Investment Fund Law Blog

InvestmentFundLawBlog

Updates and Insights on Legal Issues Facing Fund Managers and Investors

Reminder: 2015 IARD Account Renewal Obligations For Investment Advisers

Posted in Advisory, Investment Advisers

This is a reminder that the 2015 IARD account renewal obligation for investment advisers (including exempt reporting advisers) starts this November.  An investment adviser must ensure that its IARD account is adequately funded to cover payment of all applicable registration renewal fees and notice filing fees.

Key Dates in the Renewal Process:

November 10, 2014 – Preliminary Renewal Statements which list advisers’ renewal fee amount are available for printing through the IARD system.

December 12, 2014 – Deadline for full payment of Preliminary Renewal Statements.  In order for the payment to be posted to its IARD Renewal account by the December 12 deadline, an investment adviser should submit its preliminary renewal fee to FINRA through the IARD system by December 10, 2014.

December 28, 2014 – January 1, 2015 – IARD system shut down.  The system is unavailable during this period.

January 2, 2015 – Final Renewal Statements are available for printing.  Any additional fees that were not included in the Preliminary Renewal Statements will show in the Final Renewal Statements.

January 16, 2015 – Deadline for full payment of Final Renewal Statements.

For more information about the 2015 IARD Account Renewal Program including information on IARD’s Renewal Payment Options and Addresses, please visit http://www.iard.com/renewals.asp

SEC Brings Custody Rule Enforcement

Posted in Advisory, Investment Advisers, Private Funds

On October 29, 2014, the Securities and Exchange Commission (“SEC”) announced an administrative enforcement action against an investment advisory firm and three top officials for violating rule 206(4)-2 under the Investment Advisers Act of 1940 (“Advisers Act”), the “custody rule,” that requires firms to follow certain procedures when they control or have (or are deemed to have) access to client money or securities.  This enforcement action follows closely on the heels of statements by SEC officials indicating that violations of the custody rule were a recurring theme during the “presence exams” of private equity fund advisers and other first time investment adviser registrants that have been conducted by the SEC staff over the last year and a half.

Advisory firms with custody of private fund assets can comply with the custody rule by distributing audited financial statements to fund investors within 120 days of the end of the fiscal year.  This provides investors with regular independent verification of their assets as a safeguard against misuse or theft.  The SEC’s Enforcement Division alleges that Sands Brothers Asset Management LLC has been repeatedly late in providing investors with audited financial statements of its private funds, and the firm’s co-founders along with its chief compliance officer and chief operating officer were responsible for the firm’s failures to comply with the custody rule.  As investment adviser registrants are painfully aware, chief compliance officers have personal liability for compliance failures under Advisers Act rule 206(4)-7.  This particular enforcement action was brought pursuant to section 203(f) of and rule 206(4)-2 under the Advisers Act.  It remains to be seen whether the SEC will bring a separate action against the Sands Brothers’ chief compliance officer under rule 206(4)-7.

Also nervously awaiting any further action by the SEC would be the accountants and lawyers that advised the Sands Brothers and their hedge funds with respect to the custody matter.  The accounting firm or firms that conducted the audit of the Sands Brothers hedge funds likely knew that the funds did not meet the requirements of the custody rule.  It is less certain whether the external lawyers knew or should have known about these violations.  However, if either the accountants or lawyers knew of these violations and advised that they were only technical in nature and immaterial or  unimportant, the SEC could take separate administrative action pursuant to SEC rule 102(e) to bar any such party from practicing before the SEC.  We previously wrote about the more aggressive posture that the SEC signaled with respect to service providers, specifically lawyers that assist or “aid and abet” violations of the securities laws.  The SEC has a fairly high standard to meet when bringing these types of cases, but that has not deterred the regulator from aggressively pursuing more accountants and lawyers in recent months.

According to the SEC’s order instituting the administrative proceeding, Sands Brothers was at least 40 days late in distributing audited financial statements to investors in 10 private funds for fiscal year 2010.  The next year, audited financial statements for those same funds were delivered anywhere from six months to eight months late.  The same materials for fiscal year 2012 were distributed to investors approximately three months late.  According to the SEC’s order, Sands Brothers and the two co-founders were previously sanctioned by the SEC in 2010 for custody rule violations.

If you have been late on the delivery of your audited financial statements and have not availed yourself of the “surprise audit” provision of the custody rule, or if you manage “side car” funds that have never been audited, you should immediately get in touch with your Pillsbury attorney contact.

 

China’s New Foreign Exchange Control Rule on Outbound and Round-Trip Investment

Posted in Advisory, China Funds, Guest Post

Replacing Circular 75, Circular 37 simplifies the SAFE registration process for Chinese residents seeking offshore investments and financings, and it liberalizes cross-border capital outflow by Chinese residents. In addition, Circular 37 also permits registration of equity incentive plans of non-listed Special Purpose Vehicles.

In July 2014, the State Administration of Foreign Exchange (SAFE) of the People’s Republic of China released the Notice of the State Administration of Foreign Exchange on Administration of Foreign Exchange Involved in Offshore Investment, Financing and Round-Trip Investment Conducted by Domestic Residents Through Special Purpose Vehicles (SPVs) (Circular Hui Fa [2014] No. 37) (Circular 37). Circular 37 superseded Circular 75 (Circular Hui Fa [2005] No. 75), which regulated the same subject matter and was issued by SAFE almost ten years ago.

READ MORE…

Read this article and additional publications at pillsburylaw.com/publications-and-presentations.

When Sharing Isn’t Caring

Posted in Investment Advisers, Private Equity

On September 22, 2014, the Securities and Exchange Commission (the “SEC”) charged private equity fund adviser, Lincolnshire Management, Inc. (“Lincolnshire”), with misallocating expenses shared between two portfolio companies. Lincolnshire integrated two portfolio companies that were each owned by a different Lincolnshire private equity fund. Lincolnshire owed a fiduciary duty to each fund and such fiduciary duty was breached when Lincolnshire would charge one portfolio company more than its fair share for expenses benefiting both portfolio companies.

Lincolnshire was aware of the complexity involved in sharing expenses and did have an expense allocation policy in place, though it was not in writing. The instances that resulted in a breach of Lincolnshire’s fiduciary duty were those in which the verbal expense allocation policy was not followed. The SEC also found, with respect to the integration of the portfolio companies, that Lincolnshire did not have sufficient written policies and procedures in place to prevent violations of the Investment Advisers Act of 1940 (“Adviser’s Act”). Lincolnshire agreed to a settlement with the SEC in excess of $2.3 million.

It is interesting to note that, while the SEC announced several months ago it had conducted presence exams and found many issues in private equity managers, Lincolnshire was not one of the companies subject to a presence exam. Private equity managers who have not had a presence exam should not assume they are unlikely to be examined outside of the presence exam protocol. This enforcement action reinforces the requirement that private equity fund advisers are required to have policies and procedures in place that are designed to prevent violations of the Adviser’s Act and other securities laws. More importantly, once in place, such policies and procedures must be monitored by the chief compliance officer and observed by all “covered persons.”

SEC Enforcement Against Short Sellers Continues

Posted in Investment Advisers, Private Equity

On September 16, 2014, the Securities and Exchange Commission (“SEC”) announced the latest sanctions in a continuing enforcement initiative against certain hedge fund advisers and private equity firms that have participated in an offering of a stock after short selling it during a restricted period in contravention of SEC rules.

The SEC last year announced the initiative to enhance enforcement of Rule 105 of Regulation M, which is designed to preserve the independent pricing mechanisms of the securities markets and prevent stock price manipulation.  Rule 105 typically prohibits firms or individuals from short selling a stock within five business days of participating in an offering for that same stock.  Such dual activity typically results in illicit profits for the firms or individuals while reducing the offering proceeds for a company by artificially depressing the market price shortly before the company prices the stock.

The SEC’s investigations targeted 19 firms and one individual trader in the latest cases engaged in short selling of particular stocks shortly before they bought shares from an underwriter, broker, or dealer participating in a follow-on public offering.  Each firm and the individual trader have agreed to settle the SEC’s charges and pay a combined total of more than $9 million in disgorgement, interest, and penalties.

Pursuant to this enforcement initiative, the SEC’s Enforcement Division works closely with FINRA and the SEC’s National Exam Program to identify potential violations of Rule 105.  Enforcement staff seeks trading data and certain other relevant information from traders and expedites these cases by using uniform methodologies for determining trading profits and deciding appropriate penalties.

This latest round of administrative proceedings for Rule 105 violations included the following organizations with the monetary sanctions as indicated below:

  • Advent Capital Management – The New York-based firm agreed to pay disgorgement of $75,292, prejudgment interest of $3,836.36, and a penalty of $65,000.
  • Antipodean Advisors – The New York-based firm agreed to pay disgorgement of $27,970, prejudgment interest of $702.83, and a penalty of $65,000.
  • BlackRock Institutional Trust Company – The California-based firm agreed to pay disgorgement of $1,122,400, prejudgment interest of $22,471.13, and a penalty of $530,479.
  • East Side Holdings II – The New Jersey-based firm agreed to pay disgorgement of $26,613, prejudgment interest of $397.38, and a penalty of $130,000.
  • Explorador Capital Management – The Brazil-based firm agreed to pay disgorgement of $83,722, prejudgment interest of $6,936.65, and a penalty of $65,000.
  • Formula Growth – The Canada-based firm agreed to pay disgorgement of $42,488, prejudgment interest of $4,255.15, and a penalty of $65,000.
  • Great Point Partners – The Connecticut-based firm agreed to pay disgorgement of $43,068, prejudgment interest of $1,529.13, and a penalty of $65,000.
  • Indaba Capital Management – The California-based firm agreed to pay disgorgement of $194,797, prejudgment interest of $11,990.79, and a penalty of $97,398.59.
  • Ironman Capital Management – The Texas-based firm agreed to pay disgorgement of $21,844, prejudgment interest of $382.66, and a penalty of $65,000.
  • James C. Parsons – An individual trader who lives in New York City agreed to pay disgorgement of $135,531, prejudgment interest of $3,063.90, and a penalty of $67,765.72.
  • Midwood Capital Management – The Massachusetts-based firm agreed to pay disgorgement of $72,699, prejudgment interest of $5,248.19, and a penalty of $65,000.
  • Nob Hill Capital Management – The California-based firm made sworn statements to the Commission attesting to a financial condition that makes it unable to pay any penalty.
  • RA Capital Management – The Massachusetts-based firm agreed to pay disgorgement of $2,646,395.21, prejudgment interest of $73,394.16, and a penalty of $904,570.84.
  • Rockwood Investment Management (also known as Rockwood Partners LP) – The Connecticut-based firm agreed to pay disgorgement of $156,631, prejudgment interest of $9,222.16, and a penalty of $72,135.23.
  • Seawolf Capital – The New York-based firm agreed to pay disgorgement of $192,730, prejudgment interest of $7,842.28, and a penalty of $96,365.
  • Solus Alternative Asset Management – The New York-based firm agreed to pay disgorgement of $39,600, prejudgment interest of $895.22, and a penalty of $65,000.
  • SuttonBrook Capital Management – The New York-based firm agreed to pay disgorgement of $70,000.
  • Troubh Partners – The New York-based firm agreed to pay disgorgement of $262,744, prejudgment interest of $39,315.13, and a penalty of $106,651.15.
  • Vinci Partners Investimentos – The Brazil-based firm agreed to pay disgorgement of $283,480, prejudgment interest of $23,487.08, and a penalty of $141,740.
  • Whitebox Advisors – The Minnesota-based firm agreed to pay disgorgement of $788,779, prejudgment interest of $48,553.49, and a penalty of $365,592.83

Pillsbury’s Investment Funds Team regularly advises clients on how not to show up on lists such as these.

CIOs Spur Revenue Generation Through Smart Cybersecurity

Posted in Guest Post, Investment Advisers

This article was originally published in The Wall Street Journal‘s CIO Journal on September 11, 2014.

Today as companies increasingly realize the value of strong cybersecurity, those CIOs who successfully implement an effective cybersecurity system should be viewed as a critical part of the revenue generation effort. An effective CIO who maintains a robust cyber risk management program will not only help ensure efficient operations, but will also play a role in crossing cybersecurity thresholds established by customers that would otherwise serve as a barrier to entry.

The shift from regarding cybersecurity–and the people responsible for implementing it–as a “tax,” to something that can further the business comes after some hard lessons. The value of intellectual property stolen by cyber espionage is measured today in billions of dollars. Meanwhile, operational disruptions caused by other malicious cyber events have managed to cripple productivity and harm relationships with customers.

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Read this article and additional publications at pillsburylaw.com/publications-and-presentations.

CFTC Exemptive Relief Harmonizes Regulations 4.7(b) and 4.13(a)(3) with Rule 506(c) of Reg. D and Rule 144A

Posted in Advisory, Investment Advisers, Private Funds

In a press release yesterday, the CFTC issued an exemptive letter, CFTC Letter No. 14-116, providing relief from certain provisions of CFTC Regulations 4.7(b) and 4.13(a)(3) that restrict marketing to the public.  The exemptive relief was issued to make CFTC Regulations 4.7(b) and 4.13(a)(3) consistent with SEC Rule 506(c) of Reg. D and Rule 144A, which were amended by the Jumpstart Our Business Startups Act (JOBS Act), to permit general solicitation or advertising subject to certain limitations.

Generally, the JOBS Act adopted SEC Rule 506(c) to permit an issuer, subject to the conditions of the rule, to engage in general solicitation or general advertising when offering and selling securities, and amended SEC Rule 144A to permit the use of general solicitation, subject to the limitations of the rule, when securities are sold to qualified institutional buyers (“QIBs”) or to purchasers that the seller reasonably believes are QIBs.  Prior to the CFTC’s exemptive relief, commodity pool operators (“CPOs”) relying on CFTC Regulations 4.7(b) and 4.13(a)(3) were not able to use general solicitation under Rule 506(c) or Rule 144A, as the CFTC exemptions prohibited general solicitation.

The new relief from provisions in CFTC Regulations 4.7(b) and 4.13(a)(3) is subject to the following conditions:

  1. The exemptive relief is strictly limited to CPOs who are 506(c) Issuers or CPOs using 144A Resellers.
  2. CPOs claiming the exemptive relief must file a notice with the Division.  The notice of claim of exemptive relief must:
  • State the name, business address, and main business telephone number of the CPO claiming the relief;
  • State the name of the pool(s) for which the claim is being filed;
  • State whether the CPO claiming relief is a 506(c) Issuer or is using one or more 144A Resellers;
  • Specify whether the CPO intends to rely on the exemptive relief pursuant to Regulation 4.7(b) or 4.13(a)(3), with respect to the listed pool(s);

 i.      If relying on Regulation 4.7(b), represent that the CPO meets the conditions
of the exemption, other than that provision’s requirements that the offering be
exempt pursuant to section 4(a)(2) of the 33 Act and be offered solely to QEPs,
such that the CPO meets the remaining conditions and is still required to sell
the participations of its pool(s) to QEPs;
ii.       If relying on Regulation 4.13(a)(3), represent that the CPO meets the
conditions of the exemption, other than that provision’s prohibition against
marketing to the public;

  • Be signed by the CPO; and
  • Be filed with the Division via email using the email address dsionoaction@cftc.gov and stating “JOBS Act Marketing Relief” in the subject line of such email.

Advisory Alert! – Repatriation of Funds Out of China

Posted in Advisory, China Funds, Investment Advisers

China imposes controls on the inflow and outflow of foreign exchange. Given the involvement of State Administration of Foreign Exchange and various other governmental agencies in the process, repatriating funds from China can be a trap for the unwary. Foreign investors should familiarize themselves with the approval requirements and procedures.

Read more:

Advisory – Aug 2014 – China – China Business Series Repatriation of Fun…

 

 

 

Cyber Security and Investing: Steps to Help Avoid a Digital Disaster

Posted in Investment Advisers

The relentless attention being paid to cyber-attacks is driving companies to increase cyber security budgets and purchases. In turn, this has led institutional investors and asset managers to see potentially massive returns associated with companies in the cyber security market. Indeed a number of companies that have gone public have had phenomenal success, and the constantly morphing nature of cyber-attacks means that purchasing trends are not likely to slow down any time soon.

However, it is critical to keep in mind that just as cyber security capabilities can be a very attractive component in evaluating a potential investment; it also could lead to potentially negative consequences. Ignorance of some key legal and policy considerations could lead to an improper assessment of the value/future earnings potential of technology investments. These considerations are true regardless of whether or not the technology or service has a core “security” component.

Below are some key issues to consider when making cyber security investment decisions:

  • Cyber security matters in every investment
    • It is a simple fact that every company faces cyber threats. Multiple studies have  demonstrated that essentially every company has been or is currently subject to cyber-attack and that most if not all have already been successfully penetrated at least once. This leads to a key consideration: every company’s cyber security posture should be considered when making investment decisions. For example, a company selling information technology that is less prone to cyber-attacks should be viewed as a better investment than competitors who pay little to no attention to how their products can be breached.
  • Cybercrime is cheap
    • The cost of conducting cyber-attacks is depressingly cheap: $2/hour to overload and shutdown websites, $30 to test whether malware will penetrate standard anti-virus systems, and $5,000 for an attack using newly designed methods to exploit previously undiscovered flaws. Indeed it is now so cheap to create malware that the majority of malicious programs are only used once – thereby defeating many existing cyber security systems which are designed to recognize existing threats. This all adds up to a cost/benefit analysis that is irresistible for cyber-attackers, and essentially guarantees that the pace and sophistication of attacks will not let up any time soon.
  • Cyber security should be in the company’s DNA
    • Whether a company is offering a service or a technology, a critical factor to consider is its approach to security. Companies that consider security a key functionality that needs to be integrated from the start of the design process are far more likely to go to market with an offering that has higher degree of security. Security as an afterthought is just that – an afterthought. Weaving security into the DNA of a service or technology will be extremely helpful in decreasing security risks. Just remember though that no security program or process is flawless, and no one should expect perfection.
  • Is there a nation-state problem?
    • An R&D or manufacturing connection to countries known for conducting large-scale cyber espionage causes heartburn for companies and governments alike. Too many instances have occurred where buying items from companies owned by or operated in problem nation states have resulted in cyber-attacks. In some cases, Federal agencies are prohibited from buying IT systems from companies with connections to specific governments. Investors and managers need to stay abreast of problem countries, and also examine whether the product or service has a connection to such countries. Failure to do so can lead to investments in companies that have limited market potential.
  • Do your homework and forensic analyses
    • There’s nothing like buying a trade secret only to find out it really isn’t a secret. Before investing in any company, conduct due diligence to determine how good the security of the company is and whether IP or trade secret information has been compromised.
  • If the government cares, so should you
    • The Federal government is stepping up its requirements regarding cyber security in procurements. That means that all federal contractors (not just defense contractors) are going to have to increase their internal cyber security programs if they want to win government contracts. Failure to have a good cyber security program could lead to lost contracts, and thus decreased growth. 
  • Words matter
    • Companies have been too lax in negotiating terms that explicitly set forth security expectations for IT products as well as who will be liable should there be a breach/attack. Judicious reviews of terms and conditions can help avoid liability following a cyber-attack. For example, companies should not accept boilerplate language regarding the following of “industry standards” or “best practices” with respect to cyber security. Instead, specific obligations and benchmarks need to be agreed upon before signing any agreement. Further agreements should be drafted to that make clear that security measures are the obligation of the other party. That way the investor has set up a stronger argument for recovering losses as well as shifting liability away from itself.
  • Insurance isn’t everything
    • Companies may be tempted to think that if a company has a cyber-insurance policy, they are protected in the event of a cyber-attack. The reality is that there is an enormous chasm between buying coverage and having claims paid. Cyber policies are increasingly being written and interpreted to cover fewer types of attacks, and so do not be tempted to think that cyber insurance can fully protect an investment.
  • SAFETY Act
    • Under the Support Anti-Terrorism by Fostering Effective Technologies Act (SAFETY Act), cyber security services, policies, and technology providers are all eligible to receive either a damages cap or immunity from liability claims. The SAFETY Act also protects cyber security buyers, as they cannot be sued for using SAFETY Act approved items. Possessing SAFETY Act protections should be considered a positive sign and indicative of potential earnings growth.

There is no doubt about it; cyber risks are here to stay. Addressing those risks should be a core component of any business or investment strategy, because even if “today’s problem” is solved the introduction of new technologies will just mean a new threat vector for adversaries to exploit.

It is not all doom and gloom, however. Paying attention to cyber security trends and doing some simple due diligence will go far in minimizing digital risks. Make no mistake: defenses will always be incomplete and successful attacks will happen. However, with the right processes and approach, the bad outcomes can be minimized and investments will be protected.

SEC Enforcement Update – A busy (and entertaining) week, July 28 – August 1, 2014

Posted in Investment Advisers

At the Intersection of Faith and Illiteracy.

In what may have been one of the more interesting weeks this year for SEC enforcement actions, the Enforcement Division brought a number of actions last week, several of which will make you wonder if the warnings that we issued when the JOBS Act was passed are not coming to pass.  Although none of these actions are based on 506(c) reliance, they do suggest that as capital finally starts to seek new opportunities outside the mainstream, it is necessary for investors to evaluate investment opportunities very carefully in order to avoid the scam artists who, like Jesse James, go where the money is.

On July 31, 2014, the SEC filed fraud charges and sought emergency relief against Thomas J. Lawler of Snellville, Georgia, a self-proclaimed minister, and his company, Freedom Foundation USA LLC for fraudulently offering and selling fictitious securities.  With all due respect to Siskel and Ebert, this case is not to be missed.  I laughed, I cried, if you only read one enforcement action this year, it has to be this one.

The SEC’s complaint filed in U.S. District Court for the Northern District of Georgia alleged that, since as early as 2004, the defendants  Lawler and Freedom Foundation offered investors the opportunity to eliminate their debts and collect lucrative profits through the purchase of so called “administrative remedies” (“ARs”).  Defendants told potential investors that every individual had funds established for them in an account at birth — where, by whom, and in what amount the supposed account is established are details Lawler does not provide.  Defendants further told potential investors that the investors therefore did not owe their creditors for mortgage and other debts, and that Freedom Foundation would use its unique and proprietary process to create the ARs, which would eliminate the investors’ debt and provide a lucrative financial return.  Does the Wesley Snipes tax case come to mind?

The SEC alleged that defendants told potential investors that a $1,000 AR would cancel the investor’s debt and return $325,000 to the investor, while a $10,000 investment would supposedly entitle the investor to receive $1 million when the AR funded.  Freedom Foundation claimed it would fund the ARs through a mysterious process involving a Papal decree.  What could possibly go wrong there?  The SEC claims that Lawler sold approximately 2,000 ARs over ten years to investors throughout the country and that he was actively soliciting additional investors.  This is not exactly one per minute, but it is impressive.  And, as shocking as this may sound, the SEC found that not one investor in this scheme received any of the promised returns.

Freedom Club targeted our most ignorant and vulnerable citizens through an internet presentation that was designed to prey on the uninformed and easily swayed.  Let’s hope that the SEC is not successful in shutting down the Freedom Club website before you have the opportunity to check it out: http://www.freedomclubusa.com/.  Admit it, this case does raise the question of whether anyone who would fall for this scam should be allowed to handle money at all…ever.

Chief Compliance Officer/General Counsel Takes the Fall.

You may recall that we recently wrote about attorneys who seem to escape scrutiny by the SEC when they participate in illegal activities.  There is an administrative remedy against attorneys who facilitate or promote wrongdoing, but the SEC has been slow to target ethically challenged attorneys.  Well, wait no longer.  Last month, a judgment was entered by consent against the general counsel and chief compliance officer of an investment adviser who was found to have aided and abetted fiduciary violations of the firm’s principal in the misappropriation of hedge fund client assets in contravention of the offering documents of the fund.  What is the take away here?  If you are a Chief Compliance Officer, I believe you know the answer to that one.

See, Securities and Exchange Commission v. Weston Capital Asset Management, LLC, et al., Civil Action Number 14-CV-80823-COHN, in the United States District Court for the Southern District of Florida.

Criminal Referrals Catching On.

Robert G. Bard was sentenced on July 31 by a U.S. District Court in Pennsylvania. Bard had been found guilty by a jury and convicted of 21 counts of securities fraud, mail fraud, wire fraud, bank fraud, and making false statements for defrauding his investment advisory clients between December 2004 and August 2009.  The court sentenced Bard to 262 months imprisonment and ordered him to pay $4.2 million in restitution to 66 victims.  If you do the math, this comes out to right around $200,000 per year sentence.

The criminal case arose out of the same facts that were the subject of a civil injunctive action filed by the SEC in 2009. The Commission’s complaint alleged that defendant Bard, an investment adviser, and his solely-owned company Vision Specialist Group LLC had violated the federal securities laws through fraudulent misrepresentations regarding client investments, account performance and advisory fees, and by Bard’s creation of false client account statements, forgery of client documents.

In a follow-on administrative proceeding to the SEC’s civil court action, an administrative law judge barred Bard from the securities industry in an initial decision.

Elder Abuse also Brings Criminal Action.

The SEC also brought charges against a broker based in Roanoke, Va., for allegedly defrauding elderly customers, including some who are legally blind, by stealing their funds for her personal use and falsifying their account statements to cover up her fraud.

According to the SEC’s complaint, Donna Jessee Tucker siphoned $730,289 from elderly customers and used the money to pay for such personal expenses as vacations, vehicles, clothes, and a country club membership.  Tucker ensured that the customers received their monthly account statements electronically, knowing that they were unable or unwilling to access their statements in that format. The SEC further alleges that Tucker engaged in unauthorized trading and other financial transactions while making misrepresentations to customers about their investment accounts and forging brokerage, banking, and other documents.

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

The above cited actions represent just some of the more interesting enforcement actions brought by the SEC and the Department of Justice in recent days.  The full list is more extensive.