SEC Litigation Releases: Week in Review - August 31st, 2012
(Aug 2012)
SEC Charges Brokers for Defrauding Brazilian Public Pension Funds in Markup Scheme
August 29, 2012, (Litigation Release No. 22462)
According to the complaint (opens to PDF), Fabrizio Neves conducted a markup scheme while working at LatAm Investments LLC. The complaint alleges that from 2006 to 2009 Neves, with the assistance of Jose Luna, overcharged customers around $36 million "by using hidden markup fees on structured note transactions." Neves allegedly made millions in inflated sales...
The JOBS Act and Private Placements [UPDATE]
(Aug 2012)
Both the New York Times and the Wall Street Journal are reporting that the SEC has proposed removing the restriction on general solicitation of hedge funds and other private placement investments as required by the JOBS Act of 2012. Last week we blogged about the implications of this action, and at that time there was concern that the SEC would impose further restrictions that would dampen the effects of the law. It now appears that the SEC will not impose any additional regulations.
The...
SEC Litigation Releases: Week in Review - August 24th, 2012
(Aug 2012)
SEC Charges New York-Based Firm and Owner in Penny Stock Scheme
August 23, 2012,(Litigation Release No. 22457)
Edward Bronson and his company, E-Lionheart Associates LLC (which also conducts business under the name Fairhills Capital Inc.), have been charged by the SEC with conducting a penny stock scheme in which they allegedly reaped over $10 million in illegal profits. The alleged scheme involved buying shares at deep discounts from over 100 penny stock companies and then selling them...
SEC Investor Bulletin on ETFs
(Aug 2012)
The SEC recently released an Investor Bulletin on ETFs which provides background information about ETFs in general and defines several terms which may be confusing to investors. ETFs can be complex and risky investments, as they allow nearly anyone to purchase portfolios which would typically only be suitable for sophisticated investors or traders.
Some commentators were not satisfied with the Bulletin, particularly its lack of new guidelines related to leveraged and inverse products. Paul...
SEC Litigation Releases: Week in Review - August 17th, 2012
(Aug 2012)
SEC Charges Oracle Corporation with FCPA Violations Related to Secret Side Funds in India
August 16, 2012, (Litigation Release No. 22450)
According to the complaint (opens to PDF), the Indian subsidiary of Oracle Corporation, Oracle India Private Limited, "structured transactions with India's government...in a way that enabled Oracle India's distributors to hold approximately $2.2 million of the proceeds in unauthorized side funds." Oracle India's alleged misconduct occurred from 2005 to 2007,...
Overreliance on Credit Ratings Results in Large Losses for Municipalities
(Aug 2012)
Earlier this week, the SEC charged Wells Fargo's brokerage firm with selling complex securities to institutional investors such as municipalities and non-profits. The Institutional Brokerage and Sales Division, between January 2007 and August 2007, made recommendations to institutional clients to purchase asset-backed commercial paper "issued by limited purpose companies called structured investment vehicles (SIVs) and SIV-Lites backed largely by mortgage-backed securities and CDOs." Already...
SEC Litigation Releases: Week in Review - August 10th, 2012
(Aug 2012)
SEC Charges Participants in $5 Million Boiler Room Scheme
August 10, 2012, (Litigation Release No. 22444)
The SEC charged Edward M. Laborio, Jonathan Fraiman, Matthew K. Lazar, and seven entities controlled by Laborio for their alleged roles in a boiler scheme that ran from December 2006 to August 2009. The seven entities include Envit Capital Group, Inc., Envit Capital, LLC, Envit Capital Holdings, Inc., Envit Capital Private Wealth Management, LLC, Envit Capital Multi Strategy Mixed...
Many ETF Issuers Consolidating Offerings
(Aug 2012)
As inflows to ETFs have exploded over the past few years, many issuers expanded their lineup of funds to take advantage of the increased investor interest. Some have tried to compete with established funds by creating funds with very similar exposure, while others have offered highly specific investment strategies in an attempt to capture a niche market.
In general the ETF market has exhibited a 'winner take all' pattern whereby the oldest and largest funds attract by far the most investor...
Direxion to Close Several Leveraged ETFs
(Aug 2012)
Direxion Shares ETF Trust announced last week that -- upon recommendation of the trust's advisor Rafferty Asset Management, LLC -- nine daily leveraged and inverse Exchange Traded Funds will be liquidated and shares will no longer be open for purchase as of early next month. From the announcement,
Due to the Funds' inability to attract sufficient investment assets, Rafferty believes they cannot continue to conduct their business and operations in an economically efficient manner. As a result,...
SEC Litigation Releases: Week in Review - August 3rd, 2012
(Aug 2012)
SEC Settles Litigation with Former Veritas Software Corporation Chief Financial Officer
August 2, 2012, (Litigation Release No. 22432)
On July 20, 2012, a final judgment was entered against Kenneth E. Lonchar in the case SEC v. Mark Leslie, Kenneth E. Lonchar, Paul A. Sallaberry, Michael M. Cully, and Douglas S. Newton. Lonchar, the former Chief Financial Officer of Veritas Software Corporation, had been charged with inflating Veritas' reported revenues "by approximately $20 million in...
