Articles Tagged with investigation

You just received a Subpoena from the Securities and Exchange Commission (SEC).  What will you have to produce?  We regularly represent securities industry professionals and investors who have gotten these Subpoenas, and the reaction is usually the same: people are nervous and concerned.  How will this affect your business, and how what will it take the comply?

Getting an SEC Subpoena is a serious matter, and it is imperative that you carefully comply in a timely manner.  Subpoenas will typically require you to produce documents or testify, or both.  Your goal should always to limit your involvement with the federal authorities, and this begins with your production of documents in response to the Subpoena.

The first step is to remember that just because you received a Subpoena does not mean you automatically did something wrong.  You may not be the SEC’s target, but may be someone the Commission believes has information related to another person or business.  The SEC is not obligated to tell you whether they view you as a target or a witness, and you should not assume you are a target.

As reported recently, the Financial Industry Regulatory Authority has commenced an investigation into the cross-selling activities of several broker dealers in the wake of the Wells Fargo fallout. FINRA’s objective has reportedly been to determine just how much cross selling is taking place (including promotion of products such as credit cards and loans) and what incentives are being provided to employees to engage in the conduct.

A FINRA spokesperson was quoted as saying, ““In light of recent issues related to cross-selling, FINRA is focused on the nature and scope of broker-dealers’ cross-selling activities and whether they are adequately supervising these activities by their registered employees to protect investors.”

Supervision at broker dealers is a very critical aspect of customer service. It is important that brokers and their firms are only promoting and selling products to customers that are appropriate for that customer and in the customer’s best interest. As has been shown by the Wells Fargo disaster, cross-selling incentive programs can compromise that goal by creating a conflict of interest.

The Securities and Exchange Commission (SEC) announced on February 16, 2016 a settlement with Massachusetts-based PTC, Inc. involving alleged violations of the Foreign Corrupt Practices Act (FCPA).  In total, PTC was reported to agree to pay approximately $28 million, including nearly $12 million in disgorgement and more than $14 million in a non-prosecution agreement with the United States Department of Justice in a parallel action.

According to the SEC Order, PTC’s China-based subsidiaries made payments to China officials in an effort to win business, including:

  • Provided improper travel, gifts, and entertainment totaling nearly $1.5 million to Chinese government officials who were employed by state-owned entities that were PTC customers.

The investment fraud attorneys at Malecki Law announce the firm’s investigation into potential securities law claims against broker-dealers relating to the improper sale of natural gas and oil linked structured notes and similar products to investors.

Malecki Law is interested in hearing from investors who purchased structured notes issued by well-known financial institutions, including Bank of America Merrill Lynch (NYSE: BAC), Citigroup (NYSE: C), Credit Suisse (NYSE: CS), Goldman Sachs (NYSE: GS), JP Morgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS), UBS (NYSE: UBS), and Barclays (NYSE: BCS).

These investment products, often bearing such names as “Phoenix,” “Plus,” “Enhanced Return,” “Principal Protected,” “Bullish,” “Leveraged Upside” or “Accelerated Return,” were reportedly marketed to investors as a way to make significant returns and income from the rising price of oil.  In addition to promises of increased gains, investments like these are frequently also sold to investors with assurances that their potential losses would be limited and their initial investment would be protected.

United Development Funding (“UDF”) has come under fire in recent months – being accused of operating like a “Ponzi scheme.”  It has allegedly disclosed that since April 2014, it has been under SEC investigation.

UDF operates several publicly-traded and non-traded Real Estate Investment Trusts (REITs) along with other real estate related companies, according to reports.  UDF reportedly operates in a manner that is different from traditional REITs – in that its assets are not real estate holdings, but rather development loans that it originates.

The UDF fund family is reportedly comprised of four public companies – United Mortgage Trust (non-traded), UDF III (non-traded), UDF IV (publicly traded symbol: UDF), and UDF V (non-traded).

The sad truth is that the Government loves the easy kill.  It is often easier for regulators to extract settlements and punishments against smaller market participants, including brokers, traders and analysts, than the giant wire houses, because large companies can match the resources of the Government.

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), among other regulators, regularly engage in investigations to explore, deter and punish market conduct that violates the securities laws and industry rules.  While it can be hard to know what those investigations will be, the regulators like the SEC disclose regulatory priorities on an annual basis.  These examination priorities are areas where the SEC will be dedicating resources throughout 2016.

Of the 2016 Priorities announced by the SEC, the following may lead to broad investigations: