Legal

Lazard Capital Markets Fined $300K for Lack of Research Disclosure

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Lazard Capital Markets, the private banking spin-off of publicly traded Lazard Ltd. (LAZ), was fined $300,000 by the SEC after the agency accused the placement agent of long-standing failures to disclose market-making conflicts with the companies it issued equity research reports about. In a settlement release issued by the agency, the SEC said Lazard failed to include required disclosures in 47% of the research reports issued during a two-year period from April 2009 to May 2011. During the three and a half year period from January 2007 to May 31, 2011, the firm failed to include required disclosures regarding its market-making activities in covered companies in over 4,100 equity research reports, the SEC found. During that period, Lazard expanded its market making business rapidly, but failed to update its research disclosures to reflect it.

Legal

ChinaCast Education Execs Charged with Fraud, Insider Trading

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The senior executives of one of the darlings of the Chinese reverse merger boom were charged with misappropriating tens of millions of dollars of shareholder funds in self-dealing transactions, and with insider trading to avoid losses when the frauds began to be revealed, according to the SEC. ChinaCast Education’s ex-CEO Chan Tze Ngon was accused of transferring $41M of shareholder funds to a subsidiary and then outside the country by the SEC. The agency also charged the company’s former president, Jiang Xiangyuan, with allegedly selling 50,000 shares of the company to avoid $200,000 in losses after transferring other assets out of the company. "Chan orchestrated the systematic looting of ChinaCast and hid his misconduct by repeatedly lying to investors about the company's assets," said Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York office. ChinaCast Education (CAST) went public on the Singapore Stock Exchange in May 2004, after having been backed by the venture capital arms of Intel and DirecTV, and Sun Hung Kai, a large Hong Kong company.

Legal
SEC

Vicis Capital Partner Charged with Self-dealing in Client Trades

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The SEC has charged  Shadron Stastney, a partner at hedge fund manager Vicis Capital, with breach of fiduciary duty by engineering the purchase of a basket of securities by a fund he managed and in which he maintained a financial interest. The SEC accused Stastney of trading as a principal when he agreed to pay a friend $7.5 million for a portfolio of illiquid securities that the friend was required to divest in order to join Vicis as a managing director. Stastney failed to disclose to the hedge fund’s limited partners that the portfolio included securities in which he held a personal interest and that he received more than $2 million of the proceeds from the sale. “Fund advisers cannot sit on both sides of a transaction as buyer and seller without the consent of the clients who rely on them for unbiased investment advice,” said Julie M. Riewe, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.  “Stastney failed to live up to his fiduciary duty when he unilaterally set the terms of the transaction and authorized it without disclosing that he would personally profit from it.”

Under a settlement reached with the agency, Stastney will be barred from association with regulated investment professionals for 18 months, and will wind down the Vicis Capital Master Fund he manages. He will also pay $2.9 million in disgorgement and penalties.

Markets
Judd Hollas

Uncertainty Remains on Eve of Exempt Offering Advertising

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Beginning on Sept. 23, companies will for the first time in 80 years be able to advertise offerings of securities exempt from registration, as the ban on general solicitation officially expires. Crowdfunding portals, angel capital providers, venture capital funds and other proponents of startups and small growth companies have been looking forward to the day ever since April 2012. That’s when Title II of the JOBS Act required the Securities and Exchange Commission to end the ban on general solicitation in Rule 506 offerings under Regulation D as long as buyers of the securities were accredited investors. In July, the SEC approved the creation of Rule 506(c), which allows issuers to advertise exempt offerings, as well as other regulations related to Title II.