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.

For more, read the SEC Release. 

Misleading Investors: Fund Director Failed to Disclose Fund Was Failing

Joseph Hennessy and his investment advising firm Resources Planning Group defrauded investors by failing to inform that the fund was failing. In its complaint the SEC alleges that Hennessy raised $1.3 million in funds by promising high returns and misrepresenting that the fund was viable. He then used the funds to repay promissory notes to earlier investors. Additional charges include misappropriating client funds and forging documents in order to pay past debts.

For more, read the SEC Release.

Insider Trading: Two Brokers Charged in Connection with IBM-SPSS Merger

Two Connecticut-based brokers were charged with insider trading after using nonpublic information about IBM’s purchase of SPSS Inc. According to the complaint, one broker learned of the upcoming merger from his roommate, who learned it from an attorney working on the deal. The broker then shared the information with a friend, eventually leading to more downstream tips. The two brokers purchased common stock and call options, resulting in more than $1 million in profits. The SEC investigation turned up instant messages between the two brokers where they speak openly about the scheme, saying “i don’t want to go to jail” and “this is gonna be sweet.”

For more, read the SEC Release. 

Insider Trading: Former Chief Information Officer Charged

John Pamplin Jr., the former CIO of the Atlanta-based TurboChef Technologies, Inc., was charged with trading on nonpublic information in connection with TurboChef’s merger into the Illinois-based The Middleby Corporation. Pamplin was terminated by TurboChef in 2008 but allegedly used his contacts in the company to gain nonpublic information. He then bought $100,000 worth of call options on TurboChef stock, resulting in $68,000 in profit. 

For more, read the SEC Release.

Broker-Dealer Registration: Four India-based Brokers Agree to Settle Over Violations

The SEC charged four broker-dealers based in India for providing financial services to US investors without complying the SEC registration rules. The firms – Ambit Capital Private Limited, Edelweiss Financial Services Limited, JM Financial Institutional Securities Private Limited, and Motilal Oswal Securities Limited – settled the charges for a combined $1.8 million. The firms engaged in multiple activities – including sponsoring conferences, travelling to the US to meet with clients, and trading India-based securities on behalf of US clients – that require registration with the SEC. 

For more, read the SEC Release.