SEC Litigation Releases: Week in Review - May 25th, 2012
(May 2012)
SEC Charges Northern California Fund Manager in $60 Million Scheme
May 24, 2012, (Litigation Release No. 22375)
The SEC charged John A. Geringer with running a $60 million Ponzi scheme. In Geringer's management of the GLR Growth Fund, he allegedly misrepresented the fund's historical returns -- double-digit annually -- in the marketing materials and then used new investor funds to finance the returns current investors purportedly realized. Geringer went so far as to produce account statements...
SEC Litigation Releases: Week in Review - May 18th, 2012
(May 2012)
SEC Charges US Perpetrators in $35 Million International Boiler Room Scheme
May 16, 2012, (Litigation Release No. 22370)
The SEC filed charges this week against Nicholas Louis Geranio, Keith Michael Field, The Good One, Inc. and Kaleidoscope Real Estate, Inc. for their roles in an international boiler room scheme which ran from April 2007 to October 2009 and raised approximately $35 million in proceeds. Geranio allegedly "organized eight U.S. Issuers, installed management (including Field),...
SEC Litigation Releases: Week in Review - May 11th, 2012
(May 2012)
Georgia Doctor Consents to Order in Settlement of SEC Insider Trading Charges
May 10, 2012, (Litigation Release No. 22364)
In a September 2010 complaint (Litigation Release No. 21644), the SEC alleged that Dr. Bobby V. Khan traded Sciele Pharma, Inc. (a Georgia-based pharmaceutical company) stock based upon material non-public information concerning a tender offer that was to be made by a Japanese company. Yesterday, the US District Court for the Northern District of Georgia entered a consent...
Massachusetts Securities Regulators Fine RBC for Selling Unsuitable Leveraged and Inverse ETFs
(May 2012)
RBC Capital Markets has agreed to pay $2.9 million in restitution to Massachusetts investors related to the sale of unsuitable leveraged, inverse, and inverse-leveraged ETFs. Secretary of the Commonwealth of Massachusetts William Galvin, who has previously investigated Bank of America over warehousing of CLO assets, issued the complaint in July 2011, accusing RBC and its registered representative Michael D. Zukowski of selling these products "to clients who did not understand what these...
The "New" Non-Traded REITs Look a Lot Like the Old Ones
(May 2012)
Yesterday's Wall Street Journal had an article describing the "new versions" of non-traded real estate investment trusts (REITs), which purport to solve some of the transparency issues which have made non-traded REITs the subject of regulatory scrutiny. In particular, several non-traded REITs are now offering daily updated net asset values (NAV) in an attempt to calm concerns regarding the lack of transparency in the pricing of non-traded REITs.
However, a review of the prospectus for...
SEC Litigation Releases: Week in Review - May 4th, 2012
(May 2012)
SEC Charges Two Former Investor Seminar Salespeople with Securities Law Violations
May 1, 2012, (Litigation Release No. 22354)
This week, the SEC filed a settled civil injunctive action against Darlene Nelson Powell and Robert Eldridge -- independent contractors of Long Term-Short Term Inc. (BetterTrades) -- derived from allegations that the two made misrepresentations concerning their trading experience. As a result, legitimate investors purchased instructional courses and mentoring programs...
SEC Litigation Releases: Week in Review - April 27th, 2012
(Apr 2012)
SEC Charges Former Morgan Stanley Executive with FCPA Violations and Investment Adviser Fraud
April 25, 2012, (Litigation Release No. 22346)
Earlier this week, the SEC charged Garth R. Peterson (former managing director in Morgan Stanley's real estate investment and fund advisory business) with violating the Foreign Corrupt Practices Act (FCPA). The SEC alleges that "Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder's...
Rehypothecation or Filched Fund?
(Apr 2012)
The investigation of the MF Global scandal is still ongoing. A lot of details concerning the missing customer funds haven't been revealed. At this stage there is no definitive answer as to whether MF Global blatantly transferred segregated customer funds to cover its own liquidity shortfall, or it merely used the often frowned-upon, but completely allowable practice of rehypothecation. In this blog post, I explain what rehypothecation is, as well as the controversy around it.
Rehypothecation...
SEC Litigation Releases: Week in Review - April 20th, 2012
(Apr 2012)
SEC Announces Settlement of Accounting Fraud Charges Against Former CSK Auto Corporation Management
April 18, 2012, (Litigation Release No. 22338)
The US District Court in Phoenix entered a final judgment against three former CSK Auto Corporation employees: Don W. Watson (former CFO, Treasurer and Senior VP), Edward W. O'Brien (former controller) and Gary M. Opper (former director of credit and receivables). The judgment is a result of the SEC allegations in which the officers overstated CSK's...
