1. On January 2, 2025, the U.S. Treasury Department’s final rule will go into effect that prohibits all U.S. persons from engaging in certain transactions involving technologies and products in China that pose a national security threat to the United States. Covered technologies fall into three categories: semiconductors and microelectronics, quantum information technologies and artificial intelligence which are core to China’s next generation of military, cybersecurity, surveillance, and intelligence applications. Notably, the final rule does not prohibit all U.S. investments in China. https://home.treasury.gov/system/files/206/TreasuryDepartmentOutboundInvestmentFinalRuleWEBSITEVERSION_0.pdf
2. On December 23, 2024, the SEC charged Dolphin Associates III, LLC, and its principal, Donald Netter, with improperly withholding withdrawals from a private fund that they managed, charging the Fund with excessive fees, and making materially misleading statements to investors. Dolphin and Dolphin and Netter failed to disclose that Netter himself owned the same securities as the private fund and was incentivized to prevent the Fund from divesting those same securities. Dolphin and Netter also failed to obtain annual audits and distribute financial reports as required by the Fund’s organizational documents, and made materially misleading statements to investors regarding the liquidity of the Fund’s portfolio and Dolphin and Netter’s efforts to return money to investors. This matter is being litigated. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26203
3. On December 20, 2024, the SEC instituted administrative proceedings against John Matson, a formerly registered representative and investment adviser representative LPL Financial, for operating a program as a Ponzi scheme,. Matson sold securities issued by South Bay Acquisitions LLC (“South Bay”), a company controlled by him, to five investors. The securities, which were denoted “LLC Bonds” and were functionally promissory notes, stated that the Matson and South Bay would manage the proceeds as fiduciaries and promising 12% to 20% interest. Despite his obligation to act as a fiduciary and without disclosure to investors, Matson immediately and consistently transferred investor money from South Bay to his personal account to use for personal expenses. Matson was barred. https://www.sec.gov/files/litigation/admin/2024/34-102021.pdf
4. On December 20, 2024, the SEC instituted administrative proceedings against Driftwood Advisors, LLC, a registered investment adviser, for failing to comply with the custody rule. Driftwood failed timely to distribute audited financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) to investors in pooled investment vehicles that it advised. Driftwood was ordered to pay a civil money penalty of $115,000. https://www.sec.gov/files/litigation/admin/2024/ia-6804.pdf
5. On December 20, 2024, the SEC charged Eric Cobb for engaging in a fraudulent scheme where he allocated profitable securities trades to favored accounts and unprofitable trades to disfavored clients, a practice known as cherry-picking, while he was a representative of investment adviser SeaCrest Wealth Management, Inc. Cobb disproportionately allocated profitable trades to his personal and wife’s accounts and unprofitable trades to the accounts of his other clients. Cobb executed the scheme by buying securities in an omnibus account and then often waiting a day or longer to allocate the trades, which allowed him to see whether the securities had increased in price. This matter is being litigated. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26201
6. On December 20, 2024, the SEC instituted administrative proceedings against GRID 202 LLC, d/b/a Re-Envision Wealth, a registered investment adviser, for failing to timely file a Form D in connection with several unregistered securities offerings by issuers controlled by GRID. GRID was ordered to pay a civil money penalty of $60,000. https://www.sec.gov/files/litigation/admin/2024/33-11346.pdf
7. On December 20, 2024, the SEC instituted administrative proceedings against Richard Robertson and IFP Advisors, LLC for engaging in undisclosed “cherry-picking,” a practice of fraudulently allocating profitable trades to favored accounts at the expense of his advisory clients. Robertson allocated a disproportionate number of trades with positive first-day returns to his personal and family accounts, while allocating a disproportionate number of trades with negative first-day returns to certain client accounts. IFP failed to implement policies and procedures, and made false and misleading statements in its Forms ADV concerning supposed safeguards in place to prevent representatives from placing their own interests ahead of those of IFP’s advisory clients. Robertson was ordered to pay disgorgement of $592,437, prejudgment interest of $28,173, and a civil money penalty of $300,000. https://www.sec.gov/files/litigation/admin/2024/34-102019.pdf
8. On December 20, 2024, the SEC instituted administrative proceedings against Atlas Financial Advisors, Inc., a registered investment adviser, for failing to comply with the marketing rule. Atlas made false and misleading claims about its investment strategies and their performance, failed to present net performance information alongside gross performance, was unable to substantiate performance claims and advertised hypothetical performance on its public website without adopting and implementing required policies and procedures. Atlas failed to maintain books and records sufficient to demonstrate the calculation of the performance information in its advertisements and to implement certain of its compliance policies and procedures. Atlas was ordered to pay a civil money penalty of $175,000. https://www.sec.gov/files/litigation/admin/2024/ia-6803.pdf
9. On December 20, 2024, the SEC instituted administrative proceedings against Deutsche Bank Securities Inc., a dually registered investment adviser and broker-dealer, for failing to timely file certain suspicious activity reports (“SARs”). DBSI, as a registered broker-dealer, was required to file SARs on transactions conducted or attempted by, at, or through DBSI involving or aggregating at least $5,000 that it knew, suspected, or had reason to suspect were suspicious within 30 calendar days after the date of the initial detection (or within 60 calendar days where no suspect is identified on the date of the initial detection) of facts that may have constituted a basis for filing a SAR. DBSI was ordered to pay a civil money penalty of $4 million. https://www.sec.gov/files/litigation/admin/2024/34-102011.pdf
10. On December 20, 2024, the SEC charged Silver Point Capital L.P., a registered investment adviser, for with failing to establish, implement, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI) relating to its participation on creditors’ committees. One of Silver Point’s core strategies was to invest in distressed companies. As part of this strategy, and because of the nature of its business, a long-time Silver Point consultant, a now-deceased lawyer, participated on creditors’ committees of those distressed companies on Silver Point’s behalf. Silver Point failed to enforce policies and procedures that were reasonably designed to address the specific risks associated with the consultant’s receipt of MNPI as a result of his participation on creditors’ committees. This matter is being litigated. https://www.sec.gov/newsroom/press-releases/2024-209
11. On December 17, 2024, the SEC instituted administrative proceedings against SogoTrade, Inc., a registered broker-dealer, for failing to file Suspicious Activity Reports (“SARs”) with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) when it knew, suspected, or had reason to suspect that its customers were facilitating illegal activity or engaging in activity with no business or apparent lawful purpose. Due to deficiencies in SogoTrade’s design and implementation of its Anti-Money Laundering (“AML”) policies and procedures, SogoTrade repeatedly failed to investigate its customers’ engagement in suspicious activity and to file SARs when required. SogoTrade also failed to follow its written identity verification procedures and therefore failed to document accurately the procedures set forth in its Customer Identification Program (“CIP”). SogoTrade was ordered to pay a civil money penalty of $125,000. https://www.sec.gov/files/litigation/admin/2024/34-101936.pdf
12. On December 16, 2024, the SEC instituted administrative proceedings against Securities America Advisors, Inc., for failing to provide adequate disclosures and being deficient in its compliance policies and procedures as a registered investment adviser in connection its mutual fund share class selection practices. SAA failed to disclose that its IARs had a conflict of interest as a result of the additional compensation an IAR received from investing advisory clients in a fund’s 12b-1 fee paying share class when a less expensive share class was available for the same fund, and this practice was inconsistent with SAA’s duty to seek best execution for those transactions. SAA was ordered to pay disgorgement of $4,473,025, prejudgment interest of $580,423 and a civil money penalty of $775,000. https://www.sec.gov/files/litigation/admin/2024/34-101933.pdf
13. On December 16, 2024, the SEC instituted administrative proceedings against David Austin, a registered representative of and associated with J.P. Morgan Securities, LLC. (“J.P. Morgan”), for fraud or deceit regarding embezzlement of money of a client having a value of $100,000 or more, directly or indirectly benefitting himself, while knowing or having reason to know that the client was a vulnerable adult; and that Austin, as an agent of J.P. Morgan, attempted to make an unauthorized false entry in a book, report, or statement of the institution with the intent to defraud or deceive. Austin was barred. https://www.sec.gov/files/litigation/admin/2024/34-101926.pdf
14. On December 13, 2024, the SEC instituted administrative proceedings against WPAM Advisers LLC, a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds WPAM manage. WPAM Point was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. WPAM was ordered to pay a civil money penalty of $100,000. https://www.sec.gov/files/litigation/admin/2024/ia-6795.pdf
15. On December 13, 2024, the SEC instituted administrative proceedings against NFC Investments, LLC, a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds NFC manage. NFC was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. NFC was ordered to pay a civil money penalty of $100,000. https://www.sec.gov/files/litigation/admin/2024/ia-6794.pdf
16. On December 13, 2024, the SEC instituted administrative proceedings against Longpoint Partners LP, a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds Longpoint manage. Longpoint was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. Longpoint was ordered to pay a civil money penalty of $135,000. https://www.sec.gov/files/litigation/admin/2024/ia-6793.pdf
17. On December 13, 2024, the SEC instituted administrative proceedings against The Catalyst Capital Group Inc., a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds Catalyst manage. Catalyst was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. Catalyst was ordered to pay a civil money penalty of $150,000. https://www.sec.gov/files/litigation/admin/2024/ia-6792.pdf
18. On December 13, 2024, the SEC instituted administrative proceedings against Kudu Investment Holdings, LLC, a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds Kudu manage. Kudu was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. Kudu was ordered to pay a civil money penalty of $125,000. https://www.sec.gov/files/litigation/admin/2024/ia-6791.pdf
19. On December 13, 2024, the SEC instituted administrative proceedings against GSSG Solar, LLC, a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds GSSG manage. GSSG was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. GSSG was ordered to pay a civil money penalty of $90,000. https://www.sec.gov/files/litigation/admin/2024/ia-6790.pdf
20. On December 13, 2024, the SEC instituted administrative proceedings against Greenhaven Road Investment Management, LP, a registered investment adviser, for failing to file SEC Form PF, an important regulatory filing that financial regulators monitor, regarding the private funds Greenhaven manage. Greenhaven was subject to the reporting requirements of Rule 204(b)-1, but failed to file a report on Form PF. Greenhaven was ordered to pay a civil money penalty of $90,000. https://www.sec.gov/files/litigation/admin/2024/ia-6789.pdf
21. On December 12, 2024, the SEC charged global financial services firm Cantor Fitzgerald, L.P. with causing two special purpose acquisition companies (SPACs) that it controlled to make misleading statements to investors ahead of their initial public offerings (IPOs). Cantor Fitzgerald has agreed to pay a $6.75 million civil penalty to settle the SEC’s charges. https://www.sec.gov/files/litigation/admin/2024/33-11339.pdf
22. On December 11, 2024, the SEC instituted administrative proceedings against SeaCrest Wealth Management, LLC, a registered investment adviser, for engaging in a fraudulent “cherry-picking” scheme. Eric Cobb, an investment adviser representative associated with SeaCrest, disproportionately allocated profitable trades to certain personal and family accounts he controlled, and disproportionately allocated unprofitable trades to the accounts of unrelated advisory clients. He executed his scheme by buying the securities in an omnibus or “block” account, waiting to allocate those trades to his client accounts until the following day, at which time he would see whether the price of the traded securities had increased or decreased. Cobb routinely placed certain of his clients in unsuitable, highly volatile and highly risky securities that were contrary to their indicated risk tolerances. SeaCrest failed to implement policies and procedures reasonably designed to prevent violations of the federal securities laws, and failed reasonably to supervise Cobb. In addition, SeaCrest’s Form ADV brochures negligently included statements about its practices and procedures that were false or misleading in light of SeaCrest’s compliance and supervision failures. This matter is being litigated. https://www.sec.gov/files/litigation/admin/2024/33-11338.pdf
23. On December 11, 2024, the SEC charged Chibuzo Onyeachonam, Stanley Asiegbu, and Chukwuebuka Nweke-Eze with fraud for impersonating legitimate brokers and investment advisers in an elaborate online scheme through which they stole from investors. Onyeachonam, Asiegbu and Nweke-Eze created websites impersonating nearly two dozen actual brokers and investment adviser representatives at well-known U.S. securities firms as part of a fraudulent scheme to entice potential investors in the United States to invest funds. Onyeachonam, Asiegbu and Nweke-Eze lured investors to the websites by placing fictitious comments from purported clients on social media and in investment group chats praising the representatives’ trading success and promised monthly returns of up to 25 percent and directed investors to fake online investment platforms they created to make investors think their portfolios were increasing in value. Onyeachonam, Asiegbu and Nweke-Eze purchased voice changing software to talk to investors, as most of the impersonated professionals were women. This matter is being litigated. https://www.sec.gov/newsroom/press-releases/2024-194
24. On December 10, 2024, the SEC charged David Banister, an unregistered investment adviser, and an entity he controls, The Market Analysts Group, LLC, for conducting a fraudulent scheme to promote long-term investment in a Nasdaq-listed issuer without disclosing that he was actively selling his own shares of the same issuer. Banister and The Market Analysts, while acting as unregistered investment advisers, made misleading statements to paying subscribers to two of their stock advisory services, Tipping Point Stocks and Stock Reversals Premium, and to the public through their posts on internet message board Stocktwits, where their @StockReversals account had more than 60,000 followers. This matter is being litigated. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26187
25. On December 9, 2024, the SEC published a Risk Alert to help municipal advisors better understand the examination process and prepare for an examination. The Risk Alert provides information regarding what Division staff may consider when selecting firms to examine and areas of focus for the examination. It also provides the types of information, including documents, staff may initially request during an examination of a municipal advisor and includes a Sample Initial Information Request List. https://www.sec.gov/compliance/risk-alerts/risk-alert-muni-advisors-120924
26. On December 9, 2024, the SEC charged Morgan Stanley Smith Barney LLC (“MSSB”) with failing to reasonably supervise four investment adviser and registered representatives who stole millions of dollars of advisory clients’ and brokerage customers’ funds and for failing to adopt policies and procedures reasonably designed to prevent and detect such theft. MSSB failed to adopt and implement policies and procedures reasonably designed to prevent its financial advisors from using two forms of unauthorized third-party disbursements, ACH payments and certain patterns of cash wire transfers, to misappropriate funds from advisory client accounts and brokerage customer accounts. MSSB financial advisors made hundreds of unauthorized transfers from customers’ or clients’ accounts to themselves or for their own benefit. MSSB was ordered to pay a civil money penalty of $15 million. https://www.sec.gov/newsroom/press-releases/2024-193
27. On December 3, 2024, the SEC charged Stephen Leech, the former co-chief investment officer (CIO) of Western Asset Management Company LLC (“WAMCO”), for engaging in a multi-year scheme to allocate favorable trades to certain portfolios, while allocating unfavorable trades to other portfolios, a practice known as cherry-picking. Leech placed trades with brokers and then routinely waited until later in the trading day to allocate the trades among clients in the portfolios he managed. Leech’s delay between placing and allocating trades gave him the opportunity to observe price movements, and then disproportionally allocate trades at a first-day gain to favored portfolios and trades at a first-day loss to disfavored portfolios. Leech allocated hundreds of millions of dollars of net first-day gains to favored portfolios, which also benefited Leech personally, and a similar amount of net first-day losses to disfavored portfolios. This matter is being litigated. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26183
28. On December 3, 2024, the SEC charged Dow Rockwell LLC, a formerly California-registered investment adviser, and its sole proprietor, Richard Dow Rockwell, for failing to disclose compensation they received in connection with soliciting and recommending investments in the securities of Professional Financial Investors, Inc. (“PFI”), a real estate investment and management company that defrauded investors. Rockwell and Dow did not disclose the past criminal conviction of PFI’s founder to their clients and that, Rockwell and Dow offered and sold PFI securities, neither was registered as a broker-dealer or associated with a registered broker-dealer. Rockwell and Dow were ordered to pay disgorgement of $402,075, prejudgment interest of $121,843 and a civil money penalty of $80,000. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26185
29. On December 3, 2024, the SEC announced Investor Advisory Committee will hold a virtual public meeting on December 10, 2024. The meeting will be webcast on the SEC website.
The committee will host two panels:
- Examining the use of mandatory arbitration clauses by registered investment advisers; and
- Mainstreaming of alternative assets to retail investors
The Investor Advisory Committee, which focuses on investor-related interests, advises the Commission on regulatory priorities and various initiatives to help protect investors and promote the integrity of the U.S. securities markets. https://www.sec.gov/newsroom/press-releases/2024-190