Thursday, May 28, 2015

Former SEC ALJ Claims Bias

More information coming out from the Wall Street Journal's article on the failure of defendants to get a fair trial before the SEC's own administrative law judges.

According to the article, one former SEC judge said she thought the system was slanted against defendants at times.

Lillian McEwen, who was an SEC judge from 1995 to 2007, said she came under fire from Ms. Murray for finding too often in favor of defendants. “She questioned my loyalty to the SEC,” Ms. McEwen said in an interview, adding that she retired as a result of the criticism.

Ms. McEwen said the SEC in-house judges were expected to work on the assumption that “the burden was on the people who were accused to show that they didn’t do what the agency said they did.”

Of course, the burden is on the SEC to prove the allegations, not the reverse.If that comment is true, it is no wonder why defendants lose 90% of the time, and 100% of the time before Judge Elliot.

A spokeswoman for the SEC judges declined to comment, and the judges declined to be interviewed.

For more information - SEC Wins With In-House Judges - WSJ

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Wednesday, May 27, 2015

SEC Wins Big When Bringing Cases In Front of its Own Judges

This story is not going away, and the SEC needs to pull its collective heads out of the sand and stop denying what everyone knows. Using an administrative law judge, which you appoint, to decide charges that you decided to bring, by a prosecutor that you pay, is not, and cannot result in a fair hearing.

Mary Jo White, the head of the SEC, has been quoted as saying that its in-house adjudication system is  “very fair.” Enforcement chief Andrew Ceresney said the SEC’s “excellent record in administrative proceedings reflects the strength of the evidence presented in each case, and not our choice of venue.” So why the dramatic shift out of court and into their own system? Undoubtedly because the SEC wins more cases when it pays and appoints the Judge, and when it gets to decide the appeals of its own case.

 

There is simply no disputing the facts. According to the WSJ, the SEC won against 90% of defendants before its own judges in contested cases from October 2010 through March of this year. That was markedly higher than the 69% success the agency obtained against defendants in federal court over the same period, based on SEC data.

Going back to October 2004, the SEC has won against at least four of five defendants in front of its own judges every fiscal year.

The situation is worse when a defendant appeals. In an SEC administrative proceeding, the first appeal is to the Commission itself. Remember, it is the Commission itself who decided to file the charges, the Commission appoints the judge and the prosecutor who handle the case. Is there any real surprise that the Commissioners decided in their own agency’s favor concerning 53 out of 56 defendants in appeals—or 95%—from January 2010 through this past March?

In the 5 other instances, the cases were sent back to in-house SEC judges to reconsider. No defendant was cleared on appeal. None.

“In an administrative law proceeding” at the SEC, said Bradley Bondi, a former counsel to two former SEC commissioners, “the commission is akin to the prosecutor and then, in an appeal, the judge in the same case.”

For more information - SEC Wins With In-House Judges - WSJ

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--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Friday, May 22, 2015

SEC News - FCPA Violations; BD Fraud Charges; Suitability Allegations

SEC Charges BHP Billiton With Violating FCPA at Olympic Games
Global resources company BHP Billiton has been charged with violating the Foreign Corrupt Practices Act (FCPA) when it sponsored the attendance of foreign government officials at the Summer Olympics.

Brokerage Firm Co-Owners Charged With Defrauding Investors
Co-owners of a Manhattan-based brokerage firm now face fraud charges.

Investment Firm and Two Executives Accused of Defrauding Police and Firefighter Pension Funds
An Atlanta-based investment advisory firm and two executives have been accused of selling unsuitable investments to pension funds for the city’s police and firefighters, transit workers, and other employees.

Wednesday, May 20, 2015

UBS Fined $545 Million in Forex Scandal

 

UBS will pay $545 million to U.S. authorities to end an investigation into alleged manipulation of currency rates, a settlement that will help the Swiss bank to move on after a series of trading scandals.

For more information visit UBS to pay $545 mln over forex scandal, rivals await fate

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Monday, May 18, 2015

SEC News - False Claims, ITT Fraud, Insider Trading

SEC Sues Retirement Planners for Making False Claims to Investors
A self-described retirement planning firm and its principals have been charged with falsely telling customers that interests in life settlements they offered and sold were “guaranteed,” “safe as CDs,” and “federally insured.”

Fraud Charges Announced Against ITT Educational Services
Fraud charges have been announced against ITT Educational Services Inc., its chief executive officer, and its chief financial officer.

Nationwide Life Insurance Company Charged With Pricing Violations
Nationwide Life Insurance Company has been charged with routinely violating pricing rules in its daily processing of purchase and redemption orders for variable insurance contracts and underlying mutual funds.

Father and Son Charged in $1.1 Million Insider Trading Scheme
A father and son in New York have been charged with conducting a serial insider trading scheme involving tips of key nonpublic information in coded e-mail messages disguised as discussions about golf.

Friday, May 15, 2015

Be Wary of Famous People Promoting Penny Stocks

The penny stock market has the potential for significant profits, and of course, significant losses. Investing in start-ups and small companies is speculative, and high risk, but has an allure for a certain type of investor.

One problem with this market segment is the promotion of such investments to individuals who are unsuitable for the investment,

Over the years we have seen well known individuals promote such ventures. Bloomberg Business has an article regarding four-star Army general Wesley Clark's involvement in promoting such ventures, including a Grilled Cheese Truck company, and a hydroponic lettuce company.

According to the article, Clark is one of many former governors, generals, and congressmen who’ve found second careers lending their name to  companies that are willing to pay for prestige. Since he ran for president in 2004, Clark has joined the boards of at least 18 public companies, 10 of them penny-stock outfits, whose shares trade in the “over the counter” markets, a corner of Wall Street where fraud and manipulation are common.

Clark claims that these small start-ups come to him for his global connections and enginnerin background, an area of expertise which does not seem to have any connection to a cheese truck franchise. At the same time, he denies that he is lending an endorsement to the companies, and claims that "Nobody's going to invest in a company just because General Clark is a director."

Perhaps, but if the allure is his engineering background and not an endorsement, why is he making promotional videos, recommending an investment in the company and saying things like "we'd love it if you joined us with an investment" and being filmed in a replica of the oval office?

There is no question that these companies are using Clark's name, and others, to gain legitimacy, and there is nothing wrong with that. Having a famous and respected person as your spokesperson does lend credibility. But does that mean that we should be investing in the company?

The answer to that question is in the last sentence of the article:

The bottom line: Since 2004, Clark has joined the boards of at least 10 penny-stock companies. All but one lost value during his tenure.

For more information - Wesley Clark, Penny-Stock General - Bloomberg Business

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Thursday, May 14, 2015

SEC Files Charges Against ITT Educational Services

The SEC has filed charges against ITT Educational Services Inc., its chief executive officer, and its chief financial officer.   The SEC alleges that the national operator of for-profit colleges and the two executives fraudulently concealed from ITT’s investors the poor performance and looming financial impact of two student loan programs that ITT financially guaranteed.  ITT formed both of these student loan programs, known as the “PEAKS” and “CUSO” programs, to provide off-balance sheet loans for ITT’s students following the collapse of the private student loan market.  To induce others to finance these risky loans, ITT provided a guarantee that limited any risk of loss from the student loan pools.

For more information - SEC.gov | SEC Announces Fraud Charges Against ITT Educational Services

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Nationwide Life Settles Charges Violating Pricing Rules for 8 Million Dollars

If you have an annuity with Nationwide Life you may want to read this. The SEC charged the company with routinely violating pricing rules in handling purchase and redemption orders for variable insurance contracts and underlying mutual funds.

Nationwide agreed to settle the charges and pay an $8 million penalty.

Pricing rules for mutual fund shares require an investment company to compute the value of its shares at least once daily at a specific time.  According to the SEC, Nationwide’s prospectuses stated that mutual fund orders received before 4 p.m. at its home office in Columbus, Ohio, would receive the current day’s price.  Orders received after 4 p.m. would receive the next day’s price.

The SEC alleges that Nationwide intentionally delayed the pickup of its mail at its PO Box, avoiding the requirement to process trades at the current day's price. It did however pick up its other mail from PO Boxes in a timely fashion.

Meanwhile, Nationwide did arrange for prompt pickup and delivery of U.S. Postal Service Priority Mail or Priority Express Mail that enabled contract owners to track an order’s time of delivery to the P.O. boxes.  Those orders were assigned the current day’s price.

 

For more than a 15-year period, Nationwide intentionally delayed the delivery of untracked mail containing orders from customers and processed them at the next day’s prices in violation of the law. - Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office. 

The SEC's penalty will not compensate victims. If you have redeemed or purchased a Nationwide Life Insurance annuity and did so by regular mail, contact our office by email.

For more information - SEC Charges Nationwide Life Insurance Company With Pricing Violations

--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.