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Regulation and Compliance > Federal Regulation > SEC

SEC Enforcement: Advisor’s Deceptive Press Release on Barnes & Noble Halted Trading

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The SEC charged an individual and his investment advisory firm for a manipulative press release that drove up the price of Barnes & Noble stock. The agency also charged two Philadelphia-area men and their investment advisory firm for defrauding friends and family in a private equity fund they managed, and a consultant and his friend for insider trading prior to P.F. Chang’s impending acquisition.

Individual, Advisory Firm Charged by SEC for Manipulative Press Release

You can’t believe everything you read — especially if it’s a press release offering to buy a majority stake in a company.

That’s how it turned out for Barnes & Noble stockholders after Michael Glickstein and his New York-based investment advisory firm G Asset Management LLC issued a misleading press release on Feb. 21, 2014, that announced their offer to purchase a majority stake in the bookseller for $22 per share. In a matter of seconds after the announcement, Barnes & Noble’s stock price rose from $17.05 per share to $18.99 per share, causing the New York Stock Exchange to temporarily halt trading in the stock.

According to the SEC, which charged Glickstein and his firm with fraud, not only did G Asset have no ability to finance its phony offer to purchase Barnes & Noble and no reasonable basis to believe it could do so in the future, but G Asset had also recently bought thousands of Barnes & Noble shares and short-term call options, intending to profit by selling the shares and options after issuing the press release — which it did, to the tune of some $168,000.

G Asset and Glickstein have agreed to settle the charges with the SEC without admitting or denying wrongdoing. Glickstein and his firm consented to a settlement that requires them to return $175,000 of allegedly ill-gotten gains and interest. G Asset also agreed to be censured, and Glickstein agreed to pay a civil penalty of $100,000 and be barred from the securities industry for a minimum of five years.

SEC Charges Two With Bilking Friends and Family

Two Philadelphia-area men and their investment advisory firm have agreed to settle SEC charges that they defrauded investors in a private equity fund they managed.

According to the agency, William Fretz Jr. and John “Jack” Freeman managed the fraud through their unregistered advisor, Covenant Capital Management Partners L.P., and the private equity fund they managed, Covenant Partners L.P. Fretz and Freeman sold partnership interests in the fund to family and friends, but instead of keeping their promise to invest the money, they used it for their own benefit and to prop up a failing business. Fretz and Freeman funneled more than $1 million to Keystone Equities Group L.P., a failing broker-dealer that they operated and controlled, paid themselves nearly $600,000 in performance fees they had not earned and used fund assets to repay personal obligations. Covenant filed for bankruptcy in September 2014.

Without admitting or denying wrongdoing, Fretz, Freeman and CCMP agreed to settle the agency’s charges and agreed to pay $5.4 million of allegedly ill-gotten gains and prejudgment interest of $353,582. Fretz and Freeman also agreed to be permanently barred from the securities industry and to pay civil penalties of $500,000 each. Covenant’s offer of settlement is subject to bankruptcy court approval.

Executive Coach, Friend Charged by SEC With Insider Trading on P.F. Chang Merger

Richard Condon, a consultant to Panda Restaurant Group, and his friend Jonathan Ross have been charged by the SEC with insider trading after Condon tipped Ross with confidential details about the bidding process for the P.F. Chang’s restaurant chain that he learned while providing executive coaching services to Panda’s top management executives.

According to the agency, Panda, the parent company of the Panda Express Chinese restaurant chain, was involved in the bidding process but did not ultimately make a tender offer for P.F. Chang’s. But Ross purchased risky, out-of-the-money call options for P.F. Chang’s securities, and also tipped his friend Ali Sagheb so he could do the same. Ross, Sagheb, and a third trader who is now deceased immediately sold their options for a combined total of approximately $300,000 following a public announcement about the tender offer by a third party for ownership of P.F. Chang’s.

Sagheb is named as a relief defendant in the SEC’s complaint and has agreed to pay $19,829 — all his trading profits, plus interest. The case continues against Condon and Ross in federal court in Los Angeles.

— Check out NASAA: States Doled Out $579M in Enforcement Penalties in 2014 on ThinkAdvisor.


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