Selected Enforcement Actions
The sting. The SEC, Massachusetts US Attorney and the FBI announced charges against five individuals whose attempt to manipulate shares of Amogear Inc. was caught by an FBI undercover operation. According to the civil and criminal complaints, the defendants knew that Amogear was a shell company without any real operations, but engaged in a scheme to boost its price and profit by selling their own shares. Respondents, however, didn’t know that the FBI controlled Amogear and used it to obtain evidence of attempted stock manipulation. (7/11/2014) SEC v. Affa, Lit.Rel.No. 23041.
School district uses cooperation initiative to settle continuing disclosure matter. The SEC charged a school district in California with misleading bond investors about its failure to provide contractually required financial information and notices. The case is the first to be resolved under a new SEC initiative to address materially inaccurate statements in municipal bond offering documents. The California school district agreed to settle the charges without admitting or denying the findings. (7/8/2014) SEC press release.
Contested proceedings instituted against auditor of China-based firm. The SEC instituted contested administrative proceedings against Child, Van Wagoner & Bradshaw, PLLC (CVB), Russell E. Anderson, CPA, and Marty Van Wagoner, CPA, for failing to comply with PCAOB auditing standards in their audits of Yuhe International, Inc., a China-based company whose stock was previously registered with the Commission and traded on Nasdaq. Among other failures, CVB and Anderson allegedly failed to properly plan the audits and supervise assistants; properly assess audit risk and materiality; properly consider fraud and illegal acts; and act with due professional care. Respondents’ alleged failures in a 2009 audit arose principally because CVB and Anderson effectively performed no audit work of their own and instead relied on the audit work papers of Yuhe’s prior auditor, which had begun the 2009 audit but then abruptly resigned without completing it. (7/8/2014) In the Matter of Child, Van Wagoner & Bradshaw, PLLC, SEC Release No. 34-72557.
Cybersecurity. Wall Street & Technology discussed recent SEC guidance and risk alerts concerning cybersecurity. (7/22/2014) Cybersecurity.
Staff announcement. The SEC named Mark J. Flannery as its chief economist and director of its Division of Economic and Risk Analysis, which provides interdisciplinary analysis to help inform the Commission’s policymaking, rulemaking, enforcement and examinations. (7/21/2014) SEC press release.
Commissioner Piwowar’s frustration. In recent remarks, SEC Commissioner Michael S. Piwowar made clear his feelings of frustration and dismay regarding the Financial Stability Oversight Council’s lack of transparency. He also expressed concern over the dominant role played by Federal Reserve Board in the Council. (7/15/2014) Piwowar speech.
SEC developments. SEC Chair Mary Jo White provided the SEC’s Investor Advisory Committee with an update on recent agency activities. Among other things, Chair White summarized the comments recently received by the Commission concerning its target date funds proposal. While commenters generally favored tailored enhanced disclosure requirements for target date fund marketing materials, some worried about the potential for confusion posed by the standardized risk measures. White also noted that the SEC staff is working with the Department of Labor regarding the agencies’ respective initiatives. (7/10/2014) White speech.
International corporations. The Division of Corporation Finance posted charts on international registered and reporting companies. The charts depict: the number of foreign companies registered and reporting with the SEC; a market summary; a geographic listing by country of incorporation; and an alphabetical listing by company name. (7/9/2014)
Proactive monitoring and investment division guidance. The SEC’s Director of the Division of Investment Management, Norm Champ, summarized the Division’s efforts at proactively monitor the industry. An industry monitoring program to provide ongoing financial analysis of the industry has been initiated by the Risk and Examinations Office. The office will focus on strategically important investment advisers and funds. The Division is also developing recommendation regarding ways in which the SEC can streamline the information investment funds report. (7/1/2014) Champ speech.