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The weekly news source for investment management legal and compliance professionals

Topic: Litigation/Court Cases

SEC Cherry-Picking Dragnet Yields Adviser Plea Bargain and Civil Settlement

February 10, 2017
Allocation of trade results that consistently favor an adviserís own accounts over his clients are likely to gain the attention of government enforcement officials. One adviser just found that out the hard way.

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Examination Findings Led to Court Actions Against Platinum’s Founder

January 27, 2017
Platinum Partners received quite a bit of negative publicity since the civil and criminal charges against the hedge fund managerís founder and two of its subsidiary advisory firms in U.S. District Court last month. But perhaps less publicized was that much of the enforcement action began after an SEC examination found evidence of wrongdoing.

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Supreme Court Will Review Whether Time Limits Apply to Disgorgement

January 20, 2017
Those committing fraud may no longer have to disgorge money if five years pass after the theft was committed. It all depends on what the Supreme Court decides after hearing a case it just agreed to review.

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SEC Use of Administrative Law Judges Unconstitutional, Appeals Court Rules

January 6, 2017
The battle over administrative law judges goes on, and it increasingly looks like the U.S. Supreme Court will be the final arbiter.

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Court’s Investment Adviser Definition Counts Stolen Money as Compensation

August 26, 2016
What does it take to be considered an "investment adviser," as defined by the Advisers Act? Compensation is one of the necessary elements, and now, according to a ruling from a federal Court of Appeals, ill-gotten gains may count toward meeting that qualification.

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SEC Wins Key Round in Administrative Hearings Battle

August 19, 2016
A three-judge appellate court panelís decision this month to dismiss a challenge to the SECís use of administrative law judges is the latest development in the ongoing dispute between the Commission and a coalition of advisers, defense attorneys and others that want to at least curtail the agencyís use of ALJs. But this most likely is not the end of the game.

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$10 Million Judgment Against Adviser in Conflict of Interest / Disclosure Case

August 5, 2016
Advisers probably should not invest client dollars in securities or other assets that the advisory firm already owns or has an ownership interest in Ė especially if the adviser fails to first disclose that ownership.

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SEC Charges Adviser with Steering Investor Money to His Own Companies

July 28, 2016
Failure to disclose and conflicts of interest are two of the SECís top focus areas. So when the agencyís Division of Enforcement learned of an adviser who allegedly took money from investors and secretly steered it into real estate investments he owned or controlled, you can be sure the Division sat up and took notice.

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Two Hedge Fund Managers at Same Firm Face Separate Insider Trading Charges

June 17, 2016
Whatís worse than one hedge fund manager charged with insider trading at your firm? Two hedge fund managers charged with insider trading. This might usually be said in humor, but not in this case.

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Advisers Misrepresenting Advertising Returns Should Expect SEC Attention

June 10, 2016
Advertising returns are what they are. Advisers that seek to make them appear greater than what they are risk running afoul of the SEC enforcement police.

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SEC: Adviser’s Lies to Exam Staff Led to Charges of Stealing Athletes’ Money

May 13, 2016
The SEC doesnít like it when advisers lie to agency examiners Ė particularly if the lies cover up theft of client money.

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SEC: Adviser Shortchanged Clients by Putting Interests of Affiliated Firms First

January 8, 2016
The SECís crackdown on conflicts of interest continues. This time the agency has accused a Virginia-based advisory firm of failing to meet its fiduciary duty to its clients by putting the interests of its parent company and an affiliated broker-dealer first.

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House Bill Would Effectively Reduce Number of Administrative Proceedings

October 30, 2015
Critics of the SECís increased use of administrative proceedings to try advisers and other targets of SEC enforcement have a new weapon and a new battleground. A bill introduced in the U.S. House of Representatives would, if passed, enable those charged by the agency to terminate an administrative proceeding within 20 days, leaving the SEC with no recourse save a civil court proceeding.

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SEC Proposes Changes to its Administrative Proceedings That Address Defense Concerns

September 25, 2015
Advisers and their defense attorneys won at least a partial victory on September 24. The SEC proposed amendments to its administrative proceedings rules that would permit attorneys to depose witnesses as part of the discovery process and adjust the timing of proceedings, including by sometimes extending the time before a hearing occurs.

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Court Orders Broker-Turned-Adviser to Pay More Than $1 Million in Two Cases

June 18, 2015
Itís been a rough five years for Sage Advisory Group and Benjamin Lee Grant. Now, with more than $1 million in disgorgement and civil money penalties ordered in two final judgments, the worst, at least, may be over.

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The SEC Loses One: ALJ Rules for Adviser

June 12, 2015
You could almost hear the champagne corks popping. Itís not so much that the SEC lost a case it brought against an adviser Ė itís that the Commission lost it in its preferred venue, an administrative hearing.

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SEC Explains How It Chooses Between Administrative Hearings and Courts

May 15, 2015
If you ever wanted to know the criteria the SECís Division of Enforcement uses in deciding to try a case in an administrative hearing or in federal court, your wait may be over. The SEC staff on May 8 issued guidance on how it decides the venue in which to try a case.

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Advisory Agreement Case: SEC Files New Charges After $55M Court Win

May 1, 2015
Watch out for those old active advisory contracts. They can come back and bite you. The SEC on April 28 instituted administrative proceedings against adviser Charles Kokesh. The Commission action followed a March 30 final judgment by the U.S. District Court for the District of New Mexico, in which Kokesh was ordered to pay more than $55 million in disgorgement, interest and civil money penalties.

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Second Circuit Chooses Not to Review Key Insider Trading Decision

April 10, 2015
The full U.S. Court of Appeals for the Second Circuit on April 3 denied U.S. Attorney Preet Bhararaís petition that it review the December 10 decision of a Second Circuit three-judge panel that overturned the conviction of two hedge fund portfolio managers and makes it more difficult to prove insider trading. The Second Circuit gave no rationale for its decision not to review the panelís ruling in the case, United States of America v. Todd Newman and Anthony Chiasson.

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Adviser Wants Trial by Jury: Tilton Sues SEC over Administrative Action

April 10, 2015
The SEC on March 30 filed an order instituting an administrative proceeding against advisory firm CEO Lynn Tilton. The agency claimed that Tilton and her Patriarch Partners advisory firms, which invest in distressed companies, misappropriated almost $200 million from clients by mischaracterizing the performance of fund assets.

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