SEC Says Broker Stole From Clients to Pay Mortgage, Credit Cards: Enforcement

The Securities and Exchange Commission obtained an emergency court order and asset freeze preventing a former Colorado-based broker from further dissipating stolen client assets.

According to the SEC's complaint, Sonya Camarco, a resident of Colorado Springs, Colorado, stole money over the course of 13 years from her clients' accounts and then lied to her clients about the withdrawals.

The SEC alleges that Camarco appears to have forged client signatures on checks made out to C Investments, an entity Camarco used, and had the checks sent to a private post office box that she rented.

Camarco also allegedly liquidated securities in her clients' accounts to make unauthorized payments to accounts she controlled. The complaint alleges that when confronted by clients, Camarco lied and told them that C Investments was an outside investment that she made on their behalf. The complaint alleges that when confronted by her employer, Camarco lied again, saying that she had no affiliation with C Investments and characterizing it as an outside investment held by one of her advisory clients. The SEC alleges that Camarco used the stolen client funds to pay her personal credit card bills and her mortgages.

The SEC also charged Camarco Investments Inc. and Camarco Living Trust as relief defendants based on their alleged receipt of stolen client funds.

The SEC's complaint seeks disgorgement of allegedly ill-gotten gains plus interest from all the defendants and seeks a permanent injunction against and penalties from Camarco.

Hedge Fund Manager to Pay $4.6M for Inadequate Controls to Prevent Insider Trading

The SEC announced that hedge fund advisory firm Deerfield Management Company L.P. has agreed to pay more than $4.6 million to settle charges that it failed to establish, maintain and enforce policies and procedures reasonably designed to prevent the misuse of inside information, including information about confidential government decisions.

The case relates to insider trading charges that the SEC recently filed against current and former Deerfield analysts, a political intelligence analyst who passed them information, and an employee at the Centers for Medicare and Medicaid Services (CMS).

According to the SEC's order, Deerfield conducted extensive research in the health care sector to help inform its investment decisions, and engaged research firms specializing in political intelligence about upcoming regulatory and legislative decisions. But Deerfield's policies and procedures required only an initial review of the research firms' own policies and procedures, and Deerfield otherwise placed the burden on its own employees to police themselves by identifying issues and informing supervisors.

The SEC's order finds that Deerfield was on notice that the political intelligence analyst might be conveying material, nonpublic information. An email from the analyst said that he "heard from a reliable cms source" that CMS was about to issue a regulation, and an internal Deerfield email noted that the analyst "has a guy" at a "closed-door" government meeting. From at least May 2012 to November 2013, Deerfield generated more than $3.9 million in trading profits based on material, nonpublic information from the political intelligence analyst. Through its management agreements with the hedge funds, including performance-based compensation, Deerfield received approximately $714,110 due to these trades.

Without admitting or denying the findings, Deerfield consented to the SEC's order. Deerfield is censured and required to pay disgorgement of $714,110 plus interest of $97,585 and pay a penalty of $3,946,267.

Muni Bond Issuer and Underwriter Charged With Disclosure Failures

The SEC announced that a municipal financing authority in Beaumont, California, and its then-executive director have agreed to settle charges that they made false statements about prior compliance with continuing disclosure obligations in five bond offerings.

Also settling charges are the underwriting firm behind those offerings and its co-founder for failing to conduct reasonable due diligence on the continuing disclosure representations.

According to the SEC's order, the Beaumont Financing Authority had issued approximately $260 million in municipal bonds in 24 separate offerings from 2003 to 2013 for the development of public infrastructure. For each of those offerings, a community facilities district established by Beaumont agreed to provide investors with annual continuing disclosures, including important financial information and operating data. From at least 2004 to April 2013, the district regularly failed to provide investors with the promised information. The Beaumont Financing Authority failed to disclose this poor record of compliance when it conducted the 2012 and 2013 offerings totaling more than $32 million. As a result, the bonds appeared more attractive and investors were misled about the likelihood that the district would comply with its continuing disclosure obligations in the future.

In a complaint filed in the Eastern Division of the U.S. District Court for the Central District of California, the SEC charged Beaumont's then-city manager Alan Kapanicas, who also served as the Beaumont Financing Authority's executive director. According to the complaint, he approved and signed the misleading offering documents. Kapanicas agreed to settle the charges without admitting or denying the allegations, and pay a $37,500 penalty. He also agreed to be barred from participating in any future municipal bond offerings.

In consenting to an SEC order without admitting or denying the findings, the Beaumont Financing Authority agreed to retain an independent consultant to review its policies and procedures. It also is required to establish appropriate and comprehensive policies, procedures, and training for employees as well as designate a compliance officer in order to ensure compliance with continuing disclosure agreements.

O'Connor & Company Securities Inc. and its co-founder and former primary investment banker, Anthony Wetherbee, agreed to settle the charges against them without admitting or denying the SEC's findings. The firm will pay a $150,000 penalty and retain an independent compliance consultant to review its policies and procedures. Wetherbee will pay a $15,000 penalty and be suspended from the securities industry for six months.

SEC Fines, Bars Founder and CEO of Massachusetts-Based Pharma Company

The SEC obtained a final judgment against the founder and CEO of BioChemics Inc., who was charged with making false statements about collaborations with major pharmaceutical companies and the status and results of drug trials of the company's main product.

The final judgment imposes a conduct-based injunction and an officer-and-director bar, and orders him to pay a $120,000 penalty.

The court's entry of judgment against Masiz resolves this litigation in its entirety. The SEC previously obtained a $17 million judgment against BioChemics and a separate judgment against a promoter of BioChemics stock who wasn't registered as a broker.

— Related on ThinkAdvisor: