Municipal Advisor Accused of Not Telling Client About Conflict
In the first case enforcing municipal advisor’s fiduciary duty under the 2010 Dodd-Frank Act, the SEC is filing charges against Central States Capital Markets, its CEO John Stepp, and two employees. The regulator claims that in 2011, David Malone and Mark Detter arranged for a brokerage firm to underwrite the municipal bond offerings. Both of them and Stepp were registered representatives at the firm. They did not tell one particular municipal client about this relationship or that they would benefit financially from the arrangement.
In three offerings, said the SEC, Central States was paid fees from “the City” for advisory work and also received 90% of the underwriting fees. The regulator said that Central States and the three men breached their duty to the client by not revealing the conflict even though they knew this was an issue. The SEC said this failure to disclose the conflict prevented the city from being able to obtain financial advice that was unbiased.
Central States and the three men consented to the SEC’s order without denying or admitting to the findings. Central States will pay $289,800 in disgorgement and interest and an $85K penalty. Detter will pay a $25K penalty and serve a two-year financial services industry bar, Malone will pay a $20K penalty and serve a one-year industry bar, and Stepp will pay a $17,500K penalty plus serve a suspension of six months from acting in a supervisory role with any brokerage firm, municipal advisor, or investment adviser.
Microcap Company CEO Charged With Making False Claims, Including Fake Clean Energy Contracts With Foreign Governments
The Securities and Exchange Commission is charging Cary Lee Peterson, who is the CEO of RVPlus Inc., with making false claims of having lucrative ties with the United Nations and billions of $2.8B of clean energy contracts with governmental bodies in Liberia, Haiti, and Nigeria. In truth, RVPlus had no connections with the U.N. and the contracts at issue never existed.
According to the regulator, Lee Peterson made bogus claims in public filings for the company and statements that he made to private investors, took control of over 90% of RVPlus’s free trading shares, and issued them to individuals who illegally sold them into the market. In SEC filings, Peterson claimed on more than one occasion that RVPlus had put out invoices and was owed millions of dollars from the contracts.
Meantime, the U.S. Attorney’s Office for the District of New Jersey has filed criminal charges against Peterson in a parallel case.
SEC Awards Three Whistleblowers Nearly $2M
The SEC is paying three whistleblowers nearly $2M. The bulk of the money—$1.8M—will go to an individual who gave over information that spurred the regulator to begin investigating. The other two whistleblowers will get about $65K each for providing their information after the probe started.
To date, the SEC ‘s whistleblower program has awarded over $57M to 26 people since 2011. Whistleblower may be eligible for an award for voluntarily giving the Commission useful and unique information resulting in a successful enforcement probe. A whistleblower award from monetary sanctions over $1M can range from 10% to 30% of the funds collected.
Read the SEC Complaint in the RVPlus, Lee Peterson case (PDF)