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The U.S. Securities and Exchange Commission awarded $110 million to a tipster whose information resulted in enforcement actions, bringing total payments under the agency’s whistle-blower program to more than $1 billion, Bloomberg News reported. The tipster’s award, the second-largest ever, includes $40 million from the SEC and $70 million from a related action brought by another agency, according to a statement Wednesday. Under the SEC’s whistle-blower program, tipsters can be paid for information that prompts sanctions by another agency. “Today’s announcement underscores the important role that whistle-blowers play in helping the SEC detect, investigate and prosecute potential violations of the securities laws,” SEC Chair Gary Gensler said in the statement. “The assistance that whistle-blowers provide is crucial to the SEC’s ability to enforce the rules of the road for our capital markets.” The SEC has made disbursements to 207 tipsters since issuing its first award in 2012. Individuals are eligible for payments ranging from 10% to 30% of the fines collected in enforcement cases where penalties exceed $1 million. Funds used to pay tipsters don’t come out of disgorgement, the portion of a sanction that’s supposed to be returned to harmed investors.

U.S. Securities and Exchange Commission Chair Gary Gensler signaled corporate bonds are in his crosshairs, showing his focus extends beyond frothy markets like crypto and meme stocks to a key pillar of Wall Street, Bloomberg News reported. The SEC chief, set to testify Tuesday in the Senate, said in prepared remarks that he’s asked the regulator’s staff to recommend ways to “bring greater efficiency and transparency” to everything from corporate debt to municipal bonds and mortgage securities. “This market is so critical to issuers,” Gensler said of non-Treasury fixed income. “It is nearly 2.5 times larger than the commercial bank lending of about $10.5 trillion in our economy.” Gensler is making his first appearance this week before the Senate Banking Committee since being confirmed in April to lead the SEC. As he has done in earlier speeches and testimony, Gensler laid out a broad policy agenda that includes updating the agency’s rules for stock trading, cryptocurrency oversight and the derivatives that were behind the collapse of Bill Hwang’s Archegos Capital Management. In his prepared testimony, released by the banking panel Monday, Gensler reserved some of his sharpest words for the crypto explosion, noting “this asset class is rife with fraud, scams and abuse.” Noting that the SEC has been looking at trading platforms for digital coins, Gensler said it seems most are offering tokens that are securities — which should subject them to more government scrutiny. “Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the commission unless they qualify for an exemption,” he said. On the security-based swaps that fueled Archegos’s meltdown, Gensler said he has asked the SEC staff to examine whether firms should disclose aggregate positions to the SEC and the public. As he has previously, Gensler also discussed his desire to update the SEC’s market structure regulations, last revised in 2005, to take into account robo-advisers and investing apps like Robinhood Markets Inc. “Rules mostly adopted 16 years ago do not fully reflect today’s technology,” he said.

The U.S. Securities and Exchange Commission (SEC) has threatened to sue Coinbase Global Inc if the crypto exchange goes ahead with plans to launch a programme allowing users to earn interest by lending crypto assets, Reuters reported. The SEC has issued Coinbase with a Wells notice, an official way it tells a company that it intends to sue the company in court, Paul Grewal, the company's chief legal officer said in a blog post. He said Coinbase would delay the launch of its 'Lend' product until at least October as a result. Programs that allow owners of cryptocurrencies to lend these in return for interest are becoming more common around the world, but some regulators, particularly in the United States have started to raise concerns, arguing that such products should comply with existing securities laws. The U.S. state of New Jersey ordered the cryptocurrency platform BlockFi Inc. in July to stop offering interest-bearing accounts that have raised $14.7 billion from investors.

The U.S. Securities and Exchanges Commission has accused a Georgia investment adviser in a $110 million Ponzi scheme that drew money from more tha 400 investors in 20 states, according to a statement on Wednesday, Reuters reported. The SEC obtained a temporary restraining order and asset freeze from the U.S. District Court for the Northern District of Georgia against John Woods and two entities he controls, the commission statement said.

Healthcare Services Group Inc. will pay a $6 million fine to settle U.S. Securities and Exchange Commission civil charges that its failure to account for legal settlements with its employees enabled it to inflate quarterly results, the regulator said yesterday, Reuters reported. The SEC said that the Bensalem, Pa.-based provider of housekeeping and dining services to healthcare facilities did not set aside enough money in 2014 and 2015 for expected settlements of class-action litigation claiming it violated federal and state wage-and-hour laws. Had the company properly recorded its settlement costs, it would have missed Wall Street earnings forecasts at least four times and been unable to report multiple quarters of increased earnings per share, thereby misleading investors, the SEC said. The SEC called the settlement the third in its EPS Imitative, which uses risk-based data analysis to uncover potential accounting and disclosure violations resulting from so-called "earnings management," among other things. John Shea, Healthcare Services' chief financial officer since 2012, will pay a related $50,000 civil fine and accepted a two-year suspension from appearing before the SEC as an accountant.

The U.S. Securities and Exchange Commission (SEC) will seek input on whether digital customer engagement innovations used by financial firms should be governed by existing rules or may need new ones, commission chair Gary Gensler told Reuters. While the SEC's thinking on the subject is at an "early stage," its rules may need updating to account for an artificial intelligence-led revolution in predictive analytics, differential marketing and behavioral prompts designed to optimize customer engagement, he said. The SEC plans to launch a sweeping consultation in coming days that could have major ramifications for retail brokers, wealth managers and robo-advisers, which increasingly use such tools to drive customers to higher-revenue products. The consultation was partly sparked by January's meme stock saga, which resulted in intense scrutiny of retail broker practices, including "gamification" — game-like prompts designed to optimize customer engagement.

London-based Pearson PLC will pay $1 million to settle charges it misled investors about a 2018 cyber intrusion involving the theft of millions of student records, the U.S. Securities and Exchange Commission (SEC) said on Monday, Reuters reported. The educational-publishing firm did not admit nor deny the regulator's charges, the SEC said, but in 2019 the firm disclosed in its annual report that the data breach may have included birth dates and email addresses, when, in fact, it knew that such records were stolen. Pearson also said at the time that it had "strict protections" in place, but failed to patch the critical vulnerability for six months after it was notified, the SEC found. "Pearson opted not to disclose this breach to investors until it was contacted by the media, and even then Pearson understated the nature and scope of the incident, and overstated the company's data protections," said Kristina Littman, chief of the SEC enforcement division's cyber unit. Pearson spokesman Tom Steiner said the company's data breach involved a web-based software tool that was retired in July 2019, and that the firm "continues to enhance its cyber security efforts to minimise the risk of cyberattacks in an ever-changing threat landscape." It has also agreed to cease and desist from committing violations of cyber-related disclosure provisions in addition to paying the civil penalty, the SEC said.

U.S. Securities and Exchange Commission Chair Gary Gensler signaled that his deep interest in cryptocurrency doesn’t mean he’s simpatico with the hands-off oversight approach that many enthusiasts would like to see, Bloomberg Businessweek reported. Policymakers have struggled with how to respond to the mostly unregulated $1.6 trillion market, which has seen explosive growth and wild price swings. Gensler is contemplating a robust oversight regime, centered on establishing safeguards for the millions of investors who’ve been stocking their portfolios with tokens. “While I’m neutral on the technology, even intrigued — I spent three years teaching it, leaning into it — I’m not neutral about investor protection,” says Gensler, who on Tuesday will give a speech about crypto at the Aspen Security Forum. “If somebody wants to speculate, that’s their choice, but we have a role as a nation to protect those investors against fraud.” Gensler has asked Congress to pass a law that could give the agency the legal authority to monitor crypto exchanges, but he says the SEC’s powers are already broad. There’s been much discussion over the years about which kinds of digital assets fall under the SEC’s purview. Some such as Bitcoin that act like currencies are considered commodities, not securities. But there are thousands of other coins, and Gensler believes most are unregistered securities that must comply with SEC rules. Broadly he noted that technology has sparked economic progress throughout human history, and he sees a similar boost from digital assets. That may only come, however, with strong and thoughtful regulation. As an analogy, he says the automobile industry didn’t fully take off until governments laid out driving rules. Speed limits and traffic lights provided public safety but also helped cars become mainstream. “It’s only with bringing things inside — and sort of clearly within our public policy goals — that a technology has a chance of broader adoption,” he says.

The U.S. securities regulator has ramped-up its inquiry on Wall Street's blank check acquisition frenzy, homing in on potential conflicts of interest created when banks act as underwriters and advisers on the same deal, Reuters reported. The Securities and Exchange Commission is exploring whether certain fee structures may incentivise underwriters on special purpose acquisition company, or SPAC, listings to secure unsuitable deals when also advising on the later stage merger, potentially putting investors at risk. Banks that have received SEC requests for information include top SPAC underwriters Citigroup, Credit Suisse Group, Morgan Stanley and Goldman Sachs. SPACs are listed shell companies used to take private companies public, sidestepping the more traditional and lengthy initial public offering (IPO) process. Reuters reported in March that the SEC's enforcement division had opened an inquiry on Wall Street banks' SPAC dealings, sending letters to several institutions seeking information on deal risks and internal controls. Since March, the SEC has focused its inquiry on a group of banks, law firms and SPAC sponsors involved in troubled deals and has sought more information about the deals and interviewed executives concerned. The SEC is particularly interested in the fees banks have earned when playing several roles on a deal.

The Securities and Exchange Commission yesterday announced insider trading charges against six California men who allegedly used nonpublic financial information to generate roughly $1.7 million, The Hill reported. The SEC alleged that the group traded the stocks of two technology companies that employed two of the men involved in the ring based on confidential earnings information they obtained through their jobs. The SEC alleged that Nathaniel Brown, a former revenue manager at Infinera Corporation, routinely gave his friend Benjamin Wylam private information about the company’s financial status between April 2016 and November 2017. Wylam then allegedly tipped off Naveen Sood on the information, who then allegedly passed it along to three other friends: Marcus Bannon, Matthew Rauch and Naresh Ramaiya, all of whom traded on the information. The SEC also alleged that Bannon shared nonpublic information about his employer, Fortinet Inc., with Sood, who allegedly tipped off Wylam and Ramaiya, all of whom traded on the information. Bannon agreed to pay a civil penalty of $281,497, Rauch agreed to pay $128,230, Ramaiya agreed to pay a civil penalty of $65,780, and Sood agreed to pay a civil penalty of $178,320 to settle the complaint, the SEC said. Wylam consented to a injunction with potential penalties, and litigation against Brown is still pending.
https://thehill.com/policy/finance/558599-sec-charges-six-with-insider-…