The Securities and Exchange Commission today filed fraud charges against a Virginia-based mechanical engineer accused of scheming to manipulate the price of Fitbit stock by making a phony regulatory filing. According to the SEC’s complaint, Robert W. Murray purchased Fitbit call options just minutes before a fake tender offer that he orchestrated was filed on the SEC’s EDGAR system purporting that a company named ABM Capital LTD sought to acquire Fitbit’s outstanding shares at a substantial premium. Fitbit’s stock price temporarily spiked when the tender offer became publicly available on Nov. 10, 2016, and Murray sold all of his options for a profit of approximately $3,100. The SEC alleges that Murray created an email account under the name of someone he found on the internet, and the email account was used to gain access to the EDGAR system. Murray then allegedly listed that person as the CFO of ABM Capital and used a business address associated with that person in the fake filing. The SEC also alleges that Murray attempted to conceal his identity and actual location at the time of the filing after conducting research into prior SEC cases that highlighted the IP addresses the false filers used to submit forms on EDGAR. According to the SEC’s complaint, it appeared as though the system was being accessed from a different state by using an IP address registered to a company located in Napa, California. “As alleged in our complaint, Murray used deceptive techniques in a concerted effort to evade detection, but we were able to connect the dots quickly and hold him accountable,” said Stephanie Avakian, Acting Director of the SEC Enforcement Division. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Murray. The SEC’s complaint charges Murray with violating antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-8. The SEC’s continuing investigation is being conducted by David W. Snyder, Assunta Vivolo, Kelly L. Gibson, and Patrick A. McCluskey in the Market Abuse Unit in Philadelphia. The case is being supervised by unit co-chiefs Robert A. Cohen and Joseph G. Sansone. The litigation will be led by Julia C. Green and Christopher R. Kelly of the Philadelphia office. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the U.S. Postal Inspection Service.
The Securities and Exchange Commission today announced that David L. Peavler, Associate Director of Enforcement in the Fort Worth Regional Office, is leaving the agency this month after more than 15 years of service. Mr. Peavler joined the SEC staff as a Staff Attorney and went on to serve as a Branch Chief and then an Assistant Director before being named Associate Director in November 2011. Mr. Peavler has supervised a staff of more than 60 attorneys and other professionals responsible for investigating potential violations of the federal securities laws by a wide range of market participants. Mr. Peavler received the SEC’s Irving Pollack Award last year in recognition of his “fairness and compassion in dealings with the public and staff, scholarship and professional expertise in execution of their legal duties, and adherence to the highest standards of personal and professional integrity.” He received the agency’s Arthur F. Mathews Award in 2004 for “sustained demonstrated creativity in applying federal securities laws for the benefit of investors.” Stephanie Avakian, Acting Director of the SEC’s Enforcement Division, said, “David is an exceptional attorney and a dedicated public servant who has led and supervised an array of complex and high-impact actions. He has demonstrated time and time again his commitment to protecting investors and our markets.” Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office, added, “David’s consistency, creativity, professionalism, and integrity are unparalleled, and he has led not only by word but by example. His leadership of Fort Worth’s enforcement program will be emulated but never duplicated.” Mr. Peavler said, “I’m fortunate to have served with so many skilled and dedicated people. Their untiring commitment to investor protection has truly been inspirational, and I’m proud of our achievements.” Among the enforcement actions taken by the SEC’s Fort Worth office under Mr. Peavler’s leadership: Seaboard Corporation, in which the SEC first set forth its corporate cooperation guidance. Royal Dutch Shell, which paid $120 million to settle fraud charges arising from its 4.5 billion barrel proved reserves misstatement. i2 Technologies and three of its former senior officers, who collectively paid more than $20 million to settle fraud charges relating to a billion dollar software revenue overstatement. The former CEO and CFO of Quest Resources Corporation, who were charged with misappropriating millions of dollars through undisclosed insider loans. Millennium Bank and its founder, who operated a $100 million international Ponzi scheme. Life Partners Holdings and its former senior officers, who a jury found liable for fraud in connection with disclosures and accounting for life settlements. They were ordered to pay millions of dollars in penalties. KBR Inc. and SandRidge Energy, which each settled allegations arising from their use of improper non-disclosure agreements that inhibited employees from reporting fraud and misconduct to the SEC. Mr. Peavler received his undergraduate degree in accounting and economics from Baylor University in 1989 and his law degree from the University of Texas in 1992.
The Securities and Exchange Commission today announced that Robert B. Stebbins has been named General Counsel of the agency. The General Counsel is the chief legal officer of the agency, providing a variety of legal services to the Commission and staff. "Bob is an exceptional attorney and counselor, and I know his depth of knowledge and experience managing a wide range of securities-related issues will benefit the SEC," said Chairman Jay Clayton. "I thank Bob for his commitment to serving his country and our agency, and I look forward to his steadfast guidance as the Commission's chief legal officer." "I have always had a great deal of respect for the SEC's staff and their commitment to the agency’s core mission, and I am proud to be part of the team," said Mr. Stebbins. "I look forward to sharing my experience with this talented group of professionals, and I am grateful for this tremendous opportunity." Mr. Stebbins has practiced law at Willkie Farr & Gallagher LLP since 1993, first as an associate and beginning in 2001 as a partner. At Willkie, Mr. Stebbins focused on mergers and acquisitions, private equity and venture capital, investment funds, and capital markets transactions. He also advised clients on SEC compliance issues and corporate governance matters. Mr. Stebbins earned a J.D. from the University of Pennsylvania and a B.S. from Central Michigan University, where he was an Academic All-American football player. He is a member of the American Bar Association and the New York City Bar Association and is a fellow of the American College of Investment Counsel.
The Securities and Exchange Commission today announced that Jaime Klima has been named Chief Counsel to Chairman Jay Clayton. As Chief Counsel, Ms. Klima will be senior legal and policy adviser, and will coordinate the rulemaking agenda of the Commission. She will also serve as the Chairman's representative on the Deputies Committee of the Financial Stability Oversight Council. "I am thrilled that Jaime has agreed to serve the Commission in this key role," said Chairman Jay Clayton. "I am pleased that Jaime's legal acumen and experience will continue to benefit the SEC and its team of committed professionals." Most recently, Ms. Klima served as SEC co-chief of staff under then-Acting Chairman Michael S. Piwowar, advising on all issues of agency management and policy. Before that, she was counsel to Commissioner Piwowar and Commissioner Troy A. Paredes. In those roles, Ms. Klima covered a wide range of issues including rulemaking and enforcement matters. Prior to working at the SEC, Ms. Klima practiced law at Wilmer Cutler Pickering Hale and Dorr LLP, specializing in broker-dealer compliance and regulation. She also clerked for the Honorable Richard Lowell Nygaard of the U.S. Court of Appeals for the Third Circuit. Ms. Klima earned her J.D., cum laude, from Duke University School of Law, a Master of Public Policy, also from Duke, and an undergraduate degree in Systems Engineering, with distinction, from the University of Virginia.
The Securities and Exchange Commission today announced that Sean Memon has been named the agency's deputy chief of staff. "Sean has proven to have extensive knowledge of financial regulation and coordination across our various markets. I commend his willingness to share his expertise here at the SEC as we further the agency's important mission," said Chairman Jay Clayton. Mr. Memon arrived at the SEC with experience providing advice to public and private companies in both legal and financial roles. Immediately prior to joining the SEC, Mr. Memon practiced law at Sullivan & Cromwell LLP in Washington, D.C., where he advised clients in regulatory and transactional matters, including with respect to capital raisings, mergers and acquisitions and joint ventures. Mr. Memon also advised companies on matters involving financial technology and the development of new products and services. Previously, Mr. Memon was a member of the Finance and Acquisitions department at Time Warner Inc., where he worked on long-term business planning efforts and performed quantitative valuation and financial impact analysis for potential new business initiatives and transactions. Prior to Time Warner, Mr. Memon was an analyst in the investment banking groups of Raymond James & Associates and Morgan Stanley & Co., where he worked with technology companies on capital raising activities and mergers and acquisitions. Mr. Memon received J.D. and MBA degrees from Duke University and an A.B. in economics from Harvard College.
The Securities and Exchange Commission today charged a pair of former head traders who ran the commercial mortgage-backed securities (CMBS) desk at Nomura Securities International Inc. with deliberately lying to customers in order to inflate the profits of the CMBS desk and line their own pockets as a result. The SEC alleges that James Im and Kee Chan each misrepresented price information while acting as intermediaries on trades with Nomura’s customers who sought to buy and sell CMBS on the secondary market. In certain instances, Im and Chan allegedly pretended they were still negotiating bond purchases with a third-party seller at higher prices when Nomura had already acquired the bonds at a lower price. The SEC alleges that in one instance, Im bragged about his purposeful deception of a customer, and Chan once altered an email to a customer to prop up his lie about the bid price for a bond. According to the SEC’s complaints, Chan and Im fraudulently generated more than $750,000 in extra trading profits for the CMBS desk, and they received substantial bonuses based largely on the desk’s performance. Chan agreed to settle the charges by paying $51,965 in disgorgement plus $11,758 in interest and a $150,000 penalty. Without admitting or denying the allegations, Chan also agreed to be barred from the securities industry with the right to reapply after three years. The settlement is subject to court approval. The case continues against Im. “As alleged in our complaints, Im and Chan operated under cover of an opaque CMBS secondary market to gain illegal trading profits and potentially larger bonuses by lying to firms on the other side of their trades about the prices at which they were buying and selling securities,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. The SEC’s complaints, filed in federal court in Manhattan, charge Chan and Im with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. The SEC’s investigation, which is ongoing, has been conducted by Ladan Stewart, Chevon Walker and George Stepaniuk of the New York office. The litigation against Im will be handled by Richard Hong, Ms. Stewart and Ms. Walker. The case is being supervised by Sanjay Wadhwa.
The Securities and Exchange Commission today announced that Lucas Moskowitz has been named the agency’s chief of staff. “Lucas’s diverse background in both the public and private sectors has given him valuable experience in all three areas of the SEC’s core mission, and I am delighted to have him on board,” said SEC Chairman Jay Clayton. “As we have walked the floors of the Commission’s headquarters in Washington, the reception Lucas has received has made it clear that he will be a valuable addition to the dedicated and professional staff here at the SEC.” Mr. Moskowitz served as Chief Investigative Counsel of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, where he led the Committee’s investigative and oversight activities in connection with a wide variety of banking, securities, housing, and insurance matters. Before joining the Senate Banking Committee staff, Mr. Moskowitz served as a counsel on the Financial Services Committee of the U.S. House of Representatives, where he worked on legislative and oversight matters to strengthen U.S. capital markets and promote capital formation. Previously at the SEC, Mr. Moskowitz served as a counsel to former Commissioner Daniel Gallagher, advising him on domestic and international policy issues and regulatory matters. Mr. Moskowitz also served as an attorney in the Division of Enforcement. Mr. Moskowitz began his government service as a law clerk to U.S. District Judge Richard M. Berman of the U.S. District Court for the Southern District of New York. Before and after his clerkship, Mr. Moskowitz practiced securities law in the Washington, D.C. office of Wilmer Cutler Pickering Hale and Dorr LLP. Most recently, Mr. Moskowitz was a managing director at Patomak Global Partners LLC, where he provided consulting services to financial services firms and public companies on regulatory and compliance matters. Mr. Moskowitz received his B.A. in Politics from Princeton University and his J.D. from Georgetown University Law Center.
The Securities and Exchange Commission today charged a former partner at an international law firm and his neighbor with making more than $1 million in illicit profits by insider trading around corporate announcements. The SEC alleges that Walter C. Little accessed confidential documents on his law firm’s internal computer network related to at least 11 impending announcements involving law firm clients, none of which he personally advised or billed for services. Little then allegedly traded in advance of each announcement and often tipped his neighbor Andrew M. Berke with material nonpublic information so he could similarly trade in company stocks before the announcements were made publicly. According to the SEC’s complaint, the insider trading occurred from February 2015 to February 2016. “As alleged in our complaint, Little used highly-confidential information about his law firm's clients to make more than $1 million for himself and his neighbor through illegal insider trading and tipping,” said Stephanie Avakian, Acting Director of the SEC’s Enforcement Division. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Little and Berke. The SEC’s complaint charges Little and Berke with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 as well as Section 17(a) of the Securities Act of 1933. The complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, penalties, and permanent injunctions. The SEC’s investigation was conducted by Richard Kutchey and Gregory Faragasso. The case was supervised by Gerald Hodgkins, and the litigation is being led by Kevin Lombardi and Charles Stodghill. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.
Public companies must properly disclose perks, benefits, and other forms of compensation paid to CEOs and certain other highly compensated executive officers. The Securities and Exchange Commission today announced that the former CEO of a marketing company has agreed to pay $5.5 million to settle charges that his perks were not properly disclosed to shareholders. According to the SEC’s order, shareholders were informed in annual filings that Miles S. Nadal received an annual perquisite allowance of $500,000 in addition to other benefits as the chairman and CEO of MDC Partners. But the SEC’s investigation found that without disclosing information to investors as required, MDC Partners paid for Nadal’s personal use of private airplanes as well as charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks. All total, Nadal improperly obtained an additional $11.285 million in perks beyond his disclosed benefits and $500,000 annual allowances. He has since resigned and returned $11.285 million to the company. MDC Partners agreed to a $1.5 million settlement earlier this year for its role in the perk disclosure failures. “Perks paid to corporate executives should be properly disclosed so that investors can make informed decisions,” said G. Jeffrey Boujoukos, Director of the SEC’s Philadelphia Regional Office. “Nadal improperly received and failed to disclose millions of dollars in compensation.” Nadal consented to the SEC’s order without admitting or denying the findings and agreed to pay $1.85 million in disgorgement plus $150,000 in interest and a $3.5 million penalty. He also agreed to be barred from serving as an officer or director of a public company for five years. The SEC’s investigation has been conducted by Brendan P. McGlynn, Oreste P. McClung, Lisa M. Candera, and Brian R. Higgins of the Philadelphia office.
The Securities and Exchange Commission today announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged. In a settlement of more than $97 million, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50 million. The SEC’s order finds that two Barclays advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren’t being performed as represented. Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another 22,138 accounts paid excess fees to Barclays due to miscalculations and billing errors by the firm. "Barclays failed to ensure that clients were receiving the services they were paying for,” said C. Dabney O’Riordan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Each set of clients who were harmed are being refunded through the settlement.” The SEC’s order finds that Barclays violated Sections 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-7 as well as Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. Without admitting or denying the SEC’s findings, Barclays agreed to create a Fair Fund to refund advisory fees to harmed clients. The Fair Fund will consist of $49,785,417 in disgorgement plus $13,752,242 in interest and a $30 million penalty. Barclays will directly refund an additional $3.5 million to advisory clients who invested in third-party investment managers and investment strategies that underperformed while going unmonitored. Those funds also will go to brokerage clients who were steered into more expensive mutual fund share classes. The SEC’s investigation was conducted by Gwen Licardo of the Asset Management Unit, and the case was supervised by Valerie A. Szczepanik of the New York Regional Office. An SEC examination that led to the investigation was conducted by investment adviser examiners in the New York Regional Office.