division.  Our results show that we are prepared to tackle the breadth and complexity of today’s securities markets.”

George S. Canellos, co-director of the SEC’s Division of Enforcement, said, “We are focused on addressing wrongdoing in all corners of the financial industry.  Going forward, we will continue to be aggressive but fair in our pursuit of those who violate the securities laws.”

Andrew J. Ceresney, co-director of the SEC’s Division of Enforcement, added, “Numbers tell only a part of the story as we look to bring high-quality enforcement actions that make an impact across the market.  We are proud of the terrific results achieved by our hardworking and committed staff and pleased with the strong and robust pipeline of investigations they’ve developed for the year ahead.”

SEC Enforcement in Fiscal Year 2013

Market Structure and Exchanges – The SEC brought several significant actions against stock exchanges and other market participants on issues relating to market structure and fair market access.  The SEC obtained its largest-ever penalty against an exchange when NASDAQ agreed to pay a $10 million penalty for its poor systems and decision-making during the Facebook IPO. FY 2013 also included the SEC’s first penalty against an exchange for violations relating to regulatory oversight when the agency charged the Chicago Board Options Exchange (CBOE) and an affiliate for various systemic breakdowns.

Gatekeepers – The SEC is focused on holding accountable accountants, attorneys, and others who have special duties to ensure that the interests of investors are safeguarded.  Among actions against auditors, the SEC charged the Chinese affiliates of major accounting firms for refusing to produce documents related to China-based companies being investigated.  And the SEC charged trustees and directors for failing to uphold their responsibilities under the securities laws.

Insider Trading – Continuing its pursuit of those who unlawfully trade on material, nonpublic information, the SEC filed multiple actions alleging wrongdoing at S.A.C. Capital Advisors and its affiliates, including an action against Steven Cohen for failing to supervise two senior employees and prevent them from insider trading under his watch.

Municipal Securities – The SEC increased its attention to securities violations by municipalities and other participants in the market for securities of cities and other governmental issuers.

Financial Crisis Enforcement Actions – With several more enforcement cases in FY 2013 against individuals and entities whose actions contributed to the financial crisis, the SEC has now filed enforcement actions against 169 individuals and entities arising from the financial crisis resulting in more than $3 billion in disgorgement, penalties, and other monetary relief for the benefit of harmed investors.  The individuals charged include 70 CEOs, CFOs, or other senior executives.


New Admissions Policy – The SEC changed its longstanding settlement policy and now requires admissions of misconduct in a discrete category of cases where heightened accountability and acceptance of responsibility by a defendant are appropriate and in the public interest.  The first settlements under the new policy came in actions against Philip A. Falcone and his firm Harbinger Capital Partners, and JPMorgan Chase & Co.

Going to Trial – The SEC continued to aggressively deploy litigation resources to maximize the deterrent impact of enforcement actions.  One successful example in FY 2013 is the favorable verdict obtained at trial against former Goldman Sachs Vice President Fabrice Tourre, who was found liable for his role in marketing a CDO.  The SEC also obtained a favorable decision after a lengthy trial against optionsXpress and two individuals for engaging in sham transactions to give the illusion of compliance with Reg SHO.

Whistleblower Tips – The SEC’s Office of the Whistleblower received 3,238 tips in the past year and paid more than $14 million to whistleblowers whose information substantially advanced enforcement actions.

New Forward-Looking Initiatives

New Task Forces – The Financial Reporting and Audit (FRAud) Task Force was created to improve the Enforcement Division’s ability to detect and prevent financial statement and other accounting frauds.  The new Microcap Task Force brings additional resources and analytical expertise to address fraud in the microcap markets and target gatekeepers.

Consolidated Short Selling Charges – The SEC will continue to conduct streamlined investigations to crack down on violators of Rule 105 of Regulation M.  The SEC recently announced actions against 23 firms that resulted in $14.4 million in monetary sanctions.

A Strong Pipeline – The Enforcement Division headed into the next fiscal year well positioned for significant achievements across its program, having opened 908 investigations last year (up 13 percent) and obtained 574 formal orders of investigation (up 20 percent).

Technology Improvements – The Enforcement Division significantly improved its analytical capabilities, including those for forensics analysis and for reviewing and analyzing high volumes of electronic documents.  A Center for Risk and Quantitative Analytics was created to coordinate and enhance risk identification, risk assessment, and data analytic activities

Tuesday, November 26, 2013

SEC ANNOUNCES COURT ORDER AGAINST INDIVIDUAL AND COMPANY TO PAY OVER $9.8 MILLION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Court Orders Massachusetts-Based Viking Financial Group, Inc. and Steven Palladino to Pay Over $9.8 Million

The Securities and Exchange Commission announced today that, on November 18, 2013, a Massachusetts federal court entered orders against Steven Palladino of West Roxbury, Massachusetts and his Massachusetts-based company, Viking Financial Group, Inc. requiring them to pay more than $9.8 million in disgorgement of ill-gotten gains and prejudgment interest and permanently enjoining them from future violations of the antifraud provisions of the securities laws. The Court also ordered that an asset freeze imposed in April 2013 remain in effect.

The Commission initially filed this action on April 30, 2013, as an emergency enforcement action against the Defendants seeking a temporary restraining order, asset freeze and other emergency relief, which the Court granted. In its Complaint, the Commission alleged that, since April 2011, Palladino and Viking falsely promised at least 33 investors that their money would be used to conduct the business of Viking - which was purportedly to make to short-term, high interest loans to those unable to obtain traditional financing. The Commission also alleged that the Defendants misrepresented to investors that the loans made by Viking would be secured by first interest liens on non-primary residence properties and that investors would be paid back their principal, plus monthly interest at rates generally ranging from 7-15%, from payments made by borrowers on the loans. The Complaint alleges that, in truth, the Defendants made very few real loans to borrowers, and instead used investors' funds largely to make payments to earlier investors and to pay for the Palladino family's substantial personal expenses, including cash withdrawals and hundreds of thousands of dollars spent on gambling excursions, vacations, luxury vehicles and tuition.

After the parties had an opportunity to brief the issues, on July 15, 2013, the Court held that the Commission had established that the Defendants' conduct violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The orders of disgorgement and injunction against the Defendants were entered by the Honorable Douglas P. Woodlock of the United States District Court for the District of Massachusetts. The Court has delayed a determination as to civil penalties until a later date. The Commission acknowledges the assistance of Suffolk County (Massachusetts) District Attorney Daniel F. Conley's Office, which filed related criminal charges against Palladino and Viking in March 2013.

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