Below are notable developments in SEC enforcement activity for the week of December 3-7, 2012.
Big Lots CEO Resigns Amidst SEC Inquiry
The CEO of Central Ohio-based Big Lots (NYSE: BIG) is under scrutiny by the SEC surrounding his sale of over $10 million in company stock prior to a negative quarterly earnings report. Big Lots stock fell 24 percent as a result of the April 2012 earnings report. Steven Fishman will retire as soon as a replacement is found, after serving as CEO since 2005.
Chinese Affiliates of Big Four Accounting Firms Charged For Refusing To Produce Documents
The SEC announced charges this week against the Chinese affiliates of the Big Four accounting firms for refusing to produce audit records for Chinese companies under investigation for violations of accounting fraud. According to the SEC’s administrative order, the four firms (as well as BDO) have refused to cooperate with the SEC investigations for months. For the Shanghai office of Deloitte & Touche, these recent charges are similar to those brought by the SEC in May and September.
See the order here.…
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Below are updates on notable SEC enforcement activity from the week of November 26-30, 2012:
“White-Out” Firm Found Guilty
Jeffrey Liskov and his firm, EagleEye Asset Management, LLC were found guilty of securities fraud by a jury in Boston. The Plymouth, MA firm was found guilty of misleading investors by misrepresenting the risks associated with investments in the foreign currency exchange (“forex”) market.
The Commission alleged that Liskov and EagleEye persuaded “older” clients to shift investments from low-risk securities into high-risk forex positions based on misleading information. Despite racking up huge losses for the clients, Liskov earned over $300,000 in performance fees. Among the allegations were that Liskov used “white-out” to change names and dates on forms in order to, among other things, fraudulently transfer client assets into forex trading accounts.
After four hours of deliberation, the jury found Liskov and EagleEye liable for violations of Section 10(b) of the Exchange Act, Rule 10b-5, and the Advisers Act.
For more, read the SEC Release.
Insider Trading: Oil Company CEO Charged
Former CEO of Denver-based oil company Delta Petroleum Corporation was charged with insider trading. In the run-up to California-based investment firm Tracinda taking a 35% stake in Delta, former CEO Roger Parker tipped a close friend, who in turn tipped friends and family, according to the SEC complaint. Delta’s stock rose 20% in value once the Tracinda investment was announced. The complaint also alleges Parker provided early insights into a positive earnings report. The SEC obtained emails and phone records in connection with the alleged tipping.…
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On September 14, 2012, Securities and Exchange Commission ("SEC") announced that it had brought charges against the New York Stock Exchange and its parent company NYSE Euronext ("NYSE") for compliance failures that improperly gave certain customers a "head start" on trading information. A graphic analysis of the NYSE’s improper practices is attached. The NYSE agreed to a $5 million penalty and significant undertakings to settle the SEC’s charges. This case marks the first time that the SEC has brought charges against a national securities exchange that resulted in the payment of monetary damages.
Pursuant to Regulation NMS, the SEC prohibits the practice of improperly sending market data to proprietary customers before sending that data to be included in consolidated feeds, which broadly distribute trade and quote data to the public. The purpose of these provisions are to ensure that the public has fair access to current market information about stock prices and trades at the same time.
The SEC Order alleges that the NYSE’s practices violated Rule 603(a) of Regulation NMS which "requires that exchanges distribute market data on terms that are ‘fair and reasonable’ and ‘not unreasonably discriminatory.’" The SEC alleges that "[o]ver an extended period [beginning in June 2008], NYSE violated Rule 603(a) in connection with the release of certain data through two proprietary feeds. The primary reason for the disparity in the release of the information appears to be due to an internal architecture issue where the proprietary feed to customers was faster than the path used to send …
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