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On November 19, the SEC announced that an investment company affiliate of a global consulting firm agreed to pay $18 million to settle alleged compliance failures. The affiliate provided investment services to current and former partners and employees of the consulting firm. The SEC alleged that the affiliate failed to maintain adequate policies and procedures to prevent firm partners from misusing material nonpublic information (MNPI) gained from consulting clients to make investment decisions. The SEC alleged that the affiliate invested hundreds of millions of dollars in companies that the firm was advising. According to the SEC, certain firm partners oversaw these investments and had access to MNPI, such as financial results, planned bankruptcy filings, mergers and acquisitions, among other things, as a result of the consulting work they did for the firm.
According to the cease-and-desist order, allowing active firm partners, “individuals who had access to MNPI about issuers in which [affiliate] funds were invested, to oversee and monitor [the affiliate’s] investment decisions presented an ongoing risk of misuse of MNPI.” The SEC claimed that the affiliate allegedly violated Sections 204A and 206(4) of the Investment Advisers Act of 1940 (related to the prevention and misuse of MNPI and prohibited investment adviser transactions), as well as Rule 206(4)-7 (concerning compliance policies and procedures). Without admitting or denying the findings, the affiliate consented to the entry of the cease-and-desist order, a censure, and the $18 million penalty.
On August 13, the SEC announced it obtained a temporary restraining order through an emergency action filed against an individual and his two entities, which allegedly induced dozens of consumers to invest by falsely claiming that their funds would be used to acquire real estate and to make commercial loans. According to the SEC, the individual misappropriated the vast majority of the investors' funds to pay for his residences, cover credit cards bills, and make student loan payments. The complaint also alleges that the individual hid the fraud from investors by providing investors with false valuations, among other things. The SEC’s complaint alleges violations of the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and seeks a permanent injunction against the defendants enjoining them from future violations, disgorgement of all ill-gotten gains, and civil penalties, among other things.
- Jonice Gray Tucker to discuss “Getting your company ready: Managing fair lending for IMBs” at the Mortgage Bankers Association Independent Mortgage Bankers Conference
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
- Jonice Gray Tucker to discuss “Small business & regulation: How fair lending has evolved & where it is heading?” at the Consumer Bankers Association Live program
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek
- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting