Outline of Recent SEC Enforcement Actions - the Utah State Bar

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The Commission instituted settled administrative and cease-and-desist proceedings against eight specialist firms: Botta Capital Management L.L.C.; Equitec Proprietary Markets LLC; Group One Trading L.P.; Knight Financial Products LLC; Goldman Sachs Execution & Clearing L.P.; SLK-Hull Derivatives LLC; Susquehanna Investment Group; and TD Options LLC. According to the SEC's order, the firms engaged in improper proprietary trading on the American Stock Exchange, the Chicago Board Options Exchange, and the Philadelphia Stock Exchange. The Commission also filed settled civil injunctive actions in the U.S. District Court for the Southern District of New York against six specialist firms: Automated Trading Desk Specialists LLC; E*Trade Capital Markets LLC; Melvin Securities LLC; Melvin & Company LLC; Sydan LP; and TradeLink LLC. According to the SEC's complaints, these firms engaged in improper proprietary trading on the Chicago Stock Exchange. According to the SEC's orders and complaints, from 1999 through 2005, the firms violated their basic obligation as specialists to serve public customer orders over their own proprietary interests. As specialist member firms on one or more of the regional and options exchanges, the firms had a duty to match executable public customer or "agency" buy and sell orders and not to fill customer orders through trades from the firm's own accounts when those customer orders could be matched with other customer orders. However, the firms violated this obligation by filling orders through proprietary trades rather than through other customer orders, thereby causing millions of dollars of customer harm. Also according to the SEC’s orders and complaints, the improper proprietary trading took three basic forms: trading ahead, interpositioning, and trading ahead of unexecuted open or cancelled orders. In certain instances, specialists filled one agency order through a proprietary trade for their firm's account while a matchable agency order was present on the opposite side of the market, thereby improperly "trading ahead" of such opposite-side executable agency order. The customer order that was traded ahead of was then disadvantaged when it was subsequently executed at a price that was inferior to the price received by the firm's proprietary account. In some instances, after trading ahead, specialists also traded proprietarily with the matchable opposite-side agency order that had been traded ahead of, thereby interpositioning themselves between the two agency orders that should have been paired off in the first instance. By participating on both sides of trades, the specialist captured the spread between the purchase and sale prices, thereby disadvantaging the other parties to the transactions. In some instances, after the specialists traded ahead, the opposite-side executable agency orders were left open until the end of the trading day, or were cancelled by the customer prior to the close of the trading day before receiving an execution. In the orders against the group of eight firms, the Commission found that by engaging in unlawful proprietary trading, the firms each violated Section 11(b) of the Securities Exchange Act of 1934 and Rule 11b-1 thereunder, as well as various rules in effect on each of the exchanges. The Commission ordered those firms to pay, in the aggregate, more than $22.7 million in disgorgement and more than $4.3 million in penalties. The Commission also ordered 50
the firms to cease-and-desist from future violations, and censured each of the firms. The firms consented to the entry of the orders without admitting or denying the findings. In its complaints filed against the group of six firms, brought pursuant to Section 21(d) and (e) of the Exchange Act, the SEC alleges that by engaging in unlawful proprietary trading, each of the firms violated Chicago Stock Exchange Article 9, Rule 17. The complaints also allege that each of those firms failed to make or keep current records pertaining to certain types of orders, in violation of Section 17(a) of the Exchange Act and Rule 17a-3(a)(1) thereunder. Those firms have agreed to settle the SEC's charges by consenting to the entry of judgments enjoining them from future violations of the above provisions, and ordering them to pay, in the aggregate, more than $35.7 million in disgorgement and more than $6.7 million in penalties. The consent judgments are subject to approval by the court. SEC v. UBS AG Litigation Release No. 20905 (February 18, 2009) http://sec.gov/litigation/litreleases/2009/lr20905.htm Press Release (February 18, 2009) http://sec.gov/news/press/2009/2009-29.htm The SEC's complaint, filed in the U.S. District Court for the District of Columbia, alleges that UBS's conduct facilitated the ability of certain U.S. clients to maintain undisclosed accounts in Switzerland and other foreign countries, which enabled those clients to avoid paying taxes related to the assets in those accounts. UBS agreed to settle the SEC's charges by consenting to the issuance of a final judgment that permanently enjoins UBS and orders it to disgorge $200 million. As alleged in the SEC's complaint, from at least 1999 through 2008, UBS acted as an unregistered broker-dealer and investment adviser to thousands of U.S. persons and offshore entities with United States citizens as beneficial owners. UBS had at least 11,000 to 14,000 of such clients and held billions of dollars of assets for them. The U.S. cross-border business provided UBS with revenues of $120 to $140 million per year. The SEC also alleges that UBS conducted that cross-border business largely through client advisers located primarily in Switzerland, who were not associated with a registered broker-dealer or investment adviser. These client advisers traveled to the U.S., on average, two to three times per year on trips that generally varied in duration from one to three weeks. In many instances, the client advisers attended exclusive events such as art shows, yachting events, and sporting events that were often sponsored by UBS, for the purpose of soliciting and communicating with United States cross-border clients. UBS also used other U.S. jurisdictional means such as telephones, facsimiles, mail and e-mail to provide securities services to its U.S. cross-border clients. The SEC further alleges that UBS was aware that it was required to be registered with the SEC. UBS took action to conceal its use of U.S. jurisdictional means to provide securities services. Among other things, client advisers typically traveled to the U.S. with encrypted laptop computers that they used to provide account-related information, to show marketing materials for 51
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 and 46: participated in a scheme to bribe N
Page 47 and 48: The settlements will restore approx
Page 49: and that the defendants acted as un
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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