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HONG KONG EXCHANGE TO INSTITUTE VOLATILITY CONTROL MECHANISM FOR DERIVATIVES MARKET

October 25, 2016/in News /by The Law Offices of Jeff Petersen Team

Hong Kong Exchanges and Clearing Limited (HKEX), which operates stock and futures markets in Hong Kong, announced a plan to institute a Volatility Control Mechanism (VCM) designed to prevent extreme price volatility for its derivatives market in November of 2016. The institution of this mechanism follows the HKEX’s adoption of a VCM for the securities market in August of this year.

How Does the VCM Work?

The VCM consists of several measures, including the triggering of a cooling-off period of 5 minutes when there is an attempt to trade a contract covered by the VCM at a price more than 5 per cent away the reference price (the price of the last, or most recent trade, 5 minutes ago), subject to certain exceptions. Trading of the contract can continue within the cooling off period but within a band.

Roger Lee, HKEX’s Head of Markets, said in the announcement that “[t]he cooling-off period in the VCM mechanism alerts the market, provides a short time window allowing market participants to reassess their strategies and positions, and helps re-establish an orderly market at times when there is abrupt and drastic price movement for the contract concerned.”

Safeguard Against Volatility

Lee stated that the VCM is not intended to limit price fluctuations in normal market conditions but instead to safeguard the market from extreme price volatility arising from major trading incidents, and it is expected to be employed sparingly.

The HKEX announcement can be found at the following link:

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2016/161024news.htm

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of securities matters. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

CHAIR OF SEC DELIVERS SPEECH ON NEED FOR GREATER REGULATION OF THE U.S. TREASURY MARKET

October 25, 2016/in News /by The Law Offices of Jeff Petersen Team

Mary Jo White, chair of the SEC, discussed the need for increased regulatory oversight of U.S. Treasury trading in a speech at the Evolving Structure of the U.S. Treasury Market Conference at the New York Federal Reserve Board yesterday.

Data Collection to Begin on the Trading Market

In the speech, White detailed the rule proposed by FINRA in July of this year which would require its members, by June of 2017, to report transactions in U.S. Treasury securities through FINRA’s TRACE system, generally by the end of the day on which they were executed. The trading data would not be publicly distributed, but would instead be used to enhance regulators’ oversight of the trading market.

White also addressed the recent announcement this past Friday by the Federal Reserve Board that it intends to collect U.S. Treasury securities transaction data from banks, with the possibility that FINRA may act as agent on the Board’s behalf for such collection. By doing so, transactions by both broker-dealers and bank-dealers will be reported for a fuller collection of relevant data, which White favors to increase regulators’ ability to oversee the market.

Needs of the Treasurey to Avoid Violations

White also spoke on the need to increase regulatory oversight and impose regulatory standards for intermediaries in the Treasury market, stating that there was a lack of critical standard compliance in the area that was present for equity trading platforms, namely Regulation SCI and Regulation ATS.

She then went on to assert a need to ensure potential dealers in treasury securities were registering as such. She pointed to a Joint Staff Report which she said made important observations concerning the nature and characteristics of the trading activity of the 10 most active principal trading firms. She stated that the observations in the report suggested a course of conduct by firms that constituted traditional dealing activity – being engaged in the business of buying and selling securities for its own account.

The issue was whether firms were registering dealers as required, which would lead the firms to be subject to a regulatory regime requiring, among other things, net capital requirements ensuring the maintenance of sufficient liquid assets, examination of books and records, and specific anti-manipulation and anti-fraud provisions that went beyond the general restrictions imposed on all market participants.

Convergence of Equities and U.S. Treasury

White stated the she had asked SEC staff to consider clarifying how the conduct of these principal trading firms may trigger dealer registration requirements in the U.S. Treasury securities markets. White argued that it was time for a regulatory convergence across equities and U.S. Treasury securities markets here, so that a firm engaged in the business of buying and selling securities for its own account should be registered as a dealer, whatever type of securities it deals in.

It is clear that regulators intend to make a push to greatly increase regulatory oversight of the Treasury market. We will keep you apprised of future developments in this area.

White’s speech can be found at the following link:

https://www.sec.gov/news/speech/white-keynote-us-treasury-market-conference-102416.html

Jeff Petersen is an attorney licensed in California and Illinois representing a wide variety of securities industry companies and professionals with regard to compliance and registration requirements. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

CHINESE SECURITIES REGULATOR ANNOUNCES IPO INVESTIGATIONS ON SIX COMPANIES

The China Securities Regulatory Commission (“CSRC”) released a statement Friday on its investigation into six companies over alleged securities violations pertaining to initial public offerings and disclosures.

CSRC Cracks Down on Fraud

The six companies are Guangdong Guangzhou Daily Media Co., Ingenious Ene-Carbon New Materials Co., Infotmic Co., P2P Financial Information Service Co. and Shenzhen Ecobeauty Co and Longbao Ginseng & Antler Co. (which has applied for a listing and is not yet public). These six are the first cases announced following the start of a CSRC crackdown on IPO fraud.

The alleged violations in the six cases include false representations in IPO prospectuses and misrepresentations regarding revenue and net income. The CSRC also announced it was pursuing certain third parties involved in the transactions, including underwriters, auditors and lawyers.

The CSRC has assembled an investigative team to look into potential securities violations, and it appears this is only the first round in a push for greater compliance with securities laws.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.

TECHNOLOGY COMPANY AGREES TO $2.5 MILLION FINE WITH SEC OVER ACCOUNTING VIOLATIONS

October 24, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

The SEC just announced that a Houston technology solutions company agreed to pay a $2.5 million penalty to settle charges that it overstated profits, as well as that two former executives of the company agreed to settle charges of causing the violations.

Pressure to Perform Results In Fraud

The SEC’s order stated that after being pressured to improve the financial performance of the energy infrastructure segment of FMC Technologies, the segment’s controller Jeffrey Favret and business unit controller Steven Croft improperly reduced the value of a liability the company recorded for paid employee time off. The SEC alleged the improper adjustments overstated the company’s pre-tax operating profits by $800,000 and enabled the segment to meet its internal company target. The SEC charged that Favret and Croft also corrected a $730,000 error recorded in 2012 that increased the segment’s operating results, but later signed management representation letters attesting there had been no out-of-period adjustments larger than $250,000 for that period.

The SEC’s order also stated that Croft failed to comply with internal accounting controls when directing his business unit switch to a new accounting system without taking reasonable steps to ensure that errors would not occur. Errors did occur which served to overstate the segment’s results in two quarterly periods.

Findings Unchallenged as Penalties Levied

FMC Technologies, Favret, and Croft consented to the SEC’s order without admitting or denying the findings. In addition to the company penalty, Favret agreed to pay a $30,000 penalty and Croft agreed to pay a $10,000 penalty. Favret and Croft, who are no longer with FMC Technologies, also agreed to be suspended from appearing or practicing before the SEC as accountants. The order permits them to apply for reinstatement after two years.

The SEC’s press release can be found at the following link:

https://www.sec.gov/news/pressrelease/2016-221.html

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.

SEC CHARGES ATTORNEY WITH USING BOARD ACCESS TO ENGAGE IN INSIDER TRADING

October 24, 2016/in News /by The Law Offices of Jeff Petersen Team

The SEC charged a Tennessee lawyer with insider trading, alleging he used his position on the executive committee of the board of directors at Nashville-based Pinnacle Financial Partners to trade on nonpublic information he learned about an impending merger.

Insider Trading Breach

The SEC alleged that James C. Cope wrongfully obtained more than $56,000 by purchasing securities in Pinnacle’s acquisition target, Avenue Financial Holdings, prior to the banks’ joint public announcement of the merger. The SEC’s complaint states that Cope learned confidential details about the planned merger during a board executive committee meeting and placed his first order to purchase Avenue Financial stock while that meeting was still taking place, and proceeded to place four more orders within an hour of the meeting’s end.

The U.S. Attorney’s Office for the Middle District of Tennessee filed a parallel criminal case against Cope as well.

The SEC’s press release can be found at the following link:

https://www.sec.gov/news/pressrelease/2016-222.html

Jeff Petersen is an attorney licensed to practice in California and Illinois who represents clients in a wide variety of SEC investigations and SEC enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

SEC REFILES FRAUD COMPLAINT AGAINST TEXAS AG

October 24, 2016/in News, Securities Law /by The Law Offices of Jeff Petersen Team

The SEC refiled federal fraud charges against Texas Attorney General Ken Paxton, after the agency’s initial civil complaint was dismissed by a judge for lack of sufficient evidentiary allegations.

The amended complaint alleges Paxton knowingly defrauded an investment group he was involved with by violating an agreement that no member would pitch investment in a company if they were receiving any benefit that was not being provided to the other members of the investment group. Specifically, the SEC alleges that Paxton recommended the group invest in startup Servergy Inc. while that company was paying him a commission, a fact that was not disclosed to the group.

The amended complaint additionally alleged that Paxton did not properly disclose his commission on his taxes. Paxton’s attorneys released a statement that they were “disappointed” in the SEC’s decision to refile the case. The judge ordered the initial dismissal because the allegations did not establish any affirmative duty on Paxton’s part to inform potential investors that he stood to profit from any investment.

The case is number 4:16-cv-00246 in the United States District Court for the Eastern District of Texas.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.

DOJ ANNOUNCES INSIDER TRADING CHARGES AGAINST FORMER TECH EXEC AND TWO OTHERS

October 21, 2016/in News /by The Law Offices of Jeff Petersen Team

The Department of Justice announced this week that a former Palo Alto, California, based global vice president of SAP SE and two others were indicted for their roles in a scheme to commit insider trading and money laundering, allegedly resulting in hundreds of thousands of dollars in profits.

Federal Indictment on Fraud and Laundering

Christopher G. Salis, a former SAP global vice president, and Douglas and Edward Miller, were charged in the federal indictment returned yesterday by a grand jury in the Northern District of Indiana.

The indictment charges all defendants with conspiracy to commit wire fraud and securities fraud, conspiracy to commit money laundering and conspiracy to structure currency transactions involving a financial institution for the purpose of evading reporting requirements. Salis was also charged with multiple counts of wire and securities fraud.

Illegal Profits and Trading

According to the indictment’s allegations, while Salis was employed with SAP, he obtained material, non-public information about SAP’s acquisition of Concur, which he improperly disclosed to Douglas Miller. The indictment alleges that Douglas Miller, Edward Miller and others then traded in securities in Concur at a profit and returned a portion of the profits to Salis. Following the acquisition, the indictment alleges Douglas Miller made approximately $119,000 and Edward Miller made approximately $149,000. In total, Salis allegedly received nearly $90,000 from his co-conspirators

The press release from the DOJ can be found at the following link:

https://www.justice.gov/opa/pr/former-california-based-global-vice-president-international-technology-company-and-two-others

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a broad spectrum of SEC investigations and enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

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SEC ANNOUNCES HIGHS IN ENFORCEMENT ACTIONS FOR FISCAL 2016

October 18, 2016/in News /by The Law Offices of Jeff Petersen Team

The SEC recently announced its enforcement results for fiscal year 2016 (ending September 30), stating that it reached new highs in the number of actions filed and in the money that was forfeited through disgorgement and penalties.

Record Number of Cases

The announcement stated that the SEC had initiated the highest number of cases involving investment advisers or investment companies in its history (160 total, with 98 standalone actions), as well as a historical high in actions brought under the Foreign Corrupt Practices Act (21).

The SEC also reported new highs in the overall number of enforcement actions filed (868 total, with 548 independent or standalone actions). Compared to 2015, the SEC also filed more “follow-on” administrative proceedings to bar persons or entities from the securities industry, based on a prior entry of a civil injunction or a criminal proceeding.

The SEC summarized yearly data from 2014 through 2016 in the table below:

Enforcement Results: Fiscal Years 2014-2016

The SEC press release can be found at the following link:

https://www.sec.gov/news/pressrelease/2016-212.html

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a broad spectrum of SEC investigations and enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

SEC PENALIZES DEUTSCHE BANK $9.5 MILLION FOR FAILING TO SAFEGUARD RESEARCH INFORMATION

October 13, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

The SEC announced today that Deutsche Bank Securities agreed to pay a $9.5 million penalty for failing to properly safeguard nonpublic information generated by its research analysts. Deutsche Bank also published an improper research report and failed to properly preserve and provide certain electronic records sought by the SEC during its investigation.

What Are The Violations?

Per the SEC order, Deutsche Bank encouraged its research analysts to communicate with customers without adequate procedures to prevent analysts from disclosing yet-to-be-published information such as views and analyses, changes in estimates and short-term trade recommendations.

The SEC order also found that Deutsche Bank issued a research report with a “Buy” rating for discount retailer Big Lots that was at odds with the personal view of the analyst who prepared and certified it as true, despite admitting to others that Big Lots should have been downgraded.

Cease and Desist

Deutsche Bank consented to the entry of the SEC order without admitting or denying the findings. In addition to the financial penalty, Deutsche Bank agreed to be censured and to cease and desist from committing or causing violations and any future violations of Sections 15(g) and 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4 as well as Rule 501 of Regulation AC.

The SEC release can be found at the following link:

https://www.sec.gov/news/pressrelease/2016-213.html

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a host of securities matters. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

SEC RECORDS RELEASE SHOWS NEAR UNANIMITY IN BRINGING ACTIONS

October 13, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

SEC Recordings Released

Records just released by the SEC pertaining to its votes to bring legal action against companies and individuals revealed that the Commission is less divided on such votes than was commonly thought. The data revealed that SEC commissioners vote unanimously almost every time they take companies and executives to federal court. This is a stark contrast to the public disagreements that occur over regulatory matters, which in recent years have included the interpretation of rule-making requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

In total, 94% of the cases that have been brought since April 2013, when Mary Jo White became the agency’s chair, were done so unanimously.

The SEC decision to publish its voting records followed a Reuters request under the Freedom of Information Act request several years ago. The SEC had initially resisted release of internal voting records on purported privilege grounds.

The published data covers slightly more than 1,400 defendants in 414 cases filed in federal courts from April 11, 2013, through August 26, 2016.

Source: http://ow.ly/ZWRQ305FfQY