The Securities and Exchange Commission today charged the former chief financial officer of Barrett Business Services Inc. for his role in an accounting fraud involving BBSI’s workers’ compensation expenses. The SEC also charged BBSI in the accounting fraud and charged the company’s former controller for his role in improperly approving certain of the CFO’s accounting entries. Both BBSI and the former controller agreed to settle the Commission’s charges against them.  

The SEC’s complaint against BBSI’s former CFO James D. Miller, filed in federal district court in the Western District of Washington, alleges that Miller manipulated BBSI’s accounting records to hide the fact that its workers’ compensation expense was increasing relative to its revenue. According to the complaint, Miller took steps to conceal from BBSI’s independent auditor a third-party actuarial report concluding that BBSI needed to add tens of millions of dollars to its workers’ compensation liability. BBSI’s stock dropped 32 percent when the Vancouver, Washington-based firm announced it needed to restate its financial results to reflect increased workers’ compensation expenses.

In a parallel action, the U.S. Attorney’s Office for the Western District of Washington today announced criminal charges against Miller.

“Investors depend on public company executives to be up front about their company’s financial condition, not to use accounting gimmicks to hide worrisome trends,” said Erin E. Schneider, Associate Director of the SEC’s San Francisco Regional Office. “As alleged in our complaint, Miller betrayed the trust placed in him by the company and its investors by engaging in a number of accounting shenanigans designed to manipulate BBSI’s financial results.”     

The SEC today instituted a settled administrative proceeding against BBSI for violations of the antifraud, books and records, internal accounting controls, and reporting provisions of the federal securities laws, and former Controller Mark Cannon for books and records violations. Without admitting or denying the SEC’s findings, BBSI agreed to pay a $1.5 million civil penalty and Cannon agreed to pay a $20,000 civil penalty and to be suspended from appearing and practicing before the Commission as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Cannon to apply for reinstatement after one year.  

BBSI CEO Michael Elich, who was not charged by the SEC, has reimbursed the company for $20,800 in cash bonuses he received during the period of the alleged accounting violations.  

The SEC’s investigation was conducted by Rahul Kolhatkar, Michael Foley, Chrissy Filipp, and Jason H. Lee, and the case was supervised by Monique Winkler and Jennifer Lee of the San Francisco Regional Office. The litigation against Miller will be led by Suzy LaMarca and Mr. Kolhatkar. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Washington and the Federal Bureau of Investigation.

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

The Securities and Exchange Commission today announced that Pamela C. Dyson plans to leave the SEC to serve as executive vice president, head of the Technology Group, and Chief Information Officer (CIO) at the Federal Reserve Bank of New York.

Ms. Dyson joined the SEC in 2010, progressing through several positions of increasing responsibility in the Office of Information Technology (OIT). She became CIO in February 2015 after serving as Acting CIO for several months. During her time as CIO, she delivered the SEC’s 2018-2020 IT Strategic Plan, established the SEC’s core cloud capability in Amazon Web Services as well as its ongoing governance, created the IT Strategy and Innovation program to lead the SEC’s digital transformation efforts, and worked to develop and support the ongoing agency-wide cyber uplift program.

“Pam’s leadership and experience have been critical to maintaining the information technology capabilities we need to fulfill our mission while ensuring we address ever-evolving cyber threats,” said SEC Chairman Jay Clayton. “I thank her immensely for her service to the Commission and to America’s investors.”

“All of us at the Commission are deeply indebted to Pam for the hard work and dedication she has brought to her work as CIO,” said SEC Chief Operating Officer Kenneth Johnson. “We will continue to benefit from the important advances she brought to our technological systems and cybersecurity.”

“It has been an absolute honor to contribute to the important mission of this wonderful agency in its service to the citizens of America,” said Ms. Dyson. “I am equally grateful to have served alongside such a dedicated team of professionals across the Commission, and I am proud of the work we accomplished together.”

Ms. Dyson began her SEC career as Assistant Director for Enterprise Operations.  In that capacity, she managed day-to-day operations such as IT infrastructure and all enterprise operations for the SEC’s headquarters and its 11 regional offices. Before joining the SEC staff, Ms. Dyson was the Deputy CIO for the U.S. International Trade Commission.

Ms. Dyson received her Bachelor of Science degree from the University of Maryland in College Park.

Upon Ms. Dyson’s departure, Charles Riddle, the SEC’s Chief Technology Officer, will become the Acting Chief Information Officer.

Mr. Riddle joined the SEC in 2016 from the U.S. Government Publishing Office, where he served as Chief Information Officer beginning in 2011. He worked at the U.S. Department of Agriculture from 2005 to 2011 in several positions relating to information technology including Chief Technology Officer at USDA’s Food Safety Inspection Service. Prior to his government service, Mr. Riddle worked in the private sector at Booz Allen Hamilton and several organizations involved in telecommunications, including BetterWorld Telecom, Cable & Wireless, and NETtel Communications. He received his MBA from Johns Hopkins University and his BA from George Mason University.

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

The Securities and Exchange Commission today announced that Christopher R. Hetner, Senior Advisor to Chairman Jay Clayton for Cybersecurity Policy, plans to leave the agency. Mr. Hetner will remain in the Chairman’s Office during the identification of and transition to his successor.    

Mr. Hetner previously served as Senior Advisor for Cybersecurity Policy for former Chair Mary Jo White and former Acting Chairman Michael Piwowar. Mr. Hetner helped to establish the position in 2016 to better coordinate cybersecurity policy efforts across federal financial regulators, enhance the SEC’s ability to assess cyber-related market risks and improve the SEC’s cybersecurity posture. In this role, Mr. Hetner has led efforts across SEC Divisions and Offices to manage cybersecurity priorities, strengthen cyber incident response planning and enhance threat intelligence capabilities. 

Mr. Hetner has served as SEC staff representative to the U.S. Treasury’s Financial Banking Information Infrastructure Committee (FBIIC). In this capacity, Mr. Hetner provided leadership on enhancing coordination and cooperation among federal financial regulators through, among other things, expanding efforts to harmonize cybersecurity regulations, respond to cyber-attacks and enhance market-wide cyber threat assessments. Mr. Hetner has also served as SEC representative to the G-7 Cyber Expert Group.  

“The rapid evolution of technology and markets in the U.S. and globally continues to present both opportunities and challenges for regulators and market participants,” said Chairman Jay Clayton. “During his time at the SEC, Chris has worked diligently to enhance the agency’s cybersecurity capabilities and improve cybersecurity coordination among the financial regulatory community in the U.S. and abroad.”   

Mr. Hetner said, “It has been an honor to work with so many professionals here at the SEC and across the U.S. government, industry and international regulatory community, who are all committed to protecting markets and investors. The implementation of fundamental and strategic improvements across the SEC will enhance its capabilities to protect market participants and the agency from cybersecurity threats.” 

Prior to his current role as a Senior Advisor for Cybersecurity Policy, Mr. Hetner served as the Cybersecurity Leader for the Technology Control Program in the SEC’s Office of Compliance Inspections and Examinations (OCIE). Mr. Hetner played an important role in leading the implementation of cyber event monitoring capabilities for Regulation SCI entities, leading industry outreach on cybersecurity topics, enhancing OCIE’s cybersecurity examination procedures, and establishing cyber risk assessments for the agency’s Broker Dealer Large Firm Monitoring Program. He also served as a liaison in OCIE to the Division of Enforcement. 

Prior to joining the SEC, Mr. Hetner spent 20 years in a variety of senior cybersecurity and technology risk management roles in the private sector. More recently, Mr. Hetner led Ernst and Young’s Wealth and Asset Management Cybersecurity practice, served as Global Chief Information Security Officer at GE Capital and led global information security programs as Senior Vice President in Citigroup’s Institutional Client Group.  

Mr. Hetner holds industry-leading certifications including the CISSP (Certified Information Systems Security Professional), NSA INFOSEC (National Security Agency Information Security) Assessment Certification, and CISM (Certified Information Security Manager). Mr. Hetner earned his M.S. in Information Assurance from Norwich University and his B.S in Security Management from The City University of New York’s John Jay College of Criminal Justice.

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

The Securities and Exchange Commission today announced that it is providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, municipal advisors and others affected by Hurricane Florence.  The loss of property, power, transportation, and mail delivery due to the hurricane poses challenges for some individuals and entities that are required to provide information to the SEC and shareholders.  

To address compliance issues caused by Hurricane Florence, the Commission issued an order that conditionally exempts affected persons from certain requirements of the federal securities laws for periods following the weather event.  

The Commission also adopted interim final temporary rules that extend the filing deadlines for specified reports and forms that companies must file pursuant to Regulation Crowdfunding and Regulation A. 

* * *

ADDITIONAL INFORMATION

In connection with the Commission relief, issued in the order and interim final temporary rules, the Commission staff will take the following no-action positions with respect to affected parties’ obligations under the Exchange Act, the Securities Act, and the Investment Advisers Act:

• For purposes of eligibility to use Form S-3 (and for well-known seasoned issuer status, which is based in part on Form S-3 eligibility), a company relying on the exemptive order will be considered current and timely in its Exchange Act filing requirements during the relief period if it was current and timely as of the first day of the relief period. After the relief period, a company will continue to be considered current and timely if it files any required report on or before Oct. 29, 2018.

• For purposes of the Form S-8 eligibility requirements and the current public information eligibility requirements of Rule 144(c), a company relying on the exemptive order will be considered current in its Exchange Act filing requirements during the relief period if it was current as of the first day of the relief period.  After the relief period, a company will continue to be considered current if it files any required report on or before Oct. 29, 2018.

• Companies that receive an extension on filing Exchange Act annual reports or quarterly reports pursuant to the order will be considered to have a due date of Oct. 29, 2018.  As such, those companies will be permitted to rely on Rule 12b-25 if they are unable to file the required reports on or before the due date.

• During the period from Sept. 14, 2018 to Oct. 26, 2018, a registered open-end investment company and a registered unit investment trust will be considered to have satisfied the requirements of Section 5(b)(2) of the Securities Act to deliver a summary or a statutory prospectus, as applicable, to an investor, provided that: (1) the sale of shares to the investor was not an initial purchase by the investor of shares of the company or unit investment trust; (2) the investor’s mailing address for delivery, as listed in the records of the company or unit investment trust, has a ZIP code for which the common carrier has suspended mail service, as a result of Hurricane Florence, of the type or class customarily used by the company or unit investment trust, to deliver summary or statutory prospectuses; and (3) the company, or unit investment trust, or other person promptly delivers the summary or statutory prospectus, as applicable either (a) if requested by the investor, or (b) by the earlier (i) of Oct. 29, 2018 or (ii) the resumption of the applicable mail service.
• A registered investment adviser will be considered to have satisfied Form ADV filing requirements under Section 204(a) of the Advisers Act and Rule 204-1 thereunder, if:  (1) the registrant’s Form ADV filing deadline falls within the period from Sept. 14, 2018 to Oct. 26, 2018; (2) the registrant was or is not able to meet its filing deadline due to Hurricane Florence; and (3) the registrant makes the required Form ADV filing by Oct. 29, 2018.  
• During the period from Sept. 14, 2018 to Oct. 26, 2018, a registered investment adviser will be considered to have satisfied the requirements of Section 204 of the Advisers Act and Rule 204-3(b) thereunder to deliver the written disclosure statements required thereunder to its advisory client, provided that:  (1) the client’s mailing address for delivery, as listed in the records of the investment adviser, has a ZIP code for which the common carrier has suspended mail service, as a result of Hurricane Florence, of the type or class customarily used by the adviser to deliver written disclosure statements; and (2) the investment adviser or other person promptly delivers the written disclosure statement either (a) if requested by the client, or (b) at the earlier of (i) Oct. 29, 2018 or (ii) the resumption of the applicable mail service.

Some companies and other affected persons may require additional or different assistance in their efforts to comply with the requirements of the federal securities laws and therefore are encouraged to contact Commission staff.  The Commission staff will address these and any disclosure-related issues on a case-by-case basis in light of their fact-specific nature. 

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

The Securities and Exchange Commission today announced it has obtained a court order halting an ongoing Ponzi-like scheme that raised more than $345 million from over 230 investors across the U.S. The SEC also obtained an emergency asset freeze and the appointment of a receiver.

An SEC complaint unsealed yesterday alleges that Kevin B. Merrill, Jay B. Ledford and Cameron Jezierski attracted investors to their scheme by promising significant profits from the purchase and resale of consumer debt portfolios. But in fact, the defendants were allegedly using a web of lies, fabricated documents, and forged signatures in an elaborate scheme to entice investors and perpetuate the fraud. Rather than direct investor funds to the acquisition and servicing of debt portfolios as promised, the defendants allegedly used the funds to make Ponzi-like payments to earlier investors. The SEC also alleges that Merrill and Ledford stole at least $85 million of the investor funds to maintain lavish lifestyles, spending millions of dollars on luxury items, including $10.2 million on at least 25 high-end cars, $330,000 for a 7-carat diamond ring, $168,000 for a 23-carat diamond bracelet, millions of dollars on luxury homes, and $100,000 to a private fitness club.  

“The defendants touted their purported investment expertise to siphon millions of dollars from unsuspecting investors,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “We filed this action on an emergency basis to put a stop to this fraud and protect investors from further harm.”

“We allege that the defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains,” said Kelly L. Gibson, Associate Regional Director of the SEC’s Philadelphia Regional Office. “Investors should be warned that low-risk, high-return investments that never lose should be a red flag.”

In a parallel action, the U.S. Attorney’s Office for the District of Maryland today announced criminal charges against Merrill, Ledford, and Jezierski.

The SEC’s complaint, filed on Sept. 13 in federal district court in Maryland, charges Merrill, Ledford, and Jezierski, along with their entities, Global Credit Recovery, LLC, Delmarva Capital, LLC, Rhino Capital Holdings, LLC, Rhino Capital Group, LLC, DeVille Asset Management LTD, and Riverwalk Financial Corporation, with violations of the antifraud provisions of the federal securities laws. The court granted the SEC’s request for an asset freeze, temporary restraining order, and the appointment of a receiver. The SEC seeks disgorgement of allegedly ill-gotten gains and prejudgment interest, and financial penalties against the defendants.

The SEC’s continuing investigation is being conducted by Norman P. Ostrove, Dustin E. Ruta, and Scott A. Thompson in the Philadelphia Regional Office and supervised by Ms. Gibson. The SEC’s litigation is being led by Julia C. Green, Mark R. Sylvester, and Jennifer C. Barry. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Maryland and the Federal Bureau of Investigation.

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

The Securities and Exchange Commission announced today that its Division of Trading and Markets will host a roundtable on Sept. 26 on combating retail investor fraud. The Commission staff is interested in views from a broad range of market participants, regulators and industry experts concerning potential steps that might be taken to enhance the ability of regulators, broker-dealers and others to combat retail investor fraud. 

The roundtable will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C. and will begin at 9:30 a.m. ET. The roundtable will be open to the public and webcast live on the Commission’s website. Information on the agenda and participants will be issued shortly.

Members of the public who wish to provide their views on the topic may submit comments electronically or on paper. Please submit comments using one method only. Information that is submitted will become part of the public record of the roundtable and posted on the Commission’s website. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make publicly available.

Electronic Comments:

Use the Commission’s Internet comment form or send an e-mail to rule-comments@sec.gov. Please include File Number 265-31 on the subject line.

Paper Comments:

Send paper comments to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090.

All submissions should refer to File Number 265-31, and the file number should be included on the subject line if email is used.

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

The Securities and Exchange Commission today announced that a Boulder, Colorado-based biopharmaceutical company, its CEO, and its former CFO will pay more than $20 million in penalties to settle charges of misleading investors about the company’s developmental lung cancer drug. 

The SEC’s complaint filed in federal court in Denver alleges that over a four-month period starting in July 2015, Clovis Oncology Inc. and CEO Patrick Mahaffy misled investors about how well Clovis’ flagship lung cancer drug worked compared to another drug. According to the complaint, the company’s investor presentations, press releases, and SEC filings stated that the drug was effective 60 percent of the time, far higher than suggested by actual results available internally. Clovis raised approximately $298 million in a public stock offering in July 2015, and saw its stock price collapse in November 2015 after disclosing that the effectiveness rate was actually 28 percent. The company stopped development on the drug in May 2016.

“Biopharma companies cannot mislead investors about efficacy results,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “As we allege here, the data available to Clovis and its executives should have alerted them to the inaccuracy of the claims about the effectiveness of its developmental drug.”

According to the SEC’s complaint, in evaluating Clovis’ stock, investors closely followed prospects for its lung cancer drug rociletinib, or Roci, and an important driver was its “efficacy,” or how well the drug worked. In May 2015, Clovis disclosed in an investor presentation that Roci’s efficacy was 60 percent, meaning that in 60 percent of patients Roci caused targeted tumors to shrink. The complaint alleges that soon after, certain data provided to Mahaffy and Erle Mast, the company’s CFO at that time, showed that Roci’s efficacy rate was substantially lower and by early July 2015, Mahaffy and Mast learned that the efficacy for Roci at that time was 42 percent. Clovis continued referring to the 60 percent efficacy figure, including in the solicitation materials for the July 2015 offering and afterward. In November 2015, after Clovis disclosed the true efficacy using the methodology required by the U.S. Food and Drug Administration, its stock price dropped approximately 70 percent.

The SEC’s complaint charges Clovis with violating Section 17(a)(2) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934. The complaint charges Mahaffy with violating Section 17(a)(2) and aiding and abetting Clovis’ violations of Section 13(a). The complaint charges Mast with aiding and abetting Clovis’ federal securities laws violations. The defendants agreed to the settlements without admitting or denying the allegations and the settlements are subject to court approval. Clovis agreed to a $20 million penalty. Mahaffy agreed to a $250,000 penalty. Mast agreed to pay a $100,000 penalty and to provide disgorgement and prejudgment interest of $454,145, attributable to selling Clovis stock during the relevant period at inflated prices. The SEC plans to seek the creation of a Fair Fund for distribution of the penalties to harmed investors.

The SEC’s investigation was conducted by Michael Cates and Kim Greer and supervised by Ian Karpel and Kurt Gottschall in the Denver Regional Office.  

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

The Securities and Exchange Commission today announced that SeaWorld Entertainment Inc. and its former CEO have agreed to pay more than $5 million to settle fraud charges for misleading investors about the impact the documentary film Blackfish had on the company’s reputation and business. SeaWorld’s former vice president of communications also agreed to settle a fraud charge for his role in misleading SeaWorld’s investors.

Blackfish criticized SeaWorld’s treatment of its orcas (killer whales) and received significant media attention as the film became more widely distributed in the latter half of 2013. The SEC’s complaint alleges that from approximately December 2013 through August 2014, SeaWorld and former CEO James Atchison made untrue and misleading statements or omissions in SEC filings, earnings releases and calls, and other statements to the press regarding Blackfish’s impact on the company’s reputation and business. According to the SEC’s complaint, on Aug. 13, 2014, when SeaWorld for the first time acknowledged that its declining attendance was partially caused by negative publicity, SeaWorld’s stock price fell, causing significant losses to shareholders.

“This case underscores the need for a company to provide investors with timely and accurate information that has an adverse impact on its business. SeaWorld described its reputation as one of its ‘most important assets,’ but it failed to evaluate and disclose the adverse impact Blackfish had on its business in a timely manner,” said Steven Peikin, Co-Director of the SEC Enforcement Division.   

The SEC’s complaint, filed in federal court in New York, charges SeaWorld and Atchison with violating antifraud provisions of the federal securities laws and charges SeaWorld with reporting violations. SeaWorld and Atchison have agreed to settle the SEC’s charges without admitting or denying the allegations, with SeaWorld paying a $4 million penalty and Atchison paying over $1 million in penalty and disgorgement.  

SeaWorld’s former vice president of communications, Frederick D. Jacobs, agreed to settle a fraud charge and to pay disgorgement and prejudgment interest of approximately $100,000. He was not assessed a penalty, reflecting his substantial assistance in the SEC’s investigation. All of the settlements are subject to court approval.

The SEC’s investigation was conducted by James Lyman and Lee Robinson and supervised by Ian Karpel and Kurt Gottschall of the Denver office.

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

The U.S. Securities and Exchange Commission’s Division of Economic and Risk Analysis and Division of Trading and Markets are partnering with New York University’s Salomon Center for the Study of Financial Institutions to bring together regulators, practitioners, and academics for a half-day symposium on Sept. 21 at the SEC headquarters in Washington, D.C. Panelists will discuss the impact of high-frequency trading and the resiliency of liquidity in securities markets.

“High-frequency trading represents a substantial source of market volume today. It is important for market participants and regulators to understand how this activity is affecting trading, including efficiency, integrity, liquidity and depth,” said Chairman Jay Clayton. “I appreciate the efforts of those participating in this symposium and look forward to hearing their comments on how we can improve our public equity markets, focusing on the interests of our Main Street investors — those who are investing today for tomorrow’s needs and those who are selling today to meet current needs they invested for in the past.”

Discussion topics will include the effects of regulations and self-regulatory organization practices on the increasing focus on speed among traders in securities markets; the evolving state of market making and the role of automation and market quality; and how high-frequency trading has influenced liquidity provision and liquidity resiliency, including spillovers across financial markets.

The event is free and is open to the public, and will commence with welcoming remarks starting at 9:15 a.m. ET with doors opening to the public at 8:30 a.m. ET at the SEC headquarters located at 100 F Street NE, Washington, D.C. Information about the event agenda and webcast will be available at DERA Events. Members of the public planning to attend the forum are asked to register in advance. 

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