Recent news about two chief compliance officers, a couple of former lawyers, and a police chief brought to mind a warning nearly ten years ago from then SEC chair Mary Jo White: “We have tremendous respect for the work that you do. . . . That being said, we must, of course, take enforcement action against compliance professionals if we see significant misconduct or failures by them.”
Gulp.
On June 29, the SEC charged Steven Teixeira — the chief compliance officer for the U.S. arm of China’s LianLian Global — with stealing nonpublic information about Wall Street deals from his girlfriend.
They lived together in Queens and worked from home during the pandemic, she as an executive assistant at a New York investment bank. When she went out during business hours, she asked Teixeira to check her email. He checked her email and also snooped through her calendars and data files.
He found confidential documents, including term sheets about M&A deals, and used the information to make $730,000 in trading profits.
Teixeira hasn’t settled the SEC’s civil fraud charges.
But he pleaded guilty to criminal violations of the securities laws and entered into a cooperation agreement with the DOJ.
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Harry wrote about FTX ‘s former general counsel and chief compliance officer, Daniel Friedberg.
The trustee in FTX’s bankruptcy accused Friedberg in a civil complaint of helping insiders divert billions belonging to clients.
Among other things, Friedberg allegedly paid off FTX whistleblowers and their lawyers to quash complaints about commingling and misusing funds.
Friedberg said earlier he only learned about the missing $8 billion in client funds two days before he resigned from FTX and just four days before the firm’s bankruptcy filing in Delaware.
He hasn’t been charged with any crime and may be cooperating with the DOJ.
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Two former lawyers resolved SEC fraud charges in June.
Richard J. Rubin and Thomas J. Craft, Jr. issued nearly 160 fraudulent “opinion of counsel” letters that led to the illegal sale of millions of shares of penny stocks to retail investors.
Rubin had been disbarred since 1995 but continued practicing law by signing at least 128 opinion letters and drafting others for Craft’s signature.
The DOJ also charged Rubin and Craft, and each pleaded guilty to one count of securities fraud.
Both received a year probation and 200 hours of community service. Rubin forfeited $117,000 and Craft forfeited $55,000. He was also ordered to serve four months of home confinement, and he agreed to surrender his law license.
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An insider trading case in the news last week involves a different type of gatekeeper — a police chief.
According to the SEC and DOJ, Dighton, Massachusetts PD chief Shawn Cronin, 43, was part of a five-person group that made about $2.2 million trading on inside information about Alexion Pharmaceuticals’ acquisition of another pharma.
Cronin’s friend, Joseph Dupont, was a vice president and part of the acquisition team at Alexion. He tipped Cronin, who in turn tipped three others.
Cronin’s share of the profits from the insider trading was $72,000.
The SEC bought civil charges against him for violating federal securities laws.
The DOJ charged him with multiple criminal counts of securities and tender offer fraud. Some of the charges carry prison terms of up to 25 years.
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