SEC Charges Texas-Based Brokerage Firm With Violating Supervisory and Customer Protection Rules
The Securities and Exchange Commission today charged an Irving, Texas-based brokerage firm with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.
H.D. Vest Investment Securities agreed to settle the charges by paying a financial penalty and retaining an independent compliance consultant to improve its supervisory controls.
According to the SEC’s order instituting a settled administrative proceeding, H.D. Vest has more than 4,500 registered representatives typically working as independent contractors who also operate tax businesses outside of their securities businesses. H.D. Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, and as a result some representatives used their outside businesses to defraud brokerage customers in such ways as transferring or depositing customer brokerage funds into their outside business accounts.
The SEC’s order further finds that H.D. Vest did not follow customer protection rules in the wake of the...
Former Company Officer Earns Half-Million Dollar Whistleblower Award for Reporting Fraud Case to SEC
The Securities and Exchange Commission today announced a whistleblower award payout between $475,000 and $575,000 to a former company officer who reported original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.
Officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for an award under the SEC’s whistleblower program. However, there is an exception to this exclusion that makes an officer eligible if he or she reports the information to the SEC more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue. This is the first SEC whistleblower award to an officer under these circumstances.
“Corporate officers have front-row seats overseeing the activities of their companies, and this particular officer should be commended for stepping up to report a securities law violation when it...
SEC Suspends Trading in 128 Dormant Shell Companies to Put Them Out of Reach of Microcap Fraudsters
The Securities and Exchange Commission today announced it has suspended trading in 128 inactive penny stock companies to ensure they don’t become a source for pump-and-dump schemes.
The trading suspensions are the latest in a microcap fraud-fighting initiative known as Operation Shell-Expel in which the SEC Enforcement Division’s Office of Market Intelligence utilizes technology to scour the over-the-counter (OTC) marketplace and identify dormant companies ripe for abuse. The proactive efforts have prevented fraudsters from having the opportunity to manipulate these thinly-traded stocks by pumping the companies’ stock value through false and misleading promotional campaigns and then dumping the stocks after investors buy in.
Since it began in 2012, Operation Shell-Expel has resulted in trading suspensions of more than 800 microcap stocks, which comprises more than 8 percent of the OTC market. Once a stock has been suspended from trading, it cannot be relisted unless the company provides updated financial information to prove...
SEC Halts Ponzi-Like Scheme by Purported Venture Capital Fund Manager in Buffalo
The Securities and Exchange Commission today charged a purported venture capital fund manager in Buffalo, N.Y., with fraudulently using money from three investment funds to pay fictitious returns to investors in a different fund. The SEC obtained an emergency asset freeze to halt the Ponzi-like scheme.
The SEC alleges that Gregory W. Gray Jr. and his firms Archipel Capital LLC and BIM Management LP solicited money for a fund created to invest in pre-IPO shares of Twitter that would be delivered to investors with profits once the company went public. Gray raised nearly $5.3 million from investors, which was enough to purchase 230,000 pre-IPO Twitter shares under the terms of the fund’s offering documents. However, only 80,000 shares were actually purchased before Twitter went public in November 2013. Faced with increasing pressure from investors to deliver the promised shares and profits, Gray allegedly stalled and stole to make up the shortfall...
Fee Rate Advisory #4 for Fiscal Year 2015
Pursuant to Section 31(j)(2) of the Securities Exchange Act of 1934, the Commission has determined that a mid-year adjustment to the Section 31 fee rate for fiscal year 2015 is not required. These adjustments do not directly affect the amount of funding available to the SEC.
The Section 31 fee rate for fiscal 2015 will remain at the current rate of $18.40 per million. This rate will remain in place until September 30, 2015, or 60 days after the enactment of a regular FY 2016 appropriation, whichever is later. The Section 31 assessment on round turn transactions in security futures also will remain at $0.0042 per transaction.
The Office of Interpretation and Guidance in the Commission’s Division of Trading and Markets is available for questions on Section 31 at (202) 551-5777, or by e-mail at firstname.lastname@example.org.
The Commission will issue further notices as appropriate to keep the public informed of developments relating...