WHISTLEBLOWER RECEIVES $2.2 MILLION AWARD

From U.S. Securities and Exchange Commission 

Press Release
SEC Awards More Than $2.2 Million to Whistleblower Who First Reported Information to Another Federal Agency Before SEC
FOR IMMEDIATE RELEASE
2018-58

Washington D.C., April 5, 2018 —
The Securities and Exchange Commission today announced a whistleblower award of more than $2.2 million to a former company insider whose tips helped the agency open an investigation that led to an enforcement action.  The whistleblower first reported the information to another federal agency and later provided the same information to the SEC.

This is the first award paid under the “safe harbor” of Exchange Act Rule 21F-4(b)(7), which provides that if a whistleblower submits information to another federal agency and submits the same information to the SEC within 120 days, then the SEC will treat the information as though it had been submitted to the SEC at the same time that it was submitted to the other agency.

The whistleblower voluntarily reported information to a federal agency covered by the rule, which referred the matter to the SEC.  The SEC then opened an investigation.  Within 120 days of the initial report, the whistleblower provided the same information to the SEC and later provided substantial cooperation in the investigation.  Although the SEC report came after the staff had opened its investigation, the SEC treated the submission as though it had been made when the whistleblower provided the information to the other agency.

SEC ANNOUNCING MORE BROKERS CHARGED FOR FRAUD

The following press release comes from the U.S. Securities and Exchange Commission

Press Release

SEC Continues Crackdown on Brokers Defrauding Customers

FOR IMMEDIATE RELEASE

2017-223

Washington D.C., Dec. 6, 2017 —
The Securities and Exchange Commission today continued its crackdown on brokers who defraud customers, charging two New York-based brokers with making unsuitable trades that were costly for customers and lucrative for the brokers.  The case follows similar charges of excessive trading by brokers brought in January, April, and September.

The SEC’s complaint, filed in federal court in Manhattan, alleges that Zachary S. Berkey of Centerreach, New York, and Daniel T. Fischer of Greenwich, Connecticut, conducted in-and-out trading that was almost certain to lose money for customers while yielding commissions for themselves.  According to the complaint, 10 customers of Four Points Capital Partners LLC, where Berkey and Fischer previously worked, lost a total of $573,867 while Berkey and Fischer received approximately $106,000 and $175,000, respectively, in commissions.

“We’re intensifying our focus on unscrupulous brokers and their harmful practices,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office.  “As alleged in our complaint, Berkey and Fischer did grave harm to their customers by providing unsuitable recommendations and siphoning money in the form of high commissions and costs.”

According to the SEC’s complaint, since the customers incurred significant costs with every transaction and the securities were held briefly, the price of the securities had to rise significantly for customers to realize even a minimal profit.  The complaint also alleges that Berkey and Fischer churned customer accounts and concealed material information from their customers, namely that the costs associated with their recommendations, including commissions and fees, would almost certainly exceed any potential gains on the trades.  The complaint further alleges that Fischer engaged in unauthorized trading.

Without admitting or denying the SEC’s allegations, Fischer consented to a final judgment that permanently enjoins him from similar violations in the future and orders him to return his allegedly ill-gotten gains with interest and pay a $160,000 penalty.  The settlement is subject to court approval.  Fischer separately agreed to an SEC order barring him from the securities industry and penny stock trading.  The SEC’s litigation against Berkey will proceed in federal district court in Manhattan.

The SEC’s investigation was conducted by Hane L. Kim, Karen Lee, David Stoelting, and Gerald A. Gross.  The litigation will be led by Mr. Stoelting, Ms. Kim, and Ms. Lee.  The case is being supervised by Mr. Wadhwa.  The SEC examination that led to the investigation was conducted by Rosanne R. Smith, Terrence P. Bohan, William D. Ostrow, and Doreen Piccirillo.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority and the Office of Montana State Auditor, Commissioner of Securities and Insurance.

SEC TAKES ACTION AGAINST UNDISCLOSED PAID STOCK TOUTING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Press Release
SEC: Payments for Bullish Articles on Stocks Must Be Disclosed to Investors
27 Firms and Individuals Charged With Fraudulent Promotion of Stocks

FOR IMMEDIATE RELEASE
2017-79
Washington D.C., April 10, 2017—
The Securities and Exchange Commission today announced enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes that left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.

SEC investigations uncovered scenarios in which public companies hired promoters or communications firms to generate publicity for their stocks, and the firms subsequently hired writers to publish articles that did not publicly disclose the payments from the companies.  The writers allegedly posted bullish articles about the companies on the internet under the guise of impartiality when in reality they were nothing more than paid advertisements.  More than 250 articles specifically included false statements that the writers had not been compensated by the companies they were writing about, the SEC alleges.

“If a company pays someone to publish or publicize articles about its stock, it must be disclosed to the investing public.  These companies, promoters, and writers allegedly misled investors by disguising paid promotions as objective and independent analyses,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement.

According to the SEC’s orders as well as a pair of complaints filed in federal district court, deceptive measures were often used to hide the true sources of the articles from investors.  For example, one writer wrote under his own name as well as at least nine pseudonyms, including a persona he invented who claimed to be “an analyst and fund manager with almost 20 years of investment experience.”  One of the stock promotion firms went so far as to have some writers it hired sign non-disclosure agreements specifically preventing them from disclosing compensation they received.

“Deception takes many forms.  Our markets cannot operate fairly when there are deliberate efforts to reach prospective investors with positive articles about a stock while hiding that the companies paid for those articles,” said Melissa Hodgman, Associate Director of the SEC’s Division of Enforcement.

The SEC filed fraud charges against three public companies and seven stock promotion or communications firms as well as two company CEOs, six individuals at the firms, and nine writers.  Of those charged, 17 have agreed to settlements that include disgorgement or penalties ranging from approximately $2,200 to nearly $3 million based on frequency and severity of their actions.  The SEC’s litigation continues against 10 others.

The SEC also instituted separate charges against another company for its involvement in circulating promotional materials that did not comply with prospectus requirements under the federal securities laws.  The company settled the case.

The SEC today released an investor alert warning that articles on an investment research website that appear to be an unbiased source of information or provide commentary on multiple stocks may be part of an undisclosed paid stock promotion.  Investors should never make an investment based solely on information published on an investment research website.  When making an investment decision, thoroughly research the company using multiple sources.

“Stock promotion schemes may be conducted through investment research websites,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “Investors looking for objective investment information should be aware that fraudsters may use these websites to profit at investors’ expense.”

The SEC’s investigations were conducted by Beth Groves, Ian Rupell, Shelby Hunt, Jim Blenko, and Jonathan Jacobs with assistance from Michi Harthcock, Jamie Wohlert, Suzanne Romajas, and Frederick Block.  The cases were supervised by Rami Sibay, and the litigation will be led by Ms. Romajas and Patrick Costello.

FINANCIAL MANAGEMENT COMPANY ACCUSED OF SCAMMING THE ELDERLY

From:  U.S. Securities and Exchange Commission
Press Release
SEC Halts Fraud Targeting Seniors
FOR IMMEDIATE RELEASE
2017-72
Washington D.C., March 27, 2017—
The Securities and Exchange Commission today announced an emergency asset freeze and temporary restraining order against a Chicago-based investment adviser and his financial management company accused of scamming elderly investors out of millions of dollars.

The SEC alleges that Daniel H. Glick and his unregistered investment advisory firm Financial Management Strategies (FMS) provided clients with false account statements to hide Glick’s use of client funds to pay personal and business expenses, purchase a Mercedes-Benz, and pay off loans and debts among other misuses.

According to the SEC’s complaint, Glick was barred by FINRA in 2014 and had his Certified Financial Planner designation and Certified Public Accountant license revoked for conduct unrelated to today’s SEC charges.

“As alleged in our complaint, Daniel Glick raised millions of dollars from elderly clients by claiming that he would pay their bills, handle their taxes, and invest on their behalf.  In reality, Daniel Glick used much of their money to do what was best for Daniel Glick,” said David Glockner, Director of the SEC’s Chicago Regional Office.

The SEC’s complaint also names Glick Accounting Services, Glick’s business partner David B. Slagter, and Glick’s business acquaintance Edward H. Forte as relief defendants for the purposes of recovering client funds that Glick transferred or paid them in the form of advances or loans.

The court issued a temporary restraining order against Glick and FMS at the SEC’s request, and issued an order freezing the assets of Glick, FMS, and Glick Accounting Services.

The SEC encourages investors to check the background of anyone offering to sell them investments.

The SEC’s investigation, which is continuing, is being conducted by Michelle Muñoz Durk and John Kustusch, and the case is being supervised by Jeffrey A. Shank.  The SEC’s litigation will be led by Steven C. Seeger.  The SEC’s examination that led to the investigation was conducted by Terrence Bohan, Michael Altschuler, and Christine Little, and it was supervised by Rosanne Smith.

CASINO-GAMING COMPANY TO PAY HALF-MILLION PENALTY IN WHISTLEBLOWER RETALIATION CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Press Release

SEC: Casino-Gaming Company Retaliated Against Whistleblower

FOR IMMEDIATE RELEASE

2016-204

Washington D.C., Sept. 29, 2016 — The Securities and Exchange Commission today announced that casino-gaming company International Game Technology (IGT) has agreed to pay a half-million dollar penalty for firing an employee with several years of positive performance reviews because he reported to senior management and the SEC that the company's financial statements might be distorted.

In its second whistleblower retaliation case since the Dodd-Frank Act authorized the agency to bring such charges, the SEC found that the employee was removed from significant work assignments within weeks of raising concerns about the company's cost accounting model.  He was terminated approximately three months later.

"Strong enforcement of the anti-retaliation protections is critical to the success of the SEC's whistleblower program.  This whistleblower noticed something that he felt might lead to inaccurate financial reporting and law violations, and he was wrongfully targeted for doing the right thing and reporting it," said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.

"Bringing retaliation cases, including this first stand-alone retaliation case, illustrates the high priority we place on ensuring a safe environment for whistleblowers,” said Jane A. Norberg, Chief of the SEC’s Office of the Whistleblower.  "We will continue to exercise our anti-retaliation authority when companies take reprisals for whistleblowing efforts."

According to the SEC's order, IGT conducted an internal investigation into the allegations made by the whistleblower, who did not oversee the company's accounting functions, and determined its reported financial statements contained no misstatements.

Without admitting or denying the SEC's findings, IGT agreed to pay the $500,000 penalty and cease and desist from committing or causing any further violations of Section 21F(h) of the Securities Exchange Act of 1934.

The SEC’s investigation was conducted by Brent W. Wilner, Rhoda H. Chang, and Gary Y. Leung, and the case was supervised by Diana K. Tani, John W. Berry, C. Dabney O’Riordan, and Michele W. Layne of the Los Angeles Regional Office.  The SEC appreciates the assistance of the U.S. Labor Department's Occupational Safety and Health Administration.

THE WANING OF THE WHIZ

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Press Release

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“Stock Trading Whiz Kid” to Pay $1.5 Million to Settle Stock Newsletter Fraud Charges

FOR IMMEDIATE RELEASE

2016-184

Washington D.C., Sept. 13, 2016 — The Securities and Exchange Commission today announced that a self-proclaimed “stock trading whiz kid” and his stock newsletter company in Los Angeles have agreed to pay nearly $1.5 million to settle charges that they defrauded subscribers through false statements and misrepresentations.

According to the SEC’s complaint, Manuel E. Jesus and his newsletter company Wealthpire Inc. used advertising materials and websites touting him as “the untutored prodigy of stock investing” under the alias Manny Backus.  A self-purported “math whiz” who boasted a “skyscraping” IQ and training as a professional chess player, Backus claimed to be actively trading in the stock market with “real money” by age 19.  The SEC’s complaint also states that Wealthpire materials claimed that Backus made millions of dollars before “deciding to help other investors” by starting an alert service that let traders copy his every trading move.

The SEC alleges that from at least January 2012 to September 2014, Backus was not trading in the same stocks recommended by his services as he claimed.  He wasn’t the one making all of the recommendations either.  For instance, the SEC’s complaint alleges that Robert C. Joiner was paid by Wealthpire to make all of the stock picks for one alert service without any guidance from Backus on how to choose them.  Joiner allegedly posed as Backus during chat room sessions by signing in using a password that Backus supplied, and Joiner told investors that he was buying and selling certain recommended stocks when no such transactions were actually taking place.  Joiner also is named in the SEC’s complaint and agreed to settle the case.

The SEC’s complaint alleges a series of other misrepresentations to Wealthpire subscribers as well, including false claims about one particular stock alert service that purportedly made historic trading recommendations that yielded huge past returns higher than 1,400 percent.

“Investors who subscribe to trading alert services are relying on the purported expertise and success of those making the stock recommendations, but Wealthpire and Backus instead circulated repeated lies and falsehoods,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.

The SEC has warned investors that investment newsletters can be used as tools for fraud, noting in an investor alert for example to beware false performance claims misrepresenting the track record of the newsletter’s investment recommendations and be suspicious if the newsletter does not disclose having received any compensation.

Backus and Wealthpire agreed to pay disgorgement of $1,135,145 plus interest of $112,902, and Backus also must pay a $235,000 penalty.  Without admitting or denying the allegations, Backus, Wealthpire, and Joiner consented to the entry of a final judgment permanently enjoining each of them from future violations of the antifraud provisions of the federal securities laws.

The SEC’s investigation was conducted by Lucee Kirka and supervised by Robert Conrrad of the Los Angeles office.