Policy Change

Corporation Finance changes procedures for confidential treatment applications. The Division of Corporation Finance announced a change to its procedures relating to granted applications for confidential treatment. While the Division will continue to provide oral and written comments on certain applications, where it grants an application without providing comments, the Division will no longer directly notify the applicant. The Division will continue to post the orders through EDGAR but it now will be incumbent upon the applicant to review the EDGAR website to determine if the application has been granted. The Division will continue to advise applicants in writing when it intends to deny the application. (4/9/2014) Policy Change. 

Selected Enforcement Actions

Ponzi scheme allegedly included false online account updates. The SEC announced civil and criminal charges against an individual and two entities, alleging a Ponzi scheme that attracted more than US$12.8 million of investment in a fictitious credit union. The SEC alleged that false information was posted to the investors’ online accounts to give the appearance of substantial returns. In reality, investor money was misappropriated to pay for personal expenses and to make Ponzi-scheme distributions to earlier investors. (4/11/2014) SEC Release LR-22972.

Ponzi scheme in virtual concierge machines alleged. The SEC filed a civil action to halt an alleged Ponzi scheme involving the sale of investments in Virtual Concierge machines, ATM-like machines that provide advertising and services. The SEC alleges that the defendants raised more than US$40 million by guaranteeing exorbitant returns, but in fact operated a Ponzi scheme and misappropriated several million dollars for themselves. The investments were promoted through YouTube videos. (4/7/2014) SEC Release LR-22969.

SEC charges purported investment adviser. The SEC instituted administrative proceedings against the adviser to “a self-described hedge fund.” The SEC alleged that the adviser misappropriated most of the US$200,000 she received from investors in the fund losing the monies she did invest in risky options trading. The adviser also allegedly sold US$50,000 worth of subscriptions to an investment advice website, where she misrepresented her background in the industry and falsely claimed that she had an 800% annual return in her own brokerage account, when in fact she lost all the money invested in that account. The case is pending before an administrative law judge. (4/8/2014) SEC Release 33-9574.

Other Developments

NASAA speeches by SEC Commissioners address state regulation. SEC Commissioners Kara Stein and Luis Aguilar, in speeches before the North American Securities Administrators Association (NASAA) annual meeting, talked about the importance of partnership with state regulators, especially in the context of proposed Regulation A+. (4/8/2014) Speeches.

Private equity and hedge funds groups formed by SEC. Reuters reported that the SEC is forming a group of examiners to specifically look at how private equity and hedge funds value their assets. (4/7/2014) Private Funds.

Staff Announcements. The SEC has named David Gottesman as Deputy Chief Litigation Counsel. (4/15/2014)