Division of Enforcement

Equity Trust Notches a Rare Defense Win in SEC Administrative Proceedings

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On June 27, 2016, SEC Administrative Law Judge Carol Fox Foelak dismissed the Division of Enforcement’s charges against IRA custodian Equity Trust Company in connection with the company’s processing of investments marketed by two convicted fraudsters.  Judge Foelak’s decision—a complete defense victory for Equity Trust—shows that while the Division of Enforcement may still win most of its cases in administrative proceedings, it doesn’t win them all.

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Here’s a Tip: “Substantial and Important Contributions” to Pre-Existing SEC Investigations Can Pay Off For Whistleblowers

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In a move evidencing the SEC’s continued commitment to its whistleblower program, the Commission announced on Friday that it has awarded a whistleblower over $3.5 million for providing information that did not lead to a new investigation, but rather only served to bolster an ongoing investigation.  This decision came after the SEC’s Claims Review Staff preliminarily determined that the SEC should deny the whistleblower claim because the information provided by the individual did not appear to “cause Enforcement staff to open the investigation or to inquire into different conduct, nor . . . to have significantly contributed to the success” of the action.  But after reviewing the whistleblower’s written response for reconsideration, in addition to factual information from staff in the Division of Enforcement, the Commission changed course, determining that the information indeed “significantly contributed” to the success of the SEC’s action, and approving the award.

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SEC Awards Third Highest Whistleblower Award to Date

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On July 17, 2015, the SEC announced a whistleblower award of over $3 million to a company insider who provided information that “helped the SEC crack a complex fraud.”  This payout represents the third highest award under the SEC’s whistleblower program to date.  The SEC has made two of the three highest payments to clients of the same law firm – Phillips & Cohen LLP. (The SEC paid roughly $14 million to a whistleblower in October 2013, and nearly $30 million to a foreign whistleblower represented by Phillips & Cohen in September 2014.).  This latest multi-million dollar payout suggests that the SEC’s whistleblower program is in full swing, and that legal representation of whistleblowers may be on the rise.

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Highlights From SEC Speaks 2015

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Securities and Exchange Commission leadership and staff members addressed the public on February 20-21 at the annual “SEC Speaks” conference in Washington, D.C.  Common themes among the numerous presentations included the Commission’s increasing use of data analytics, the Commission’s focus on gatekeepers such as accountants and attorneys, and the Commission’s still incomplete rulemakings mandated by both the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.

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SEC Announces Settlement With “Big Four” China Accounting Firms Over Production of Documents Located in China

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Today, the Securities and Exchange Commission (“SEC” or “Commission”) announced the terms of a settlement with four of the Respondents in In the Matter of BDO China Dhaua CPA Co., Ltd. The four Respondents are the China affiliates of the “Big Four” international accounting firms —Deloitte Touche Tohmatsu Certified Public Accountants Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen (Special General Partnership), and PricewaterhouseCoopers Zhong Tian CPAs Limited. The settlement resolves an administrative proceeding brought by the Commission against Respondents pursuant to Rule 102(e) of the SEC’s Rules of Practice over requests made by the SEC for the production of audit work papers located in China.

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