Securities and Exchange Commission

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Published on: June 29, 2023 | by Shepherd Smith Edwards & Kantas, LLP

How Can A Skilled SEC Attorney Help You Pursue Damages From Your Broker-Dealer?

Shepherd Smith Edwards and Kantas Has Been Fighting For Investors For Over 30 Years

If you believe that you could be the victim of securities fraud, you may want to explore your legal options with a knowledgeable Securities and Exchange Commission (SEC) lawyer who can help you assess the cause of your losses and determine whether you have grounds for a lawsuit against your broker-dealer or investment adviser.

Investment Recommendations Don’t Always Equate To a Customer’s Best Interests

Published on: February 1, 2021 | by Shepherd Smith Edwards & Kantas, LLP

SEC’s Regulation BI May Not Be Protecting Investors The Way They Think

It has been nearly seven months since the SEC’s Regulation Best Interest (BI), a rule mandating that brokers NOT market themselves as financial advisors unless they actually are dually registered to be one, went into effect. The aim of this distinction is to let investors know whether they are working with someone who is bound to act in their best interests or not.

While brokers are supposed only to recommend financial products to customers that are suitable for them, this recommendation can also be based on what product will earn them the highest commission. This potential conflict of interest can be financially disadvantageous to an investor.

Strong Investment Management and Laurel Wealth Advisors Settle Cherry Picking Allegations

Published on: September 30, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A final judgment has been reached in the US Securities and Exchange Commission’s (SEC) fraud case against Strong Investment Management. The investment adviser, based in California, and its owner James Bronson are accused of running a cherry picking scam that harmed clients and went on for over four years. Now, they will pay $1.2M.

Strong has more than six dozen clients and Bronson had sole discretion regarding how to allocate trades that the firm made. The SEC brought its complaint against both of them early last year, with Bronson accused of using the investment adviser’s omnibus account to trade securities while delaying their allocations to different client accounts until he’d seen how the trades had performed throughout the day. Bronson would then allegedly “cherry pick” the trades by giving himself a disproportionate amount of the profitable trades while a similar disproportionate number of unprofitable ones were sent to clients. As a result, Bronson “reaped substantial profits” that he would not have otherwise.

Bronson and Strong are also accused of misrepresenting their allocation and trading practices in their Form ADV, which falsely stated that no accounts had been given preference when trades were divvied up. Now, they are liable for nearly $961K of disgorgement and over $100K of prejudgment interest. They must pay a $184,767 civil penalty.

Mispriced Funds and Elder Investor Fraud Lead to SEC Cases

Published on: August 8, 2019 | by Shepherd Smith Edwards & Kantas, LLP

State Street To Pay More Than $88M After Overcharging For Mutual Funds

State Street Bank and Trust Company will pay over $88M to resolve US Securities and Exchange Commission charges accusing it of overcharging investment advisory clients, including mutual funds, for expenses related to its custody of client assets. From 1998 to 2015, State Street allegedly collected $170M in overcharges involving out-of-pocket custodial costs that it paid on behalf of clients. While the clients had consented to pay for these costs, they did not agree to being overcharged for them.

Of the $170M in excessive charges, $110M was for a concealed markup added to the charge for transmitting financial messages via the Society of Worldwide Interbank Financial Telecommunication (SWIFT) network. As part of the settlement, State Street will pay almost $49M of disgorgement plus prejudgment interest and a $40M penalty.

AR Capital, Nick Schorsch, and Brian Block Settle REIT Fraud Case for $60M

Published on: July 18, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A $60M settlement has been reached between The US Securities and Exchange Commission (SEC) and AR Capital, the real estate investment trust (REIT) manager’s founder Nicholas Schorsch, and American Realty Capital Properties Inc. (ARCP) ex-CFO Brian Block. The three of them are accused of “wrongfully obtaining” millions of dollars related to two mergers involving REITS that AR Capital managed and sponsored.

According to the regulator’s complaint, between the latter part of 2012 and the beginning of 2014, AR Capital took steps so that ARCP, a publicly traded REIT, would merge with American Realty Capital Trust III and American Realty Capital Trust IV, two non-traded REITS that were publicly held. Schorsch was the principal owner and CEO of all three REITs during the time of the merger, while Block was the CFO and a minority shareholder.

The Commission contends that without their board’s permission, the REIT manager, Schorsch, and Block “inflated an incentive fee” during the mergers, which made it possible for them to get another $2.92M in ARCP operating partnership units as a portion of their “incentive-based” compensation.” The SEC is also accusing the three defendants of “wrongfully obtaining” at least $7.2M in charges that were not supported from the sale and asset purchase agreements that were related to the mergers.

Former NY Trader Accused of $19.3M Ponzi Fraud

Published on: July 5, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) is accusing Paul Andrews Rinfret, Plandome LLC, and Plandome Partners LP of defrauding investors in a securities offering scam. At least five investors were allegedly collectively bilked of $19.3M. Rinfret, who is a former New York trader, is now also facing parallel criminal charges.

The SEC, in its complaint, contends that Rinfret told investors they were backing an already successful trading strategy using a proprietary algorithm that had rendered returns in the triple digits—360% in a multiyear period, supposedly—when, in reality, money was being lost on a consistent basis. Meantime, Rinfret allegedly used investors’ money to fund his extravagant lifestyle.

The investors are five individuals who thought they were buying limited partnership interests in Plandome Partners, LP, which Rinfret claimed was an investment fund that he and Plandome Partners LLC ran. These investors thought their funds would be traded in S & P futures contracts and foreign currency.

Healthcare Investment Scam Targeted Dozens of Investors

Published on: June 26, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Unregistered investment advisers (IAs) David Wagner and Mark Lawrence, Downing Investment Partners, Downing Partners, and Downing Digital Healthcare Group are now facing US Securities and Exchange Commission (SEC) charges accusing them of involvement in an $8M scam that allegedly defrauded dozens of healthcare fund investors. Wagner and Downing are also facing parallel criminal charges.

The regulator contends that between 5/2014 and 1/2017, Wagner, Lawrence, and the companies they headed sold healthcare services and technology-related investment opportunities while defrauding 30 investors, many of them “purported” employees at two of the defendant companies, as well as at Downing Health Technologies, Inc., and Cliniflow Technologies. According to the SEC’s complaint, the two unregistered investment advisers and their companies claimed to acquire, oversee, and resell companies that offered technologies and services for the investment portfolios of the healthcare funds at issue.

To bring in new investors, the two unregistered IA’s allegedly would inflate how much was available in cash reserves at the funds, including at Downing Digital Healthcare Group and Downing Investment Partners, as well as the revenue from the portfolio companies of the funds. Wagner is also accused of secretly negotiating a deal that obligated Downing Digital Healthcare Group to pay him and an entity that he operated certain management fees. This allegedly resulted in the defendants misusing at least $540K of the $1.5M that was invested in Downing Digital Healthcare Group to go toward these fees.

Investors Defrauded in Alleged $1.4M Prime Bank Fraud

Published on: May 30, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) has filed fraud charges against David Sims and Mario Procopio accusing them of running a $1.4M prime bank scam that defrauded 13 investors. ALC Holdings, LLC, Sims Equities, Inc., and El Cether-elyown, which are companies that they control, are also defendants in the investor fraud scam. This is not the first time that the SEC has charged Sims in relation to alleged fraud.

The regulator contends that the two men mostly found their investors through referrals given to them by associates and friends. Between 4/2014 and 5/2017, Sims and Procopio allegedly told those whom they solicited, usually by phone, that their investments would go into “prime bank” financial instruments that would make returns of 1200-40,000% percent.

Procopio and Sims falsely touted “special access” to trading platforms that they claimed also were used by rich investors, corporations, and governments to purchase huge amounts of currency, usually $500M to $1B, at a reduced rate from different banks. The notes could then supposedly be sold for an up to 30% profit.

SEC Charges Abraaj Investment Management With Defrauding Investors

Published on: April 19, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) is accusing Abraaj Investment Management Ltd., a Dubai-based investment advisory firm, with misappropriating money from the Abraaj Growth Markets Health Fund. The regulator said that the fraud has resulted in losses for US investors, including charitable organizations that invested over $100M in the Fund. Also facing civil fraud charges is Abraaj founder Arif Navqi. In total, the investment adviser and Navqi are accused of misappropriating more than $230M from the fund between at least 9/2016 and 6/2018.

According to the regulator’s civil complaint, investors were told that their money would go into businesses related to healthcare in emerging markets. Instead, Abraaj Investment Management allegedly used the money to pay for cash shortfalls at the firm and at parent company Abraaj Holdings, Ltd., both of which Navqi controlled. Meantime, investors were allegedly sent financial statements and quarterly reports that were materially misleading or false.

Registered in the Cayman Islands, the Abraaj Growth Markets Health Fund’s investors had committed $850M. Additionally, the SEC stated that one of the fund’s investors was a US government entity that had committed an additional $150M debt investment.

Latest SEC Whistleblower Award is $50 Million | Securities Fraud Attorney

Published on: April 5, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) has awarded $50M to two individuals who acted as whistleblowers, helping the regulator to render a successful enforcement action because of the quality information they provided. Details of the enforcement action and the identity of the whistleblowers are not disclosed so as to protect their identities. However, the SEC did announce that one of the whistleblower awards is for $37M and the other is for $13M.

The SEC awards individuals that voluntarily share unique, credible, timely, and relevant information that then leads to a successful enforcement action when the resulting monetary sanctions imposed is more than $1M. 10-30% of that may then be awarded to the SEC whistleblower , or in some case, the whistleblowers.

Since the inception of the SEC whistleblower program in 2012, the regulator has awarded 61 individuals about $376M. All whistleblower awards come out of an investor protection fund set up by Congress. Money in the funds come out of monetary sanctions that have been paid to the Commission. Whistleblower awards are never taken out of any funds that investors who sustained losses from fraud might be able to recover.