In times of crisis, unscrupulous people often disseminate false information to the public in the hope of securing a personal benefit from the fear and concern surrounding the event. Such is the case with the COVID-19 pandemic. Since February of this year, the Securities and Exchange Commission (“SEC” or “Commission”) has released several warnings to investors to beware of fraud, illicit schemes and other misconduct during the coronavirus health emergency (here). In fact, th

Regulators and enforcement authorities have often expressed concerns about the revenue recognition practices of corporate entities and those who implement them. Indeed, improper revenue recognition is one of the most common accounting errors pursued by the Securities and Exchange Commission (“SEC” or “Commission”). To properly recognize revenue, the revenue must be realized and earned. Under generally accepted accounting principles, revenue may be recognized when all the fol

“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 deceive peopl

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 recommendation

Endorsements from the rich and famous, such as movie and television stars, professional athletes, and musicians, can be found on TV, radio, and social media. Virtually any product or service can be endorsed by a celebrity. Sometimes the endorsement concerns investment opportunities. But, as the Securities and Exchange Commission (“SEC” or the “Commission”) has warned, “a celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all inv

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 fals

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 operations

On August 29, 2018, the Securities and Exchange Commission (”SEC”) announced (here) that it charged a Tallahassee-based investment advisory firm and its two former principals with defrauding investors, most of whom were retired NFL players who had joined the class-action lawsuit against the National Football League (“NFL”) claiming they suffered brain injuries as a result of concussions. The SEC charged Cambridge Capital Group Advisors, LLC (f/k/a Cambridge Capital Advisors,

The disclosure of material information is the foundation of the Securities and Exchange Commission’s (“SEC”) mission. For this reason, the SEC considers itself to be “a disclosure agency.” See “The Importance of the SEC Disclosure Regime” by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission (July 16, 2013) (here). One need only look at the SEC’s website to confirm this point: “he laws and rules that govern the securities industry in the United States

On June 17, 2019, the Securities and Exchange Commission (“SEC” or the “Commission”) announced (here) that KPMG LLP (“KPMG”) agreed to settle charges that it altered prior audit work after receiving information about inspections of the firm by the Public Company Accounting Oversight Board (“PCAOB”). In connection with the settlement, KPMG agreed to pay a $50 million penalty and comply with a set of remedial measures to prevent the conduct at issue, including retaining an ind

On May 7, 2019, the Securities and Exchange Commission (“SEC” or “Commission”) announced (here) that it had settled an insider trading action against Brian Fettner (“Fettner”), a Nevada resident who obtained confidential, inside information about a potential corporate merger from a lifelong friend and used it to generate more than $250,000 in illicit trading profits. The action involved unlawful trading in the securities of G&K Services, Inc. (“G&K”) prior to an August 16, 20

On April 29, 2019, the Securities and Exchange Commission (“SEC”) announced (here) that it filed charges against a New York City man for continuing a previously charged ticket resale scheme, in which investors were falsely promised that their funds would be used for the purchase and resale of tickets to Broadway shows and a sporting event. According to the SEC, at least 12 investors were defrauded out of approximately $2.7 million as a result of the scam. According to the SEC

On April 25, 2019, the Securities and Exchange Commission (“SEC”) announced (here) that it had charged Indianapolis-based Celadon Group Inc. (“Celadon”), a truckload freight transportation provider, with an accounting fraud that allowed it to avoid disclosing substantial losses and misrepresent its financial condition. The SEC alleged (here) that, between mid-2016 and April 2017, Celadon avoided recognizing at least $20 million in impairment charges and losses – almost two-th

On March 5, 2019, the Securities and Exchange Commission (“SEC”) announced (here) that BB&T Securities, LLC (“BB&T Securities”), a wholly owned brokerage subsidiary of BB&T Corp., had agreed to return more than $5 million to retail investors and pay a $500,000 penalty to settle charges that a firm it acquired, Valley Forge Asset Management, LLC (“Valley Forge”), misled its advisory clients into believing they were receiving full service brokerage services at a discount while

Securities fraud comes in all shapes and sizes. While the substance of a fraudulent investment scheme may change depending upon the circumstances and the fraudster involved, the types of securities fraud 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 abou

Last month, former Dewey & LeBoeuf, LLP (“Dewey”) executives agreed to a settlement with the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) to pay civil penalties in connection with their roles in a $150 million fraudulent bond offering by the now defunct international law firm. The SEC claimed that the executives used accounting tricks when the firm needed money to weather the economic recession and steep costs resulting from the merger between the pred