FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today announced charges against Zurich-based Credit Suisse Group AG for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.
Credit Suisse agreed to pay $196 million and admit wrongdoing to settle the SEC’s charges.
According to the SEC’s order instituting settled administrative proceedings, Credit Suisse provided cross-border securities services to thousands of U.S. clients and collected fees totaling approximately $82 million without adhering to the registration provisions of the federal securities laws. Credit Suisse relationship managers traveled to the U.S. to solicit clients, provide investment advice, and induce securities transactions. These relationship managers were not registered to provide brokerage or advisory services, nor were they affiliated with a registered entity. The relationship managers also communicated with clients in the U.S. through overseas e-mails and phone calls.
“The broker-dealer and investment adviser registration provisions are core protections for investors,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance.”
According to the SEC’s order, Credit Suisse began conducting cross-border advisory and brokerage services for U.S. clients as early as 2002, amassing as many as 8,500 U.S. client accounts that contained an average total of $5.6 billion in securities assets. The relationship managers made approximately 107 trips to the U.S. during a seven-year period and provided broker-dealer and advisory services to hundreds of clients they visited. Credit Suisse was aware of the registration requirements of the federal securities laws and undertook initiatives designed to prevent such violations. These initiatives largely failed, however, because they were not effectively implemented or monitored.
“As a multinational firm with a significant U.S. presence, Credit Suisse was well aware of the steps that a firm needs to take to legally conduct advisory or brokerage business with U.S. clients,” said Scott W. Friestad, an associate director in the SEC’s Division of Enforcement. “Credit Suisse failed to effectively implement internal controls designed to keep its employees from crossing the line and being non-compliant with the federal securities laws.”
According to the SEC’s order, it was not until after a much-publicized civil and criminal investigation into similar conduct by Swiss-based UBS that Credit Suisse began to take steps in October 2008 to exit the business of providing cross-border advisory and brokerage services to U.S. clients. Although the number of U.S. client accounts decreased beginning in 2009 and the majority were closed or transferred by 2010, it took Credit Suisse until mid-2013 to completely exit the cross-border business as the firm continued to collect broker-dealer and investment adviser fees on some accounts.
The SEC’s order finds that Credit Suisse willfully violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940. Credit Suisse admitted the facts in the SEC’s order, acknowledged that its conduct violated the federal securities laws, accepted a censure and a cease-and-desist order, and agreed to retain an independent consultant. Credit Suisse agreed to pay $82,170,990 in disgorgement, $64,340,024 in prejudgment interest, and a $50 million penalty.
The SEC’s investigation was conducted by senior attorneys David S. Karp and Matthew R. Estabrook under the supervision of assistant director Laura B. Josephs and associate director Scott W. Friestad. The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority.
Showing posts with label FEDERAL SECURITIES LAW. Show all posts
Showing posts with label FEDERAL SECURITIES LAW. Show all posts
Saturday, February 22, 2014
Monday, October 7, 2013
SEC ANNOUNCES CHARGES AUDITORS WITH FAILING TO COMPLY
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today announced charges against three auditors for violating federal securities laws or failing to comply with U.S. auditing standards during their audits and reviews of financial statements for publicly traded companies.
The actions are part of the agency’s ongoing effort to hold gatekeepers accountable for the important roles they play in the securities industry. Internally designated “Operation Broken Gate,” the Enforcement Division’s efforts seek to identify auditors who fail to carry out their duties and responsibilities consistent with professional standards. Gatekeepers that fail to comply with professional standards put investors at risk due to the possibility of undetected fraud or other financial misstatements.
The auditors charged in these latest SEC enforcement actions are certified public accountants Malcolm L. Pollard, who practices in Erie, Pa., and Wilfred W. Hanson and John Kinross-Kennedy, who live in the Irvine, Calif., area. Pollard and Hanson agreed to settle the respective actions against them and will be prohibited from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC. Kinross-Kennedy is litigating his action in a proceeding before an administrative law judge at the agency.
According to the SEC’s order instituting a settled administrative proceeding against Pollard and his firm also located in Erie, they engaged in improper professional conduct while auditing three companies that are empty shells or in the developmental stages. The companies’ public stock is quoted on the Over-the-Counter Bulletin Board. Pollard and his firm’s audits of the issuers were seriously deficient. They failed to include evidence of procedures performed or conclusions reached, and they failed to retain required documentation, perform the required engagement quality reviews, and consider fraud risks and obtain written management representations. Despite these audit failures, Pollard and his firm represented in each of their audit reports that they had conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB).
“These orders reinforce the importance of the audit process and the critical function the auditor plays,” said Antonia Chion, an Associate Director in the SEC’s Division of Enforcement. “Pollard and his firm repeatedly engaged in unreasonable conduct that resulted in violations of applicable professional standards. Their misconduct demonstrates a lack of competence to audit the financial statements of companies registered with the Commission.”
According to the SEC’s order instituting a litigated administrative proceeding against Kinross-Kennedy, he has been the independent accountant for as many as 23 public companies since 2009. The SEC’s Enforcement Division and Office of Chief Accountant allege that there were significant deficiencies in six of Kinross-Kennedy’s audit engagements, and that he failed to obtain engagement quality reviews (EQRs) for more than 30 other audit engagements. Kinross-Kennedy falsely represented that he conducted his audits in accordance with PCAOB standards.
According to the SEC’s order instituting a settled administrative proceeding against Hanson, he conducted EQRs for five of Kinross-Kennedy’s audits, but was not competent to serve as the engagement quality reviewer and failed to exercise due professional care. Accordingly, he failed to conduct multiple EQRs in accordance with PCAOB standards.
“Engagement quality reviews are intended to be a meaningful check on the audit engagement team’s work, and when conducted properly they improve the reliability of a public company’s financial statements,” said David Peavler, Associate Regional Director for Enforcement in the SEC’s Fort Worth Regional Office. “Kinross-Kennedy failed to exercise due professional care on fundamental aspects of the audits by, for example, using outdated audit templates and failing to adapt to changes in auditing standards. He also retained Hanson to conduct engagement quality reviews when Hanson did not have the recent experience necessary to serve as a competent engagement partner.”
By issuing inaccurate audit reports, the SEC’s order finds that Pollard and his firm violated Securities Exchange Act of 1934 Rule 2-02 of Regulation S-X. The SEC’s order also finds that Pollard and his firm violated Exchange Act Section 10A(a)(1) and (b)(1) by failing to have procedures in place to detect, investigate, and report illegal acts. In agreeing to settle the charges without admitting or denying the SEC’s findings, Pollard and his firm consent to the entry of an order to cease and desist from committing or causing any violations of Exchange Act Section 10A(a)(1) and (b)(1) and Rule 2-02 of Regulation S-X. Pollard and his firm also consent to an order suspending their right to appear and or practice before the Commission as an accountant.
The SEC’s order against Kinross-Kennedy alleges violations of Sections 10A(j) and 10A(k) of the Exchange Act and Rules 2-02and 2-07 of Regulation S-X, and improper professional conduct under Rule 102(e)(1)(ii) and (iii) of the Commission’s Rules of Practice and Section 4(C) of the Exchange Act.
The SEC order finds that Hanson engaged in improper professional conduct under Rule 102(e)(1)(ii) and Rule 102(e)(1)(iv)(B)(2) of the Commission’s Rules of Practice and Section 4(C) of the Exchange Act. Without admitting or denying the SEC’s findings, Hanson consents to an order suspending him from practicing before the Commission as an accountant.
The SEC’s investigation of Pollard was conducted by Peter Rosario and Scott Lowry, and supervised by Deborah Tarasevich. The SEC’s investigation of Kinross-Kennedy and Hanson was conducted by Ronda Blair and David King, and supervised by Barbara Gunn.
The Securities and Exchange Commission today announced charges against three auditors for violating federal securities laws or failing to comply with U.S. auditing standards during their audits and reviews of financial statements for publicly traded companies.
The actions are part of the agency’s ongoing effort to hold gatekeepers accountable for the important roles they play in the securities industry. Internally designated “Operation Broken Gate,” the Enforcement Division’s efforts seek to identify auditors who fail to carry out their duties and responsibilities consistent with professional standards. Gatekeepers that fail to comply with professional standards put investors at risk due to the possibility of undetected fraud or other financial misstatements.
The auditors charged in these latest SEC enforcement actions are certified public accountants Malcolm L. Pollard, who practices in Erie, Pa., and Wilfred W. Hanson and John Kinross-Kennedy, who live in the Irvine, Calif., area. Pollard and Hanson agreed to settle the respective actions against them and will be prohibited from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC. Kinross-Kennedy is litigating his action in a proceeding before an administrative law judge at the agency.
According to the SEC’s order instituting a settled administrative proceeding against Pollard and his firm also located in Erie, they engaged in improper professional conduct while auditing three companies that are empty shells or in the developmental stages. The companies’ public stock is quoted on the Over-the-Counter Bulletin Board. Pollard and his firm’s audits of the issuers were seriously deficient. They failed to include evidence of procedures performed or conclusions reached, and they failed to retain required documentation, perform the required engagement quality reviews, and consider fraud risks and obtain written management representations. Despite these audit failures, Pollard and his firm represented in each of their audit reports that they had conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB).
“These orders reinforce the importance of the audit process and the critical function the auditor plays,” said Antonia Chion, an Associate Director in the SEC’s Division of Enforcement. “Pollard and his firm repeatedly engaged in unreasonable conduct that resulted in violations of applicable professional standards. Their misconduct demonstrates a lack of competence to audit the financial statements of companies registered with the Commission.”
According to the SEC’s order instituting a litigated administrative proceeding against Kinross-Kennedy, he has been the independent accountant for as many as 23 public companies since 2009. The SEC’s Enforcement Division and Office of Chief Accountant allege that there were significant deficiencies in six of Kinross-Kennedy’s audit engagements, and that he failed to obtain engagement quality reviews (EQRs) for more than 30 other audit engagements. Kinross-Kennedy falsely represented that he conducted his audits in accordance with PCAOB standards.
According to the SEC’s order instituting a settled administrative proceeding against Hanson, he conducted EQRs for five of Kinross-Kennedy’s audits, but was not competent to serve as the engagement quality reviewer and failed to exercise due professional care. Accordingly, he failed to conduct multiple EQRs in accordance with PCAOB standards.
“Engagement quality reviews are intended to be a meaningful check on the audit engagement team’s work, and when conducted properly they improve the reliability of a public company’s financial statements,” said David Peavler, Associate Regional Director for Enforcement in the SEC’s Fort Worth Regional Office. “Kinross-Kennedy failed to exercise due professional care on fundamental aspects of the audits by, for example, using outdated audit templates and failing to adapt to changes in auditing standards. He also retained Hanson to conduct engagement quality reviews when Hanson did not have the recent experience necessary to serve as a competent engagement partner.”
By issuing inaccurate audit reports, the SEC’s order finds that Pollard and his firm violated Securities Exchange Act of 1934 Rule 2-02 of Regulation S-X. The SEC’s order also finds that Pollard and his firm violated Exchange Act Section 10A(a)(1) and (b)(1) by failing to have procedures in place to detect, investigate, and report illegal acts. In agreeing to settle the charges without admitting or denying the SEC’s findings, Pollard and his firm consent to the entry of an order to cease and desist from committing or causing any violations of Exchange Act Section 10A(a)(1) and (b)(1) and Rule 2-02 of Regulation S-X. Pollard and his firm also consent to an order suspending their right to appear and or practice before the Commission as an accountant.
The SEC’s order against Kinross-Kennedy alleges violations of Sections 10A(j) and 10A(k) of the Exchange Act and Rules 2-02and 2-07 of Regulation S-X, and improper professional conduct under Rule 102(e)(1)(ii) and (iii) of the Commission’s Rules of Practice and Section 4(C) of the Exchange Act.
The SEC order finds that Hanson engaged in improper professional conduct under Rule 102(e)(1)(ii) and Rule 102(e)(1)(iv)(B)(2) of the Commission’s Rules of Practice and Section 4(C) of the Exchange Act. Without admitting or denying the SEC’s findings, Hanson consents to an order suspending him from practicing before the Commission as an accountant.
The SEC’s investigation of Pollard was conducted by Peter Rosario and Scott Lowry, and supervised by Deborah Tarasevich. The SEC’s investigation of Kinross-Kennedy and Hanson was conducted by Ronda Blair and David King, and supervised by Barbara Gunn.
Sunday, August 4, 2013
STOCK PROMOTER TO PAY OVER $1.6 MILLION FOR INFORMATION ISSUED IN PENNY STOCK PUBLICATIONS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Massachusetts-Based Penny Stock Promoter Ordered to Pay Over $1.6 Million in Penny Stock Fraud Case
The Securities and Exchange Commission announced today that on July 24, 2013, a final judgment was entered by default against Massachusetts-based National Financial Communications, Inc. ("NFC"). NFC is a defendant in an action filed by the Commission in the U.S. District Court for the District of Massachusetts on December 12, 2011, alleging that Massachusetts resident Geoffrey J. Eiten and NFC made material misrepresentations and omissions in penny stock publications they issued.
The judgment enjoins NFC from further violations of the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder) and from certain specified activities related to penny stocks, including the promotion of a penny stock or deriving compensation from the promotion of a penny stock. The judgment also imposed a penny stock bar against NFC which permanently bars it from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for the purpose of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. The judgment orders NFC to pay disgorgement of $605,262, representing NFC's ill-gotten gains, plus prejudgment interest of $38,819 and a civil penalty of $1 million.
The Commission's complaint alleged that Eiten and NFC issued a penny stock promotional publication called the "OTC Special Situations Reports." According to the complaint, the defendants promoted penny stocks in this publication on behalf of clients in order to increase the price per share and/or volume of trading in the market for the securities of penny stock companies. The complaint alleged that Eiten and NFC made misrepresentations in these reports about the penny stock companies they promoted. For example, the Commission's complaint alleged that during 2010, Eiten and NFC issued reports promoting four penny stock companies: (1) Clean Power Concepts, Inc., based in Regina, Saskatchewan, Canada, a purported manufacturer and distributor of various fuel additives and lubrication products made from crushed seed oil; (2) Endeavor Power Corp., based in Robesonia, Pennsylvania, a purported recycler of value metals from electronic waste; (3) Gold Standard Mining, based in Agoura Hills, California, a purported owner of Russia gold mining operations; and (4) Nexaira Wireless Corp., based in Vancouver, British Columbia, Canada, a purported developer and seller of wireless routers. The Commission's complaint alleged that in these four reports, Eiten and NFC made material misrepresentations and omissions, concerning, among other things, the companies' financial condition, future revenue projections, intellectual property rights, and Eiten's interaction with company management as a basis for his statements.
According to the complaint, Eiten and NFC were hired to issue the above reports and used false information provided by their clients, without checking the accuracy of the information with the companies in question or otherwise ensuring that the statements they were making in the OTC Special Situations Report were true.
Massachusetts-Based Penny Stock Promoter Ordered to Pay Over $1.6 Million in Penny Stock Fraud Case
The Securities and Exchange Commission announced today that on July 24, 2013, a final judgment was entered by default against Massachusetts-based National Financial Communications, Inc. ("NFC"). NFC is a defendant in an action filed by the Commission in the U.S. District Court for the District of Massachusetts on December 12, 2011, alleging that Massachusetts resident Geoffrey J. Eiten and NFC made material misrepresentations and omissions in penny stock publications they issued.
The judgment enjoins NFC from further violations of the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder) and from certain specified activities related to penny stocks, including the promotion of a penny stock or deriving compensation from the promotion of a penny stock. The judgment also imposed a penny stock bar against NFC which permanently bars it from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for the purpose of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. The judgment orders NFC to pay disgorgement of $605,262, representing NFC's ill-gotten gains, plus prejudgment interest of $38,819 and a civil penalty of $1 million.
The Commission's complaint alleged that Eiten and NFC issued a penny stock promotional publication called the "OTC Special Situations Reports." According to the complaint, the defendants promoted penny stocks in this publication on behalf of clients in order to increase the price per share and/or volume of trading in the market for the securities of penny stock companies. The complaint alleged that Eiten and NFC made misrepresentations in these reports about the penny stock companies they promoted. For example, the Commission's complaint alleged that during 2010, Eiten and NFC issued reports promoting four penny stock companies: (1) Clean Power Concepts, Inc., based in Regina, Saskatchewan, Canada, a purported manufacturer and distributor of various fuel additives and lubrication products made from crushed seed oil; (2) Endeavor Power Corp., based in Robesonia, Pennsylvania, a purported recycler of value metals from electronic waste; (3) Gold Standard Mining, based in Agoura Hills, California, a purported owner of Russia gold mining operations; and (4) Nexaira Wireless Corp., based in Vancouver, British Columbia, Canada, a purported developer and seller of wireless routers. The Commission's complaint alleged that in these four reports, Eiten and NFC made material misrepresentations and omissions, concerning, among other things, the companies' financial condition, future revenue projections, intellectual property rights, and Eiten's interaction with company management as a basis for his statements.
According to the complaint, Eiten and NFC were hired to issue the above reports and used false information provided by their clients, without checking the accuracy of the information with the companies in question or otherwise ensuring that the statements they were making in the OTC Special Situations Report were true.
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