Division of Corporation Finance revises Financial Reporting Manual. The Securities and Exchange Commission’s Division of Corporation Finance published an updated Financial Reporting Manual, which includes revised guidance for delinquent filers. (8/25/2015) Financial Reporting Manual.
Deficiencies in SSPs controls subject of OCIE Risk Alert. The staff of the SEC Office of Compliance Inspections and Examinations’ (OCIE) National Examination Program staff identified deficiencies in controls related to suitability determinations in the sales of structured securities products (SSPs) during examinations of registered broker-dealers, according to a Risk Alert issued by OCIE. (8/24/2015) OCIE Risk Alert.
SEC grants relief from corporate governance requirements to Japanese credit rating agency. The SEC announced that it has granted temporary conditional relief to Japan Credit Rating Agency, Ltd. from certain requirement of Section 15E(t) of the Securities Exchange Act, which will remain in effect until August 20, 2018. (8/20/2015) SEC Release No. 34-75747.
Selected Enforcement Actions
SEC halts scheme to defraud EB-5 investors. The SEC filed a complaint in federal court alleging that a man and his company misled Chinese investors regarding their eligibility for US residency through the EB-5 Immigrant Investor Pilot Program by making investments in his companies. According to the SEC’s complaint, Lobsang Dargey and his Path America companies obtained at least US$125 million in investments from 250 Chinese investors for two real estate projects in the Seattle area under the umbrella of the EB-5 program. Dargey informed the investors, along with US Citizenship and Immigration Services (USCIS), that he would use investor funds only for the two real estate projects. In reality, Dargey channeled investor funds away from the designated projects into unrelated projects and for his own personal use. Dargey failed to inform investors that he used their funds for other purposes and that, by diverting funds from the business plan approved by USCIS, he jeopardized the approval of their residency applications. The court granted the SEC’s request for an asset freeze and a restraining order against Dargey and his companies. (8/25/2015) SEC v. Path America LLC, Lit. Release No. 23326.
Lack of recklessness results in reduced monetary sanctions for violative trading. An Administrative Law Judge recently ordered Thrasos Tommy Petrou to disgorge US$15,000 in proceeds from transactions conducted in violation of Regulation M. The Commission alleged that Petrou engaged in twenty-eight violative trades by obtaining the maximum allocations for short-term trading in initial public offerings, as well as follow-on and secondary offerings, and then purchasing offering shares in a covered offering after having sold short the same security during the restricted period in violation of Regulation M. Petrou previously agreed to be censured and to the entry of a cease and desist order without admitting or denying the allegations. The ALJ cited Petrou’s lack of education and securities-related experience, as well as the lack of evidence from the Commission, in concluding that Petrou did not act with reckless disregard of securities regulations. The ALJ declined to impose a civil penalty and reduced the amount of stipulated disgorgement from nearly US$285,000 to US$15,000, citing Petrou’s inability to pay, along with Petrou’s lack of recklessness. (8/19/2015) In the Matter of Thrasos Tommy Petrou, SEC Release No. ID 869.
Statements and Speeches
Aguilar recommends waiver reforms. In a recent statement, SEC Commissioner Luis Aguilar urged the Commission to adopt a more transparent, flexible, and calibrated approach to its process for granting requests for waivers from regulatory disqualifications. Aguilar made several recommendations, including the preparation of periodic reports by SEC staff detailing relevant information regarding all waiver requests processed, the creation of a public website to track the progress and resolution of all waiver requests, and the greater use of conditional waivers by the Commission to address gray-area cases. (8/27/2015) Aguilar statement.
Trading limits. Bloomberg reported that the SEC is examining whether controls it imposed on high-frequency trading in response to the 2010 “flash crash” adversely affected exchange-traded funds on 2015’s “black Monday,” when the Dow Jones Industrial Average fell over 1,000 points in 10 minutes. (8/28/2015) Trading limits.
SEC sets securities registration fee rates for 2016. The SEC adjusted the fee rates it charges for the registration of securities for fiscal year 2016. The new fee rate will be US$100.70 per million and will be effective October 1, 2015. (8/26/2015) SEC Release No. 33-9898.
Division of Corporation Finance revises Financial Reporting Manual. The SEC’s Division of Corporation Finance published an updated Financial Reporting Manual, which includes revised guidance for delinquent filers. (8/25/2015) Financial Reporting Manual.
SEC observes 75th anniversary of the Investment Company and Investment Advisers Acts. The SEC will host a conference on Tuesday, September 29, commemorating the 75th anniversary of the Investment Company Act and the Investment Advisers Act. The event will include remarks from current SEC Commissioners and panel discussions featuring former SEC chairs, former division directors, and leading members of the asset management field. (8/21/2015) SEC Press Release.
Money market fund statistics. The SEC’s Division of Investment Management released its data on money market fund statistics as of July 31, 2015. (8/21/2015) Money market fund statistics.
Staff announcements. The SEC announced that Shelly Luisi will serve as an Associate Director in the Division of Corporation Finance starting in September. (8/19/2015). SEC press release.