The following SEC Investor Bulletins are excerpts from the SEC web site:
Investor Bulletin: Indexed Annuities
Tuesday, April 26, 2011, 10:17:39 AM
An indexed annuity is a type of contract between you and an insurance company. During the accumulation period, when you make either a lump sum payment or a series of payments, the insurance company credits you with a return that is based on changes in a securities index, such as the S&P 500 Composite Stock Price Index.
Investor Bulletin: Say on Pay and Golden Parachute Votes
Wednesday, April 13, 2011, 10:17:39 AM
The Office of Investor Education and Advocacy is issuing this Investor Bulletin to help investors understand new rules about shareholder votes on Say on-Pay and golden parachutes. The rules concern three separate non-binding shareholder votes on executive compensation: Say-on-Pay Votes, Frequency Votes and Golden Parachute Disclosures.
Investor Alert: Pre-IPO Investment Scams
Friday, March 18, 2011, 10:17:39 AM
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn you about investment scams that purport to offer investors the opportunity to buy pre-IPO shares of Facebook, Twitter, Groupon, or other popular companies.
Investor Bulletin: Trading Basics
Tuesday, March 08, 2011, 11:17:39 AM
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help educate investors about the different types of orders they can use to buy and sell stocks through a brokerage firm. The following are general descriptions of some of the common order types and trading instructions that investors may use to buy and sell stocks. Please note that some of the order types and trading instructions described below may not be avail-able through all brokerage firms. Furthermore, some brokerage firms may offer additional order types and trading instructions not described below. Investors should contact their brokerage firms to determine which types of orders and trading instructions are available for buying and selling as well the brokerage firms’ specific policies regarding such available orders and trading instructions.
Investor Bulletin: Margin Rules for Day Trading
Tuesday, February 08, 2011, 11:17:39 AM
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help educate investors regarding the margin rules that apply to day trading in a Regulation T margin account and to respond to a number of frequently asked questions we have received.
Investor Bulletin: New Rules Give Customers Option of All Public Arbitration Panels
Thursday, February 03, 2011, 11:17:39 AM
Investor Bulletin: New Rules Give Customers Option of All Public Arbitration Panels
Money Market Funds: Staff Responses to Questions about Information Filed on Form N-MFP
Monday, January 31, 2011, 11:17:39 AM
Money Market Funds: Staff Responses to Questions about Information Filed on Form N-MFP
Investor Bulletin on Life Settlements
Thursday, January 20, 2011, 10:17:39 AM
The Office of Investor Education and Advocacy is issuing this Investor Bulletin to highlight information about life settlements and some of the risks these types of transactions may pose for investors. Individual investors considering a life settlement transaction may wish to keep the following points in mind and seek guidance from an unbiased financial professional who will not receive a commission or any other financial benefit from the transaction.
Trading in Cash Accounts
Tuesday, January 11, 2011, 11:56:39 AM
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help educate investors regarding the rules that apply to trading securities in cash accounts and to highlight the 90-day account freeze which may arise with certain trading activities in these type of accounts.
Top 11 Tips for 2011
Wednesday, December 22, 2010, 10:56:39 AM
It’s that time of year -- the time to ring out the old and ring in the new, to ditch bad habits and replace them with good ones. We can’t guarantee you’ll lose weight, or become a better human being, but we can give you some suggestions to help you whip your finances into shape.
Investor Alert: BP Payout Recipients: Be on the Lookout for Investment Scams
Wednesday, October 13, 2010, 10:56:39 AM
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to help educate investors, including individuals and small businesses receiving lump sum payouts from BP related to the oil spill in the Gulf, about potential investment frauds that target recipients of lump sum payouts.
Investor Alert: Investor Warning Regarding Web-Based Scheme Defrauding Deaf Investors
Wednesday, October 06, 2010, 10:56:39 AM
The Securities and Exchange Commission ("SEC") has charged an Internet-based investment company, Imperia Invest IBC ("Imperia"), with securities fraud for soliciting several million dollars from U.S. investors and promising guaranteed annual returns in excess of 300% while in reality siphoning the funds into foreign bank accounts and not paying any returns back to investors.
Investor Alert: Investors Beware of Government Impersonators
Tuesday, October 05, 2010, 10:56:39 AM
The staff of the United States Securities and Exchange Commission (SEC) is issuing this Investor Alert about an individual who is falsely representing to be an employee of the SEC and offering to provide assistance with settling federal tax obligations with the United States Internal Revenue Service.
Investor Bulletin: New Stock-by-Stock Circuit Breakers
Wednesday, September 22, 2010, 10:56:39 AM
The Securities and Exchange Commission approved rules on Sept. 10, 2010, to expand the existing circuit breaker program that currently is triggered by large, sudden price moves in an individual stock.
Investor Bulletin: Focus on Municipal Bonds
Monday, September 20, 2010, 10:56:39 AM
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help educate investors about municipal bonds. For additional assistance, investors can call the SEC's Office of Investor Education and Advocacy at 1-800-SEC-0330, or ask a question using ours online form.
Investor Bulletin: Trading in Stock After an SEC Trading Suspension -- Be Aware of the Risks
Monday, August 30, 2010, 1:56:39 PM
Investors should be very cautious when considering trading in stock after the SEC has suspended trading in the shares. An SEC trading suspension is a "red flag", often indicating the SEC has concerns about the information that the company has been providing to the public. By law, an SEC suspension usually ends after ten business days, even if the company has not provided current, accurate information about itself. However, when a company does not provide current, reliable information about itself and its finances, trading its shares can be very risky.
Investor Bulletin: New Rule to Curb “Pay to Play” Practices
Thursday, July 29, 2010, 1:56:39 PM
The Securities and Exchange Commission approved a new rule on June 30, 2010 to curb so-called "pay to play" practices in which investment advisers make campaign contributions to elected officials in order to influence the award of contracts to manage public pension plan assets and other government investment accounts.
Investor Bulletin on Life Settlements
Thursday, July 29, 2010, 1:56:39 PM
We are issuing this Investor Bulletin to highlight information about life settlements and some of the risks these types of transactions may pose for investors. Individual investors considering a life settlement transaction may wish to keep the following points in mind and seek guidance from an unbiased financial professional who will not receive a commission or any other financial benefit from the transaction.
Investor Bulletin: Amendments to Form ADV – New Disclosure Requirements for Investment Advisers
Thursday, July 29, 2010, 1:56:39 PM
Investment advisers provide a wide range of advisory services and play an important role in helping individuals and institutions make significant financial decisions. To allow clients and prospective clients to evaluate the risks associated with a particular investment adviser, its business practices, and its investment strategies, it is essential that clients and prospective clients have clear disclosure that they are likely to read and understand. That is why the Securities and Exchange Commission (SEC) has adopted amendments to Part 2 of Form ADV to require investment advisers to provide new and prospective clients with a brochure and brochure supplements written in plain English. These amendments are designed to provide new and prospective clients with clearly written, meaningful current disclosure of the business practices, conflicts of interest, and background of the investment adviser firm and the firm’s employees who provide advice.
This is a photo of the National Register of Historic Places listing with reference number 7000063
Wednesday, June 1, 2011
Tuesday, May 31, 2011
FAMILY TRUST LIABLE FOR DISCLOSURE VIOLATIONS UNDER EXCHANGE ACT
The following is from the Sec web site:
" SEC v. ALFRED S. TEO, SR. AND M.A.A.A. TRUST, 04 Civ. 1815 (DNJ) (SW)
JURY FINDS ALFRED S. TEO, SR., LIABLE FOR SECURITIES FRAUD
On Wednesday, May 25, 2011, a jury in federal court in Newark, New Jersey, returned a verdict in favor of the U.S. Securities and Exchange Commission finding Alfred S. Teo, Sr. liable for securities fraud and disclosure violations under the Securities Exchange Act of 1934. The jury also found the M.A.A.A. Trust, a trust for Teo’s children, liable for disclosure violations under the Exchange Act. The Commission had charged that Teo and the M.A.A.A. Trust made false public filings with the Commission, and failed to make required filings, thereby materially misrepresenting their ownership of stock in the Musicland Stores Corporation.
The jury found that Teo violated Sections 10(b) and Rule 10b-5 thereunder and 13(d) of the Exchange Act. The jury also found that the M.A.A.A. Trust violated Sections 13(d) and 16(a) of the Exchange Act. The jury found the M.A.A.A. Trust not liable for violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. United States District Court Judge Susan D. Wigenton, who presided over the trial, previously granted the Commission’s motion for summary judgment with regard to Teo’s liability pursuant to Section 16(a) of the Exchange Act.
Teo, age 65, is a resident of Kinnelon, New Jersey and Fisher Island, Florida. The M.A.A.A. Trust is a resident of New Jersey.
Judge Wigenton will determine the relief. The Commission is seeking an injunction, disgorgement, prejudgment interest and civil penalties.”
" SEC v. ALFRED S. TEO, SR. AND M.A.A.A. TRUST, 04 Civ. 1815 (DNJ) (SW)
JURY FINDS ALFRED S. TEO, SR., LIABLE FOR SECURITIES FRAUD
On Wednesday, May 25, 2011, a jury in federal court in Newark, New Jersey, returned a verdict in favor of the U.S. Securities and Exchange Commission finding Alfred S. Teo, Sr. liable for securities fraud and disclosure violations under the Securities Exchange Act of 1934. The jury also found the M.A.A.A. Trust, a trust for Teo’s children, liable for disclosure violations under the Exchange Act. The Commission had charged that Teo and the M.A.A.A. Trust made false public filings with the Commission, and failed to make required filings, thereby materially misrepresenting their ownership of stock in the Musicland Stores Corporation.
The jury found that Teo violated Sections 10(b) and Rule 10b-5 thereunder and 13(d) of the Exchange Act. The jury also found that the M.A.A.A. Trust violated Sections 13(d) and 16(a) of the Exchange Act. The jury found the M.A.A.A. Trust not liable for violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. United States District Court Judge Susan D. Wigenton, who presided over the trial, previously granted the Commission’s motion for summary judgment with regard to Teo’s liability pursuant to Section 16(a) of the Exchange Act.
Teo, age 65, is a resident of Kinnelon, New Jersey and Fisher Island, Florida. The M.A.A.A. Trust is a resident of New Jersey.
Judge Wigenton will determine the relief. The Commission is seeking an injunction, disgorgement, prejudgment interest and civil penalties.”
SEC CHIEF SPEAKS AT SEC OPEN MEETING
Most people who have lived through fascism, socialism, communism and various forms of strong man governments and feudalistic states know that the free enterprise system can do the most good for the most people in the long run unless, criminal minds run both business and government. Criminal minds believe in fixed enterprise. They believe that the government is there to protect those who pay off public officials. The funny thing is that criminals will almost always call those who point out their criminal pursuits, a communist, socialist or, fascist. In truth, the free enterprise system works best when there is true competition free of politicians picking winners and losers in the market placed based solely upon political contributions. The following speech by Mary Schapiro is in regards to companies who use felons and bad actors in their commerce:
"Speech by SEC Chairman:
Opening Statement at SEC Open Meeting: Item 1 — Felons and Bad Actors
By
Chairman Mary L. Schapiro
U.S. Securities and Exchange Commission
Washington, D.C.
May 25, 2011
Good morning. This is an Open Meeting of the Securities and Exchange Commission on May 25, 2011.
Today, the Commission will consider two actions.
First, we will consider proposing a rule that would deny certain securities offerings from qualifying for an exemption from registration if the offerings involve certain “felons and other bad actors.”
And second, we will consider adopting a rule to create a whistleblower program that would reward individuals who provide the agency with high-quality tips leading to successful enforcement actions.
Both sets of rules are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
* * *
We begin with the “bad actor” rule — a rule that would deny securities offerings the benefit of one of the most commonly used exemptions from SEC registration if a felon or other bad actor is involved in the offering.
To understand the rule, one first must appreciate that federal law generally requires securities offerings to be registered with the SEC — unless of course an exemption is available.
Regulation D of the Securities Act of 1933 provides three exemptive rules that a company can use to avoid having to register an offering.
The most widely used provision of Regulation D is Rule 506. More than 90 percent of all offerings made under Regulation D are done under that rule.
If an offering qualifies for Rule 506, issuers can raise an unlimited amount of capital from an unlimited number of “accredited investors” and up to 35 non-accredited investors.
Section 926 of the Dodd-Frank Act requires the Commission to adopt rules that would make this safe harbor unavailable if a “felon and other ‘bad actor’” is involved in the offering.
When the section was added, Senator Dodd noted that the disqualification provision would “reduce the danger of fraud in private placements,” and expressed his belief that it would “protect investors from … unscrupulous persons while encouraging capital formation.” One important consequence of this change is that private offerings that include felons and other bad actors would no longer automatically qualify for state securities law preemption.
The proposal before us would advance these goals by implementing the requirements of the Act in a balanced and tailored way.
The proposed rule would apply to a wide swath of persons, including issuers; directors and officers of the issuer; and, placement agents. Bad actor disqualification would apply if any of them has been convicted of — or is subject to court or administrative sanctions for — securities fraud or other specified violations.
Meredith Cross and her Division of Corporation Finance staff will speak in greater detail about the proposed rule, but I would like to address one important aspect. Under the proposal, the new rules would take account of all disqualifying events, regardless of whether they occurred before or after the new rules come into effect.
I believe that taking into account disqualifying events that occurred prior to the effective date of the new rules fulfills Congress’ mandate to protect investors from felons and other bad actors. Nonetheless, I recognize that there may be concerns about the effects of applying the proposed rules to pre-existing convictions and sanctions.
That is why we are seeking comment on this approach.
We also are seeking comment on whether, and if so how, we should make these “bad actor” provisions uniform with the “bad actor” provisions contained in other Securities Act exemptions.
Further, we are seeking comment on whether to extend the proposed bad actor provision to all offerings under Regulation D, not just those under Rule 506.
Through such uniformity, we could potentially make our exemptive rules easier to understand and apply.
At the same time, we are mindful of the need to consider the relative costs and benefits of such an approach. For that reason, we are also very interested in public comment on the many questions posed in the release on this topic.
Before I turn to Meredith Cross, the Director of the Division of Corporation Finance, I would like to thank her and other staff including Lona Nallengara, Mauri Osheroff, Gerry Laporte, Karen Wiedemann, Johanna Losert and Jennifer Zepralka from the Division of Corporation Finance for their hard work in preparing the recommendations before us.
I also appreciate the contributions from Rich Levine, David Fredrickson and Bob Bagnall from the Office of the General Counsel; Emre Carr, Scott Bauguess and Ayla Kayhan from the Division of Risk, Strategy, and Financial Innovation; Hunter Jones, Barbara Chretien-Dar, Amy Miller and Martin Kimel from the Division of Investment Management; Lourdes Gonzalez, Daniel Fisher and Robert Cushmac from the Division of Trading and Markets; and Charlotte Buford and Laurita Finch from the Division of Enforcement.
And thank you to my colleagues on the Commission and to our counsels.
Now, I turn the meeting over to Meredith to hear more about the Division’s recommendations.”
"Speech by SEC Chairman:
Opening Statement at SEC Open Meeting: Item 1 — Felons and Bad Actors
By
Chairman Mary L. Schapiro
U.S. Securities and Exchange Commission
Washington, D.C.
May 25, 2011
Good morning. This is an Open Meeting of the Securities and Exchange Commission on May 25, 2011.
Today, the Commission will consider two actions.
First, we will consider proposing a rule that would deny certain securities offerings from qualifying for an exemption from registration if the offerings involve certain “felons and other bad actors.”
And second, we will consider adopting a rule to create a whistleblower program that would reward individuals who provide the agency with high-quality tips leading to successful enforcement actions.
Both sets of rules are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
* * *
We begin with the “bad actor” rule — a rule that would deny securities offerings the benefit of one of the most commonly used exemptions from SEC registration if a felon or other bad actor is involved in the offering.
To understand the rule, one first must appreciate that federal law generally requires securities offerings to be registered with the SEC — unless of course an exemption is available.
Regulation D of the Securities Act of 1933 provides three exemptive rules that a company can use to avoid having to register an offering.
The most widely used provision of Regulation D is Rule 506. More than 90 percent of all offerings made under Regulation D are done under that rule.
If an offering qualifies for Rule 506, issuers can raise an unlimited amount of capital from an unlimited number of “accredited investors” and up to 35 non-accredited investors.
Section 926 of the Dodd-Frank Act requires the Commission to adopt rules that would make this safe harbor unavailable if a “felon and other ‘bad actor’” is involved in the offering.
When the section was added, Senator Dodd noted that the disqualification provision would “reduce the danger of fraud in private placements,” and expressed his belief that it would “protect investors from … unscrupulous persons while encouraging capital formation.” One important consequence of this change is that private offerings that include felons and other bad actors would no longer automatically qualify for state securities law preemption.
The proposal before us would advance these goals by implementing the requirements of the Act in a balanced and tailored way.
The proposed rule would apply to a wide swath of persons, including issuers; directors and officers of the issuer; and, placement agents. Bad actor disqualification would apply if any of them has been convicted of — or is subject to court or administrative sanctions for — securities fraud or other specified violations.
Meredith Cross and her Division of Corporation Finance staff will speak in greater detail about the proposed rule, but I would like to address one important aspect. Under the proposal, the new rules would take account of all disqualifying events, regardless of whether they occurred before or after the new rules come into effect.
I believe that taking into account disqualifying events that occurred prior to the effective date of the new rules fulfills Congress’ mandate to protect investors from felons and other bad actors. Nonetheless, I recognize that there may be concerns about the effects of applying the proposed rules to pre-existing convictions and sanctions.
That is why we are seeking comment on this approach.
We also are seeking comment on whether, and if so how, we should make these “bad actor” provisions uniform with the “bad actor” provisions contained in other Securities Act exemptions.
Further, we are seeking comment on whether to extend the proposed bad actor provision to all offerings under Regulation D, not just those under Rule 506.
Through such uniformity, we could potentially make our exemptive rules easier to understand and apply.
At the same time, we are mindful of the need to consider the relative costs and benefits of such an approach. For that reason, we are also very interested in public comment on the many questions posed in the release on this topic.
Before I turn to Meredith Cross, the Director of the Division of Corporation Finance, I would like to thank her and other staff including Lona Nallengara, Mauri Osheroff, Gerry Laporte, Karen Wiedemann, Johanna Losert and Jennifer Zepralka from the Division of Corporation Finance for their hard work in preparing the recommendations before us.
I also appreciate the contributions from Rich Levine, David Fredrickson and Bob Bagnall from the Office of the General Counsel; Emre Carr, Scott Bauguess and Ayla Kayhan from the Division of Risk, Strategy, and Financial Innovation; Hunter Jones, Barbara Chretien-Dar, Amy Miller and Martin Kimel from the Division of Investment Management; Lourdes Gonzalez, Daniel Fisher and Robert Cushmac from the Division of Trading and Markets; and Charlotte Buford and Laurita Finch from the Division of Enforcement.
And thank you to my colleagues on the Commission and to our counsels.
Now, I turn the meeting over to Meredith to hear more about the Division’s recommendations.”
Monday, May 30, 2011
SUBPRIME AUTO LOAN EXECUTIVES CHARGED WITH FRAUD
It seems like the allegations against sub-prime lenders will never stop. Although it might be a good thing that the SEC et. al. have been agresively pursuing these cases it is very sad that there are so many of them. The following is an alleged fraud scheme which has been excerpted fromt SEC web site:
April 14, 2011
"The Securities and Exchange Commission announced that it filed a civil injunctive action today in federal district court in Massachusetts charging Massachusetts-based subprime auto loan provider Inofin Inc. and three company executives with misleading investors about their lending activities and diverting millions of dollars in investor funds for their personal benefit. The SEC also charged two sales agents with illegally offering to sell company securities without being registered with the SEC as broker-dealers.
The SEC alleges that Inofin executives Michael Cuomo of Plymouth, Mass., Kevin Mann of Marshfield, Mass., and Melissa George of Duxbury, Mass., illegally raised at least $110 million from hundreds of investors in 25 states and the District of Columbia through the sale of unregistered notes. Investors in the notes were told that Inofin would use the money for the sole purpose of funding subprime auto loans. As part of the pitch, Inofin and its executives told investors that they could expect to receive returns of 9 to 15 percent because Inofin loaned investor money to its subprime borrowers at an average rate of 20 percent. But unbeknownst to investors, and starting in 2004, approximately one-third of investor money raised was instead used by Cuomo and Mann to open four used car dealerships and begin multiple real estate property developments for their own benefit.
Inofin is not registered with the SEC to offer securities to investors.
According to the SEC’s complaint filed in federal court in Boston, Inofin and the executives materially misrepresented Inofin’s financial performance beginning as early as 2006 and continuing through 2011. Inofin had a negative net worth and a progressively deteriorating financial condition caused not only by the failure of Inofin’s undisclosed business activities, but also by management’s decisions in 2007, 2008, and 2009 to sell some of its auto loan portfolio at a substantial discount to solve ever-increasing cash shortages that Inofin concealed from investors. Nonetheless, Inofin and its principal officers continued to offer and sell Inofin securities while knowingly or recklessly misrepresenting to investors that Inofin was a profitable business and sound investment.
The SEC further alleges that beginning in 2006 and continuing to April 2010, Inofin’s executives defrauded investors while maintaining Inofin’s license to do business as a motor vehicle sales finance company by preparing and submitting materially false financial statements to its licensing authority, the Massachusetts Division of Banks. The SEC’s complaint charges Cuomo, Mann, and George with violating the antifraud and registration provisions of the federal securities laws, and seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties.
The SEC’s charges against the two sales agents — David Affeldt and Thomas K. (Kevin) Keough — allege that they promoted the offering and sale of Inofin’s unregistered securities. They were unjustly enriched with more than $500,000 in referral fees between 2004 and 2009. Affeldt and Keough are charged with selling the unregistered Inofin securities and failing to register with the SEC as a broker-dealer, and the SEC seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The Commission’s complaint alleges that Inofin, Cuomo, Mann, and George violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that Kevin Keough, and David Affeldt violated Sections 5(a), and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Inofin, Cuomo, Mann, George, Kevin Keough, and David Affeldt. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The SEC appreciates the assistance of the Secretary of the Commonwealth of Massachusetts William F. Galvin, who today filed charges against Inofin, Cuomo, Mann, George, Affeldt, Kevin Keough, and Nancy Keough based on the same conduct. The SEC also appreciates the assistance of the Massachusetts Division of Banks, which previously took action requiring Inofin to surrender its license to operate as a subprime auto lender in Massachusetts.”
April 14, 2011
"The Securities and Exchange Commission announced that it filed a civil injunctive action today in federal district court in Massachusetts charging Massachusetts-based subprime auto loan provider Inofin Inc. and three company executives with misleading investors about their lending activities and diverting millions of dollars in investor funds for their personal benefit. The SEC also charged two sales agents with illegally offering to sell company securities without being registered with the SEC as broker-dealers.
The SEC alleges that Inofin executives Michael Cuomo of Plymouth, Mass., Kevin Mann of Marshfield, Mass., and Melissa George of Duxbury, Mass., illegally raised at least $110 million from hundreds of investors in 25 states and the District of Columbia through the sale of unregistered notes. Investors in the notes were told that Inofin would use the money for the sole purpose of funding subprime auto loans. As part of the pitch, Inofin and its executives told investors that they could expect to receive returns of 9 to 15 percent because Inofin loaned investor money to its subprime borrowers at an average rate of 20 percent. But unbeknownst to investors, and starting in 2004, approximately one-third of investor money raised was instead used by Cuomo and Mann to open four used car dealerships and begin multiple real estate property developments for their own benefit.
Inofin is not registered with the SEC to offer securities to investors.
According to the SEC’s complaint filed in federal court in Boston, Inofin and the executives materially misrepresented Inofin’s financial performance beginning as early as 2006 and continuing through 2011. Inofin had a negative net worth and a progressively deteriorating financial condition caused not only by the failure of Inofin’s undisclosed business activities, but also by management’s decisions in 2007, 2008, and 2009 to sell some of its auto loan portfolio at a substantial discount to solve ever-increasing cash shortages that Inofin concealed from investors. Nonetheless, Inofin and its principal officers continued to offer and sell Inofin securities while knowingly or recklessly misrepresenting to investors that Inofin was a profitable business and sound investment.
The SEC further alleges that beginning in 2006 and continuing to April 2010, Inofin’s executives defrauded investors while maintaining Inofin’s license to do business as a motor vehicle sales finance company by preparing and submitting materially false financial statements to its licensing authority, the Massachusetts Division of Banks. The SEC’s complaint charges Cuomo, Mann, and George with violating the antifraud and registration provisions of the federal securities laws, and seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties.
The SEC’s charges against the two sales agents — David Affeldt and Thomas K. (Kevin) Keough — allege that they promoted the offering and sale of Inofin’s unregistered securities. They were unjustly enriched with more than $500,000 in referral fees between 2004 and 2009. Affeldt and Keough are charged with selling the unregistered Inofin securities and failing to register with the SEC as a broker-dealer, and the SEC seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The Commission’s complaint alleges that Inofin, Cuomo, Mann, and George violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that Kevin Keough, and David Affeldt violated Sections 5(a), and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Inofin, Cuomo, Mann, George, Kevin Keough, and David Affeldt. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The SEC appreciates the assistance of the Secretary of the Commonwealth of Massachusetts William F. Galvin, who today filed charges against Inofin, Cuomo, Mann, George, Affeldt, Kevin Keough, and Nancy Keough based on the same conduct. The SEC also appreciates the assistance of the Massachusetts Division of Banks, which previously took action requiring Inofin to surrender its license to operate as a subprime auto lender in Massachusetts.”
Sunday, May 29, 2011
SEC CHARGES SIX FORMER EXECUTIVES WITH FRAUD
Executives of failing businesses will often misrepresent the condition of their business to investors. Enron was a prime example of a failing conglomerate that had executives lie about financial condition to shareholders. The following is an excerpt from the SEC web site which alleges that six executives hid information from investors :
“ Washington, D.C., May 4, 2011 – The Securities and Exchange Commission today charged six former leading executives affiliated with a Kansas-based financial corporation with hiding critical information from investors and conducting a financial fraud.
The SEC alleges that senior executives at Brooke Corporation and two subsidiaries – whose line of business was insurance agency franchising and providing loans to franchisees – misrepresented their deteriorating financial condition in filings to investors and other public statements in 2007 and 2008. Meanwhile, behind the scenes they engaged in various undisclosed schemes to meet almost weekly liquidity crises, and falsified reports and made accounting maneuvers to conceal the rapid deterioration of the loan portfolio.
Five of the six executives have agreed to settle the SEC’s charges against them. The Brooke companies are no longer in business.
“The unscrupulous senior corporate executives at Brooke Corporation orchestrated a massive scheme to conceal the company’s deteriorating financial condition through virtually any means necessary, including reporting inflated asset values, double-pledging collateral, and diverting funds for improper uses,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The fallout from their fraud had a devastating impact on the livelihood of hundreds of insurance franchisees that depended on Brooke and on the balance sheets of regional banks and other lenders, all of whom mistakenly relied on the good faith and honesty of these executives.”
The SEC’s complaint filed in federal court in Kansas charged two brothers and four other leading executives at Brooke Corporation and its two publicly-traded subsidiaries – Brooke Capital Corporation (insurance agency franchisor) and Aleritas Capital Corporation (lender to insurance agency franchises and other businesses).
Robert D. Orr – founder and former chairman of the board of Brooke Corporation, former CEO and chairman of the board of Brooke Capital, former CFO of Aleritas.
Leland G. Orr – former CEO, CFO, and vice chairman of the board of Brooke Corporation, and former CFO of Brooke Capital.
Kyle L. Garst – former CEO, president, and member of the board of Brooke Capital.
Michael S. Hess – former CEO and member of the board of Aleritas.
Michael S. Lowry – former CEO and member of the board of Aleritas.
Travis W. Vrbas – former CFO of Brooke Corporation and Brooke Capital.
According to the SEC’s complaint, Brooke Capital’s former management inflated the number of franchise locations by including failed and abandoned locations in company totals. They concealed that the financial assistance to franchisees was so burdensome that Robert and Leland Orr secretly borrowed funds received from Brooke insurance customers to pay company operating expenses. That money was supposed to be held in trust for payment of insurance premiums. They also hid Brooke Capital’s inability to timely pay funds owed to profitable franchisees and creditors. Aleritas’s former management hid the company’s inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They sold or pledged the same loans as collateral to multiple lenders, and improperly diverted payments from borrowers for the company’s operating expenses. Aleritas’s former management concealed the deterioration of the company’s loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and failing to write-down its residual interests in securitization and credit facility assets.
In October 2008, Brooke Corporation declared Chapter 11 bankruptcy and suspended most of their operations. The companies were unable to reorganize in bankruptcy. The rapid collapse of the Brooke Companies had a devastating regional impact as hundreds of its franchisees failed. As a result of losses suffered on Aleritas loans, several regional banks also failed.
The SEC’s complaint charges violations of, among other things, the antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws. The complaint seeks permanent injunctions, officer and director bars, and monetary remedies against the Brooke executives.
Robert Orr, Leland Orr, Hess, Lowry, and Vrbas agreed to settle the charges against them without admitting or denying the SEC’s allegations. The settlements are subject to the approval of the U.S. District Court for the District of Kansas. The executives each consented to orders of permanent injunction and permanent officer and director bars. Lowry agreed to pay a disgorgement of $214,500, prejudgment interest of $24,004, and a $175,000 penalty. Hess agreed to pay a $250,000 penalty, and Vrbas agreed to pay a $130,000 penalty. Robert Orr and Leland Orr agreed to pay penalties and disgorgement in amounts to be determined by the court.
The SEC’s case against Garst continues in litigation.
The SEC acknowledges the assistance and cooperation of the Office of the Kansas Securities Commissioner, the Kansas City Field Office of the Federal Bureau of Investigation, and the U.S. Attorney's Office for the District of Kansas.”
“ Washington, D.C., May 4, 2011 – The Securities and Exchange Commission today charged six former leading executives affiliated with a Kansas-based financial corporation with hiding critical information from investors and conducting a financial fraud.
The SEC alleges that senior executives at Brooke Corporation and two subsidiaries – whose line of business was insurance agency franchising and providing loans to franchisees – misrepresented their deteriorating financial condition in filings to investors and other public statements in 2007 and 2008. Meanwhile, behind the scenes they engaged in various undisclosed schemes to meet almost weekly liquidity crises, and falsified reports and made accounting maneuvers to conceal the rapid deterioration of the loan portfolio.
Five of the six executives have agreed to settle the SEC’s charges against them. The Brooke companies are no longer in business.
“The unscrupulous senior corporate executives at Brooke Corporation orchestrated a massive scheme to conceal the company’s deteriorating financial condition through virtually any means necessary, including reporting inflated asset values, double-pledging collateral, and diverting funds for improper uses,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The fallout from their fraud had a devastating impact on the livelihood of hundreds of insurance franchisees that depended on Brooke and on the balance sheets of regional banks and other lenders, all of whom mistakenly relied on the good faith and honesty of these executives.”
The SEC’s complaint filed in federal court in Kansas charged two brothers and four other leading executives at Brooke Corporation and its two publicly-traded subsidiaries – Brooke Capital Corporation (insurance agency franchisor) and Aleritas Capital Corporation (lender to insurance agency franchises and other businesses).
Robert D. Orr – founder and former chairman of the board of Brooke Corporation, former CEO and chairman of the board of Brooke Capital, former CFO of Aleritas.
Leland G. Orr – former CEO, CFO, and vice chairman of the board of Brooke Corporation, and former CFO of Brooke Capital.
Kyle L. Garst – former CEO, president, and member of the board of Brooke Capital.
Michael S. Hess – former CEO and member of the board of Aleritas.
Michael S. Lowry – former CEO and member of the board of Aleritas.
Travis W. Vrbas – former CFO of Brooke Corporation and Brooke Capital.
According to the SEC’s complaint, Brooke Capital’s former management inflated the number of franchise locations by including failed and abandoned locations in company totals. They concealed that the financial assistance to franchisees was so burdensome that Robert and Leland Orr secretly borrowed funds received from Brooke insurance customers to pay company operating expenses. That money was supposed to be held in trust for payment of insurance premiums. They also hid Brooke Capital’s inability to timely pay funds owed to profitable franchisees and creditors. Aleritas’s former management hid the company’s inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They sold or pledged the same loans as collateral to multiple lenders, and improperly diverted payments from borrowers for the company’s operating expenses. Aleritas’s former management concealed the deterioration of the company’s loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and failing to write-down its residual interests in securitization and credit facility assets.
In October 2008, Brooke Corporation declared Chapter 11 bankruptcy and suspended most of their operations. The companies were unable to reorganize in bankruptcy. The rapid collapse of the Brooke Companies had a devastating regional impact as hundreds of its franchisees failed. As a result of losses suffered on Aleritas loans, several regional banks also failed.
The SEC’s complaint charges violations of, among other things, the antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws. The complaint seeks permanent injunctions, officer and director bars, and monetary remedies against the Brooke executives.
Robert Orr, Leland Orr, Hess, Lowry, and Vrbas agreed to settle the charges against them without admitting or denying the SEC’s allegations. The settlements are subject to the approval of the U.S. District Court for the District of Kansas. The executives each consented to orders of permanent injunction and permanent officer and director bars. Lowry agreed to pay a disgorgement of $214,500, prejudgment interest of $24,004, and a $175,000 penalty. Hess agreed to pay a $250,000 penalty, and Vrbas agreed to pay a $130,000 penalty. Robert Orr and Leland Orr agreed to pay penalties and disgorgement in amounts to be determined by the court.
The SEC’s case against Garst continues in litigation.
The SEC acknowledges the assistance and cooperation of the Office of the Kansas Securities Commissioner, the Kansas City Field Office of the Federal Bureau of Investigation, and the U.S. Attorney's Office for the District of Kansas.”
SWISS TRADER SETTLES CHARGES OF INSIDER TRADING WITH SEC
The following insider trading case is an excerpt from the SEC web site:
"The United State Securities and Exchange Commission (“Commission”) today announced that on May 24, 2011, the United States District Court for the Southern District of New York entered a Final Judgment as to the Defendant Giuseppe Tullio Abatemarco, a Swiss resident.
The Commission’s previously filed amended complaint, Securities and Exchange Commission v. Giuseppe Tullio Abatemarco, Civil Action No. 10 Civ. 9527 (WHP) (S.D.N.Y. filed April 20, 2011), alleges that Abatemarco engaged in illegal insider trading in connection with his purchase of the securities of Martek Biosciences Corporation, a Delaware corporation headquartered in Columbia, Maryland. Abatemarco, age 40, is a Swiss resident and insurance salesman. On December 21, 2010, Martek and Royal DSM, N.V., a Dutch company, announced that DSM would commence a cash tender offer to acquire all the outstanding shares of the common stock of Martek. The price of Martek stock rose 35% after the announcement. The amended complaint further alleges that in the days preceding the announcement, Abatemarco purchased 2,616 Martek call options based on material nonpublic information about the impending tender offer that he learned from a colleague who is the common-law wife of a DSM employee who was working on the tender offer. Abatemarco knew or should have known that the information was material and nonpublic. He stood to profit by about $1.2 million from the sale of the call options. On the Commission’s motion, the court froze the sale proceeds on December 22, 2010.
The amended complaint alleges that Abatemarco violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rules 10b-5 and 14e-3. The complaint seeks a permanent injunction, disgorgement with prejudgment interest civil money penalties.
Abatemarco has consented, without admitting or denying the allegations in the amended complaint, to the entry of a proposed final judgment: (1) permanently enjoining him from violating Sections 10(b) and 14(e) of the Exchange Act, and Exchange Act Rules 10b-5 and 14e-3; (2) ordering him to disgorge his trading profits in the amount of $1,193,594, plus pay prejudgment interest of $1,438.85; and (3) ordering him to pay a civil penalty of $250,667.15 pursuant to Section 21A of the Exchange Act."
"The United State Securities and Exchange Commission (“Commission”) today announced that on May 24, 2011, the United States District Court for the Southern District of New York entered a Final Judgment as to the Defendant Giuseppe Tullio Abatemarco, a Swiss resident.
The Commission’s previously filed amended complaint, Securities and Exchange Commission v. Giuseppe Tullio Abatemarco, Civil Action No. 10 Civ. 9527 (WHP) (S.D.N.Y. filed April 20, 2011), alleges that Abatemarco engaged in illegal insider trading in connection with his purchase of the securities of Martek Biosciences Corporation, a Delaware corporation headquartered in Columbia, Maryland. Abatemarco, age 40, is a Swiss resident and insurance salesman. On December 21, 2010, Martek and Royal DSM, N.V., a Dutch company, announced that DSM would commence a cash tender offer to acquire all the outstanding shares of the common stock of Martek. The price of Martek stock rose 35% after the announcement. The amended complaint further alleges that in the days preceding the announcement, Abatemarco purchased 2,616 Martek call options based on material nonpublic information about the impending tender offer that he learned from a colleague who is the common-law wife of a DSM employee who was working on the tender offer. Abatemarco knew or should have known that the information was material and nonpublic. He stood to profit by about $1.2 million from the sale of the call options. On the Commission’s motion, the court froze the sale proceeds on December 22, 2010.
The amended complaint alleges that Abatemarco violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rules 10b-5 and 14e-3. The complaint seeks a permanent injunction, disgorgement with prejudgment interest civil money penalties.
Abatemarco has consented, without admitting or denying the allegations in the amended complaint, to the entry of a proposed final judgment: (1) permanently enjoining him from violating Sections 10(b) and 14(e) of the Exchange Act, and Exchange Act Rules 10b-5 and 14e-3; (2) ordering him to disgorge his trading profits in the amount of $1,193,594, plus pay prejudgment interest of $1,438.85; and (3) ordering him to pay a civil penalty of $250,667.15 pursuant to Section 21A of the Exchange Act."
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