Saturday, May 28, 2016

Investors Filing Claims for Energy, Oil and Gas Stock Losses

English: An entrance to ONEOK Field in Tulsa, ...
With the collapse of oil prices over the past two years, many analysts were predicting a decline in the overall stock market, and in particular in oil and energy stocks. That of course, means an increase in securities arbitration claims involving oil, gas and energy stocks.

Sure enough, those cases are being filed. Our firm is seeing an increase in FINRA sales practice investigations of firms whose clients have concentrated positions in energy company stocks. Energy Stocks and high yield bonds from oil and gas companies have suffered large losses after the collapse of oil prices. Investors who placed their funds in energy stocks, master limited partnerships (MLPs) or oil and gas offerings may have found themselves over concentrated in these investments and are now looking to their financial advisers for compensation for their losses.
English: Seadrill West Epsilon Jack-up drillin...

Securities at the top of the list of targets for such claims include Linn Energy, ONEOK Partners, Mobile Energy, Breitburn Energy Partners LP, Hi-Crush Partners LP, Legacy Partners, Memorial Resource Development Corp., Memorial Production Partners LP, and Permian Basin Royalty Trust, Alerian MLP ETF, Seadrill Limited, Cobalt International Energy, Sandridge Energy, Camac Energy and Hercules Offshore 

Other targeted securities include Kinder Morgan, Marathon Oil Corp., Magellan Midstream Partners, LP, Buckeye Partners, Enbridge Energy Partners, QEP Resources, Pioneer Natural Resources, ClearBridge American Energy MLP Fund and EOG Resources  as well as many of the large mutual fund family offerings in the energy sector.

Thursday, May 26, 2016

FINRA and SEC Actions Against Compliance Officers

There was a time when FINRA and the SEC, gave compliance officers a pass in regulatory actions, except of course in the most egregious cases. Their job is tough enough without worrying about a regulatory complaint because of perceived mis-step by someone at their firm.

Those days are gone, and the first line of regulatory oversight at the 4,000+ brokerage firms in this country is finding itself the subject of regulatory proceedings. Fortunately, we have not seen many actions against compliance officers, and the reality is that a good faith effort to create a supervisory system, and to insure that it is being followed, should keep the compliance department out of a regulatory action.

But it does happen, and Brian L. Rubin from Sutherland Asbill and Brennan, LLP, has put together an analysis and recap of recent enforcement proceedings against compliance officers.


Tuesday, May 24, 2016

SEC Prevents Trader’s Profits From False Filing

The Securities and Exchange Commission has obtained a court order to freeze the profits of a trader who allegedly manipulated a technology stock through a false regulatory filing traced to a computer in Pakistan.  
The asset freeze issued today in federal court in Manhattan ensures that Nauman A. Aly of Pakistan cannot withdraw from his U.S.-based account the $425,000 in options trading profits made in less than 30 minutes last month after the false filing.  The filing stated that Aly and six Chinese investors had collectively acquired 5.1 percent of Silicon Valley-based Integrated Device Technology (IDT).  According to the SEC’s complaint, his false statements caused the company’s stock to spike more than 25 percent within minutes.
 
“We allege that Aly tried to fool the markets from a computer in Pakistan to make an easy profit, but we made sure he didn’t cash in.  Market manipulation doesn’t pay, no matter the method or how distant the perpetrator,” said Andrew Ceresney, Director of the SEC Enforcement Division.
 
According to the SEC’s complaint: 
 
  • On April 12 at 11:50 a.m. Eastern Time, Aly purchased 1,850 call options in IDT in his U.S. brokerage account for $18,500.  
  • At 12:08 p.m., Aly filed a form known as a Schedule 13D on the SEC’s EDGAR system and falsely stated that his group of investors had a 5.1 percent beneficial ownership of IDT and had sent a letter to the board of directors offering to acquire all of the company’s shares for a price that represented a 65 percent premium.  
  • The market reacted quickly to the filing, and IDT’s stock price increased by more than 25 percent in less than 10 minutes.
  • At 12:18 p.m., Aly sold all of the options for the illicit $425,000 profit.  He then filed another Schedule 13D stating that his group of investors no longer owned more than 5 percent of IDT after his options sales.
  • Aly used the same IP address for the options trades that he used to make the false filings. 
  • Aly’s group of investors never actually owned 5.1 percent of IDT and never contacted IDT to buy all of its shares.  
The SEC’s complaint charges Aly with violating antifraud provisions of the federal securities laws, including 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 complaint seeks disgorgement, penalties, and other related relief.
 
The SEC’s continuing investigation is being conducted by David Snyder, Assunta Vivolo, Kelly Gibson, John Rymas, and Patrick McCluskey in the Market Abuse Unit in Philadelphia.  The case is being supervised by the unit’s co-chiefs Robert Cohen and Joseph Sansone.  The litigation will be led by David Axelrod and Julia Green of the Philadelphia office.  


SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Friday, May 20, 2016

Two Individuals Share Whistleblower Award of More Than $450,000

The Securities and Exchange Commission today announced it will jointly award more than $450,000 to two individuals for a tip that led the agency to open a corporate accounting investigation and for their assistance once the investigation was underway.

The whistleblower award is the third announced by the SEC in the past week, bringing the past week’s payouts to $10 million.

“The recent flurry of awards reflects the high-quality nature of the tips the SEC is receiving as public awareness of the whistleblower program grows,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower.  “These two individuals not only submitted valuable tips to help open our investigation but also provided valuable assistance as we proceeded, showing that our program particularly rewards those eager to continue helping us throughout the process of bringing an enforcement action.”

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

The SEC’s whistleblower program has now awarded more than $68 million to 31 whistleblowers since the program’s inception in 2011.  Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

For more information about the whistleblower program and how to report a tip: http://ift.tt/NFydSr.



SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Thursday, May 19, 2016

Mayor in Illinois Settles Muni Bond Fraud Charges

The Securities and Exchange Commission today announced that the mayor of Harvey, Ill., has agreed to pay $10,000 and never participate in a municipal bond offering again in order to settle fraud charges.

The SEC alleges that Eric J. Kellogg was connected to a series of fraudulent bond offerings by the city.  Investors were told that their money would be used to develop and construct a Holiday Inn hotel in Harvey, but instead city officials diverted at least $1.7 million in bond proceeds to fund the city’s payroll and other operational costs unrelated to the hotel project.

According to the SEC’s complaint filed in the U.S. District Court for the Northern District of Illinois, Mayor Kellogg exercised control over Harvey’s operations and signed important offering documents the city used to offer and sell the bonds.  Based on his control of the city, Kellogg is liable for fraud as a control person under Section 20(a) of the Securities Exchange Act.

“Investors were told one thing while the city did another, and Kellogg was in a position to control the bond issuances and prevent any fraudulent use of investor money.  His days of participating in muni bond offerings are over,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit. 

Kellogg agreed to settle the charges without admitting or denying the SEC’s allegations.  The settlement is subject to court approval.

The SEC’s investigation was conducted by Sally J. Hewitt, Eric A. Celauro, and Brian D. Fagel of the Public Finance Abuse Unit, with assistance from Scott J. Hlavacek and Eric M. Phillips of the Chicago Regional Office.



SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

SEC Announces Insider Trading Charges in Case Involving Sports Gambler and Board Member

The Securities and Exchange Commission today announced insider trading charges against a professional sports gambler who allegedly made $40 million based on illegal stock tips from a corporate insider who owed him money.

The SEC alleges that the sports gambler, William “Billy” Walters of Las Vegas, was owed money by then-Dean Foods Company board member Thomas C. Davis.  According to the SEC complaint, Davis regularly shared inside information about Dean Foods with Walters in advance of market-moving events, using prepaid cell phones and other methods in an effort to avoid detection.  The SEC further alleges that while Walters made millions of dollars insider trading using the confidential information, he provided Davis with almost $1 million and other benefits to help Davis address his financial debts. 

The SEC complaint also alleges that professional golfer Phil Mickelson traded Dean Foods’s securities at Walters’s urging and then used his almost $1 million of trading profits to help repay his own gambling debt to Walters.  Walters and Davis are charged with insider trading, and Mickelson is named as a relief defendant.  Relief defendants are not accused of wrongdoing but are named in SEC complaints for the purposes of recovering alleged ill-gotten gains in their possession from schemes perpetrated by others.

“As we charge in our complaint, Walters illegally reaped tens of millions of dollars with the benefit of the ultimate ace in the hole – confidential information leaked by a sitting board member of a public company,” said Andrew Ceresney, Director of the SEC’s Enforcement Division.  “Additionally, Mickelson will repay the money he made from his trading in Dean Foods because he should not be allowed to profit from Walters’s illegal conduct.” 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Walters and Davis.

After certain suspicious trades had been identified, the SEC’s investigation analyzed years of trading data and other information and followed the leads back to Walters and Davis, including their use of a variety of prepaid cell phone numbers.

According to the SEC’s complaint, Walters provided Davis with a prepaid cellular phone to use when he shared inside information about Dean Foods.  Walters further instructed Davis to refer to Dean Foods as the “Dallas Cowboys” during conversations.

According to the SEC’s complaint filed in federal court in Manhattan:

  • The unlawful trading occurred during a five-year period.  Among the inside information passed from Davis to Walters in advance of Dean Foods public announcements was earnings information for the second and fourth quarters in 2008, the first and third quarters in 2010, and the first and second quarters of 2012.
  • Davis also tipped Walters as Dean Foods prepared to convert its profitable subsidiary WhiteWave Foods Company into a separate business with its own stock.  Walters traded in Dean Foods stock in advance of public announcements about the spin-off and initial public offering (IPO) of WhiteWave shares.
  • The SEC also identified suspicious trades in the stock of Darden Restaurants and linked them to Davis, who was recruited in 2013 by a group of shareholders buying up Darden stock with the goal of influencing management to make corporate changes.
  • Davis was lacking market-moving information about Dean Foods to share with Walters at that time, so he began sharing nonpublic information about strategic plans for Darden despite signing a non-disclosure agreement to keep the group’s details secret.
  • Walters in turn bought almost $30 million worth of Darden stock based on illegal tips from Davis and profited when the stock price increased 7 percent in October 2013 upon reported news about the investor group’s plans.
  • In July 2012, Walters called Mickelson, who had placed bets with Walters and owed him money at the time.  While Walters was in possession of material nonpublic information about Dean Foods, he urged Mickelson to trade in Dean Foods stock.
  • Mickelson bought Dean Foods stock the next trading day in three brokerage accounts he controlled.  About one week later, Dean Foods’s stock price jumped 40 percent following public announcements about the WhiteWave spin-off and strong second-quarter earnings.
  • Mickelson then sold his shares for more than $931,000 in profits.  He repaid his debt to Walters in September 2012 in part with the trading proceeds.

The SEC’s complaint charges Walters and Davis with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks a final judgment ordering the return of ill-gotten gains plus interest and penalties as well as permanent injunctions from future violations of Section 10(b) and Rule 10b-5 and an officer-and-director bar against Davis. 

Mickelson neither admitted nor denied the allegations in the SEC’s complaint and agreed to pay full disgorgement of his trading profits totaling $931,738.12 plus interest of $105,291.69.

The SEC’s investigation was conducted in its San Francisco Regional Office by Karen Kreuzkamp, Market Abuse Unit members Victor W. Hong, William J. Martin, and Steven D. Buchholz, and Alexander M. Vasilescu of the New York office, who will also lead the SEC’s litigation.  The case was supervised by San Francisco office director Jina L. Choi and Market Abuse Unit co-chief Joseph Sansone. 

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, U.S. Postal Inspection Service, and Financial Industry Regulatory Authority.



SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Tuesday, May 17, 2016

SEC Awards More Than $5 Million to Whistleblower

The Securities and Exchange Commission today announced that it will award between $5 million and $6 million to a former company insider whose detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information. 
“Employees are often best positioned to witness wrongdoing,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “When they report specific and credible tips to us, we will leverage that inside knowledge to advance our enforcement of the securities laws and better protect investors and the marketplace.”
 
Today’s award is the SEC’s third highest to a whistleblower.  In September 2014, the agency announced a more than $30 million whistleblower award, exceeding the prior highest award of more than $14 million announced in October 2013.  Since the inception of the whistleblower program in 2011, the SEC has awarded more than $67 million to 29 whistleblowers, including one for more than $3.5 million announced last week.
 
“The whistleblower program has seen tremendous growth since its inception and we anticipate the continued issuance of significant whistleblower awards in the months and years to come,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower.  
 
By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action. 
 
Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.
 
For more information about the whistleblower program and how to report a tip: http://ift.tt/NFydSr.
 


SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Monday, May 16, 2016

Statement on Trade Reporting in the U.S. Treasury Market

The U.S. Department of the Treasury and the Securities and Exchange Commission today announced that they are working together to explore efficient and effective means of collecting U.S. Treasury cash market transaction information. As part of those efforts, the agencies are requesting that the Financial Industry Regulatory Authority (FINRA) consider a proposal to require its member brokers and dealers to report Treasury cash market transactions to a centralized repository.

Treasury’s recent request for information (RFI) on the evolution of the U.S. Treasury market structure sought views on the most effective means of obtaining more comprehensive official sector access to U.S. Treasury cash market data on a regular and ongoing basis. The responses to the RFI expressed broad support for more comprehensive reporting to regulators, including nearly unanimous support for reporting additional information on Treasury cash market activity.
 
“The Treasury cash market is vital for investors and other market participants,” said SEC Chair Mary Jo White. “Regulatory reporting by FINRA members could provide important new information about day‑to‑day activity in both inter‑dealer and dealer‑to‑client markets.”
 
“The need for more comprehensive official sector access to data, particularly with respect to Treasury cash market activity, is clear,” said Antonio Weiss, Counselor to Treasury Secretary Jacob J. Lew. “It is important to build on this growing consensus and, we are committed to having a comprehensive plan to collect cash market data in place by year end. Today’s request to FINRA is a significant first step toward that objective.”
 
Any proposal by FINRA to require reporting of Treasury cash market activity would be subject to review and approval by the SEC, in consultation with Treasury.
 
Treasury will continue working with other agencies and authorities to develop a plan for collecting similar data from institutions who actively trade U.S. Treasury securities but are not FINRA members.
 
The collection of this data will better enable official authorities to fulfill their responsibilities to safeguard the U.S. Treasury market, which remains the deepest and most liquid securities market in the world.


SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Agencies Invite Comment on Proposed Rule to Prohibit Incentive-Based Pay that Encourages Inappropriate Risk-Taking in Financial Institutions

Six federal agencies are inviting public comment on a proposed rule to prohibit incentive-based compensation arrangements that encourage inappropriate risks at covered financial institutions. The deadline for comments on the proposed rule, which was submitted for publication in the Federal Register, is July 22, 2016.

Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the agencies to jointly prescribe such regulations or guidelines. There is evidence that flawed incentive-based compensation packages in the financial industry were one of the contributing factors in the financial crisis that began in 2007.
 
The proposed rules would apply to covered financial institutions with total assets of $1 billion or more. The requirements are tailored based on assets, and covered institutions would be divided into three categories:
  • Level 1: institutions with assets of $250 billion and above;
  • Level 2: institutions with assets of $50 billion to $250 billion; and
  • Level 3: institutions with assets of $1 billion to $50 billion.
Much of the proposed rules would address requirements for senior executive officers and employees who are significant risk-takers at Level 1 and Level 2 institutions. All institutions that would be covered by the proposed rules would be required to annually document the structure of incentive-based compensation arrangements and retain those records for seven years. Boards of directors of covered institutions would be required to conduct oversight of the arrangements. All covered institutions would be subject to general prohibitions on incentive-based compensation arrangements that could encourage inappropriate risk-taking by providing excessive compensation or that could lead to a material financial loss.
 
Interested parties may find a copy of the proposed rule at http://ift.tt/21EUUrv.
 
 
Media Contacts:
FDIC                          LaJuan Williams-Young         (202) 898-6859
FHFA                         Stefanie Johnson                   (202) 649-3030
Federal Reserve        Darren Gersh                         (202) 452-2955
NCUA                         John Fairbanks                      (703) 518-6336
OCC                           Bryan Hubbard                       (202) 649-6870
SEC                            Ryan White                            (202) 551-4120          
 
 


SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.