Outline of Recent SEC Enforcement Actions - the Utah State Bar

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CASES INVOLVING BROKER-DEALERS SEC v. Aura Financial Services, Inc., Ronald E. Hardy, Jr., Peter C. Dunne, Qais R. Bhavnagari, Dipin Malla, Sandeep Singh, and Raymond Rapaglia Lit. Rel. No. 21081 (June 12, 2009) http://sec.gov/litigation/litreleases/2009/lr21081.htm The defendants, Aura Financial Services, Inc. (Aura), an Alabama corporation headquartered in Birmingham, Alabama, and six of its current and former registered representatives, allegedly used fraudulent sales practices to induce customers to open and fund Aura brokerage accounts from October 2005 through at least April 2009. The defendants are also accused of rampantly churning at least fifteen customers. Customers were allegedly defrauded of $1 million in illicit commissions while suffering combined losses of over $3.5 million. The defendants are charged with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The complaint seeks (1) preliminary injunctions against Aura and the four individual defendants still affiliated with it as registered representatives, Hardy, Bhavnagari, Malla, and Singh; (2) permanent injunctions against future violations; (3) disgorgement of ill-gotten gains with prejudgment interest; and (4) imposition of civil penalties. SEC v. Banc of America Securities LLC and Banc of America Investment Services, Inc. SEC v. RBC Capital Markets Corporation SEC v. Deutsche Bank Securities Inc. Lit. Rel. No. 21066 (June 3, 2009) http://sec.gov/litigation/litreleases/2009/lr21066.htm These filed complaints allege that these firms misled investors regarding the liquidity risks associated with auction rate securities (ARS) that they underwrote, marketed or sold. Without admitting or denying the allegations, the firms consented to settle the actions. These settlements, combined, will provide or already have provided nearly $6.7 billion to approximately 9,600 customers who invested in auction rate securities before the market for those securities froze in February 2008. According to the complaints, Bank of America, RBC and Deutsche Bank misrepresented to certain customers that ARS were safe, highly liquid investments that were comparable to money markets. According to the complaints, in late 2007 and early 2008, the firms knew that the ARS market was deteriorating, causing the firms to have to purchase additional inventory to prevent failed auctions. At the same time, however, the firms knew that their ability to support auctions by purchasing more ARS had been reduced, as the credit crisis stressed the firms’ balance sheets. The complaints allege that Bank of America, RBC and Deutsche Bank failed to make their customers aware of these risks. In mid-February 2008, according to the complaints, Bank of America, RBC and Deutsche Bank decided to stop supporting the ARS market, leaving Bank of America, RBC and Deutsche Bank customers holding billions in illiquid ARS. 46
The settlements will restore approximately $4.5 billion in liquidity to Bank of America customers, $800 million in liquidity to RBC customers and $1.3 billion in liquidity to Deutsche Bank customers. that: The Bank of America, RBC and Deutsche Bank settlements provide, among other things, • Each firm will offer to purchase ARS at par from individuals, charities, and small or medium businesses that purchased those ARS from the firm, even if those customers moved their accounts. • Each firm will use its best efforts to provide liquidity solutions for institutional and other customers, including, but not limited to, facilitating issuer redemptions, restructurings, and other reasonable means, and will not take advantage of liquidity solutions for its own inventory before making those solutions available to these customers. • Each firm will pay eligible customers who sold their ARS below par the difference between par and the sale price of the ARS. Bank of America, RBC and Deutsche Bank will be permanently enjoined from violating the provisions of Section 15(c) of the Exchange Act of 1934, which prohibit the use of manipulative or deceptive devices by broker-dealers. The SEC reserved the right to seek a financial penalty against the firms. SEC v. William Betta, JR., et al. Lit. Rel. No. 21061 (May 28, 2009) http://sec.gov/litigation/litreleases/2009/lr21061.htm In this case, the SEC charged ten brokers with fraud related to mortgage backed securities known as Collateralized Mortgage Obligations (“CMOs”). The defendants allegedly defrauded over 750 customers by selling them risky types of CMOs between 2004 and 2007. According to the complaint, the defendants told their customers that the CMOs in which they would invest were safe, secure, liquid investments that were suitable for retirees and investors with conservative investment goals. The complaint alleges that contrary to these representations, the defendants invested in risky types of CMOs that: (1) were not all guaranteed by the United States government; (2) jeopardized customers’ yield and principal; (3) were largely illiquid; and (4) were only suitable for sophisticated investors with a high-risk investment profile. The complaint alleges that the defendants received $18 million in commissions and salaries related to CMO investments. The complaint also alleges that some defendants told customers that they would use margin, or the ability to borrow money to purchase CMOs, only sparingly, when in fact they heavily margined customers’ accounts, resulting in losses of over $36 million. The complaint specifically alleges that the defendants violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 47
Page 1 and 2: Outline of Recent SEC Enforcement A
Page 3 and 4: OTHER CASES .......................
Page 5 and 6: SEC v. Marc S. Dreier .............
Page 7 and 8: severe concerns about the increasin
Page 9 and 10: The complaint alleges: • Strauss
Page 11 and 12: According to the SEC's orders, Zuri
Page 13 and 14: The SEC alleges that Cassidy and O'
Page 15 and 16: Watson, engaged in a fraudulent sch
Page 17 and 18: judgment that permanently enjoins h
Page 19 and 20: officer or director of a public com
Page 21 and 22: CASES INVOLVING STOCK OPTION BACKDA
Page 23 and 24: made materially false and misleadin
Page 25 and 26: the antifraud, reporting, record-ke
Page 27 and 28: Specifically, the SEC's complaint a
Page 29 and 30: its extensive remedial measures. Un
Page 31 and 32: and former Director of Human Resour
Page 33 and 34: thereunder. In addition, the SEC al
Page 35 and 36: The complaint alleges that all of t
Page 37 and 38: OIL FOR FOOD CASES CASES INVOLVING
Page 39 and 40: held for one year and the unusually
Page 41 and 42: Bangladesh; telecommunications proj
Page 43 and 44: In a related action, the Commission
Page 45: participated in a scheme to bribe N
Page 49 and 50: and that the defendants acted as un
Page 51 and 52: the firms to cease-and-desist from
Page 53 and 54: 2008, Wachovia offered to purchase
Page 55 and 56: eligible customers incurred consequ
Page 57 and 58: deceptive or fraudulent devices or
Page 59 and 60: Securities Act of 1933 and Section
Page 61 and 62: Admin. Proc. File No. 3-12751 (Sept
Page 63 and 64: CASES INVOLVING SELF-REGULATORY ORG
Page 65 and 66: The defendants are Michael T. Uberu
Page 67 and 68: Specifically, the SEC alleges that
Page 69 and 70: The SEC's charges against Harding r
Page 71 and 72: have withdrawn approximately $8.4 m
Page 73 and 74: Press Release (January 21, 2009) ht
Page 75 and 76: CASES INVOLVING MUTUAL FUNDS AND IN
Page 77 and 78: securities, became illiquid on that
Page 79 and 80: http://sec.gov/litigation/admin/200
Page 81 and 82: The SEC alleges that Pax World purc
Page 83 and 84: BACAP aided and abetted and caused
Page 85 and 86: The complaint alleges that the defe
Page 87 and 88: disgorgement of illegal profits, ci
Page 89 and 90: InVision Technologies, Inc.; Eon La
Page 91 and 92: firm. The SEC alleges Murdoch used
Page 93 and 94: SEC v. Pawel P. Dynkowski, Matthew
Page 95 and 96: shares of Mobile Ready Entertainmen
Page 97 and 98:
The Securities and Exchange Commiss
Page 99 and 100:
The complaint alleges violations of
Page 101 and 102:
CASES INVOLVING SECURITIES OFFERING
Page 103 and 104:
y causing the release of spam email
Page 105 and 106:
The SEC filed an emergency action t
Page 107 and 108:
Restructuring Officer Hamstreet & A
Page 109 and 110:
investigation. King went so far as
Page 111 and 112:
limited trading that he did, withdr
Page 113 and 114:
separate transactions) and forwarde
Page 115 and 116:
The SEC alleges that Weitzman eithe
Page 117:
misrepresentations including promis
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Outline of Recent SEC Enforcement Actions - the Utah State Bar

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