SEC Proposes FAIR Act Rules to Promote Research Reports on Investment Funds

The Securities and Exchange Commission today proposed rules and amendments that would promote research on mutual funds, exchange‑traded funds, registered closed-end funds, business development companies, and similar covered investment funds. 

The proposal would reduce obstacles to providing research on investment funds by harmonizing the treatment of such research with research on other public entities. 

“The proposed changes are intended to provide investors with greater access to research to aid them in making investment decisions,” said SEC Chairman Jay Clayton.  “This congressional mandate recognizes the critical role that mutual funds and similar investment products play in helping Main Street investors meet their financial goals.” 

If adopted, the proposal would generally establish a safe harbor for a broker or dealer to publish or distribute research reports on investment funds under certain conditions.  This proposed safe harbor is similar to a regulatory safe harbor that currently exists for research reports about other public entities.

The Commission took this action in furtherance of the mandate of the Fair Access to Investment Research Act of 2017 (FAIR Act).

The public comment period will remain open for 30 days following publication of the proposing release in the Federal Register.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com

Investing in America: SEC Commissioners are Heading to Atlanta to Interact with Investors

The Securities and Exchange Commission today announced that the five-member Commission and staff from across the agency will be in Atlanta on June 13 for an interactive event with investors at Georgia State University College of Law. The event is an opportunity for all Main Street investors—from those who just started their first job to those approaching retirement—to hear directly from, and share feedback with, the SEC’s leaders on topics that directly affect their personal finances and the regional and national economies. 

“With its dynamic population, innovative ideas, and thriving economy, Atlanta is an ideal place for us to discuss the work we do and hear directly from the people we serve,” said SEC Chairman Jay Clayton, who will be joined in Atlanta by Commissioners Kara Stein, Michael Piwowar, Robert Jackson, and Hester Peirce.

The Commissioners will kick the day off with a town hall-style event covering a range of topics from choosing a financial professional, to initial coin offerings and digital assets, to cybersecurity. Directly after the town hall, attendees are invited to join the Commissioners and SEC staff at one of the interactive breakout sessions to gain greater insight into some of the most requested topics before the SEC today. 

Breakout session topics:

  • The Investor Experience: Does the Information You Get From Mutual Funds and ETFs Work for You?
  • Tips for Savers, Including Military and Early Career
  • Stopping Fraud
  • Bitcoin & ICOs
  • Investing in, and Raising Money by, Small Companies

“As anyone in the Atlanta Regional Office can tell you, this area has no shortage of people with great ideas, and I know their input will make this event a meaningful learning opportunity both for our agency and the region,” said Richard Best, Director, SEC Atlanta Regional Office. 

Seating is first come, first served and attendants are encouraged to RSVP via the SEC’s Atlanta Regional Office’s webpage, which has event details. There is convenient parking and a MARTA Station nearby. The event is free and open to the public and the media.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com

SEC Charges Three Former Healthcare Executives With Fraud

The Securities and Exchange Commission today announced fraud charges against three former Constellation Healthcare Technologies Inc. executives who falsified financial and other information they provided to a private firm in the course of negotiating the private firm’s acquisition of a majority stake in Constellation. Houston-based Constellation filed for bankruptcy in March, a little more than a year after the January 2017 acquisition.

According to the SEC’s complaint, the executives convinced a private firm to acquire a majority of Constellation’s equity and provided fake information, including financial statements for three fictitious subsidiaries supposedly acquired for more than $62 million. The complaint alleges that the former executives funded the sham acquisitions with stock sales in London and then diverted the proceeds to themselves.  The complaint charges former Constellation chief executive Parmjit (Paul) Parmar, former chief financial officer Sotirios (Sam) Zaharis, and former company secretary Ravi Chivukula.  In September 2017, amid concerns about Constellation’s financial condition, Parmar resigned and Zaharis and Chivukula were put on administrative leave. 

“Using phony balance sheets, doctored bank statements, and other fabrications to conceal the theft of investor monies, which we allege occurred in this case, will not go undetected or unpunished,” said Marc P. Berger, Director of the SEC’s New York Regional Office.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Parmar, Zaharis, and Chivukula.

The SEC’s complaint, filed in U.S. District Court in New Jersey, charges Parmar, Zaharis, and Chivukula with violating the antifraud provisions of the federal securities laws.  The SEC is seeking permanent injunctions, return of allegedly ill-gotten gains plus interest, civil penalties, and officer-and-director bars against the Parmar, Zaharis, and Chivukula.

The SEC’s investigation, which is continuing, has been conducted by John O. Enright and Sheldon L. Pollock of the New York Regional Office and supervised by Lara S. Mehraban.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey and the FBI.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com

SEC Charges Owner of Alternative Investment Firm in Belize Airport Financing Scam

The Securities and Exchange Commission today charged the owner of a Manhattan-based alternative investment firm with misappropriating close to $6 million in investor funds earmarked to finance the construction of an international airport in Belize. 

The SEC’s complaint alleges that between 2014 and 2017, Brent Borland sold more than $21 million of promissory notes to dozens of investors, promising that the funds would be used as bridge financing for development of an international airport in Placencia, Belize, and that the investments would be protected by pledges of real estate as collateral.  Borland marketed and sold the notes through two companies, Borland Capital Group LLC, which purports to be active in “alternative investment,” and Belize Infrastructure Fund I, LLC, which purports to be in the business of construction finance. 

The complaint alleges that Borland used millions of dollars of investor funds for personal expenses and unrelated business expenses, including mortgage and property tax payments on his family’s Florida mansion, multiple luxury automobiles, private school tuition for his children, $36,000 for his family’s beach club membership, and almost $2.7 million to pay off credit cards.  Borland also allegedly deceived investors by pledging the same collateral to multiple investors.

“Investors should be able to count on the fact that their invested funds are used as promised,” said Robert J. Burson, Associate Regional Director of the SEC’s Chicago Regional Office.  “We seek an asset freeze and immediate injunctive relief in this case to protect victims from alleged false promises.”

The SEC’s complaint charges Borland, Borland Capital Group and Belize Infrastructure Fund with violating the antifraud provisions of the federal securities laws.  The SEC seeks asset freezes, an accounting of investor assets, disgorgement, and civil penalties.  The complaint also names as relief defendants Borland’s wife, Alana LaTorra Borland, and a corporation controlled by Borland and his wife, Canyon Acquisitions, LLC.  The SEC seeks to recover investor proceeds that Borland transferred to the relief defendants.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Borland who was arrested earlier in the day.

The SEC’s investigation, which is continuing, was conducted by Andrew O’Brien and Donald Ryba and supervised by C.J. Kerstetter.  The SEC’s litigation will be led by Benjamin Hanauer and Timothy Leiman.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com