Lawrence D. Polizzotto Vice President of Investor Relations With Violating Fair Disclosure Rules

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539799034#.Uiu4-8a1ESE

Washington D.C., Sept. 6, 2013 —

The Securities and Exchange Commission today charged the former head of investor relations for a Tempe, Ariz.-based solar energy company with violating rules requiring fair disclosure of information when he alerted certain analysts and investors about an upcoming major development.

Regulation FD requires material nonpublic information to be disclosed publicly in a broad manner and not selectively. An SEC investigation determined that Lawrence D. Polizzotto, a former vice president at First Solar Inc., violated Regulation FD when he indicated in phone conversations with some analysts and investors that the company was unlikely to receive a much-anticipated loan guarantee from the U.S. Department of Energy. When First Solar broadly disclosed this material information in a press release the next morning, its stock price dropped 6 percent.

Polizzotto agreed to pay $50,000 to settle the SEC’s charges.

“Polizzotto offered previously undisclosed information to select analysts and institutional investors and left the rest of First Solar’s investors in the dark,” said Michele Wein Layne, Director of the SEC’s Los Angeles Office. “All investors, regardless of their size or relationship with the company, are entitled to the same information at the same time.”

According to the SEC’s order instituting a settled administrative proceeding, Polizzotto attended an investor conference on Sept. 13, 2011, with First Solar’s then-CEO, who publicly expressed confidence that the company would receive three loan guarantees totaling approximately $4.5 billion for which the company had received conditional commitments from the Energy Department. However, two days later, Polizzotto and several other executives learned that the company would not be receiving at least one of the loan guarantees. A group of employees including Polizzotto and one of First Solar’s in-house lawyers began discussing how and when the company should publicly disclose the loss of the loan guarantee. The company lawyer specifically noted that when the company received official notice from the Energy Department, “we would not have to issue a press release or post something to our website the same day. We would, though, be restricted by Regulation FD in any [sic] answering questions asked by analysts, investors, etc. until such time that we do issue a press release or post to our website…”

According to the SEC’s order, Polizzotto violated Regulation FD during one-on-one phone conversations with approximately 20 sell-side analysts and institutional investors on Sept. 21, 2011 – the day after a Congressional committee sent a letter to the Energy Department inquiring about its loan guarantee program and the status of conditional commitments, including three involving First Solar. This Congressional line of inquiry caused concern within the solar industry about whether the Energy Department would be able to move forward with its conditional commitments. Analysts began issuing research reports about the Congressional inquiry, and analysts and investors began calling Polizzotto. Despite knowing that the company had not yet publicly disclosed anything, Polizzotto drafted several talking points that effectively signaled that First Solar would not receive one of the three loan guarantees. His talking points emphasized the high probability of receiving two of the loan guarantees and the low probability of receiving the third. Polizzotto delivered his talking points in the one-on-one calls with analysts and institutional investors, and he directed a subordinate to do the same. Polizzotto went even further than his talking points when he told at least one analyst and one institutional investor that if they wanted to be conservative, they should assume that First Solar would not receive one of the loan guarantees.

Polizzotto agreed to settle the SEC’s charges without admitting or denying the findings. In addition to the $50,000 penalty, he agreed to cease and desist from causing any violations and any future violations of Regulation FD and Section 13(a) of the Securities and Exchange Act of 1934.

The SEC has determined not to bring an enforcement action against First Solar due to the company’s extraordinary cooperation with the investigation among several other factors. Prior to Polizzotto’s selective disclosure on September 21, First Solar cultivated an environment of compliance through the use of a disclosure committee that focused on compliance with Regulation FD. The company immediately discovered Polizzotto’s selective disclosure and promptly issued a press release the next morning before the market opened. First Solar then quickly self-reported the misconduct to the SEC. Concurrent with the SEC’s investigation, First Solar undertook remedial measures to address the improper conduct. For example, the company conducted additional Regulation FD training for employees responsible for public disclosure.

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Thailand-Based Trader Agrees to Pay $5.2 Million to Settle Insider Trading Case

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539798614#.Uiu4_Ma1ESE

Washington D.C., Sept. 5, 2013 —

The Securities and Exchange Commission today announced that a Bangkok-based trader whose U.S. brokerage account was frozen in an SEC emergency action in June has agreed to pay $5.2 million to settle charges that he traded on inside information in advance of a public announcement about a proposed acquisition of Smithfield Foods by a firm in China.

The SEC obtained the asset freeze on June 5 after filing a complaint alleging that Badin Rungruangnavarat made more than $3 million in illicit profits just days earlier by insider trading in Smithfield securities. Badin loaded up on out-of-the-money Smithfield call options and single-stock futures contracts in the week leading up to a May 29 public announcement about the proposed sale of Smithfield Foods to Shuanghui International Holdings. Among his possible sources of material, non-public information about the impending deal was a Facebook friend who was an associate director at the investment bank for a different company that was considering a Smithfield acquisition.

The settlement was approved today by Judge Matthew Kennelly of the U.S. District Court for the Northern District of Illinois.

“Our quick action in June to stop Badin’s insider trading profits from leaving the U.S. made this multi-million dollar settlement possible,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Once he was denied access to his trading account, Badin elected to forfeit all of his ill-gotten proceeds plus pay a $2 million penalty to settle the case against him.”

Badin agreed to the entry of a final judgment ordering him to pay $3.2 million in disgorgement and the $2 million penalty. Without admitting or denying the SEC’s allegations, he agreed to be permanently enjoined from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

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SEC Charges Ronald Feldstein Purported Money Manager With Defrauding Investors and Brokerage Firms

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539797873#.Uiu5A8a1ESE

Washington D.C., Sept. 3, 2013 —

The Securities and Exchange Commission today charged a purported money manager in New York with conducting a free-riding scheme to defraud three brokerage firms, and then bilking several investors out of nearly a half-million dollars that he stole to fund his luxurious lifestyle that included a Bentley automobile, summers in the Hamptons, and casino junkets.

The SEC alleges that Ronald Feldstein caused more than $2 million in losses for the brokerage firms that he victimized in the free-riding scheme, which occurs when customers buy or sell securities in their brokerage accounts without having the money or shares to actually pay for them. Feldstein opened three separate brokerage accounts in the names of two purported investment funds that he created. He had no intention to pay for the stocks that he purchased if they resulted in big losses. Feldstein planned to walk away from any transactions where the price declined substantially after the trade date, and planned to use sales proceeds to pay for the purchases if the price of a stock increased.

The SEC further alleges that Feldstein later began soliciting investments by targeting owners of businesses that he had frequented for decades, including a dry cleaner and a car leasing and servicing company. Feldstein convinced them to provide funds for him to invest on their behalf, promising such profitable opportunities as a successful hedge fund, a promising penny stock, and an initial public offering (IPO) of a fashion company. However, Feldstein never invested this money, instead converting it for his personal use without their knowledge.

“Without sufficient assets to pay for his stock purchases, Feldstein illegally arranged trades in which he got the profits if he won and left brokerage firms holding the bag if he lost,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Then Feldstein used blatantly false promises to lure longtime acquaintances to pour their life savings into his investment schemes that were footing the bill for his luxurious lifestyle.”

According to the SEC’s complaint filed in U.S. District Court in the Southern District of New York, Feldstein and the two purported investment funds – Mara Capital Management LLC and Vita Health of America LLC – traded through a type of account that brokerage firms offer to customers with the understanding that the customer has sufficient assets held with a third-party custodial bank to cover the cost of the trades. Feldstein and the funds never disclosed to three broker-dealers that they were simply gambling with the brokerage firms’ money. Their plan was to refuse to issue instructions to settle the trades, and stick the broker-dealers with the unprofitable positions. The free-riding scheme began in September 2008 and continued until February 2009.

According to the SEC’s complaint, Feldstein shifted his fraudulent conduct to individual investors later in 2009. He induced investors to give him money they typically had saved for their retirement or their children’s education. Feldstein raised approximately $450,000 based on such false investment promises as a hedge fund that he described as substantial and successful, a penny stock issuer that Feldstein described as the next AT&T/Verizon of the rural Midwest, and the IPO of a purported fashion company. The investor funds were typically deposited into Feldstein’s personal bank account or the bank account of an entity that he owned so he could spend their money on his personal expenses.

The SEC’s complaint charges Feldstein, Mara Capital, and Vita Health of America with committing violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Feldstein also is charged with violations of Section 17(a) of the Securities Act of 1933. Trademore Capital Management LLC is charged as a relief defendant.

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SEC Charges San Diego-Based Investment Adviser in Cherry-Picking and Soft Dollar Schemes

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539795856#.Uiu5DMa1ESE

Washington D.C., Aug. 30, 2013 —

The Securities and Exchange Commission today announced charges against a San Diego-based investment advisory firm and its president for allegedly steering winning trades to favored clients and lying about how certain money was being spent.

The SEC’s Enforcement Division alleges that J.S. Oliver Capital Management and Ian O. Mausner engaged in a cherry-picking scheme that awarded more profitable trades to hedge funds in which Mausner and his family had invested. Meanwhile they doled out less profitable trades to other clients, including a widow and a charitable foundation. The disfavored clients suffered approximately $10.7 million in harm.

The SEC’s Enforcement Division further alleges that Mausner and J.S. Oliver misused soft dollars, which are credits or rebates from a brokerage firm on commissions paid by clients for trades executed in the investment adviser’s client accounts. If appropriately disclosed, an investment adviser may retain the soft dollar credits to pay for expenses, including a limited category of brokerage and research services that benefit clients. However, Mausner and J.S. Oliver misappropriated more than $1.1 million in soft dollars for undisclosed purposes that in no way benefited clients, such as a payment to Mausner’s ex-wife related to their divorce.

“Mausner’s fraudulent schemes were a one-two punch that betrayed his clients and cost them millions of dollars,” said Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Investment advisers must allocate trades and use soft dollars consistent with their fiduciary duty to put client interests first.”

The SEC also charged Douglas F. Drennan, a portfolio manager at J.S. Oliver, for his role in the soft dollar scheme.

According to the SEC’s order instituting administrative proceedings, Mausner engaged in the cherry-picking scheme from June 2008 to November 2009 by generally waiting to allocate trades until after the close of trading or the next day. This allowed Mausner to see which securities had appreciated or declined in value, and he gave the more favorably priced securities to the accounts of four J.S. Oliver hedge funds that contained investments from Mausner and his family. Mausner profited by more than $200,000 in fees earned from one of the hedge funds based on the boost in its performance from the winning trades he allocated. Mausner also marketed that same hedge fund to investors by touting the fund’s positive returns when in reality those returns merely resulted from the cherry-picking scheme.

According to the SEC’s order, the soft dollar scheme occurred from January 2009 to November 2011. Mausner and J.S. Oliver failed to disclose the following uses of soft dollars:
More than $300,000 that Mausner owed his ex-wife under their divorce agreement.
More than $300,000 in “rent” for J.S. Oliver to conduct business at Mausner’s home. Most of this amount was funneled to Mausner’s personal bank account.
Approximately $480,000 to Drennan’s company for outside research and analysis when in reality Drennan was an employee at J.S. Oliver.
Nearly $40,000 in maintenance and other fees on Mausner’s personal timeshare in New York City.

According to the SEC’s order, Drennan participated in the soft dollar scheme by submitting false information to support the misuse of soft dollar credits and approving some of the soft dollar payments to his own company.

The SEC’s order alleges that J.S. Oliver and Mausner willfully violated the antifraud provisions of the federal securities laws and asserts disclosure, compliance, and recordkeeping violations against them. The SEC’s order alleges that Drennan willfully aided, abetted, and caused J.S. Oliver’s fraud violations in the soft dollar scheme.

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SEC Sanctions Colorado-Based Portfolio Manager for Forging Documents and Misleading Chief Compliance Officer

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539791420#.UivJS8a1ESE

Washington D.C., Aug. 27, 2013 —

The Securities and Exchange Commission today sanctioned a former portfolio manager at a Boulder, Colo.-based investment adviser for forging documents and misleading the firm’s chief compliance officer to conceal his failure to report personal trades.

An SEC investigation found that Carl Johns of Louisville, Colo., failed to pre-clear or report several hundred securities trades in his personal accounts as required under the federal securities laws and the code of ethics at Boulder Investment Advisers (BIA). Johns concealed the trades in quarterly and annual trading reports that he submitted to BIA by altering brokerage statements and other documents that he attached to those reports. Johns later tried to conceal his misconduct by creating false documents that purported to be pre-trade approvals, and misled the firm’s chief compliance officer in her investigation into his improper trading.

To settle the SEC’s charges – which are the agency’s first under Rule 38a-1(c) of the Investment Company Act for misleading and obstructing a chief compliance officer (CCO) – Johns agreed to pay more than $350,000 and be barred from the securities industry for at least five years.

“Securities industry professionals have an obligation to adhere to compliance policies, and they certainly must not interfere with the chief compliance officers who enforce those policies,” said Julie Lutz, Acting Co-Director of the SEC’s Denver Regional Office. “Johns set out to cover up his compliance failures by creating false documents and misleading his firm’s CCO.”

According to the SEC’s order instituting settled administrative proceedings against Johns, the Investment Company Act required him to submit quarterly reports of his personal securities transactions and annual reports of his securities holdings. His firm’s code of ethics contained further restrictions on when and how Johns could trade in securities, and required his transactions to be pre-cleared by the firm’s chief compliance officer. From 2006 to 2010, Johns failed to comply with these obligations and did not pre-clear or report approximately 640 trades. These included at least 91 trades involving securities held or acquired by the funds managed by the firm. The code of ethics restricted trading in securities that the funds were buying or selling.

According to the SEC’s order, Johns submitted inaccurate quarterly and annual reports and falsely certified his annual compliance with the code of ethics. Johns physically altered brokerage statements, trade confirmations, and pre-clearance approvals before submitting them to the firm along with these reports. For example, he manually deleted securities holdings listed on his brokerage statements before submitting them in order to avoid disclosing securities purchases that were not pre-cleared.

The SEC’s order further finds that Johns created several documents that purported to be pre-clearance requests approved by the firm’s CCO, who had never actually reviewed or approved such trades. Johns created these false pre-clearance approvals to cover up instances in his annual report when securities transactions were not pre-cleared. Johns also altered the trade confirmations that he submitted to BIA by backdating the dates of the transactions, and he backdated trade confirmations to make it falsely appear as though pre-clearances were granted in advance of the transactions.

According to the SEC’s order, the firm’s CCO in late 2010 identified irregularities in the documents that Johns submitted to BIA detailing his personal securities transactions. The irregularities prompted the CCO to make inquiries about his compliance with the firm’s code of ethics, and Johns misled the CCO in response. Johns falsely told the CCO that he had closed certain brokerage accounts when in fact they remained open and were involved in trading that was not pre-cleared as required. Johns also accessed the hard copy file of his previously submitted brokerage statements and physically altered them to create the false impression that his trading was in compliance.

In settling the SEC’s charges, Johns has agreed to pay disgorgement of $231,169, prejudgment interest of $23,889, and a penalty of $100,000. Without admitting or denying the SEC’s findings, Johns consented to a five-year bar and a cease-and-desist order.

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SEC Charges John K. Marcum With Conducting Ponzi Scheme Targeting Retirement Savings of Investors

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539791027#.UivJTca1ESE

Washington D.C., Aug. 26, 2013 —

The Securities and Exchange Commission today charged a Noblesville, Ind., resident and his company with defrauding investors in a Ponzi scheme that targeted retirement savings.

The SEC alleges that John K. Marcum touted himself as a successful trader and asset manager to raise more than $6 million through promissory notes issued by his company Guaranty Reserves Trust. Marcum helped investors set up self-directed IRA accounts and gained control over their retirement assets, saying he would earn them strong returns on the promissory notes by day-trading in stocks while guaranteeing the safety of their principal investment. Yet Marcum did little actual trading and almost always lost money when he did. Throughout his scheme, Marcum provided investors with false account statements showing annual returns of more than 20 percent. Meanwhile, he used investor funds to pay for his luxurious personal lifestyle and finance several start-up companies.

The SEC obtained an emergency court order to freeze the assets of Marcum and his company.

“Marcum tricked investors into putting their retirement nest eggs in his hands by portraying himself as a talented trader who could earn high returns while eliminating the risk of loss,” said Timothy L. Warren, Acting Director of the Chicago Regional Office. “Marcum tried to carry on his charade of success even after he squandered nearly all of the funds from investors.”

According to the SEC’s complaint filed in federal court in Indianapolis, Marcum began his scheme in 2010. Investors gave Marcum control of their assets by either rolling their existing IRA accounts into the newly-established self-directed IRA accounts or by transferring their taxable assets directly to brokerage accounts that Marcum controlled. Marcum and certain investors co-signed the promissory notes, and Marcum then placed them in the IRA accounts.

The SEC alleges that Marcum assured investors he could safely grow their money through investments in widely-held publicly-traded stocks, and he promised annual returns between 10 percent and 20 percent. Marcum also told a number of investors that their principal was “guaranteed” and would never be at risk. He falsely told at least one investor that her principal would be federally insured. In the little trading he has done, Marcum has suffered losses amounting to more than $900,000. He has misappropriated the remaining investor funds for various unauthorized uses.

According to the SEC’s complaint, Marcum used investor money as collateral for a $3 million line of credit at the brokerage firm where he used to work. He took frequent and regular advances from the line of credit to fund such start-up ventures as a bridal store, a bounty hunter reality television show, and a soul food restaurant owned and operated by the bounty hunters. None of these businesses appear to be profitable, and Marcum’s investors were not aware that their money was being used for these purposes. Marcum used nearly $1.4 million of investor money to make payments directly to the start-up ventures and other companies. He also used more than a half-million dollars to pay personal expenses accrued on credit card bills, including airline tickets, luxury car payments, hotel stays, sports and event tickets, and tabs at a Hollywood nightclub.

According to the SEC’s complaint, Marcum did not have the funds needed to honor investor redemption requests. So he provided certain investors with a “recovery plan” that revealed his intention to solicit funds from new investors so that he could pay back his existing investors. Marcum had a phone conversation with three investors in June 2013 and admitted that he had misappropriated investor funds and was unable to pay investors back. During this call, Marcum begged the investors for more time to recover their money. He offered to name them as beneficiaries on his life insurance policies, which he claimed include a “suicide clause” imposing a two-year waiting period for benefits. He suggested that if he is unsuccessful in returning their money, he would commit suicide to guarantee that they would eventually be repaid.

The SEC’s complaint alleges that Marcum and Guaranty Reserves Trust violated the antifraud provisions of the federal securities laws. The SEC sought and obtained emergency relief including a temporary restraining order and asset freeze. The SEC additionally seeks permanent injunctions, disgorgement of ill-gotten gains and financial penalties from Marcum and Guaranty Reserves Trust, and disgorgement of ill-gotten gains from Marcum Companies LLC, which is named as a relief defendant.

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SEC Stops California Company With Misleading Registration Statement From Issuing Public Stock

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539788096#.UivJTsa1ESE

Washington D.C., Aug. 22, 2013 —

The Securities and Exchange Commission today issued an order to stop an initial public offering (IPO) of a Los Angeles area company before its shares were sold to the public. In issuing its stop order against Counseling International, the Commission determined that the company’s registration statement contains false and misleading information.

According to the SEC’s stop order, Counseling International’s registration statement fails to disclose the identity of the company’s control persons and promoters as required under the securities laws. Among other deficiencies, the registration statement falsely describes the circumstances surrounding the departure of the former CEO.

Stop orders proactively prevent fraud by halting the securities registration process before a company’s stock is sold to the public based on a deficient or misleading registration statement. Counseling International first filed a registration statement in August 2012 for an initial public offering of 764,000 shares of common stock. The registration statement has been amended four times since that filing.

“A company’s registration statement is the bedrock on which its stock is offered to the general public, and Counseling International did not provide the accurate and complete information that investors would be entitled to when deciding whether it’s appropriate to invest in the company,” said Michele Layne, Director of the SEC’s Los Angeles Regional Office. “Rarely do we have the opportunity to prevent investor harm before shares are even sold, but this stop order ensures that Counseling International’s stock cannot be sold in the public markets under this misleading registration statement.”

Counseling International agreed to the issuance of the order instituting the stop order proceeding, and also agreed not to engage or participate in any unregistered offering of securities conducted in reliance on Rule 506 of Regulation D for a period of five years from the issuance of the order.

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SEC Charges North Carolina-Based Investment Adviser for Misleading Fund Board About Algorithmic Trading Ability

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539785773#.UivJUMa1ESE

Washington D.C., Aug. 21, 2013 —

The Securities and Exchange Commission today announced charges against a North Carolina-based investment adviser and its former owner for misleading an investment fund’s board of directors about the firm’s ability to conduct algorithmic currency trading so they would approve the firm’s contract to manage the fund.

The SEC’s Enforcement Division alleges that Chariot Advisors LLC and Elliott L. Shifman misled the fund’s board about the nature, extent, and quality of services that the firm could provide as he touted the competitive benefits of algorithmic trading in two presentations before the board. Contrary to what Shifman told the directors, Chariot Advisors did not devise or otherwise possess any algorithms capable of engaging in the currency trading that Shifman was describing. After the fund was launched, Chariot Advisors did not use an algorithm model to perform the fund’s currency trading as represented to the board, but instead hired an individual trader who was allowed to use discretion on trade selection and execution. The misconduct by Shifman and Chariot Advisors caused misrepresentations and omissions in the Chariot fund’s registration statement and prospectus filed with the SEC and viewed by investors.

The case arises out of an initiative by the SEC Enforcement Division’s Asset Management Unit to focus on the “15(c) process” – a reference to Section 15(c) of the Investment Company Act of 1940 that requires a registered fund’s board to annually evaluate the fund’s advisory agreements. Advisers must provide the board with the truthful information necessary to make that evaluation. Other enforcement actions taken against misconduct in the investment contract renewal process and fee arrangements include cases against Morgan Stanley Investment Management, a sub-adviser to the Malaysia Fund, and two mutual fund trusts affiliated with the Northern Lights Variable Trust fund complex.

“It is critical that investment advisers provide truthful information to the directors of the registered funds they advise,” said Julie M. Riewe, Co-Chief of SEC Enforcement Division’s Asset Management Unit. “Both boards and advisers have fiduciary duties that must be fulfilled to ensure that a fund’s investors are not harmed.”

According to the SEC’s order instituting administrative proceedings, the false claims by Chariot and Shifman defrauded the Chariot Absolute Return Currency Portfolio, a fund that was formerly within the Northern Lights Variable Trust fund complex. In December 2008 and again in May 2009, Shifman misrepresented to the Chariot fund’s board that his firm would implement the fund’s investment strategy by using a portion of the fund’s assets to engage in algorithmic currency trading. Chariot fund’s initial investment objective was to achieve absolute positive returns in all market cycles by investing approximately 80 percent of the fund’s assets under management in short-term fixed income securities, and using the remaining 20 percent of the assets under management to engage in algorithmic currency trading.

According to the SEC’s order, Chariot Advisors did not have an algorithm capable of conducting such currency trading. The ability to conduct currency trading was particularly significant for the Chariot fund’s performance, because in the absence of an operating history the directors focused instead on Chariot Advisors’ reliance on models when the board evaluated the advisory contract. Even though Shifman believed that the fund’s currency trading needed to achieve a 25 to 30 percent return to succeed, Shifman never disclosed to the board that Chariot Advisors had no algorithm or model capable of achieving such a return.

According to the SEC’s order, because Chariot Advisors possessed no algorithm, currency trading for the fund was under the control of an individual trader who was not using an algorithm for at least the first two months after the fund’s launch. Shifman had interviewed the trader prior to her hiring and knew that she used a technical analysis, rules-based approach for trading that combined market indicators with her own intuition. The trader traded currencies for the fund until Sept. 30, 2009 when she was terminated due to poor trading performance. Subsequently, Chariot employed a third party who utilized an algorithm to conduct currency trading on behalf of the Chariot fund.

The SEC’s order alleges that the misconduct by Chariot and Shifman, who lives in the Raleigh area, resulted in violations of Sections 15(c) and 34(b) of the Investment Company Act of 1940 and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the order are true and whether any remedial sanctions are appropriate.

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SEC Charges Houston-Based Investor Relations Executive With Insider Trading in Stocks of Clients

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539732190#.UfRwaY21FG0

Washington D.C., July 26, 2013 —
The Securities and Exchange Commission today charged the former CEO of a Houston-based investor relations firm with insider trading in the securities of multiple firm clients.

The SEC alleges that Stephen B. Gray obtained confidential information about the companies while the firm assisted them with drafting and publishing press releases to announce quarterly and annual earnings, mergers and acquisitions, and other major events. Gray then traded on the basis of that material, non-public information for profits and avoided losses of more than $313,000 during a 13-month period. Gray disregarded the firm’s standard agreements with clients to protect confidential information and use it solely for business purposes, and he also flouted the firm’s “statement of policy regarding securities trades” that prohibited trading by firm personnel when in possession of non-public information about clients. Gray was fired last October after the firm learned about the SEC’s investigation.

“As head of an investor relations firm that helped clients prepare announcements of material events, Gray had unique access to extremely sensitive and confidential information before the rest of the world received it,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office. “Gray boldly abused his position for the sake of illegal insider trading profits.”

David L. Peavler, Associate Director of the Fort Worth Regional Office, added, “Gray not only knew the firm’s policies that prohibited employees from trading on confidential information gleaned from clients – he authored them. While Gray was personally requiring firm employees to sign copies of the policies he wrote, he was insider trading himself.”

According to the SEC’s complaint filed in federal court in Houston, Gray illegally traded in the securities of at least six firm clients. Employees often asked Gray for advice on press releases based on his status as the firm’s CEO as well as his experience as a former CEO of a public company. Gray asked employees about forthcoming material transactions or announcements before they became public, and he sometimes met directly with clients to discuss confidential information with them. Gray also helped maintain the firm’s shared computer network drive, which included drafts and final versions of all relevant press releases.

According to the SEC’s complaint, Gray opened his only trading account in September 2009 and borrowed funds from his life insurance policy to fund his trading activity. Despite the firm’s policies, the overwhelming majority of Gray’s trades involved securities of the firm clients, and he did not disclose his trades or his intention to trade to the firm or clients. At first, Gray primarily traded in the common stock of firm clients, sometimes holding the securities for months at a time but on other occasions compiling shares immediately before a major announcement. For example, on May 5, 2011, The Men’s Wearhouse issued a press release announcing higher than expected earnings per share for its quarter ending April 30. Its stock price increased 16 percent upon this news. While in possession of material non-public information about Men’s Warehouse about the impending announcement, Gray made an electronic calendar appointment for himself on April 29 with the subject: “Buy MW stock ahead of early June earnings release.” On April 30, Gray created another appointment with the subject: “Buy MW stock??” On May 3 and 4, he purchased 4,323 shares of Men’s Warehouse stock. Gray sold his shares on May 5 after the announcement for an illegal profit of $17,397.

According to the SEC’s complaint, later that same year Gray began engaging in more risky and lucrative short-term options trades in which profits were facilitated by his knowledge of inside information. In several instances, Gray purchased very short-term call and put options contracts. For instance, Gray’s firm worked with Powell Industries on drafting a press release in late 2011 to announce that its financial statements for the second and third quarters would be restated. Based on this material, non-public information, Gray purchased 15,000 Powell put options between October 18 and November 3. All of these options had the shortest term available. Powell issued the press release on November 8, and its stock price declined by 22 percent. Gray immediately sold his options for a profit of $82,570.

The SEC’s complaint charges Gray with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and seeks a final judgment ordering him to disgorge all of his ill-gotten gains with prejudgment interest and pay financial penalties. The complaint also seeks permanent injunctive relief.

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SEC Charges Former Portfolio Manager at S.A.C. Capital With Insider Trading

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539732673#.UfRwbY21FG0

Washington D.C., July 25, 2013 —
The Securities and Exchange Commission today charged a former portfolio manager at S.A.C. Capital Advisors with insider trading ahead of major announcements by technology companies.

The SEC alleges that Richard Lee’s illegal trading based on nonpublic information he received from sources with connections to insiders at the technology companies enabled the S.A.C. Capital hedge fund that he managed to generate more than $1.5 million in illegal profits. Lee also made trades in his personal account. The insider trading occurred ahead of public announcements about a Microsoft-Yahoo partnership and the acquisition of 3Com Corporation by Hewlett-Packard.

“Lee’s illegal trading is yet another byproduct of a pervasive, win-at-all-cost culture that will not be tolerated,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement. “Lee cultivated and used sources in the U.S. and China to gain an unfair trading edge that landed him in law enforcement’s crosshairs.”

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “We continue to relentlessly pursue and expose insider trading by hedge fund managers who are under the misguided belief that they won’t be apprehended and held accountable for their unlawful conduct.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Lee received inside information in July 2009 from a sell-side analyst familiar with nonpublic negotiations between Microsoft and Yahoo to enter into an Internet search engine partnership. Lee learned that the negotiations, previously the subject of market rumors, were moving forward and a deal could be finalized in the next two weeks. The analyst told Lee that the confidential information came from a close personal friend who worked at Microsoft. Lee thanked the analyst for the “very specific information” and promptly purchased hundreds of thousands of shares of Yahoo stock in a portfolio that he managed on behalf of S.A.C. Capital. Lee also purchased shares of Yahoo stock in his personal trading account. When the imminent deal was reported in the press almost a week later, Yahoo’s stock price rose approximately four percent on the news and S.A.C. Capital and Lee reaped substantial profits.

The SEC further alleges that Lee received highly confidential information about 3Com from a Beijing-based consultant who he knew had close personal ties with executives at the company. When his source tipped him on Nov. 11, 2009, that 3Com was on the verge of being acquired by Hewlett-Packard, Lee quickly purchased several hundred thousand shares of 3Com stock for the S.A.C. Capital hedge fund. On the basis of the nonpublic information, Lee amassed the sizeable 3Com position just minutes before Hewlett-Packard announced it agreed to acquire 3Com for $2.7 billion. The price of 3Com stock jumped more than 30 percent the next day, and the S.A.C. Capital hedge fund reaped substantial illicit profits as a result of Lee’s illegal trades.

The SEC's complaint charges Lee, who lives in Chicago, with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a final judgment ordering Lee to pay disgorgement of his ill-gotten gains plus prejudgment interest and financial penalties, and permanently enjoining him from future violations of these provisions of the federal securities laws.

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SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539730583#.UfRwcI21FG0

Washington D.C., July 23, 2013 —
The Securities and Exchange Commission today charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin, a virtual currency traded on online exchanges for conventional currencies like the U.S. dollar or used to purchase goods or services online.

The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today the value of 700,000 Bitcoin exceeds $60 million.

The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities. In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments. Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses.

The SEC issued an investor alert today warning investors about the dangers of potential investment scams involving virtual currencies promoted through the Internet.

“Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed.”

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Shavers sold BTCST investments over the Internet to investors in such states as Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. Shavers posted general solicitations on a website dedicated to Bitcoin discussions, and he misled investors with such false assurances about his investment opportunity as “It’s growing, it’s growing!” and “I have yet to come close to taking a loss on any deal,” and “risk is almost 0.” Contrary to the representations made to investors, BTCST was not in the business of buying and selling Bitcoin at all.

The SEC alleges that Shavers, who lives in McKinney, Texas, paid 507,148 Bitcoin in investor withdrawals and purported interest payments. He transferred at least 150,649 Bitcoin to his personal account at an online Bitcoin currency exchange. Shavers suffered a net loss from his day trading, but realized net proceeds of $164,758 from his sales of 86,202 Bitcoin. Shavers transferred $147,102 from his personal account at the online Bitcoin currency exchange to accounts he controlled at an online payment processor as well as his personal checking account. He used this money to pay his rent, utilities, and car-related expenses as well as for food and retail purchases and gambling.

The SEC’s complaint charges Shavers and BTCST with offering and selling investments in violation of the anti-fraud and registration provisions of the securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. The SEC is seeking a court order to freeze the assets of Shavers and BTCST in addition to other relief, including permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

The SEC’s investor alert, prepared by the agency’s Office of Investor Education and Advocacy, recommends that investors be wary of so-called investment opportunities that promise high rates of return with little or no risk, especially when dealing with unregistered, Internet-based investments sold by unlicensed promoters.

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SEC Charges Steven A. Cohen With Failing to Supervise Portfolio Managers and Prevent Insider Trading

Source- http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539726923#.UeswNY21FG0

The Securities and Exchange Commission today announced charges against hedge fund adviser Steven A. Cohen for failing to supervise two senior employees and prevent them from insider trading under his watch.

The SEC’s Division of Enforcement alleges that Cohen received highly suspicious information that should have caused any reasonable hedge fund manager to investigate the basis for trades made by two portfolio managers who reported to him – Mathew Martoma and Michael Steinberg. Cohen ignored the red flags and allowed Martoma and Steinberg to execute the trades. Instead of scrutinizing their conduct, Cohen praised Steinberg for his role in the suspicious trading and rewarded Martoma with a $9 million bonus for his work. Cohen’s hedge funds earned profits and avoided losses of more than $275 million as a result of the illegal trades.

“Hedge fund managers are responsible for exercising appropriate supervision over their employees to ensure that their firms comply with the securities laws,” said Andrew J. Ceresney, Co-Director of the SEC’s Division of Enforcement. “After learning about red flags indicating potential insider trading by his employees, Steven Cohen allegedly failed to follow up to prevent violations of the law. In addition to the more than $615 million his firm has already agreed to pay for the alleged insider trading, the Enforcement Division is seeking to bar Cohen from overseeing investor funds.”

According to the SEC’s order instituting administrative proceedings against Cohen, portfolio managers Martoma and Steinberg obtained material non-public information about publicly traded companies in 2008, and they traded on the basis of that information. The SEC charged Martoma and his tipper with insider trading in an enforcement action last year, and charged Steinberg with insider trading in a complaint filed earlier this year. In connection with those cases, CR Intrinsic, an affiliate of Cohen’s firm S.A.C. Capital Advisors, agreed to pay more than $600 millionin the largest-ever insider trading settlement. Another Cohen affiliate, Sigma Capital,agreed to pay nearly $14 million to settle insider trading charges.

The SEC’s investigation found that in his supervisory role, Cohen oversaw trading by Martoma and Steinberg and required them to update him on their stock trading and convey the reasons for their trades. On at least two separate occasions in 2008, they provided information to Cohen indicating their potential access to inside information to support their trading. However, Cohen stood by on both occasions instead of ascertaining whether insider trading was taking place.

According to the SEC’s order, Cohen watched Martoma build a massive long position in the stock of two pharmaceutical companies – Elan and Wyeth – based on their joint clinical trial of a drug with the potential to treat Alzheimer’s disease. Cohen allowed this despite repeated e-mails and instant messages to Cohen from other analysts at CR Intrinsic advocating against it. The analysts questioned whether Martoma possessed undisclosed data on the results of the trial. Cohen responded by saying it was “tough” to know whether Martoma knew something, but that he would follow Martoma’s advice because he was “closer to it than you.” In later exchanges of instant messages, Cohen further remarked that it “seems like mat [Martoma] has a lot of good relationships in this arena.” Cohen also was told about a doctor who had provided his portfolio managers with potentially non-public information about the clinical trial, but failed to express any concern about the use of that information. During his e-mail exchanges, Cohen displayed no concern that Martoma might possess non-public information or about his use of such information to inform investment decisions at his firm. Instead, Cohen encouraged Martoma to talk further with a doctor familiar with the clinical trial.

The SEC’s Enforcement Division alleges that after months of building up the massive position and being bullish on both Elan and Wyeth, Martoma had a 20-minute phone conversation with Cohen on July 20, 2008. According to Cohen, Martoma said that he was no longer comfortable with the Elan investments that CR Intrinsic and SAC held. Despite Martoma’s abrupt change in view and red flags that he likely received confidential information about the clinical trials from a tipper, Cohen failed to take prompt action to determine whether an employee under his supervision was violating insider trading laws. Starting the next morning, Cohen oversaw the liquidation of his and Martoma’s positions in Elan and Wyeth and the accumulation of a short position instead.

According to the SEC’s order, Cohen also supervised Steinberg while he was involved in insider trading of Dell securities in August 2008. After being looped into a highly suspicious e-mail between Steinberg and other firm employees reflecting the clear possibility that they possessed material non-public information about an upcoming earnings announcement at Dell, Cohen again failed to take prompt action to determine whether Steinberg was engaged in unlawful insider trading. Instead, Cohen liquidated his Dell shares based on the recommendation of Steinberg, who continued short selling Dell shares in his Sigma Capital portfolio based on the confidential information. Dell’s stock price dropped sharply after its August 28 earnings announcement, and funds managed by Cohen’s firms profited or avoided losses totaling at least $1.7 million. Three hours after the earnings announcement, Cohen e-mailed Steinberg: “Nice job on Dell.”

The SEC’s Division of Enforcement alleges that by engaging in the conduct described in the SEC’s order, Cohen failed reasonably to supervise Martoma and Steinberg with a view to preventing their violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The administrative proceedings will determine what relief is in the public interest against Cohen, including financial penalties, a supervisory and financial services industry bar, and other relief.

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SEC Halts Texas-Based Forex Trading Scheme

Source- http://www.sec.gov/news/press/2013/2013-125.htm

Washington, D.C., July 12, 2013 — The Securities and Exchange Commission today announced an emergency asset freeze against an unregistered money manager and his companies in Plano, Texas, who are charged with defrauding investors in a foreign currency exchange trading scheme

The forex market is a large and generally liquid financial market in which the risk of loss for individual investors can be substantial. The SEC has previously warned individual investors about the risks involved with forex trading.

The SEC alleges that Kevin G. White raised more than $7.1 million from investors by touting a sophisticated low-risk forex trading strategy yielding astronomical returns. He advertised his purported "25-year Wall Street career." In reality, the forex trading has incurred losses of investor funds, and White actually spent only six years as a licensed securities professional in Houston before being barred by the New York Stock Exchange two decades ago. White also lied about his education. Meanwhile, White has siphoned away more than $1.7 million of investor money to pay personal expenses, finance expensive trips, and fund other unrelated and undisclosed businesses and investments.

"White and his companies brandished phony credentials and a can't-miss trading strategy to lure investors into a web of deceit," said David Woodcock, Director of the SEC's Fort Worth Regional Office. "In reality, White was suffering forex trading losses and putting investor money to other uses."

The Commodity Futures Trading Commission (CFTC) today announced parallel charges against White and his companies.

According to the SEC's complaint that was unsealed late yesterday in U.S. District Court of the Eastern District of Texas, White raised investor money through two entities that he owns and controls: KGW Capital Management and Revelation Forex Fund. KGW Capital purports to be "one of the world's leading private investment firms."

The SEC alleges that White and his companies used websites, press releases, and presentations to prospective investors to solicit funds. White and his companies told investors that Revelation Forex was a $1 billion hedge fund that had achieved total returns of more than 393 percent since its January 2009 inception, and earned a compound annual rate of return of more than 36 percent. Marketing materials provided to prospective investors boasted that an initial investment of $250,000 in Revelation Forex in January 2009 would have grown to $983,111 by May 2013.

The SEC alleges that these claims were false. While White and KGW Capital tout a track record for the fund that began in January 2009, Revelation Forex did not actually receive investor funds or begin forex trading until September 2011. The fund has since incurred realized trading losses of more than $550,000 plus approximately $1,419,600 in unrealized losses through May 31, 2013. Meanwhile, bank records reveal that White has taken more than $1.7 million for himself, KGW Capital, and two of his other businesses, including approximately $248,600 in investor funds from Revelation Forex to fund an unrelated and undisclosed propane business and $97,000 on another business entitled KGW Real Estate. The SEC's complaint names both of these companies as relief defendants for the purpose of seeking disgorgement of investor funds in their possession.

The court has granted the SEC's request for an asset freeze and temporary restraining order against White, KGW Capital, Revelation Forex, and RFF GP LLC, which is the general partner of Revelation Forex. The court appointed Kelly Crawford as the receiver over these entities. A hearing has been scheduled for July 18, 2013, on the SEC's motion for a preliminary injunction.

The SEC's complaint alleges that White, KGW Capital, Revelation Forex, and RFF violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties as well as preliminary and permanent injunctions.

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SEC Freezes Assets Of Insider Traders in Onyx Pharmaceuticals

Source- http://www.sec.gov/news/press/2013/2013-123.htm

Washington, D.C., July 3, 2013 — The Securities and Exchange Commission today obtained an emergency court order to freeze the assets of traders using foreign accounts to reap approximately $4.6 million in potentially illegal profits by trading in advance of the Sunday, June 30, 2013 announcement that Onyx Pharmaceuticals, Inc. had received, but rejected an acquisition offer from Amgen, Inc.

The SEC alleges that unknown traders took risky bets that Onyx's stock price would increase by purchasing call options on June 26, 27 and 28, the three trading days before the announcement. Through quick, cross country coordination between the agency's Los Angeles and New York offices, the SEC took emergency action to freeze the traders' assets before courts closed for the holiday.

"This action demonstrates that the SEC will not hesitate to freeze the assets of suspicious foreign traders when the timing and size of their trades indicate that they were misusing inside information, and use of foreign accounts will not dissuade us," said Michele Wein Layne, Director of the SEC's Los Angeles Regional Office.

According to the SEC's complaint filed in federal court in Manhattan, on June 30, 2013 Onyx announced that it had received, but rejected, an unsolicited proposal from Amgen to acquire all of Onyx's outstanding shares and share equivalents for $120 per share in cash. The Announcement also stated that Onyx's board of directors rejected Amgen's proposal and that Onyx had authorized its financial advisors to contact potential acquirers who may have an interest in a transaction with Onyx. Amgen's $120 per share price offer represented a 38% premium to Onyx's closing share price on Friday June 28, 2013. The complaint further alleges that as a result of the announcement, Onyx's share price increased from a close of $86.82 on over 51% on Monday July 1 compared with the prior trading day's closing price, and that the trading volume of its stock increased by over 900% that day. The complaint alleges that the traders, as a result of these well-timed trades, collectively earned a profit of approximately $4.6 million in just three days.

The SEC alleges that certain unknown traders were in possession of material nonpublic information about the offer to acquire Onyx at a substantial premium over the stock price at the time they made thy purchased Onyx call options, many of which were out-of-the-money, in the three trading days before the announcement. According to the complaint, the timing and size of the trades were highly suspicious because they constituted large increases over the historical volume for those call options purchased.

The emergency court order obtained by the SEC freezes the traders' assets related to the Onyx call options transactions and prohibits the traders from destroying any evidence. The SEC's complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. In addition to the emergency relief, the Commission is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and permanently bar them from future violations

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