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The weekly news source for investment management legal and compliance professionals

Topic: Litigation/Court Cases

SEC Files Misrepresentation Charges Against Adviser Raising Money to Flip Real Estate

February 2, 2018  Flip or flop? Advisers seeking to raise money from clients and investors for the declared purposed of flipping residential properties would be wise to ensure that the dollars raised go to that purpose. The SEC has filed charges against an adviser and others for allegedly failing to do just that.
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Status of Administrative Law Judges Will be Reviewed by Supreme Court

January 18, 2018  It took just eight words: "The petitions for writs of certiorari are granted." With that sentence, the U.S. Supreme Court on January 12 let it be known that it will review a lower court decision in Lucia v. SEC, potentially overturning the way that the agency has traditionally classified its administrative law judges. The high court’s ultimate decision may upend a number of established lower court’s verdicts.
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SEC Charges Gatekeepers in Federal Court with Aiding and Abetting Fraud

January 12, 2018  Don’t expect the crackdown on "gatekeepers" – attorneys, accountants, consultants and other third parties that work with advisory firms – to let up any time soon, even with a new SEC chairman at the helm. The agency recently filed charges in U.S. District Court against an attorney and an accountant for allowing, if not enabling, an adviser’s alleged misappropriation of more than $9 million from a charitable foundation.
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PF Manager Settles Charges Involving Conflicts, Disclosure and Exam Findings

January 5, 2018  A private fund manager that the SEC accused of not acting in a timely fashion on multiple examination findings was taken to federal court by the agency, which charged him with, among other things, engaging in conflicted transactions and misleading investors. The manager, Louis Mohlman, Jr. and his two advisory firms reached a settlement with the SEC the same day.
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2017 in Review: A New SEC, Cybersecurity Threats and the Fiduciary Rule

January 1, 2018  The past year saw a great deal of change and development in the asset management community, but three loom larger than others: A new SEC with Jay Clayton at the helm, bringing different priorities than his predecessor; exacerbating cybersecurity concerns, with the SEC itself one of the victims; and the Department of Labor’s Fiduciary Rule and its exemptions, delays in their taking effect, and the increasing likelihood of SEC involvement in the process.
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2018: What Advisers Should Expect in the Year Ahead

January 1, 2018  Prognostication is always a bit of a guessing game. What may look like priorities in January may be replaced by other issues in the latter part of the year or may be driven by external and internal events, politics and the marketplace. Whatever may occur, 2018 is already marked as a year for change in the asset management industry.
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Government Reversal in ALJ Case May Reverberate Beyond Supreme Court

December 8, 2017  The decision of the Justice Department to switch sides in a pending Supreme Court appeal involving the status of administrative law judges – and the Commission’s subsequent ratification of its five ALJs as appointed officers rather than continuing to classify them as agency employees – is likely to have ramifications for the SEC and those it regulates beyond the immediate case.
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Jury Rules Against F-Squared Founder in Federal Court

October 13, 2017  The SEC came out the winner on October 6, when a federal jury ruled against advisory firm F-Squared Investments founder and former CEO Howard Present in a case the agency brought almost two years ago in federal district court.
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High Court Will Review Protections for Whistleblowers Who Report Only Internally

July 7, 2017  Are whistleblowers protected from employer retaliation if they report wrongdoing to their employer but not to the SEC? The answer will depend on the U.S. Supreme Court, which this fall will review a lower-level court case dealing with that very question.
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Supreme Court: SEC Cannot Impose Disgorgement After Five Years

June 9, 2017  You could almost hear the champagne bottles uncorking at the law offices of securities defense attorneys from coast to coast. At the same time, one can imagine a mood akin to a funereal grim at the SEC Division of Enforcement. The reason for both was the same: The U.S. Supreme Court on June 5 ruled that the Commission cannot require disgorgement for violations that occurred outside a five-year statute of limitations.
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Cooperman Settles Insider Trading Charges for $5 Million and Onsite Monitoring

June 2, 2017  Don’t let anyone tell you that the SEC isn’t pursuing insider trading cases in the wake of some reversals the agency experienced in the past couple of years. The rules governing such enforcement actions may have tightened, but they continue to be brought. One just resulted in significant penalties against an advisory firm owner and his firm.
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Portfolio Manager Charged with Stealing Dollars in Matched-Trades Scheme

April 28, 2017  Chief compliance officers know that high among the advisory firm employees they need to monitor are portfolio managers. After all, they sit at the nexus of the trading action. The SEC, in an April 24 complaint filed against a Massachusetts-based portfolio manager, makes clear just how serious the dangers are.
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Advisory Firm President Gets Home Detention for Obstructing SEC Investigation

April 28, 2017  It’s not often that an advisory firm executive is sentenced to incarceration, even at home, related to an Advisers Act violation. When that executive is charged with obstructing an SEC investigation, however, it can be a different story, as one former advisory firm president found out.
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Appellate Ruling Increases Chances SEC Use of ALJs Will Go to Supreme Court

March 10, 2017  Not only do the U.S. Courts of Appeals for the 2nd Circuit and the 10th Circuit disagree on the issue of whether SEC use of administrative law judges is constitutional, the 2nd Circuit will now look into a past ruling of its own three-judge panel on the same question in a review scheduled for May 24. It’s increasingly looking like the U.S. Supreme Court will provide the final answer.
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SEC Cherry-Picking Dragnet Yields Adviser Plea Bargain and Civil Settlement

February 10, 2017  Allocation of trade results that consistently favor an adviser’s 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 manager’s 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 panel’s decision this month to dismiss a challenge to the SEC’s 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 agency’s 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 – 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 SEC’s top focus areas. So when the agency’s 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  What’s 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 doesn’t like it when advisers lie to agency examiners – particularly if the lies cover up theft of client money.
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