Category: SEC News

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SEC Brings First Enforcement Action Against Credit Ratings Agency

On January 21, the Securities and Exchange Commission (SEC) announced a settlement with a credit rating agency regarding its rating of certain commercial mortgage-backed securities (CMBS). According to the announcement, the ratings agency agreed to pay the SEC more than $58 million to settlement the SEC’s charges, plus an additional $19 million to settle parallel cases announced … Continue Reading

SEC Awards Whistleblower $30M Under Dodd-Frank Act, Sets Record

On September 22, 2014, the U.S. Securities and Exchange Commission (SEC) announced that it expects to award more than $30 million to a whistleblower who provided information that led to a successful SEC fraud enforcement action.  The award is the highest whistleblower payment under the SEC’s three-year-old Dodd-Frank whistleblower program.  According to the SEC, the final … Continue Reading


On June 4, 2014, the Second Circuit issued a 28-page ruling holding that U.S. District Court Judge Jed Rakoff had “abused” his discretion by rejecting a $285 million U.S. Securities and Exchange Commission (“SEC”) settlement with Citigroup, Inc. because the bank neither admitted nor denied wrongdoing.  The 2011 decision led to increased criticism of the … Continue Reading

SEC Speaks 2012 – Early Reports from SEC Whistleblower Office’s Launch Year

By Caryn L. Trombino At the annual “SEC Speaks” conference convened in Washington, D.C. from February 24-25, 2012, Sean McKessy, chief of the SEC’s Office of the Whistleblower, reported that the new Whistleblower Program from Dodd-Frank has resulted in hundreds of high-quality tips, as well as prodded numerous untold companies to enhance their own internal … Continue Reading

Poll finds that majority willing to “blow whistle” following Dodd-Frank

A December 12, 2011 Reuters report states that a recent poll found that three-quarters of Americans are willing to blow the whistle under the protections and incentives offered by the Dodd-Frank Wall Street Reform and Consumer Act. "According to the poll released on Monday, 78 percent of Americans said they would report wrongdoing in the workplace as … Continue Reading

SEC Close to Settling Subprime Mortgage Risk Disclosure Claims Against Fannie and Freddie

On September 8, 2011, the New York Times reported that the Securities and Exchange Commission is close to settling claims that Fannie Mae and Freddie Mac failed to adequately disclose their subprime mortgage risk.  The SEC investigation centers on whether the GSEs misled its regulators and the public regarding the nature and extent of risk … Continue Reading

Disclosure the Key: What to Learn from the Dismissal of SEC’s Claims Against Morgan Keegan

By Abiman Rajadurai A federal judge in Georgia has dismissed claims pursued by that Securities and Exchange Commission ("SEC") that Morgan Keegan committed securities fraud by misleading investors about the risks involved with auction-rate securities (or "ARS").  Over two years ago, the SEC filed a complaint against Morgan Keegan alleging that the company had failed … Continue Reading

Another Former Madoff Employee Pleads Guilty to Fraud

By:  Abiman Rajadurai              Eric Lipkin, a longtime employee at Bernard L. Madoff Investment Securities LLC, pled guilty yesterday to six counts of falsifying books and conspiracy in federal court.  Lipkin, the ninth person to be charged with involvement in the Ponzi Scheme run by Bernard Madoff, was charged by the Securities and Exchange Commission … Continue Reading

SEC Approves Rules Establishing Dodd-Frank Whistleblower Program

On Wednesday, May 25, 2011, the Securities and Exchange Commission (the "SEC") adopted rules to create a whistleblower program that rewards individuals who provide the agency with tips that lead to successful enforcement actions. The SEC implemented the rules under Section 992 of the Dodd-Frank Act.  (Read the SEC press release.) Under the SEC’s proposed rule, whistleblowers … Continue Reading

Notebook on MBS Litigation

The Securities and Exchange Commission could be going to school on private litigation being brought against MBS issuers. In a recent article from the April 2011 issue of  Mortgage Banking Magazine, Perkins Coie attorneys Pravin Rao and Suleen Lee discuss recent MBS litigation trends and related SEC enforcement priorities.  The article discusses how mortgage-backed securities have become a significant priority for the … Continue Reading

SEC, Federal Indictment Accuse Former Taylor Bean & Whitaker Exec of Fraud

June 16, 2010.  The former chief executive of Taylor Bean & Whitaker has been indicted with orchestrating a massive equity and MBS fraud scheme tied to TBW’s borrowings from Colonial Bank, a depository it tried to take control of last summer using TARP money.   The indictment alleges that Lee Bentley Farkas and co-conspirators "tried to steal $553 million" through the TARP program. According to … Continue Reading

More Struggles for SEC’s Case Against BOFA

The Wall Street Journal has reported that on Monday evening, U.S. District Judge Jed S. Rakoff of the Southern District of New York denied the SEC’s motion to expand charges against Bank of America in connection with the company’s 2009 merger with Merrill Lynch. A previously filed SEC suit accused the bank of concealing plans to pay … Continue Reading

Khuzami Testimony: “Mortgage Fraud, Securities Fraud and the Financial Meltdown: Prosecuting Those Responsible.”

On December 9, 2009, the Director of the SEC’s Division of Enforcement, Robert Khuzami, testified before Senate Judiciary Committee at a hearing entitled “Mortgage Fraud, Securities Fraud and the Financial Meltdown: Prosecuting Those Responsible.” Khuzami’s testimony detailed five primary areas in which the SEC is focusing its enforcement efforts. First, the SEC is investigating and pursuing … Continue Reading

New NYSE Disclosure Requirements Take Effect January 1, 2010

Last month, the SEC approved a proposed rule change filed by the New York Stock Exchange which amends certain of the Exchange’s disclosure requirements for listed companies, including publicly traded financial services corporations. The changes take effect January 1, 2010, so the new disclosures will be required in proxy statements for annual meetings to be held … Continue Reading

Inspector General Report Critical of SEC Enforcement, Recommends Sweeping Changes

Two reports issued by the SEC’s independent inspector general recommends sweeping changes to the agency’s investigation and enforcement programs following failures to detect fraudulent activity, including Bernard Madoff’s ponzi scheme, according to a New York Times report.  The two reports issued by SEC inspector general H. David Kotz recommend a total of 58 changes in the way the agency … Continue Reading

Feds Ready to Impanel Grand Jury for Former Head of AIG’s Financial Products Unit

After an 18 month investigation, federal prosecutors are preparing to impanel a grand jury in Brooklyn, N.Y., to consider an indictment of former American International Group Inc. executive Joseph Cassano, according to the Wall Street Journal.    WSJ reported that, according to sources familiar with the matter, the Justice Department and the SEC have been investigating whether Cassano, who … Continue Reading

Hedge Fund FairfieldGreenwich Group Pays $8MM to Settle Civil Fraud Charges Related to Madoff Investments

The Wall Street Journal reports that FairfieldGreenwich Group, one of the largest funds to invest in Barnard Madoff’s Ponzi scheme, has agreed to pay  Massachusetts $8 million to settle civil fraud charges filed by the state’s chief securities regulator.  The April 2009 complaint alleged that FairfieldGreenwich invested its clients’ money with Madoff, but neglected to conduct its promised due diligence.   According … Continue Reading

Former Chief Accounting Officer Faces SEC Allegations of Fraud, Earnings Smoothing

On Wednesday, July 1st, the SEC filed a civil suit against the former chief accounting officer of Beazer Homes USA, Inc. The complaint alleges that from 2000 to 2007, Michael Rand manipulated Beazer’s reported quarterly and annual income in order to meet EPS projections and analyst expectations, as well as to maximize bonuses for company officers … Continue Reading

SEC and FINRA Sue Brokers for Alleged Mortgage Backed Securities Fraud

The SEC and Financial Industry Regulatory Authority (FINRA) filed separate lawsuits alleging that 16 brokers from the now defunct Brookstreet Securities Crop. fraudulently mislead investors that derivatives based on mortgage-backed securities were safe and conservative investments.  In its complaint, the SEC alleges that 10 Brookstreet brokers failed to inform customers about the risks associated with investing in collateralized mortgage obligations.  The brokers portrayed … Continue Reading

SEC Imposes Staff Trading Bans

Following a Securities and Exchange Commission Office of Inspector General investigation which "revealed suspicious activity, appearances of improprieties, and evidence of possible trading on nonpublic information, and/or potential insider trading on the part of SEC Enforcement attorneys," the SEC has imposed new internal rules governing securities transactions for all SEC employees. Under the new SEC rules, staff will … Continue Reading

SEC Recommends Civil Fraud Charges Against Countrywide’s Mozillo

The Los Angeles Times reported on May 14, 2009 that SEC investigators had recommended the filing of civil fraud charges against former Countrywide chief executive Angelo Mozillo.  According to the article written by E. Scott Reckard and William Heisel, persons familiar with the matter report that SEC staff are seeking approval to file fraud charges that … Continue Reading

SEC To Propose Audit Requirements for Investment Advisors, Possibly by Mid-May

On April 6th, SEC Chairwoman Schapiro told the Counsel of Institutional Investors that the Commission was looking into “many potential reforms” for market professionals and intermediaries, including brokers, advisors and credit rating agencies. Among the Commission’s early ideas, Schapiro added, were annual unannounced audit requirements for market professionals who directly hold client assets, in order to … Continue Reading