On May 3, 2024, the Securities and Exchange Commission (SEC) announced that it has charged BF Borgers CPA PC and its owner, Benjamin F. Borgers, with serious misconduct. They were found to have repeatedly failed to meet required auditing standards in their reviews and audits, which were part of over 1,500 filings to the SEC from January 2021 to June 2023.

The charges include:

• Misleading their clients by claiming that their audits met official standards when they did not
• Falsifying audit documents to appear as though they were compliant
• Incorrectly stating in reports that their audits were up to standard

As a result, BF Borgers has agreed to pay a $12 million fine, and Benjamin Borgers will pay $2 million. Both are also banned from working as accountants for any entities regulated by the SEC.

The SEC pointed out that this misconduct has jeopardized investor trust and the integrity of the financial markets because accurate and reliable financial statements are crucial for investment decisions. The SEC highlighted the failure of the firm to properly oversee the audit process, maintain accurate records, or perform necessary quality reviews.

Ultimately, these actions led to a large number of inaccurate public filings. The investigation into these activities was managed by the SEC’s Chicago office.

The U.S. Supreme Court made a significant decision affecting how lawsuits can be filed against public companies under specific securities laws (Macquarie Infrastructure Corp. v. Moab Partners).

Macquarie Infrastructure Corporation, a company involved in various infrastructure projects, didn’t disclose how a new regulation (IMO 2020) would negatively affect its business. This regulation aimed to stop the use of a certain type of fuel oil, which Macquarie stored and handled.

Investors sued Macquarie (under Rule 10(b) and Rule Rule 10b5), claiming the company should have told its shareholders that the new regulation would hurt its business. They argued this under a rule that requires companies to report anything that could significantly impact their financial health.

Initially, a lower court dismissed the lawsuit, but the appeals court disagreed, suggesting the case could proceed based on the company’s failure to disclose these important details. This led to different opinions among various courts, creating a need for a definitive ruling from the Supreme Court.

The Supreme Court decided that just failing to mention something important (pure omissions) isn’t enough to be sued under the specific securities law they were considering. Therefore, this decision makes it harder for shareholders in the future to sue companies unless they can prove that the company’s failure to disclose certain information made their other public statements untrue or misleading.

The Securities and Exchange Commission (SEC) has taken legal action against 17 people involved in a fraudulent scheme linked to CryptoFX LLC, a company based in Houston, Texas. This scheme targeted over 40,000 investors, promising them big profits from investments in cryptocurrency and foreign exchange markets. However, instead of investing the money as promised, the scheme operated like a Ponzi scheme, using new investors’ money to pay fake returns to earlier investors and lining the pockets of those running the scheme. Even after the SEC stepped in to stop the fraud in 2022, some of the defendants continued to solicit investments and even tried to cover up their wrongdoing.

The SEC’s complaint, filed in court, accuses these individuals of breaking laws related to fraud, securities registration, and broker registration. The SEC is seeking legal orders to stop these individuals from continuing their activities, as well as to require them to return any ill-gotten gains and pay financial penalties. Two of the defendants have already agreed to settle the charges without admitting or denying guilt, and they will pay penalties and give back some of the money they made from the scheme.

The SEC’s investigation into this matter was led by its Fort Worth Regional Office and supervised by experienced staff. If you’re someone who invested in CryptoFX or have information about this scheme, you can contact the SEC staff via email or reach out to the court-appointed receiver for assistance. The SEC advises investors to be cautious and thoroughly research anyone offering investment opportunities, using the free search tool on Investor.gov to check backgrounds and learn more about investment risks. Additionally, investors can stay informed about potential risks associated with unregistered offerings by reading alerts issued by the SEC’s Office of Investor Education and Advocacy.

The Securities and Exchange Commission (SEC) has introduced new changes to improve the disclosure of order execution information, specifically for stocks listed on national securities exchanges, known as national market system stocks (NMS stocks). These changes are part of updates to Rule 605 of Regulation NMS, which was initially implemented in 2000 to help the public compare and assess the quality of order executions across different market centers.

SEC Chair Gary Gensler highlighted the need for these updates, emphasizing that advancements in technology and business models have transformed equity markets over the past 24 years. The amendments aim to enhance transparency surrounding execution quality, making it easier for investors to evaluate and compare brokers, thereby fostering greater competition in the markets.

The key changes include broadening the scope of entities subject to Rule 605, revising the categorization and content of order information required for reporting, and mandating the production of a summary report on execution quality. Specifically, the amendments extend the reporting requirements to include broker-dealers with a larger number of customer accounts and single dealer platforms. They also expand the definition of “covered order” to include certain orders submitted outside regular trading hours, those with stop prices, and certain short sale orders, capturing more relevant execution quality information for these order types.

Moreover, the amendments alter how orders are categorized by size and type, capturing execution quality information for fractional share orders, odd-lot orders, and larger-sized orders. They also refine the time-to-execution categories and require average time to execution to be measured in increments as small as a millisecond for all orders. Additionally, the amendments modify the information required for reporting under the rule, introducing new statistical measures of execution quality such as average effective divided by quoted spread and size improvement statistics. Finally, all entities subject to Rule 605 are required to make a summary report publicly available.

These changes aim to provide investors with more comprehensive and detailed information about order execution quality, enabling them to make more informed decisions. The adopting release containing these amendments is accessible on SEC.gov and will be published in the Federal Register. The amendments will come into effect 60 days after publication in the Federal Register, with a compliance deadline set for 18 months after the effective date.

The Securities and Exchange Commission (SEC) has made new rules to help investors get clear and consistent information about how climate change might affect companies they’re investing in. These rules make it necessary for public companies to tell investors about any big risks from climate change that could affect their business. They also have to explain what they’re doing to deal with these risks.

The SEC Chairman, Gary Gensler, says these rules are about making sure investors get honest and complete information when they invest in companies. These new rules are based on the idea that investors should know about any risks a company faces because of climate change.

Here’s what the new rules require companies to disclose investors:

• Any big risks from climate change that might affect how the company works, makes money, or its financial health.
• How these risks could affect the company’s plans, how it works, and its future.
• If the company is doing anything to deal with these risks, they have to explain what they’re doing and how much money they’re spending on it.
• Details about the company’s efforts to reduce its carbon footprint or adapt to climate change, like using clean energy or making plans for different climate scenarios.
• Information about how the company’s board of directors and management team are dealing with these climate-related risks.
• Any plans or goals the company has related to climate change and how these plans might affect its business and finances.
• For bigger companies, they also have to disclose information about how much greenhouse gases they produce directly or indirectly through their activities.
• Companies have to provide a report confirming the accuracy of their greenhouse gas emissions information, to assure investors.
• Details about any costs or losses the company faces because of extreme weather events or other natural disasters caused by climate change.
• If the company is using things like carbon offsets or renewable energy credits to meet their climate goals, they have to tell investors about it.
• If climate change or related goals affect the company’s financial statements, they have to explain how.

Before making these rules final, the SEC looked at feedback from lots of people and groups, and now these rules are ready to go. They’ll be effective in 60 days after being published, and companies will have some time to get in line with these new requirements.