SEC Archives - The Industry Spread

International Tax Evasion: CRA Conducts 15 Searches in Ontario and Quebec

June 16, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Canada, CRA, excise tax laws, financial transactions, Income Tax Act, International Tax Evasion, Ontario, Quebec, SEC

The Canada Revenue Agency , CRA announced that it executed 15 simultaneous search warrants on June 12, 2019, in Ottawa, the Greater Toronto Area, London, and Windsor, Ontario, and in Gatineau, Laval, and Montréal, Quebec. These searches were conducted in order to collect more information in connection to an investigation, representing approximately $8.3 million in tax evaded.

Approximately 128 members of the CRA, assisted by the Royal Canadian Mounted Police, took part in the operation to search each of the locations in Canada for evidence corresponding to the commission of offences against the Income Tax Act and the Criminal Code.

The CRA would like to acknowledge the significant contribution of the Financial Transactions and Reports Analysis Centre of Canada to this criminal investigation.

Under the income tax and excise tax laws, persons convicted of tax evasion can face fines ranging from 50% to 200% of the evaded taxes and up to five years imprisonment. If convicted of fraud under Section 380 of the Criminal Code, an individual can face up to 14 years in jail.

The CRA has set up a free subscription service to help Canadians stay current on the CRA’s enforcement actions.

SEC Announces 2019 Government-Business Forum to Be Held in Omaha

June 16, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, Creighton University, entrepreneurs, Government-Business, industry, Money, OASB, Omaha, Remarks, SEC, small business

Washington D.C., June 12, 2019 — The Securities and Exchange Commission today announced that it will host the 38th annual Government-Business Forum on August 14, 2019, in Omaha, Nebraska. The Forum provides a platform to highlight perceived impediments to capital formation, culminating in recommendations for government and private action to improve the environment for small businesses. The Forum will be hosted in partnership with the Heider College of Business at Creighton University.

This is the first year that the newly established Office of the Advocate for Small Business Capital Formation (OASB) will coordinate the annual Forum. “We are looking forward to this important event where market participants provide invaluable feedback on ways to improve the small business capital formation landscape,” said SEC Advocate for Small Business Capital Formation Martha Legg Miller.
Jay Clayton, SEC Chairman
“Hosting the Forum this year in the heart of the Silicon Prairie is a great continuation of reaching out to, and hearing directly from, small businesses and their investors from across the country,” said Chairman Jay Clayton.

The Forum will begin at 9 a.m. Central Time and will be free and open to the public. It will be held in the Hixson-Lied Auditorium on the campus of Creighton University. As in past years, the format of the Forum will include a live webcast informational morning session followed by an afternoon working session where participants will formulate specific policy recommendations in groups. The afternoon breakout group sessions will not be webcast but will be accessible by teleconference for those not attending in person. Anyone wishing to participate in a breakout group either in person or by teleconference must register online by August 9.

Information on the Forum full agenda, including the panel topics and breakout sessions, will be announced in the coming weeks and will be available on the Forum website.

Members of the public are invited to suggest topics to be discussed at the Forum through the registration form or by contacting OASB at Events_OASB@sec.gov.

Following the Forum, Ms. Miller will provide remarks to entrepreneurs as a featured speaker at the Maha Discovery Conference on August 15.

SEC Updates List of Firms Using Inaccurate Information to Solicit Investors

June 15, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: avoiding fraud, Federal government, federal securities laws, fraud, Impersonators, Investor Alert, investors, Investors Buy Stock, Money, PAUSE, SEC

Washington D.C., June 10, 2019 — The Securities and Exchange Commission today announced that it updated its list of unregistered entities that use Inaccurate information to solicit primarily non-U.S. investors, adding 11 soliciting entities, four impersonators of genuine firms, and nine bogus regulators.

The SEC’s list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being a victim of fraud. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration. Under U.S. securities laws, firms that solicit investors generally are required to register with the SEC and meet minimum financial standards and disclosure, reporting, and recordkeeping requirements.

Jennifer Diamantis, Chief of the SEC’s Office of Market Intelligence
“By making this information readily available through the PAUSE list, investors are better able to evaluate solicitations to buy and sell securities and avoid being a victim of fraud,” said Jennifer Diamantis, Chief of the SEC’s Office of Market Intelligence.

In addition to alerting investors to firms falsely claiming to be registered, the PAUSE list flags those impersonating registered securities firms and bogus “regulators” who falsely claim to be government agencies or affiliates. Inclusion on the PAUSE list does not mean the SEC has found violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.

The PAUSE list is periodically updated by the SEC’s Office of Market Intelligence in coordination with the Office of Investor Education and Advocacy and the Office of International Affairs.

How to protect yourself:

Be aware that fraudsters may impersonate government agencies to lure investors into scams, including advance fee fraud schemes.

Impersonators may falsely claim to be affiliated with the SEC (or another federal government agency) in an attempt to steal your personal information or your money. Federal government agencies, including the SEC, do not endorse or sponsor any particular securities, issuers, products, services, professional credentials, firms, or individuals.

Investor Alert: SEC Impersonators Pretend to Help Investors Buy Stock.

Visit Investor.gov for tips on investing wisely and avoiding fraud.

Allison Herren Lee Faces Nominating Hearing for SEC

June 10, 2019 by Michael Volpe Leave a Comment Filed Under: Feature Articles Tagged: SEC, US Senate

The Securities and Exchange Commission (SEC) is one step closer to filling a vacancy among its commissioners.

The Senate Banking, Housing and Urban Affairs Committee held a nomination hearing on Thursday June 6, 2019, and among the nominees considered was Allison Herren Lee.

Herren Lee noted in her opening remarks.

Allison Herren lee

“I have spent the bulk of my legal career at the SEC for one very straightforward reason: the SEC has a mission that is vital to the economic well-being of Americans and American businesses. It navigates the critical intersection between these two; between everyday Americans striving to build savings to buy a home, to send kids to college and eventually retire, and American businesses that need capital to grow and prosper. This reciprocal relationship must be nourished from both sides.

“We are a nation of investors, both retail and institutional, protected by the SEC. This protection is especially important as we continue the shift away from employer pensions toward individual plans in which people must fund and select their own retirement assets and manage their own risk.

“The SEC works to ensure that investors are taking the kinds of risk they sign up for — business and economic risk — not the risk of fraud, and not the risk of poorly structured or opaque markets that may disadvantage investors. This instills confidence which, in turn, fosters capital formation.”

Since 2005, Herren Lee has worn several hats at the SEC.

She has been an enforcement counsel, a counsel to then Commissioner Kara Stein, and is currently Senior Counsel, Enforcement Division, Complex Financial Instruments Unit, according to her LinkedIn page.

Prior to that, she worked as a securities lawyer at the law firm of Sherman & Howard from 1998-2005.

Before that, she clerked for Judge Rebecca Kourlis, who was on the Colorado Supreme Court.

Of her breadth of experience, she noted, “I have seen, experienced and understood this interdependence between investors and business from nearly every angle. I worked in the oil business, at both private and public companies. I’ve owned and run my own small business. Since law school, I’ve worked for over two decades as a securities lawyer, first in private practice as a litigator and partner, and then I was privileged to work on the staff of the SEC.”

President Trump nominated her to be a commissioner on the SEC in April 2019.

The SEC has five commissioners; Lee, if approved by the US Senate, would serve until June 2022.

Herren Lee was one of six people who were grilled for their nomination hearing on June 6.

The others were: Mr. Thomas Peter Feddo, of Virginia, to be an Assistant Secretary of the Treasury for Investment Security; Ms. Nazak Nikakhtar, of Maryland, to be Under Secretary of Commerce for Industry and Security; Mr. Ian Paul Steff, of Indiana, to be Assistant Secretary of Commerce and Director General of the United States and Foreign Commercial Service; The Honorable Michelle Bowman, of Kansas, to be a Member of the Board of Governors of the Federal Reserve System; and Mr. Paul Shmotolokha, of Washington, to be First Vice President of the Export-Import Bank of the United States.

Herren Lee’s nomination must still be voted on by the Senate Banking Committee before the full Senate votes but both are expected to pass.

B.C. Residents and Nevada-based Company Breached Cease Trade Order and Made Misrepresentations

June 10, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: BCSC, business, Capital Markets, Financial Officer, government agency, industry, industry news, investment, investment opportunities, investors, SEC, securities industry, trade

Vancouver – A British Columbia Securities Commission (BCSC) panel has found that three B.C. residents and a Nevada-based green energy company breached a cease trade order of the BCSC and failed to tell investors about the existence of the order.

ecoTECH (now known as Dong Fang Hui Le Inc.) and three of its top executives, Chief Executive Officer Colin V. Hall, Chief Financial Officer Rolf Eugster and Director Anne Sanders, sold $55,100 worth of securities in 2013 to 16 investors despite a cease trade order issued by the BCSC in 2012. In addition, they failed to tell investors about the order.

Hall, Sanders and ecoTECH – a reporting issuer in B.C. – also distributed $3.3 million worth of securities to 15 people as compensation for services rendered in breach of the order.

By neglecting to inform investors that the shares issued for cash were being issued in violation of a cease trade order, Hall, Eugster, Sanders and ecoTECH committed misrepresentation. The panel stated that “one of the acceptable risks associated with an investment (no matter how risky) cannot be the risk of misrepresentation.”

The panel will impose sanctions after considering submissions from BCSC staff and the respondents.

About the British Columbia Securities Commission (www.bcsc.bc.ca)

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

A securities market that is fair and warrants public confidence
A dynamic and competitive securities industry that provides investment opportunities and access to capital

Marshall Gandy Named Co-Head of SEC’s Investment Adviser/Investment Company Examination Program

June 10, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: industry news, Investment Adviser, investment companies, Investment Company, Marshall Gandy, OCIE, SEC, SEC policy, securities laws

Washington D.C., June 4, 2019 — The Securities and Exchange Commission today announced that Marshall Gandy has been named Co-National Associate Director of the Investment Adviser/Investment Company examination program in the Office of Compliance Inspections and Examinations (OCIE).

He joins Co-National Associate Director Kristin Snyder, who has led the program since Aug. 10, 2016, and was named OCIE’s Deputy Director on July 25, 2018. Together, Ms. Snyder and Mr. Gandy will oversee more than 630 lawyers, accountants, and examiners responsible for inspections of SEC-registered investment advisers and investment companies.

Mr. Gandy has been the Associate Regional Director for Examinations in the SEC’s Fort Worth office since March 2012 and will continue in that role while also assuming this shared leadership position in the national investment adviser/investment company program. He joined the SEC in 1999 and spent eight years as a trial counsel and enforcement attorney in the Fort Worth office’s enforcement program before taking the role of Senior Regional Counsel at FINRA’s Dallas District Office. Mr. Gandy also held the roles of Presiding Judge and Assistant District Attorney in Dallas County before joining the SEC.

“Marshall is an exceptional and collaborative leader of our Fort Worth exam team and will bring additional strong leadership to the national IA/IC program,” said OCIE Director Peter B. Driscoll. “His efforts to improve our exam process, increase investor outreach and pursue emerging risk areas have strengthened the entire exam program.”
Mr. Gandy said, “I am extraordinarily honored for the opportunity to serve in this new role in OCIE. For seven years, I have been extremely privileged to work with Fort Worth’s fantastic exam team, and now that privilege will extend to working with the equally talented and dedicated IA/IC teams across the entire exam program.”

Mr. Gandy received his law degree from Southern Methodist University and his bachelor’s degree from Sam Houston State University.

OCIE conducts the SEC’s National Examination Program through examinations of SEC-registered investment advisers, investment companies, broker-dealers, self-regulatory organizations, clearing agencies and transfer agents. It uses a risk-based approach to examinations to fulfill its mission to promote compliance with U.S. securities laws, prevent fraud, monitor risk and inform SEC policy

SEC Charges Kik Interactive Inc. With Conducting $100 Million Unregistered ICO

June 10, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, industry, industry news, investment, investors, management, news, SEC, securities laws, transaction service

Washington D.C., June 4, 2019 — The Securities and Exchange Commission today sued Kik Interactive Inc. for conducting an illegal $100 million securities offering of digital tokens. The SEC charges that Kik sold the tokens to U.S. investors without registering their offer and sale as required by the U.S. securities laws.

As alleged in the SEC’s complaint, Kik had lost money for years on its sole product, an online messaging application, and the company’s management predicted internally that it would run out of money in 2017. In early 2017, the company sought to pivot to a new type of business, which it financed through the sale of one trillion digital tokens. Kik sold its “Kin” tokens to the public, and at a discounted price to wealthy purchasers, raising more than $55 million from U.S. investors. The complaint alleges that Kin tokens traded recently at about half of the value that public investors paid in the offering.

The complaint further alleges that Kik marketed the Kin tokens as an investment opportunity. Kik allegedly told investors that rising demand would drive up the value of Kin, and that Kik would undertake crucial work to spur that demand, including by incorporating the tokens into its messaging app, creating a new Kin transaction service, and building a system to reward other companies that adopt Kin. At the time Kik offered and sold the tokens, the SEC alleges these services and systems did not exist and there was nothing to purchase using Kin. Kik also allegedly claimed that it would keep three trillion Kin tokens, Kin tokens would immediately trade on secondary markets, and Kik would profit alongside investors from the increased demand that it would foster. The Kin offering involved securities transactions, and Kik was required to comply with the registration requirements of the U.S. securities laws.

Steven Peikin, Co-Director of the SEC’s Division of Enforcement
“By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “Companies do not face a binary choice between innovation and compliance with the federal securities laws.”
“Kik told investors they could expect profits from its effort to create a digital ecosystem,” said Robert A. Cohen, Chief of the Enforcement Division’s Cyber Unit. “Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”

The SEC’s complaint charges Kik Interactive Inc. with violating the registration requirements of Section 5 of the Securities Act of 1933. The SEC seeks a permanent injunction, disgorgement plus interest, and a penalty. The Commission has previously charged issuers in settled cases alleging violations of these requirements, including Munchee Inc., Gladius Network LLC, Paragon Coin Inc. and CarrierEQ Inc. d/b/a Airfox.

The SEC’s investigation was conducted by Brent Mitchell, Jeff Leasure, and James Murtha of the SEC’s Complex Financial Instruments Unit and supervised by Mr. Cohen and Reid Muoio, Deputy Chief of the unit. The litigation will be handled by David Mendel and Stephan Schlegelmilch. The SEC appreciates the assistance of the Ontario Securities Commission.

Hedge Fund Manager to Pay $5 Million for Compliance Failures Related to Valuation of Fund Assets

June 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, financial instruments, Fund Assets, funds, hedge fund, industry news, investment, investor, SEC, SEC Enforcement

Washington D.C., June 4, 2019 — The Securities and Exchange Commission today announced that a private fund manager in the mortgage-backed securities space has agreed to pay a $5 million penalty to settle charges stemming from compliance deficiencies that contributed to the firm’s failure to ensure that certain securities in its flagship fund were valued properly.

The fund manager’s chief investment officer (CIO) agreed to pay a $250,000 penalty.

An SEC investigation found that Colorado-based investment adviser Deer Park Road Management Company LP, in connection with its flagship STS Partners’ fund which has been ranked as one of the most consistent performing hedge funds in the country, failed to have policies and procedures to address the risk that its traders were undervaluing securities and selling for a profit when needed. The firm also failed to guard against its traders’ providing inaccurate information to a pricing vendor and then using the prices it got back to value bonds. CIO Scott Burg oversaw the valuation of certain assets in the flagship fund and approved valuations that the traders flagged as “undervalued” with notations to “mark up gradually.” Also overseeing valuation was a committee comprised of the principal’s relatives and others without relevant expertise.

“Valuation of client assets is a critically important area for investment advisers,” said Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Deer Park’s pervasive compliance failures allowed its traders to mark assets up gradually instead of marking them to market, in violation of the accounting principles they were required to follow.”

Without admitting or denying the findings in the SEC’s order, Deer Park consented to a censure and Deer Park and Burg agreed to cease and desist from committing or causing any violations and future violations of a provision of the Investment Advisers Act requiring reasonably designed policies and procedures.

The SEC’s investigation was conducted by William Finkel and Gregory Smolar of the Complex Financial Instruments Unit and Douglas Smith of the New York office with assistance from Ling Yu of the Office of Compliance Inspections and Examinations as well as Dugan Bliss and Christopher Dunnigan. Osman Nawaz and Mr. Michael supervised the case.

SEC Announces Enforcement and Investor Education Initiatives to Protect Teachers and Military Service Members

June 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Enforcement, Enforcement Division, financial regulation, fraud, investment, Investor Education Initiatives, Military Service Members, SEC

Washington D.C., June 3, 2019 — The Securities and Exchange Commission today announced two new education initiatives that will build on its ongoing efforts to protect retail investors. The Teachers’ Initiative and the Military Service Members’ Initiative will build on the Commission’s past efforts and focus additional enforcement and investor education resources on behalf of teachers, veterans, and active duty military personnel stationed domestically and abroad.

“Teachers, active duty military, and veterans provide tremendous service to our country,
Jay Clayton, SEC Chairman
often at great personal and financial sacrifice to themselves and their families, yet far too often are targeted and fall victim to securities fraud and other misconduct,” said Chairman Jay Clayton. “These new initiatives reflect the Commission’s dedication to fighting fraud and to educating retail investors. My colleagues and I are particularly focused on ensuring that our teachers, veterans, and active duty military, who often leave financial planning to others, know the financial services they are getting, what they are paying for those financial services, and to call us if something doesn’t seem right.”

The initiatives build upon Chairman Clayton’s commitment to protecting the most vulnerable market participants and the SEC Enforcement Division’s long and successful history in pursuing securities fraudsters who target teachers, active military, and veterans. We look forward to continuing to partner with state securities regulators, as well as other state and federal law authorities, on these important initiatives.

The initiatives will increase proactive outreach to these groups to educate them about savings and investment, investment fees and expenses, retirement programs specific to educators and service members, and the red flags of investment fraud. The initiatives will be led by the Enforcement Division’s Retail Strategy Task Force in partnership with the Commission’s Office of Investor Education and Advocacy. These efforts will build upon the Commission’s existing Teacher Investment Outreach program, led by the SEC’s San Francisco Regional Office, and the Commission’s longstanding commitment to serving active military and veterans through investor advocacy and outreach (www.sec.gov/spotlight/military.shtml, www.sec.gov/page/spotlight-military-investment-options and www.investor.gov/military).

“The Enforcement Division is committed to fighting for our country’s educators, service members, and veterans, who may be vulnerable to fraud in the securities markets,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.
Stephanie Avakian Stephanie Avakian – Co-Director of the SEC’s Enforcement Division
“Teachers and members of the military community have already made tremendous financial sacrifices for our country and can quickly face financial ruin as the result of securities fraud,” added Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.
“Education is the cornerstone of investor protection, and we have no more important constituents than our teachers and members of the military,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “We look forward to working together to help these important groups make the best investment decisions right for them – and protect themselves from fraud.”
“State securities regulators have long recognized the importance of protecting those who serve our communities and our nation from financial exploitation. These public servants dedicate their professional lives to helping others and they deserve to know that their state and federal governments are working together to provide them the tools and resources necessary to protect their financial future,” said Michael S. Pieciak, President of the North American Securities Administrators Association and Commissioner of the Vermont Department of Financial Regulation.

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SEC Seeks Emergency Relief to Halt Ponzi Scheme Run From College Fraternity House

June 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, capital management, College Fraternity House, Emergency Relief, industry, investor, investor funds, Ponzi scheme, Retail Strategy, SEC

Washington D.C., June 3, 2019 — The Securities and Exchange Commission today announced an emergency action charging a recent college graduate with orchestrating a Ponzi scheme that targeted college students and young investors. The SEC is seeking an asset freeze and other emergency relief.

The SEC’s complaint alleges that Syed Arham Arbab, 22, conducted the fraud from a fraternity house near the University of Georgia campus in Athens, Georgia. Arbab allegedly offered investments in a purported hedge fund called “Artis Proficio Capital,” which he claimed had generated returns of as much as 56% in the prior year and for which investor funds were guaranteed up to $15,000. Arbab also allegedly sold “bond agreements” which promised investors the return of their money along with a fixed rate of return. The SEC’s complaint alleges that at least eight college students, recent graduates, or their family members invested more than $269,000 in these investments.

According to the SEC’s complaint, no hedge fund existed, Arbab’s claimed performance returns were fictitious, and he never invested the funds as represented. Instead, as money was raised, Arbab allegedly placed substantial portions of investor funds in his personal bank and brokerage accounts, which he used for his own benefit, including trips to Las Vegas, shopping, travel, and entertainment. Arbab also allegedly used portions of new investor money to pay earlier investors who had asked for their money back, the hallmark of a Ponzi scheme. Arbab even instructed some new investors to send their money – unwittingly – to existing investors through payment applications such as Venmo, Zelle, and Cash App, and misleadingly told them that the existing investors were either a “partner” or “manager” in the fund.

“We allege that Mr. Arbab used his college affiliations to operate a Ponzi scheme that drained valuable resources from current and former students. This is a reminder that investors of all ages and experience levels—whether long-time investors or recent graduates investing funds from their first few paychecks—should carefully research investment opportunities and the people offering them,” said Richard R. Best, Regional Director of the SEC’s Atlanta Office. “To learn more, investors can find an overview of Ponzi scheme red flags on the SEC’s Investor.gov website.”

The SEC’s complaint, filed Friday in federal district court in Athens, Georgia, charges Arbab, Artis Proficio Capital Investments LLC, and Artis Proficio Capital Management LLC, with violating the antifraud provisions of the federal securities laws. The SEC is seeking an order freezing certain assets of Arbab and his entities, as well as a temporary restraining order, preliminary and permanent injunctive relief, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties.

The SEC’s Retail Strategy Task Force and Office of Investor Education and Advocacy (OIEA) encourage investors to check the background of anyone selling or offering them an investment using the free and simple search tool on Investor.gov. There are also useful tips on avoiding investment fraud.

The SEC’s investigation was conducted by Brian M. Basinger, W. Shawn Murnahan, and Krysta M. Cannon of the Atlanta Regional Office. The investigation was supervised by Stephen E. Donahue. The litigation is being handled by Mr. Murnahan, with the assistance of Mr. Basinger, and will be overseen by M. Graham Loomis.