Material Misstatements

News & Analysis as of

Winery Equity Crowdfunding Raises Opportunities, Risks

Many are familiar with the rewards-based model of crowdfunding popularized by websites like Kickstarter and Indiegogo. The basic idea is that a group of individuals — the “crowd” — contributes funds to a company or project in...more

SEC Sanctions Alt Fund Asset Manager for Fee Overcharges and Misleading Investors

On January 19, 2016, the SEC settled proceedings against a Denver-based asset manager for material misstatements made in the offer and sale of units of a publicly-registered managed futures fund. The SEC found that the...more

SEC Announces Settlement with Loan Servicer for Misstating Financial Results

On January 20, the SEC announced a settlement with a residential and commercial loan servicer for allegedly misstating its financial results for the last three quarters of 2013 and the first quarter of 2014, the consequence...more

FERC enforcement report cites screenshots, keylogger

The Federal Energy Regulatory Commission has issued an Order to Show Cause and Notice of Proposed Penalty against Coaltrain Energy, L.P. and six individuals relating to alleged fraudulent transactions in PJM Interconnection...more

Second Circuit Broadens Scope Of Expert Testimony Admissible In White-Collar Fraud Trials

In United States v. Litvak, 14-2902, the U.S. Court of Appeals for the Second Circuit vacated the conviction of a securities trader after concluding that the district court erroneously excluded his proffered expert witnesses....more

First Circuit Overturns SEC Ruling in Flannery v. SEC

The First Circuit’s decision underscores the limits of court deference to Commission decisions, gives teeth to the “substantial evidence” standard of review, and provides a valuable roadmap for evaluating and defending...more

Limiting Securities Litigation Risks in EB-5 Offerings: What Regional Centers and Issuers Need to Know

The flurry of federal suits filed by the U.S. Securities and Exchange Commission (SEC) in the past few months against several companies and individuals for alleged fraud and false statements in soliciting foreign investors...more

SEC Sanctions Adviser for Misstatements in Advertisements, Client Presentations and Regulatory Filings

The SEC found that a registered investment adviser that operates as a “manager of managers” misstated a sub-adviser’s investment performance in communications with its clients, potential clients and the SEC. According to the...more

The PCAOB’s Enhanced Auditor Performance Standards–Be Sure You’re Ready

A little over a year ago the PCAOB issued new Auditing Standard No. 18, which enhanced auditor performance standards in three significant areas of a company’s audit: - Company relationships and transactions with related...more

Know Your Weaknesses: PwC reports on disclosing material weaknesses during the IPO process. 

PwC recently released a study on the effect of disclosing material weaknesses (MWs) during an issuer’s initial public offering. Disclosing material weaknesses, which are defined by the SEC as “a deficiency, or a combination...more

If Considered Material, False Statements Made to Federal Regulatory Bodies Create Exposure to Criminal Liability - United States...

The U.S. Court of Appeals for the Tenth Circuit reversed a conviction for making a false statement to the U.S. Patent and Trademark Office (USPTO), holding that a false statement is not material if it could not influence the...more

Recent MCDC Settlements Provide Guidance Concerning Scope of Materiality in Continuing Disclosure Obligations

In responding to the Securities and Exchange Commission’s recent Municipalities Continuing Disclosure Cooperation (MCDC) initiative, the unanswered question for many municipalities and broker-dealers was determining whether...more

Hastert Reaches Plea Deal in Anti-Money Laundering Case – Guilty Plea Expected

As I reported in a June 2, 2015 client alert, on May 28, 2015, Dennis Hastert, former Speaker of the U.S. House of Representatives, was indicted by a federal grand jury in the Northern District of Illinois. Mr. Hastert, a...more

Structured Thoughts: News for the financial services community, Volume 6, Issue 6

U.S. Structured Warrant Programs: Introduction - U.S. and non-U.S. banks have offered structured warrants in the U.S. to address the needs of both institutional and high-net worth investors. This article will...more

Add-On Products Add up to $63M Settlement With FDIC

Why it matters - Credit card add-on products were the subject of a recent enforcement action brought by the Federal Deposit Insurance Corporation (FDIC) against Comenity Bank of Delaware and Comenity Capital Bank in...more

One Size Does Not Fit All: Written Disclosure Policies in a Time of Increased SEC Enforcement

The U.S. Securities and Exchange Commission (SEC) continues to increase its enforcement efforts in the municipal bond market by focusing on the sufficiency and timeliness of disclosure in initial municipal securities...more

Five Advantages to Section 18 – A New Weapon for Institutions

Section 18 of the Securities Exchange Act, while seldom used in the past, has been increasingly used by institutional investors in suits against banks and other entities. The advantages of Section 18 are as follows...more

SEC Sanctions Investment Adviser For Materially False Advertisements

The SEC recently instituted proceedings against a registered investment adviser and its founder, CEO and majority shareholder for allegedly making material misstatements and omissions regarding the amount of assets...more

SEC Issues Wells Notice to Pimco Over Fund Valuations

On Monday, August 3, 2015, Pacific Investment Management Co. LLC (Pimco) announced that it had received a Wells notice from the Securities and Exchange Commission concerning the valuation of certain nonagency mortgage-backed...more

Court of Appeals Warns Against Complacency in the PSLRA’s Safe Harbor

SEC Rule 10b-5 makes it unlawful to misstate a material fact (or omit to say something if the omission would render misleading what you do say) in connection with the purchase or sale of a security. The Private Securities...more

PCAOB Launches Audit Committee “Dialogue”

As part of its audit committee outreach efforts, the Public Company Accounting Oversight Board has established a webpage called "Audit Committee Dialogue" focusing on recurrent areas of concern identified by the PCAOB over...more

Bridging the Week - June 2015 #4

Investment Adviser Chief Compliance Officer Blamed in SEC Lawsuit for President’s Theft of Client Funds; SEC Commissioner Criticizes Enforcement Actions Against CCOs Generally - The Securities and Exchange Commission...more

The Guide to Social Media and the Securities Laws

The growing use of social media has created challenges for federal securities regulators, who must enforce antifraud rules that were written at a time when the prevailing technology was the newspaper. This Guide...more

Compliance Officers Can Face Individual Liability for Corporate Importation Violations

Corporate officers and shareholders take note: personal liability for unpaid duties may result from material misrepresentations on import documentation even when the importer of record is a corporate entity. The corporate...more

SEC Files Financial Fraud Actions, Mired In Controversy

In the wake of the market crisis and the formation of a task force, the SEC has sought to focus in part on financial fraud actions. The action filed at the close of last week against Computer Sciences Corporation and seven of...more

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