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February 18, 2016 at 07:21 AM
Among recent enforcement actions by the SEC were a settlement with a technology company charged with bribery; charges against a former Deutsche Bank analyst for certifying a stock rating when his opinion on the stock was different from the rating; and charges against a biopesticide company and a former executive for accounting fraud.
Former Deutsche Bank Analyst Fined Over Rating Certification
The SEC charged former Deutsche Bank research analyst Charles Grom with certifying a stock rating when his own beliefs about the stock did not agree with the rating he gave it.
According to the agency, Grom certified that his March 29, 2012, research report about discount retailer Big Lots accurately reflected his own beliefs about the company and its securities. But his private communications with Deutsche Bank research and sales personnel indicated that the only reason he didn’t downgrade Big Lots from a Buy recommendation in his report was his desire to keep his relationship with Big Lots management.
Grom and Deutsche Bank hosted Big Lots executives at a nondeal roadshow on March 28, 2012, when Grom became concerned by what he believed to be cautious comments by the Big Lots executives. After the roadshow ended, he communicated with a number of hedge fund clients about Big Lots. Four of those funds subsequently sold their entire positions in Big Lots stock.
The next day, Grom issued a research report on Big Lots, but maintained a Buy rating he had previously given the company. He also signed an analyst certification included at the end of the report stating, “The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer.”
During an internal conference call with Deutsche Bank’s research and sales personnel only hours after the publication of that report, Grom said, among other things, that he had maintained a Buy rating on Big Lots because “we just had them in town so it’s not kosher to downgrade on the heels of something like that.”
On April 24, 2012, during another conference call with Deutsche Bank research and sales personnel, Grom discussed disappointing first quarter sales figures at Big Lots and stated, “I think the writing was on the wall [that] we were getting concerned about it, but I was trying to maintain, you know, my relationship with them. So, that’s why we didn’t downgrade it a couple of weeks back.”
Grom has neither admitted nor denied the SEC’s findings, but has agreed to settle the charges by paying a $100,000 penalty, and he will be suspended from the securities industry for a year.
The SEC’s investigation is continuing.
SEC Fines Tech Company, Subsidiaries for Bribery
Massachusetts-based technology company PTC Inc. and its Chinese subsidiaries have agreed to pay more than $28 million to settle parallel civil and criminal actions involving violations of the Foreign Corrupt Practices Act (FCPA).
According to the agency, an investigation found that from at least 2006 to 2011, two PTC China-based subsidiaries provided improper travel, gifts and entertainment adding up to almost $1.5 million to Chinese government officials employed by state-owned entities that were PTC customers.
As a result of sales contracts with state-owned entities whose officials had gotten the payments, PTC made approximately $11.8 million in profits. The Chinese officials were compensated directly and through third-party agents for sightseeing and tourist activities tacked onto visits to a PTC facility, usually the corporate headquarters in Massachusetts.
