Securities Lawyer Blog: BB&T to Return More Than $5 Million to Retail Inve…

The Securities and Exchange Commission announced that BB&T Securities has agreed to return more than $5 million to retail investors and pay a $500,000 penalty to settle charges that a firm it acquired misled its advisory clients into believing they were receiving full service brokerage services in-house at a discount while significantly less expensive options were available externally.

According to the SEC’s order, Valley Forge Asset Management used misleading statements and inadequate disclosures about its brokerage services and prices to convince customers to choose the in-house broker. Despite promises of a high level of service at a low cost, the SEC’s order finds that Valley Forge did not provide any additional services to advisory clients using its in-house brokerage than it did to advisory clients who chose other brokerages with significantly lower commission rates. According to the order, Valley Forge charged commissions averaging roughly 4.5 times more than what clients would have paid using other brokerage options, and the firm obscured the price difference by claiming that it was giving clients a 70 percent discount off of its supposed retail commission rate..

BB&T to Return More Than $5 Million to Retail Investors

Mark Astarita has 30 years of experience representing investors, brokers and issuers in their securities regulatory and litigation matters, including SEC and FINRA proceedings, arbitrations, and due diligence in connection with public and private offerings and investments. For more information call Mark at 212-509-6544 or send an email to mja@sallahlaw.com

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Mobile TeleSystems Settles FCPA Violations

The Securities and Exchange Commission today announced that Russian telecommunications provider Mobile TeleSystems PJSC (MTS) will pay $100 million to resolve SEC charges that it violated the Foreign Corrupt Practices Act (FCPA) to win business in Uzbekistan.

According to the SEC’s order, MTS bribed an Uzbek official who was related to the former President of Uzbekistan and had influence over the Uzbek telecommunications regulatory authority.  During the course of the scheme, MTS made at least $420 million in illicit payments for the purpose of obtaining and retaining business.  The payments enabled MTS to enter the telecommunications market in Uzbekistan and operate there for eight years, during which it generated more than $2.4 billion in revenues.  In 2012, the Uzbek government expropriated MTS’s Uzbek operations.  As further described in the SEC’s order, the bribes were funneled to front companies controlled by the Uzbek official and were disguised in MTS’s books as acquisition costs, option payments, purchases of regulatory assets, and charitable donations. 

“The company engaged in egregious misconduct for nearly a decade, secretly funneling hundreds of millions of dollars to a corrupt official.  Building business on a foundation of bribery leaves the business and American investor interests at the mercy of corrupt officials,” said Charles E. Cain, Chief of the SEC Enforcement Division’s FCPA Unit.

MTS consented to the SEC’s order finding that it violated the anti-bribery, books and records and internal accounting control provisions of the Securities Exchange Act of 1934, and requiring it to pay a $100 million penalty.  In a related matter, MTS has entered into a deferred prosecution agreement with the U.S. Department of Justice and its subsidiary has pleaded guilty in federal court, and has agreed to pay a criminal fine and forfeiture in the amount of $850 million.  The Department is crediting the $100 million penalty that MTS is paying to the SEC.  The company must also retain an independent compliance monitor for at least three years. 

This is the third case brought by the SEC and the Department of Justice involving public companies operating in the Uzbek telecommunications market.  Taken as a whole, these actions have led to the recovery by U.S. and foreign authorities of $2.6 billion.

The Commission greatly appreciates the cooperation and assistance of the Department of Justice, Criminal Division, Fraud and Asset Forfeiture Money Laundering Sections, the Internal Revenue Service, the Department of Homeland Security, the Prosecution Authority of the Netherlands, the National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway (ØKOKRIM), the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland, and the Corruption Prevention and Combating Bureau in Latvia.  Valuable assistance was also provided by regulatory and law enforcement colleagues in the United Kingdom, France, and Ireland, including the British Virgin Islands Financial Services Commission, the Cayman Islands Monetary Authority, the Bermuda Monetary Authority, the Central Bank of Ireland, the Paris Court of Appeals, the Serious Fraud Office, and the Financial Control Authority.

SEC Press Release

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SEC Celebrates African American History Month with Presentation by Award-Winning Filmmaker

The Securities and Exchange Commission celebrated African American History Month with events in its Regional Offices and a presentation by scholar and award-winning filmmaker Dr. Henry Louis Gates, Jr. to discuss his latest documentary series, “Reconstruction: America After the Civil War,” at the agency’s headquarters in Washington, D.C. This year’s African American History Month theme, “Black Migrations,” focuses on the movement of African Americans throughout the United States from the early 20th century to today. 

Hosted by the SEC’s African American Council and the Office of Minority and Women Inclusion, Dr. Gates’ presentation culminated a month of events throughout the agency. Dr. Gates has written a number of books and created documentary films and educational programming, including “The African Americans: Many Rivers to Cross” and the television program, “Finding Your Roots with Henry Louis Gates, Jr.” 

In introducing Dr. Gates, Chairman Jay Clayton remarked, “I believe in our quest for a pluralistic and inclusive society where opportunity and support are broadly and fairly distributed and our past failures—particularly in the area of race—are faced head on and provide us with the tools to do better. It is people like Dr. Gates who give us that context and enable us to communicate better, who help us on this journey.”

During a discussion about the importance of expanding economic opportunity for everyone, Dr. Gates noted the larger implications of these efforts, “If people think that they have no hope, then they do hopeless things.” He added, “We have to reshape the economy such that people believe in the future again.”

Dr. Henry Louis Gates answered questions during a fireside chat with Chairman Jay Clayton and Glenn Hutchins, Chair of the Hutchins Center for African & African American Research at Harvard University.

Dr. Henry Louis Gates (center) answered questions during a fireside chat with Chairman Jay Clayton (left) and Glenn Hutchins (right), Chair of the Hutchins Center for African & African American Research at Harvard University.

Staff at the SEC’s headquarters in Washington, D.C. watch a presentation by Dr. Henry Louis Gates in honor of African American History Month.

Staff at the SEC’s headquarters in Washington, D.C. watch a presentation by Dr. Henry Louis Gates in honor of African American History Month.

The SEC also celebrated the important contributions of African Americans in law, culture, and history with events at its Regional Offices. 

The Atlanta Regional Office hosted Christy Garrison, teacher at Atlanta Metropolitan State College, Samuel T. Livingston, associate professor and director of the African American Studies Program at Morehouse College and Deryl Bailey, professor and admissions coordinator, Department of Counseling and Human Development Services in the University of Georgia’s College of Education for a program about the movements of Americans of African descent to new locations throughout the United States and the new economic and social realities they experienced. 

The staff of the Chicago Regional Office heard the fascinating history of gospel music from its beginnings to the present, along with recordings and sung examples, as explained by E. Patrick Johnson, PhD, Chair of the Department of African American Studies and Carlos Montezuma Professor of African American Studies and Performance Studies at Northwestern University.  The presentation included technical descriptions and demonstrations of musical characteristics of gospel music from its origins in nineteenth century hymns of the south through present day.  It explored melodic lines and harmonic structures that are indicative of past and modern day gospel music as well as its influences on modern day blues and jazz.  Dr. Johnson explained the use of syncopated instrumentation to the “worrying” of notes, made famous by gospel greats such as Aretha Franklin, Mahalia Jackson, Shirley Caesar, and the father of gospel music, Mr. Thomas Dorsey.

The New York Regional Office hosted Rob Fields, president and executive director of the Weeksville Heritage Center. He discussed the history of Weeksville, the second-largest slavery-free African American community in pre-Civil War America.

The Philadelphia Regional Office hosted Mark C. Alexander, Esq., dean and professor of law at Villanova University’s Charles Widger School of Law. Mr. Alexander shared experiences from his legal career and highlighted a few current legal issues in the election law arena.

“Thank you to all who contributed to the SEC’s celebration of African American History Month, particularly those at the African American Council and the Office of Minority and Women Inclusion,” said SEC Chairman Jay Clayton. “On a personal note, it was a great honor to host Dr. Henry Louis Gates Jr. and, in particular, to hear his insight about how our world has been shaped by matters of race and by economic circumstances, and that widely-distributed economic opportunity is important to the betterment of our society. This reminded all of us at the SEC of the significance of our responsibility to America’s investors.”

Dr. Henry Louis Gates (center) with Naseem Nixon and Olawale Oriola, Co-Chairs of the SEC’s African American Council.

Dr. Henry Louis Gates (center) with Naseem Nixon and Olawale Oriola, Co-Chairs of the SEC’s African American Council.

Pam Gibbs, Director of the Office of Minority and Women Inclusion, thanks Dr. Henry Louis Gates for his presentation with a certificate of appreciation from the SEC.

Pam Gibbs, Director of the Office of Minority and Women Inclusion, thanks Dr. Henry Louis Gates for his presentation with a certificate of appreciation from the SEC.

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.

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SEC Names Gabriel Benincasa As Its First Chief Risk Officer

The Securities and Exchange Commission today announced that Gabriel Benincasa has been named the Commission’s first Chief Risk Officer.  This position was created by SEC Chairman Jay Clayton to strengthen the agency’s risk management and cybersecurity efforts.

As Chief Risk Officer, Mr. Benincasa will coordinate the SEC’s continued efforts to identify, monitor, and mitigate key risks facing the Commission.  Working within the SEC’s Office of the Chief Operating Officer, he will also serve as a key adviser on other matters related to enterprise risks and controls.  Julie Erhardt, who had been serving as Acting Chief Risk Officer while the SEC completed its recruitment efforts, will return to her role as Deputy Chief Accountant for Technology and Innovation in the Commission’s Office of the Chief Accountant.

“Establishing the Chief Risk Officer position at the SEC is an important step forward in our continuing efforts to strengthen the agency’s risk management program,” said Chairman Jay Clayton.  “Gabe is an experienced senior leader with deep risk, legal, compliance, and financial markets expertise.  I am certain we will benefit from his advice and insights.  I also want to thank Julie for giving us a running start on this initiative.”

“I look forward to working with Gabe to maintain a robust risk management program at the agency,” said Ken Johnson, the SEC’s Chief Operating Officer.  “Gabe’s strong background in risk management positions him well to help the SEC continue to evaluate a wide range of current and emerging challenges, whether related to our markets, cybersecurity, or our own operations.”

Mr. Benincasa added, “It is an honor to serve America’s investors and markets as the SEC’s first Chief Risk Officer.  I look forward to joining the team and building upon existing programs to help the agency tackle current and future challenges.”

Mr. Benincasa brings to the SEC significant experience in senior leadership roles in risk and compliance in the financial sector. He began his legal career as an attorney at Davis Polk & Wardwell before working for Morgan Stanley and other financial firms. He has served in roles including as Director of Enterprise Risk Management and Vice Chair of the Risk Control Committee for a financial services holding company; Deputy Global Head of Operational Risk Management for an investment bank; General Counsel and Chief Compliance Officer for an institutional asset management company; and Global Head of Compliance for a financial technology company.

Mr. Benincasa is an attorney and a Certified Public Accountant. He earned his J.D. from Fordham Law School and a Bachelor’s in Business Administration from Baruch College.

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.

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SEC Modifies Timing for Filing Non-Public Form N-PORT Data to Align With Its Approach to Data Management and Cybersecurity

The Commission today modified the submission deadlines for registered investment companies filing non-public monthly reports on Form N-PORT. Form N-PORT is a new form for reporting both public and non-public fund portfolio holdings to the Commission in a structured data format.  As a result of today’s changes, rather than filing non-public monthly reports with the Commission within 30 days after each month-end, funds will be required to maintain the relevant information in their records and file all three monthly reports with the Commission no later than 60 days after the end of each fiscal quarter.  The non-public monthly reports on Form N-PORT for the first and second months of the fiscal quarter will remain non-public and the monthly report for the third month will become publicly available upon filing (with the exception of certain specific data items), rather than being filed non-publicly no later than 30 days after the end of the fiscal quarter and being made public 60 days after the end of the fiscal quarter.  

Importantly, the amount and timing of the information on Form N-PORT that will be made available to the public will not change. 

As part of its approach to data management and cybersecurity, the Commission periodically assesses whether alternatives exist that would allow the Commission to fulfill its mission while reducing the sensitivity of the data that it collects.  The Commission has determined that allowing funds to report this monthly data at quarter end – while not changing the amount or substance of the data – will allow the Commission to fulfill its mission while reducing its cyber risk profile.  

“I applaud the staff’s efforts to evaluate our data needs and cybersecurity risk profile and believe this revised approach to the receipt of new, non-public monthly Form N-PORT data enables the Commission to receive and analyze this new data while meaningfully reducing the sensitivity of that data at the time it is transmitted to the Commission,” said Chairman Jay Clayton. 

Filing Form N-PORT through the EDGAR system will begin in April 2019 for larger fund groups and in April 2020 for smaller fund groups.

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.

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SEC Names Vanessa Countryman Acting Secretary

The Securities and Exchange Commission today announced that Vanessa Countryman has been named Acting Secretary.  Ms. Countryman will replace Brent Fields, who is stepping down as Secretary effective March 11, 2019, to accept a position in the Commission’s Division of Investment Management.

For the past five years, Ms. Countryman has served as Chief Counsel in the Division of Economic and Risk Analysis (DERA), where she has actively participated in numerous significant rulemakings, ensuring the effective use of economic analysis across the agency. Between 2010 and 2012, Ms. Countryman served as Counsel to two SEC Commissioners, where she provided legal advice on regulatory and enforcement matters.

Within the SEC, the Office of the Secretary plays a central role in ensuring the effective processing of Commission business.  Office staff, among other things, review all documents submitted to the Commission, track documents submitted to the Commission, schedule Commission meetings in accordance with the Government in the Sunshine Act, maintain records of official Commission actions, and provide public notice of those actions on the SEC.gov website and in the Federal Register.

“I appreciate Vanessa’s willingness to step into the role of Acting Secretary during this time,” said SEC Chairman Jay Clayton. “Her deep knowledge of agency procedures and strong relationships with Commissioners and senior staff across the divisions and offices will help ensure the Commission continues to run smoothly.”

Ms. Countryman added, “It is a great honor to be asked to serve in this role. I look forward to working with and supporting the Office of the Secretary’s exceptional team to carry out the Commission’s work on behalf of investors.”

Prior to joining the SEC, Ms. Countryman practiced law at Gibson, Dunn & Crutcher LLP, representing clients in regulatory matters.

Ms. Countryman earned her J.D. from the University of Chicago.  She earned a Master’s degree from Oxford University and a B.A. from Columbia 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.

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Brent J. Fields Named Associate Director in the Division of Investment Management

The Securities and Exchange Commission today announced that Brent J. Fields has been named Associate Director of Disclosure Review and Accounting in the Division of Investment Management.

Mr. Fields is a 23-year SEC veteran who has served as Secretary of the Commission since 2014. As Secretary, he is responsible for leading the office in its central role of ensuring the effective processing of Commission business. Among the office’s responsibilities are the review of all SEC documents submitted to and approved by the Commission and the preparation and maintenance of the records of Commission actions, including dissemination of those actions to the public. 

In his new role, Mr. Fields will oversee the division’s disclosure and accounting review programs. He will be primarily responsible for the implementation of disclosure and accounting policy that impacts nearly 16,000 investment companies, including open-end, closed-end, exchange-traded funds, unit investment trusts, and business development companies.  

“During my time at the Commission, I have had the opportunity to see Brent’s dedication to the SEC and its mission firsthand,” said SEC Chairman Jay Clayton.  “Brent is a proven leader who engenders an environment of respect, purpose, and achievement. Our Main Street investors are fortunate to have an individual of his caliber leading an office that plays a key part in ensuring transparency in our capital markets.”

“We are excited to have Brent rejoin the Division,” said Dalia Blass, Director of the Division of Investment Management.  “Brent is a well-respected and talented leader.  His professional expertise as a lawyer and C.P.A., as well as his comprehensive experience with agency processes and procedures will help the Division continue to look out for the long term interests of Main Street investors.”

“I look forward to returning to the office where I began my investment company career, and working with the dedicated team in that office,” said Mr. Fields. “The disclosure and accounting staff perform a vital function, informing and protecting investors – particularly retail investors – and I am excited to return to that role.”

Before becoming Secretary, Mr. Fields held a variety of positions within the SEC. He first joined the agency’s Division of Enforcement in 1996 and moved to the Division of Investment Management later the following year where he held various leadership roles.  From 2002 to 2004, he served as a counsel to then-SEC Commissioner Paul S. Atkins. Mr. Fields has also served as an Assistant Director leading an office that reviews the disclosures of investment companies and as the Assistant Director leading a disclosure rulemaking office.  In those capacities he was instrumental in the implementation of the SEC’s mutual fund disclosure reform initiative, which included a new summary prospectus to give fund investors a concise, plain English description of the key information needed to make informed investment decisions.

Prior to joining the SEC, Mr. Fields worked as an associate at the law firm of Fulbright & Jaworski L.L.P. in Washington D.C.  After law school, Mr. Fields clerked for the Honorable Anthony A. Alaimo in the U.S. District Court for the Southern District of Georgia. 

Mr. Fields earned his J.D. cum laude from University of Georgia School of Law and his bachelor’s degree in accounting from Virginia Tech.
 

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.

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SEC Names S.P. Kothari as Chief Economist and Director of the Division of Economic and Risk Analysis

The Securities and Exchange Commission today announced that S.P. Kothari has been named Chief Economist and Director of the agency’s Division of Economic and Risk Analysis (DERA).  Dr. Chyhe Becker, who has served as DERA’s Acting Director while the SEC completed its search, will continue to serve both as Deputy Director and Associate Director of Litigation Economics.

Mr. Kothari joins the SEC from the Sloan School of Management at the Massachusetts Institute of Technology (MIT), where he is a professor of accounting and finance and recently ended a six-year term as Deputy Dean of MIT Sloan School of Management.

“S.P. brings with him wide-reaching insight from his decades spent as a leader in applying sophisticated research to the operation of our financial markets, including firsthand experience from his time in the private sector,” said SEC Chairman Jay Clayton.  “His leadership will guide DERA well in the research and analysis it provides in support of the Commission’s work on behalf of Main Street investors.  I also want to thank Chyhe for her exemplary leadership as Acting Director of the division over the last year.”

“I am delighted to welcome S.P. to DERA.  His warm and thoughtful leadership is an excellent fit for the division and will serve us well in our role in providing economic analysis to help the Commission fulfill its mission,” said Dr. Becker.

“I am honored to join the SEC’s team of dedicated economists, whose work is well-known and respected throughout the discipline,” said Mr. Kothari.  “I look forward to working with the staff and the Commission to explore the important economic issues affecting investors and our markets.”

Mr. Kothari has spent nearly two decades at MIT, both as a professor and as an administrator.  He has also been Co-Chair of the Board of Governors Asia School of Business, Kuala Lumpur, faculty director of the MIT-India Program, and editor of the academic publication Journal of Accounting & Economics.   In 2008, he served as global head of equity research for Barclays Global Investors, where he was responsible for research supporting the firm’s active equity strategies and for managing a team of approximately 50 PhDs based around the world.

Mr. Kothari earned his B.S in Engineering from the Birla Institute of Technology and Science and his MBA from the Indian Institute of Management.  He completed his PhD from the University of Iowa.

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.

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SEC Halts South Florida Alternative Investments Scheme Targeting Retail Investors

The Securities and Exchange Commission today announced fraud charges and an asset freeze against the operators of a South Florida-based investment fund scheme, one of whom has a prior felony conviction and is on parole after nearly 20 years in prison.

The SEC filed an emergency action in federal district court against Castleberry Financial Services Group LLC, president T. Jonathon Turner, formerly known as Jon Barri Brothers, and CEO Norman M. Strell, alleging that in the past year they have defrauded investors out of $3.6 million. According to the SEC’s complaint unsealed Feb. 25, 2019, Castleberry falsely represented to investors it had hundreds of millions of dollars in capital invested in local businesses and a portfolio of hundreds of investment properties. Castleberry claimed to offer high yields while protecting investors’ principal by having it “fully insured and bonded” by CNA Financial Corp. and Chubb Group, when the insurance companies had no relationship with Castleberry and did not authorize it to use their logos in Castleberry’s sales materials.

The SEC’s complaint alleges that Turner and Strell misused investor funds to pay personal expenses and transferred other funds to businesses they controlled and to family members. The complaint also alleges that Castleberry falsely stated on its website and in promotional materials that Turner has extensive finance industry experience, a MBA degree, and a law degree, while concealing that Turner has been convicted of multiple fraud, theft, and forgery felonies and was imprisoned from 1998 until 2016.

“We received an investor tip during the partial government shutdown that provided critical evidence. The team then moved quickly to halt the alleged ongoing fraud,” said Eric I. Bustillo, Director of the Miami Regional Office. “We encourage anyone that suspects potential investment fraud to report it to the SEC.”

The Honorable Judge Robin L. Rosenberg of the U.S. District Court for the Southern District of Florida granted the SEC’s request for a temporary restraining order and temporary asset freeze against the defendants, and issued an order directing the defendants to provide a sworn accounting.

The SEC’s investigation, which is continuing, is being led by Eric E. Morales and Fernando Torres in the Miami Regional Office and supervised by Jason R. Berkowitz and Glenn S. Gordon. The SEC’s litigation is being led by Alejandro O. Soto and Mr. Morales, under the supervision of Andrew O. Schiff. The SEC appreciates the assistance of Florida’s Office of Financial Regulation.

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.

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Giles Cohen Named Acting Chief Counsel, Office of the Chief Accountant

The Securities and Exchange Commission today announced that Giles Cohen has been named Acting Chief Counsel, Office of the Chief Accountant (OCA). 

Mr. Cohen joined the SEC in 2005 as senior counsel in the Division of Enforcement, and later served as counsel in the Office of Commissioner Luis Aguilar. Mr. Cohen has served as OCA’s Deputy Chief Counsel since May 2016.

“Giles is widely respected by his colleagues throughout the Commission for his steady and thoughtful counsel,” said Chairman Jay Clayton. “I want to thank him for taking on this important role in support of the Commission and OCA.”

“Giles has a deep knowledge of the U.S. financial reporting system, the oversight activities for the Financial Accounting Standards Board and the Public Company Accounting Oversight Board, the disqualification and reinstatement of accountants, and the other responsibilities of OCA,” said SEC Chief Accountant Wes Bricker. “Giles is widely known and trusted throughout the Commission not only for his thoughtful counsel and insights to even the most challenging questions, but also for the generosity with which he shares his time and talents with his colleagues.”

“I am excited and grateful for this opportunity to continue to work alongside the talented and dedicated staff in the Office of the Chief Accountant as we advance the Commission’s mission, including the protection of investors, through the promotion of high quality financial reporting,” said Mr. Cohen.   

Before joining the SEC, Mr. Cohen served as securities counsel at the law firm of WilmerHale, and prior to that as an attorney at the law firm of Davis Polk and Wardwell. Mr. Cohen received his law degree from the University of Pennsylvania Law School, where he was a comments editor on the University of Pennsylvania Law Review.  He received his B.A. in Government from Cornell University.

The Office of the Chief Accountant is responsible for accounting and auditing matters arising in the Commission’s administration of the federal securities laws, such as oversight activities of standard setting organizations and the PCAOB.

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.

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