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This Week in SEC Enforcement Activity

Posted in SEC Enforcement Cases

State of Illinois Charged With Misleading Muni Bond Investors

The SEC charged the state of Illinois with failing to inform municipal bond investors of potential issues with its pension funding plan. The state failed to disclose that its pension obligations were at risk of “structural underfunding” issues associated with the state’s statutory funding plan, and misrepresented the overall risk associated with the pension’s financial condition.  Illinois offered $2.2 billion in bonds during 2005 to 2009.

Oppenheimer & Co. Fund Managers Charged With False Valuations

Two investment advisers of Oppenheimer & Co. were charged with false representations in connection with private equity funds they manage. On quarterly reports, the managers falsely used their own internal valuations to claim that their largest holding had seen improved underlying performance.  Oppenheimer agreed to settle the claims for over $740,000 in penalties, and returned $2.3 million to investors. 

Redondo Beach, California Real Estate “Ponzi-like” Scheme Charged, Assets Frozen

The SEC charged Alvin R. Brown with running a Ponzi-like scheme focused on senior citizen investors, claiming high returns for investments in real estate and rental properties in California and other western states. Brown used new investments to make payments to previous investors and withdrew cash for personal use. The investment’s website featured the seals of various financial and regulatory entities, including the SEC, NYSE, NASDAQ and the state of California, falsely implying their endorsement of the investment. The full, very colorful complaint is worth a read.

Twin British Brothers Settle Charges of Penny Stock “Pump-and-Dump”

Alexander and Thomas Hunter, twin brothers from Great Britain, settled charges this week of developing and disseminating software advertised as a “stock-picking robot” that analyzed market data and suggested stocks to subscribers. The twins developed the first version of the software at the age of 16. The brothers then marketed to penny stock promoters, who paid them to rig the software and promote their penny stocks. They settled for $175,000 in penalties.