Compliance Officers Beware: Your Conversations With the NFA During Examinations Could Lead to Charges
The U.S. Commodity Futures Trading Commission (“CFTC”) sent a strong message to Chief Compliance Officers (“CCO”) this week when it held a CCO held accountable for lying to the National Futures Association (“NFA”) during an examination. Also, if you did not believe the CFTC’s message about its intention to reach across borders to pursue bad actors, it’s time to reconsider.
Earlier this year the CFTC instituted a civil enforcement action against Phy Capital Investments, LLC and its CEO, Fabio Bretas de Freitas. The firm was formed in 2016 and the CEO solicited participants to invest in a pool to trade commodity futures contracts. According to the CFTC, despite representing to pool participants that it made substantial commodity trading profits, the firm never engaged in any trading activity and instead misappropriated participant funds. The civil charges against the firm and the CEO … Read More »
An SEC administrative law judge recently rejected some of the SEC’s fraud charges against hedge fund manager RD Legal Capital, LLC and its owner Roni Dersovitz (“Respondents”) by finding that the SEC did not prove that Respondents made certain material misrepresentations and failed to establish that other alleged material misrepresentations were made with scienter. In the Matter of RD Legal Capital, LLC, and Roni Dersovitz, File No. 3-17342, Initial Decision (Oct. 15, 2018). While ALJ Jason S. Patil did conclude that Respondents were liable for negligence-based fraud violations, his rulings with respect to the scienter-based charges and the drastically-reduced penalties he ordered were largely a defeat for the SEC.
In July 2016, the SEC instituted proceedings alleging, among other things, that Respondents defrauded investors by misrepresenting the types of legal receivables in which two funds managed by RD Legal Capital invested. … Read More »
On July 8, 2014, the SEC announced that it had settled charges that a school district in California misled bond investors about its failure to comply with its continuing disclosure obligations under Rule 15c2-12 of the Exchange Act. Pursuant to the Municipalities Continuing Disclosure Cooperation (“MCDC”) Initiative, Kings Canyon Joint Unified School District, without admitting or denying the SEC’s findings, agreed to entry of an Order (1) finding that it was in violation of Section 17(a)(2) of the Securities Act, (2) requiring it to cease and desist from violating Section 17(a)(2), (3) requiring it to establish written policies and procedures and to conduct periodic training regarding continuing disclosure obligations, and (4) requiring it to cooperate with the Enforcement Division in any subsequent investigation and to disclose the settlement in future bond offering materials. The SEC did not order any disgorgement … Read More »
The Fourth Circuit Court of Appeals this week rejected the bid of a securities lawyer to vacate his guilty plea on the ground that the conduct to which he pled guilty was no longer criminal under the U.S. Supreme Court’s decision in Janus Capital Group, Inc. v. First Derivative Traders, 131 S.Ct. 2296 (2011). The Fourth Circuit’s decision strengthens the DOJ’s and the SEC’s position that Janus is limited to private litigants.
In Janus, the U.S. Supreme Court held that in a private action under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder—which make it unlawful, among other things, for any person to “make any untrue statement of a material fact” in connection with the purchase or sale of securities—the “maker” is the person or entity with ultimate authority over the statement, including its content and … Read More »