At the end of every month, the SEC publishes a Notice of Covered Action (NOCA) for enforcement actions where penalties exceeded one million dollars. In November, the SEC published 15 NOCAs for a combined total of over $1.4 billion in fines. The headline cases were:
- $1.1 billion for big banks using WhatsApp
- $23 million for Oracle’s second time caught out for foreign bribery
- $20 million for Deloitte asking its Chinese audit clients to do their own audits
- $1.25 million for Kim Kardashian’s touting of crypto tokens
Summaries of November’s NOCAs are below, and remember, once a NOCA is published, any whistleblower who provided information to the SEC on the case has 90 days to claim a whistleblower reward by filing a Form WB-APP.
With over $1.4 billion in fines noticed in November, there is over $400 million in whistleblower rewards up for grabs this month.
Major Banks Fined For WhatsApp Use
The SEC settled charges with 15 banks for longstanding failures to maintain and preserve electronic communications. The banks were primarily charged because they had allowed employees to communicate about business using messaging apps, such as WhatsApp, which were not monitored or recorded. The firms involved were Barclays, BofA, Citigroup, Credit Suisse, Deustche Bank, Goldman Sachs, Morgan Stanley, UBC, Jeffries, Nomura and Cantor Fitzgerald. The firms paid a combined $1.1 billion penalty.
The SEC settled charges with Oracle for violations of the Foreign Corrupt Practices Act in Turkey and the UAE. The SEC alleged that Oracle had allowed subsidiaries to maintain ‘slush funds’ which were used to pay for foreign officials to attend conferences, however, in some instances, the funds were used to pay for family members or vacation trips to California. Oracle settled the charges by agreeing to pay $23 million.
The SEC settled charges with Deloitte in China for failing to comply with audit requirements. The SEC alleged that Deloitte’s China affiliate asked audit clients to conduct their own audit work. This created the appearance that Deloitte had conducted testing of financial statements when there was no evidence that this had in fact been done. As a result of the charges Deloitte agreed to pay a $20 million penalty.
The SEC settled charges with Kim Kardashian for touting a crypto assed sold by EthereumMax. According to the SEC, Kim was paid $250,000 to publish a post on her Instagram about EMAX tokens, but failed to disclose that it was a paid post. Kim agreed to pay $1.25 million to settle the charges.
Barclays Bank PLC
The SEC settled charges with Barclays for selling over $17 billion in unregistered securities. The SEC noted that the violation came about because of a failure to implement internal controls that tracked transactions which needed to be registered. As a result of the settlement, Barclays agreed to pay $361 million.
The SEC settled charges with accounting firm Friedman LLP for improper professional conduct. According to the SEC, Friedman failed to recognize red flags and respond to fraud risks in its audit of iFresh. (The SEC has separately charged iFresh with fraud). Friedman also failed to have procedures that would have detected numerous related party transactions conducted by iFresh. In order to settle the charges, Friedman has agreed to pay $1.5 million in penalties.
The SEC settled charges against audit firm RSM US LLP and three employees for professional misconduct in their audit of Revolution Lighting Technologies. According the SEC, RSM’s audit failed to adhere to proper standards, and in addition, there was a failure to plan, supervise and execute audits by senior employees. In order to settle the charges, RSM agreed to pay a $3.75 million penalty.
The SEC settled charges against Mattel Inc for errors in its financial statements. According to the SEC, Mattel understated certain allowances and expenses because of a $109 million accounting error. To settle the charges, Mattel has agreed to pay a penalty of $3.5 million. In addition, the SEC is initiating litigation against a former audit partner at PwC to determine whether he engaged in improper conduct related to the allegations.
The SEC settled proceedings against Cemtrex Inc for securities violations arising from allegations that the company had raised funds from investors which were used for unrelated business purposes. No fine was announced, but Cemtrex agreed to certain undertakings in the order regarding its compliance and public statements.
Property Income Investors
The SEC filed charges against Larry Brodman and several entities he controls for misusing millions of dollars of investor funds that were raised through fraudulent offerings. The charges are contested and the case is ongoing in the Southern District of Florida.
UCB Financial Advisers
The SEC obtained a freezing order against a Florida investment professional and UCB Financial Advisers for operating a “cherry picking” scheme. According to the SEC, after obtaining money from customers, the defendants placed trades and booked them to different accounts depending on whether they were profitable or not. If the trades were profitable, the defendants would book the trades to their own accounts, but if the trades were loss-making, they would book them to client accounts. As a result of this scheme the defendants generated $4.6 million in profit for themselves and cost clients $5 million in losses. The charges are contested and the case is ongoing.
Lev Parnas pled guilty to his role in an offering fraud scheme that raised over $2 million from investors. According to the SEC, Parnas and another individual raised money by telling investors that their funds would be used to develop products to help people affected by investment fraud. Instead, the money was largely used for personal expenses, jewelry, cars and casino trips. As part of parallel criminal proceedings, Parnas was fined ~$1.7 million for his role in the fraud.
Bevil et al.
The SEC charged fifteen individuals who worked for Intertech Solutions in a cold-calling scheme. According to the SEC, the individuals called hundreds of prospective investors in order to raise over $7 million dollars for Intertech. However, the individuals failed to disclose that they were charging exorbitant commissions of up to 50% on investments. The charges are contested and the case is ongoing in federal courts in Nevada, Texas and Florida.
Devito and Esposito
The SEC filed fraud charges against two Florida residents, Joseph DeVito and Dean Esposito for acting as unregistered brokers who cold-called investors seeking to raise funds. Both DeVito and Esposito hid the fact that they were barred from the securities industry by the SEC. The charges are contested and the case is ongoing in federal court in Florida.
Cetera Advisor Networks LLC
Cetera Advisor Networks LLC, a registered investment advisor, has been added to a complaint involving failure to disclose conflicts of interests and undisclosed compensation in an ongoing action against an affiliate of Cetera. The charges are contested and the case is ongoing in Colorado.