Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > SEC

SEC Enforcement: Advisor Charged With Failing to Disclose Conflict of Interest

Your article was successfully shared with the contacts you provided.

The Securities and Exchange Commission charged John Leo Valentine, the founder and president of former registered investment advisor firm Valentine Capital Asset Management (VCAM) based in California, with failing to disclose a financial conflict of interest when making an investment recommendation and making other misleading statements to his advisory clients, according to the SEC’s order.

The SEC previously charged Valentine and VCAM in 2010 for failing to fully and adequately disclose a material conflict of interest. VCAM has withdrawn its registration as an investment advisor with the SEC and has ceased all operations.

According to the SEC’s order instituting settled administrative and cease-and-desist proceedings, between late 2011 and 2012, Valentine recommended that his clients sell shares of a fund named Bridgeton Global Directional Fund, LP and buy shares of another fund he created named Valt LP. However, the SEC says that Valentine failed to disclose that he had a financial incentive to make the recommendation because he had recently lost the ability to earn approximately $1 million per year in commissions based on client investments in the Bridgeton fund, but would be compensated based on client investments in Valt.

Without admitting or denying the findings in the SEC’s order, Valentine consented to entry of a cease-and-desist order, to be barred from the securities industry with a right to apply for reentry after two years, and to pay a $140,000 penalty.

Bank Leumi Charged With Conducting Unregistered Cross-Border Business

Israeli-based Bank Leumi agreed to pay $1.6 million and admit wrongdoing to settle charges that it provided investment advice and induced securities transactions for U.S. customers for more than a decade without registering as an investment adviser or broker-dealer as required under U.S. securities laws, according to the SEC.

The SEC found that Bank Leumi maintained several hundred securities accounts that were beneficially owned by U.S. customers and managed more than $500 million in securities assets for U.S. customers.

Energy Services Company and Execs Charged With Fraud

The SEC charged Lime Energy Co., an energy services provider, and four executives for their roles in an accounting fraud, which included the improper reporting of “a significant amount of fake revenue,” according to the announcement.

Lime Energy Co. agreed to pay $1 million to settle the charges, and its four now-former executives also agreed to settlements.

The SEC finds that the company recognized revenue earlier than allowed in order to meet internal targets. The SEC’s complaint alleges that Lime Energy improperly recognized $20 million in revenue from at least 2010 to 2012.

Company and Former Execs to Pay Over $2.5M Penalty

FMC Technologies, a Houston-based technology solutions company, has agreed to pay a $2.5 million penalty to settle charges that it overstated profits in one of its business segments, according to the SEC

Two then-executives at the company also agreed to settle charges that they caused the violations to meet internal targets.

After being pressured to improve the financial performance of the energy infrastructure segment at FMC Technologies, the segment’s controller Jeffrey Favret and a business unit controller Steven Croft artificially reduced the value of a liability the company recorded for employee paid time off, the SEC finds. 

The improper adjustments overstated the segment’s pre-tax operating profits by $800,000 and enabled an internal target to be met for the first quarter of 2013. Favret and Croft also corrected a $730,000 error recorded in 2012 that increased their segment’s operating results for first quarter 2013, yet they later signed management representation letters attesting there had been no out-of-period adjustments larger than $250,000 recorded during that period.

In addition to the $2.5 million penalty to be paid by FMC Technologies, Favret agreed to pay a $30,000 penalty and Croft agreed to pay a $10,000 penalty.

Ernst & Young to Pay $11.8 Million for Audit Failures

Ernst & Young LLP has agreed to pay more than $11.8 million total to settle charges related to failed audits of an oil services company that used deceptive income tax accounting to inflate earnings, according to the SEC.

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.