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SEC Charges Former CFO of Cash Advance Company With Defrauding Retail Investors

August 18, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Cash Advance Company, Defrauding Retail Investors, SEC

Washington D.C., Aug. 15, 2019 — The Securities and Exchange Commission today charged 1 Global Capital LLC’s former chief financial officer, Alan G. Heide, with defrauding retail investors. The now bankrupt Florida-based cash advance company allegedly fraudulently raised more than $322 million from 3,600 investors between 2014 and last year. The SEC previously charged Global and former CEO Carl Ruderman with fraud and charged Henry J. “Trae” Wieniewitz, III for his allegedly unlawful sales of 1 Global securities. Ruderman and Wieniewitz have consented to final judgments.

According to the SEC’s complaint, although 1 Global promised investors profits from its short-term cash advances to businesses, the company used substantial investor funds for other purposes, including paying operating expenses and funding Ruderman’s lavish lifestyle. The SEC alleges that Heide, a certified public accountant, for nine months regularly signed investors’ monthly account statements that he knew overstated the value of their accounts and falsely represented that 1 Global had an independent auditor that had endorsed the company’s method of calculating investor returns.

Eric I. Bustillo, Director of the SEC’s Miami Regional Office
“Heide’s misrepresentations gave false comfort to investors, allowing them to be duped to invest in 1 Global’s securities,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We allege that as 1 Global’s CFO, Heide played a significant role in 1 Global’s fraud by overstating the value of investors’ accounts and their rates of return and falsely representing the role of an auditor.”

The SEC’s complaint charges Heide with violations of the antifraud provisions of the federal securities laws. The SEC seeks a court-ordered injunction and a financial penalty. Heide agreed to settle the SEC’s charges as to liability, without admitting or denying the allegations, and agreed to be subject to an injunction, with the court to determine the penalty amount at a later date.

Separately, the U.S. Attorney’s Office for the Southern District of Florida today announced criminal charges against Heide.

This is the third action the SEC has brought involving the 1 Global fraud. In the first case, Ruderman consented to a final judgment against him in which he was permanently enjoined from violating the antifraud, securities registration, and broker-dealer registration provisions of the federal securities laws, and held liable for disgorgement of approximately $32 million in ill-gotten gains and a civil penalty of $15 million. As part of the judgment, Ruderman agreed to turn over approximately $750,000 in cash, as well as 50 percent of the equity in his multimillion-dollar condominium.

Additionally, in July, the SEC filed a settled action charging a 1 Global external sales agent, Wieniewitz, with securities and broker-dealer registration violations. Wieniewitz agreed to a final judgment holding him and his former company jointly and severally liable for more than $3.5 million in disgorgement and a $150,000 civil penalty. He was previously enjoined from violating the securities registration and broker-dealer registration provisions of the federal securities laws.

The SEC’s continuing investigation is being conducted by Gary Miller in the Miami Regional Office and supervised by Elisha L. Frank and Glenn S. Gordon. The SEC’s litigation is being led by Robert K. Levenson. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation, and the Florida Office of Financial Regulation.

SEC Obtains Freeze of $8 Million in Assets in Alleged Fraudulent Token Offering and Manipulation Scheme

August 18, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Fraudulent Token, Manipulation Scheme, SEC

Washington D.C., Aug. 13, 2019 — The Securities and Exchange Commission announced fraud charges against a Brooklyn individual and two entities under his control who allegedly engaged in a fraudulent manipulation scheme to sell digital securities to investors and to manipulate the market for those securities. On Aug. 12, 2019, the court entered an emergency freeze to preserve at least $8 million of the $14.8 million the defendants raised in 2017 and 2018 in an offering of digital securities.

The SEC filed charges against Reginald “Reggie” Middleton, a self-described “financial guru,” and two entities he controls, Veritaseum, Inc. and Veritaseum, LLC (collectively Veritaseum). The Commission’s complaint, filed in federal court in Brooklyn, New York, alleges that the Defendants marketed and sold securities called “VERI” tokens on the internet, inducing retail investors to invest based on multiple material misrepresentations and omissions. Among other things, Defendants allegedly knowingly misled investors about their prior business venture and the use of offering proceeds, touted oversized – but fictitious – investor demand for VERI, and claimed to have a product ready to generate revenue when no such product existed. The complaint further alleges that Middleton manipulated the price of the VERI tokens trading on an unregistered digital asset platform. The complaint also alleges that Middleton recently moved a significant amount of investor assets and then dissipated a portion of those assets, transferring them to Middleton’s personal account.

Marc P. Berger, Regional Director of the SEC’s New York Regional Office
“After learning about Middleton’s transfer of funds, we took quick action to prevent the further dissipation of investor assets,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Whether in digital currency or plain cash, we will act to protect investor assets and to pursue fraud and manipulation in our securities markets.”

The SEC’s complaint charges Middleton and Veritaseum with violating the registration and antifraud provisions of the U.S. federal securities laws, and Middleton with additionally violating the antifraud provisions on the basis of his manipulative trading. The complaint seeks permanent injunctions, disgorgement plus interest and penalties, and a bar from offering digital securities. For Middleton, the SEC also seeks an officer-and-director bar.

The Commission’s investigation was conducted by Jorge G. Tenreiro and Victor Suthammanont of the New York Regional Office, assisted by Roseann Daniello, a staff accountant in the New York Regional Office, John O. Enright of the Cyber Unit, and IT Forensics staff Ken Zavos and Olga Cruz-Ortiz. The case is being supervised by Lara Shalov Mehraban, Associate Regional Director of the New York Regional Office. The SEC’s litigation will be led by Mr. Tenreiro and Mr. Suthammanont.

SEC Charges Investment Banking Analyst with Insider Trading

August 18, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: insider trading, Investment Banking Analyst, SEC

Washington D.C., Aug. 12, 2019 — The Securities and Exchange Commission today charged an analyst at a large international investment banking with insider trading based on confidential information that he learned about Siris Capital Group’s plans to acquire Electronics for Imaging, Inc. (EFII).

According to the SEC’s complaint filed in federal court in Manhattan, Bill Tsai, a junior investment banker in the bank’s New York office, learned of the acquisition when Siris consulted the bank about providing financing and advice on the transaction. The SEC alleges that soon after learning about the deal, Tsai purchased EFII call options, which he sold for a profit of approximately $98,750 shortly after the deal was announced in mid-April 2019.

Tsai allegedly attempted to hide his illegal activity by conducting his trading in a brokerage account that he concealed from his employer, and by circumventing the bank’s policies that require employees to pre-clear securities trades.

“As alleged in our complaint, Tsai reaped nearly $100,000 in illicit profits by misusing highly confidential information entrusted to him,” said Joseph G. Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Using our enhanced analysis and detection capabilities, the SEC was able to act swiftly, exposing Tsai’s misconduct just months after his illegal trading took place.”

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

The SEC’s complaint charges Tsai with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief.

The SEC’s investigation, which is continuing, has been conducted by Melanie A. MacLean, David Oliwenstein, and Simona Suh of the Market Abuse Unit, with assistance from John Rymas in the Market Abuse Unit’s Analysis and Detection Center, and Jordan Baker and James D’Avino from the New York Regional Office. The case has been supervised by Mr. Sansone. The SEC’s litigation will be led by Ms. MacLean, Mr. Oliwenstein, and Ms. Suh. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.

SEC Charges Broker-Dealer with Violations of Gatekeeping Provisions Aimed at Protecting Investors

August 17, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Gatekeeping Provisions, Protecting Investors, SEC

Washington D.C., Aug. 14, 2019 — The Securities and Exchange Commission today charged Canaccord Genuity LLC, a broker-dealer headquartered in New York City, with enabling trading in dozens of thinly-traded securities without conducting the review required by the federal securities laws.

According to the SEC’s order, Canaccord published quotes and made markets in dozens of over-the-counter (OTC) securities without performing the review required by Exchange Act Rule 15c2-11, which requires that broker-dealers have a reasonable basis for believing the prospectus and other information made available by the issuer of the securities was accurate. The order finds that Canaccord delegated to a compliance associate the responsibility to obtain and review the information required by Rule 15c2-11 and to fill out and sign the necessary forms demonstrating compliance with the rule. The compliance associate had no trading experience and no formal training on conducting the requisite review, such as training related to the analysis of financial statements and other information. As a result of the deficient review performed by the compliance associate, Canaccord allowed dozens of OTC securities to be traded in U.S. markets without conducting the review required to protect investors. Canaccord has since revised and improved its policies and procedures with respect to Rule 15c2-11.

“Rule 15c2-11 imposes important responsibilities on broker-dealers to minimize the risk of fraud in the securities they sell to customers,” said Daniel Michael, Chief of the Complex Financial Instruments Unit. “By rubber stamping certifications that it had done its homework on the securities in which it made markets, Canaccord failed to perform this critical gatekeeping function.”

Without admitting or denying the SEC’s findings, Canaccord consented to the institution of proceedings ordering that it cease and desist from committing or causing any violations and any future violations of Section 15(c)(2) of the Exchange Act and Rule 15c2-11, imposing a censure and ordering that it pay a $250,000 penalty.

The matter was investigated by James F. Murtha, Christopher C. Nee and Reid A. Muoio of the Division of Enforcement’s Complex Financial Instruments Unit.

SEC Releases Educational Videos for Investors

August 17, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: financial professional, SEC

Washington D.C., Aug. 15, 2019 — The Securities and Exchange Commission today released a series of short educational videos designed to provide ordinary investors with basic information about choosing and working with a financial professional. The videos are now available at SEC.gov and Investor.gov/CRS.

“Through my discussions with Main Street investors across the country, it became apparent to me that there are several key concepts involving working with a financial professional that have not been well explained,” said Chairman Jay Clayton. “These videos are designed to describe, generally and in plain
Jay Clayton, SEC Chairman
language, the differences between brokers-dealers and investment advisers, arming investors with the information they need to ask better questions and help them make sound decisions for themselves and their families with their hard-earned money. We encourage investors to ask direct questions of their financial professional, so that they can better understand the services they will receive and what they are paying. I encourage investors to ask my favorite question: If I work with you, how much of my money is going to fees and costs, and how much is going to work for me?”

The videos released today are a part of the Commission’s larger Main Street investor engagement and education campaign, following recently adopted rulemakings and interpretations designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers and bring the legal requirements and mandated disclosure in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products. Specifically, these actions include new Regulation Best Interest, the new Form CRS Relationship Summary, and two separate interpretations under the Investment Advisers Act of 1940. Chairman Clayton previously announced that these videos, along with investor events, would be part of a new campaign designed to help retail investors understand key differences between broker-dealers and investment advisers, and to help them decide whether working with one of those types of financial professionals is right for them.

We encourage Main Street investors to watch these videos and use the other tools available at Investor.gov.

SEC Wins Jury Trial Against Broker Charged with Insider Trading

August 16, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Atlanta federal court, insider trading, SEC

Washington D.C., Aug. 14, 2019 — SEC wins jury trial against broker charged with insider trading. Today, jurors in Atlanta federal court returned a verdict finding New Jersey securities broker Raymond J. Pirrello, Jr. liable for insider trading in advance of three merger and acquisition transactions.

The SEC’s evidence at trial showed that Pirrello received highly confidential nonpublic information about the impending acquisitions of Radiant Systems Inc., Midas Incorporated Inc., and BrightPoint Inc. from Thomas W. Avent, Jr., who performed tax work on each transaction as a partner at an international accounting firm. Pirrello, in turn, tipped his former colleague and long-time friend Lawrence J. Penna, Jr., who traded in the securities of each of the three companies. According to evidence presented during the trial, Penna and his family made at least $107,922 in illicit trading profits, and shared at least $21,500 of these profits with Pirrello.

The jury found Pirrello liable on all counts, finding that he violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder.

Avent and Penna each previously settled insider trading charges brought against them.

Joel R. Levin, Director of the SEC’s Chicago Regional Office
“This case involved a sophisticated scheme by industry professionals to use inside information on multiple occasions to obtain substantial illegal profits.” said Joel R. Levin, Director of the SEC’s Chicago Regional Office. “Insider trading undermines investor confidence in the integrity of the markets and those who engage in it must be held accountable.”

The SEC’s litigation is being conducted by John E. Birkenheier, Robert M. Moye and Ruta G. Dudenas of the Chicago Regional Office, and Pat Huddleston of the Atlanta Regional Office. The investigation that led to the SEC’s action was conducted by Ms. Dudenas, Mr. Moye, Amy S. Cotter, and Rebecca Hollenbeck.

SEC Chairman Clayton Announces Event for Main Street Investors in Chicago

August 10, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: CRS Relationship, Main Street investors, SEC

Washington D.C., Aug. 5, 2019 — Securities and Exchange Commission Chairman Jay Clayton today announced an event for Main Street investors to be held in Chicago on Thursday, August 15.

Chairman Clayton will participate in a roundtable with Main Street investors as part of the SEC’s ongoing investor engagement and education efforts. The roundtable will focus on issues relevant to Main Street investors, such as tips to avoid fraud, the impact of fees and costs, and the key differences between broker-dealers and investment advisers. It is the latest in a series of investor engagement and education events that included a previous investor roundtable held earlier this summer in Boston. Director Lori Schock from the SEC’s Office of Investor Education and Advocacy is expected to join Chairman Clayton at this event.

“I have heard from investors around the country that they wish they knew more about investing, including how to identify various red flags of fraudulent investment schemes and understanding the impact that fees and costs can have on investments,” said Chairman Clayton. “Helping Main Street investors make informed decisions about their financial future continues to be one of my top priorities as Chairman. An important part of this process is to hear directly from Main Street investors of all types. I look forward to a productive discussion in Chicago.”

Details about the upcoming event can be found below. The event is free and open to the public and the media. Participants in the investor roundtable should be retail investors, including those who work with, or are considering working with, a financial professional. Please note that the number of participants for the event may be limited.

Main Street Investor Roundtable

Location: U.S. Securities and Exchange Commission, Chicago Regional Office – 175 W. Jackson Blvd. Chicago, IL 60604
Date: August 15, 2019
Time: 10:30 – 11:30 a.m. CT, Registration begins at 10:00 a.m. CT
RSVP: CHICAGO@sec.gov

Background

On June 5, 2019, the Securities and Exchange Commission adopted a package of rulemakings and interpretations designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products. Specifically, these actions include new Regulation Best Interest, the new Form CRS Relationship Summary, and two separate interpretations under the Investment Advisers Act of 1940. Chairman Clayton previously announced that events such as these would be part of a new campaign designed to help retail investors understand key differences between broker-dealers and investment advisers, and to help them decide whether working with one of those types of financial professionals is right for them. This campaign will also feature a series of short educational videos and updates to the SEC’s investor education website, Investor.gov.

SEC Charges Brixmor Property Group Inc. and Former Senior Executives with Accounting Fraud

August 5, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: accounting fraud, Brixmor Property Group, SEC

Washington D.C., Aug. 1, 2019 — The Securities and Exchange Commission today charged Brixmor Property Group Inc., a publicly-traded real estate investment trust, and four former senior executives with fraud in connection with a scheme to manipulate a key non-GAAP metric relied on by analysts and investors to evaluate the company’s financial performance.

Brixmor has agreed to settle the Commission’s charges and pay a $7 million penalty.

The SEC’s complaint against the individuals, which was filed in the United States District Court for the Southern District of New York, alleges that from the third quarter of 2013 to the third quarter of 2015, Brixmor CEO Michael Carroll, CFO Michael Pappagallo, CAO Steven Splain and Senior VP of Accounting Michael Mortimer improperly adjusted Brixmor’s same property net operating income (SP NOI) in order to report quarterly numbers that hit the Company’s publicly-issued growth targets. According to the complaint, certain of the defendants described their manipulation of the non-GAAP measure as “mak[ing] the sausage,” using tactics such as selectively recognizing income from a “cookie jar” account, incorporating certain income that the company had represented was excluded, and improperly lowering the prior year’s SP NOI to give the appearance of stronger growth in the current year.

Marc P. Berger, Regional Director of the SEC’s New York Regional Office
“We allege that these senior executives intentionally manipulated a key metric to mislead investors about Brixmor’s ability to hit its targets,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “A company that chooses to publicly present non-GAAP financial measures must do so truthfully.”

The SEC’s complaint charges Carroll, Pappagallo, Splain, and Mortimer with violating or aiding and abetting violations of the antifraud and books and records provisions of the Securities Exchange Act of 1934, as well as with violating Rule 100(b) of Regulation G, which pertains to the reporting of non-GAAP performance measures. The complaint seeks permanent injunctions, disgorgement plus interest and penalties, and officer-and-director bars. Splain and Mortimer have agreed to the entry of partial judgments against them in which they consent to injunctive relief with other monetary relief and bars to be determined by the court in the future. These settlements are subject to court approval.

The SEC’s settled order as to Brixmor finds that the company violated the antifraud provision of the federal securities laws and Rule 100(b) of Regulation G, and filed false and misleading annual, quarterly, and current reports with the SEC. Without admitting or denying the allegations, the company agreed to pay a $7 million penalty and comply with certain undertakings, including retaining an independent consultant to review and assess controls relating to the calculation and presentation of non-GAAP measures including SP NOI.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Carroll, Pappagallo, Splain, and Mortimer. Splain and Mortimer have pleaded guilty to those charges.

The SEC’s investigation was conducted by Tuongvy T. Le, Tejal D. Shah, Sheldon L. Pollock and Scott B. York. The litigation will be led by Nancy A. Brown, Ms. Shah, and Ms. Le. The case is being supervised by Lara Shalov Mehraban. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the New York State Department of Financial Services.

Robert A. Cohen, Cyber Unit Chief, to Leave SEC After 15 Years of Service

August 1, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Cyber Unit, Robert A. Cohen, SEC

Washington D.C., July 29, 2019 — The Securities and Exchange Commission today announced that Robert A. Cohen, Chief of the Division of Enforcement’s Cyber Unit, will be leaving the agency in August after 15 years of service.

Mr. Cohen is the first Chief of the Cyber Unit, created in 2017. The unit focuses on violations involving digital assets and cryptocurrency, cyber-related trading violations such as hacking to obtain material nonpublic information, and cybersecurity disclosures and procedures at public companies and financial institutions. Previously, Mr. Cohen was Co-Chief of the Market Abuse Unit.

“I’m grateful to Rob for his thoughtfulness, expertise and leadership in taking on the creation of the Cyber Unit,” said Chairman Jay Clayton. “He leaves the unit well-positioned to continue the critical work of protecting our markets and retail investors in this complex and continually developing area.”
“Rob has been a true leader in the Enforcement Division,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “We relied on Rob to lead the Cyber Unit because of his record of handling complex, high priority enforcement cases with both toughness and fairness, while also mentoring and training countless SEC attorneys and supervisors.”
“The Cyber Unit has been a great success under Rob’s strategic leadership,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “Soon after its creation, the Cyber Unit immediately began filing impactful cases that protect investors and demonstrate the SEC’s ability to respond nimbly to new and difficult challenges.”
Robert A. Cohen
Mr. Cohen said, “It has been a privilege working with great colleagues at the SEC, whom I cannot thank enough for their commitment, perseverance, and friendship. I am proud of our work together, which has had a strong and positive impact for investors.”

As Chief of the Cyber Unit, Mr. Cohen led groundbreaking investigations, including cases involving:

a wide-spread fraudulent initial coin offering (ICO);
celebrities who promoted ICOs without disclosing their compensation;
several issuers that sold digital tokens to retail investors in unregistered securities offerings;
the founder of an unregistered securities exchange that traded digital tokens;
a hacker and multiple traders who hacked into the SEC’s EDGAR system, and
a broker-dealer and investment adviser that had deficient cybersecurity procedures.

Previously, as Co-Chief of the Market Abuse Unit, Mr. Cohen supervised market structure, insider trading, and manipulation cases, such as cases involving national stock exchanges, dark pools, retail order handling, and order routing. The insider trading cases Mr. Cohen supervised include illegal trading based on confidential government information and information received from a U.S. Congressman, as well as an insider trading scheme involving a middleman who ate post-it notes containing the tips. Earlier in his career, Mr. Cohen worked on cases involving accounting violations by public issuers, violations by hedge funds, and a $118 million settlement involving an ultra-short bond fund that declined during the financial crisis.

Mr. Cohen joined the SEC’s Enforcement Division from private practice in 2004. He was promoted to Branch Chief in 2008, Assistant Director in 2010, Co-Deputy Chief of the Market Abuse Unit in 2013, Co-Chief of the unit in 2015, and Chief of the Cyber Unit in 2017. He received his J.D. from New York University School of Law and his undergraduate degree from Cornell University.

Facebook to Pay $100 Million for Misleading Investors About the Risks It Faced From Misuse of User Data

August 1, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Misleading Investors, political advertising activities, SEC

Washington D.C., July 24, 2019 — The Securities and Exchange Commission today announced charges against Facebook Inc. for making misleading disclosures regarding the risk of misuse of Facebook user data. For more than two years, Facebook’s public disclosures presented the risk of misuse of user data as merely hypothetical when Facebook knew that a third-party developer had actually misused Facebook user data. Public companies must identify and consider the material risks to their business and have procedures designed to make disclosures that are accurate in all material respects, including not continuing to describe a risk as hypothetical when it has in fact happened.

Facebook has agreed to pay $100 million to settle the charges.

According to the SEC’s complaint, in 2014 and 2015, the now-defunct advertising and data analytics company, Cambridge Analytica, paid an academic researcher, through a company he controlled, to collect and transfer data from Facebook to create personality scores for approximately 30 million Americans. In addition to the personality scores, the researcher, in violation of Facebook’s policies, also transferred to Cambridge Analytica the underlying Facebook user data, including names, genders, locations, birthdays, and “page likes.” Cambridge Analytica used this information in connection with its political advertising activities.

The SEC’s complaint alleges that Facebook discovered the misuse of its users’ information in 2015, but did not correct its existing disclosure for more than two years. Instead, Facebook continued to tell investors that “our users’ data may be improperly accessed, used or disclosed.” (emphasis added) According to the SEC complaint, Facebook reinforced this false impression when it told news reporters who were investigating Cambridge Analytica’s use of Facebook user data that it had discovered no evidence of wrongdoing. When the company finally did disclose the incident in March 2018, its stock price dropped.

The complaint further alleges that during this two-year period, Facebook had no specific policies or procedures in place to assess the results of their investigation for the purposes of making accurate disclosures in Facebook’s public filings.

Stephanie Avakian Stephanie Avakian – Co-Director of the SEC’s Enforcement Division
“Public companies must accurately describe the material risks to their business,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “As alleged in our complaint, Facebook presented the risk of misuse of user data as hypothetical when they knew user data had in fact been misused. Public companies must have procedures in place to make accurate disclosures about material business risks.”
“We allege that Facebook exacerbated its disclosure failures when it misled reporters who asked the company about its investigation into Cambridge Analytica,” said Erin E. Schneider, Director of the SEC’s San Francisco Regional Office. “This gave further weight to Facebook’s misleading statements in its public filings.”

Without admitting or denying the SEC’s allegations, Facebook has agreed to the entry of a final judgment ordering a $100 million penalty and permanently enjoining it from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934, and Rules 12b-20, 13a-1, 13a-13, and 13a-15(a) thereunder.

The SEC’s investigation was conducted by Matthew Meyerhofer and Robert Tashjian and supervised by Tracy L. Davis and Erin Schneider of the San Francisco office.