SEC Enforcement Actions

By: Jeffrey M. Haber “Spoofing is a type of scam in which criminals attempt to obtain someone’s personal information by pretending to be a legitimate business, a neighbor, or some other innocent party.”  Spoofing can occur in any form of online communication, including emails, text messages, telephone calls, and websites.  Id . Although spoofing comes in many forms, the goal of spoofing is the same: to deceive people into divulging personal and/or financial information that t

By: Jeffrey M. Haber As a general matter, “ cross trade is a practice where buy and sell orders for the same asset are offset without recording the trade on the exchange.” An adviser that arranges for a security to be purchased from or sold to a client from its own account (which can include an affiliate of the advisor) – as opposed to purchasing or selling the security in the secondary markets – is engaging in a “principal trade.” An “agency cross trade” occurs when an advi

By: Jeffrey M. Haber “Ensuring that potential whistleblowers can communicate directly with the Commission is a critical part of the SEC’s oversight mandate” On numerous occasions, we have written about the Securities and Exchange Commission’s (“SEC” or the “Commission”) whistleblower program and, in particular, the success of the program with respect to detecting and preventing violations of the federal securities laws. The success of the program depends, in large part, on th

By:  Jeffrey Haber A multi-level marketing program is a relative of pyramid scheme. “ pyramid scheme is an illegal investment scam based on a hierarchical setup.”  In the classic pyramid scheme, “participants attempt to make money solely by recruiting new participants, usually where: he promoter promises a high return in a short period of time; o genuine product or service is actually sold; and he primary emphasis is on recruiting new participants.” Promoters of a pyramid sc

By  Jeffrey M. Haber Cybersecurity disclosures are important for a number of constituencies. For example, consumers have a right to know if their data has been compromised at the company in which they do (or have done) business. Investors have a right to know if the company in which they have invested, or will invest, is the victim of a data breach and how such a breach has impacted (or will impact) the company’s business and operations.  As cybersecurity breaches become more

Whistleblowers often risk career and reputation to report fraud or other illegal conduct. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) to, among other things, promote compliance with the federal securities laws. The Dodd-Frank Act contains whistleblower provisions that authorize the Securities and Exchange Commission (“SEC” or “Commission”) to pay cash rewards to whistleblowers who voluntarily provide the SEC wi

In prior posts, we examined Securities and Exchange Commission (“SEC” or “Commission”)   enforcement actions brought against those who seek to personally benefit from the COVID-19 health crisis affecting the country ( here and here ). These actions had a common thread between them – they involved pump and dump schemes. In a “pump-and-dump” scheme, promoters “pump” up, or increase, the stock price of a company by spreading positive, but often false, rumors.  These rumors caus

Elder financial exploitation is a significant problem. Everyone reading this article may be affected in some way. Family, friends, neighbors, colleagues, and/or customers can fall victim to financial exploitation. All of us are at risk of being financially abused and/or exploited as we grow older. Seniors are Particularly Vulnerable to Financial Abuse and Exploitation “Scam artists prey on seniors who are too polite and have difficulty saying ‘no’ or feel indebted to someone

“Spoofing is a type of scam in which criminals attempt to obtain someone’s personal information by pretending to be a legitimate business, a neighbor, or some other innocent party.” See Julia Kagan, Spoofing , Investopedia (updated Jan. 29, 2020) (“ Spoofing ”) ( here ). Spoofing can occur in any form of online communication, including emails, text messages, telephone calls, and websites. Id . Although spoofing comes in many forms, the goal of spoofing is the same: to deceiv

On February 27, 2020, the Securities and Exchange Commission (“SEC”) announced ( here ) that it settled charges against Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network (collectively, “Wells Fargo”) for failing to supervise investment advisers and registered representatives who recommended single-inverse ETF investments to retail investors, and for lacking adequate compliance policies and procedures with respect to the suitability of those recommendati

Investment scams come in many forms. Affinity fraud is one type of investment scam. In this form of fraud, the person committing the fraud preys upon members of an identifiable group, such as a religious or ethnic community, the elderly, or a professional group. The promoter of an affinity fraud frequently is – or pretends to be – a member or a good friend of the group. The fraudster often enlists respected members of the community or religious leaders from within the group t

A common fact pattern for accounting fraud involves a public company recognizing revenues before they are realized or realizable and earned. Senior executives who engage in such fraud often do so to meet or beat analysts’ revenue and earnings estimates. Case after case shows that the pressure to satisfy Wall Street (that is, meet or beat analysts’ estimates) is strong. When a public company and its senior executives issue materially false and misleading statements about the c

Retaliation is the primary concern among those who decide to blow the whistle on wrongdoing. It represents a significant impediment to obtaining the primary goals of whistleblowing:  accountability and transparency of government and corporate activities. According to a 2010 government survey of federal employees, “approximately one-third of the individuals who felt they had been identified as a source of a report of wrongdoing also perceived either threats or acts of reprisal

The Foreign Corrupt Practices Act (“FCPA”) requires issuers to “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that” all transactions are “executed” and “recorded … to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and … to maintain accountability for assets.” 15 U.S.C. §§ 78m(b)(2)(B). As discussed below, com

On September 19, 2013, Andrew Ceresney, then Co-Director of the Division of Enforcement of the Securities and Exchange Commission (“SEC” or the “Commission”), told an audience attending a continuing legal education program at the American Law Institute in Washington, D.C. about the importance of pursuing those who commit financial and accounting fraud ( here ). Comprehensive, accurate and reliable financial reporting is the bedrock upon which our markets are based because fa

This Blog has often noted that “securities fraud comes in all shapes and sizes.” ( E.g. , here .) Though the alleged fraudulent scheme may differ, the types of schemes implemented tend to fall into one of the following (non-exclusive) categories: financial statement/accounting fraud; pyramid schemes; Ponzi schemes; pump-and-dump schemes; affinity fraud; promissory note fraud; Internet fraud; “microcap” stock fraud; and fraud concerning information about a company, its operati

During the last week in August, the Securities and Exchange Commission (“SEC” or “Commission”) filed a number of actions and administrative proceedings involving, among other things, insider trading and the use of financial models and controls. Today’s installment of SEC Enforcement News looks at two of the actions/proceedings filed by the Commission: one involving insider trading allegations against former Cleveland Browns linebacker, Mychal Kendricks (“Kendricks”), and the