Former Bank Executive Settles SEC Charges for Misleading Investors
A former bank executive settled SEC charges for misleading investors about the financial success of one of the bank's core businesses.
In the Complaint, filed in the United States District Court for the Northern District of California, the SEC alleged that from mid-2014 through mid-2016, the Senior Executive Vice President of Community Banking, the bank's "largest operating segment," misled investors by publicly endorsing a "cross-sell" metric as a measurement of success. The SEC found that the cross-sell metric was inflated by accounts and services that were "unused, unneeded, or unauthorized." The SEC said the bank executive made misleading statements to the Community Bank's investors at their investor conferences in 2014 and 2016 and signed inaccurate sub-certifications regarding the Community Bank's public disclosures. The SEC alleged that the bank executive knew or recklessly failed to know that the statements regarding the cross-sell metric were materially false and misleading.
The SEC charged the bank executive with violations of Exchange Act Sections 10(b) ("Regulation of the Use of manipulative and deceptive devices"), 13(a), and 13(b)(2)(A) ("Periodical and other reports"), and Exchange Act Rules 10b-5 ("Employment of manipulative and deceptive devices"), 13a-1 ("Requirements of annual reports"), 13a-13 ("Quarterly reports on Form 10-Q"), and 12b-20 ("Additional information") and Securities Act Section 17(a) ("Fraudulent Interstate Transactions").
To settle the charges, the bank executive agreed to (i) a permanent injunction against violating the antifraud and other provisions of the federal securities laws, (ii) a permanent officer-and-director bar, and (iii) pay disgorgement of $1,459,076, plus prejudgment interest of $447,874. The SEC said it will combine the financial penalty with funds from previous settlements involving the Community Bank and its former CEO and Chairman to distribute to harmed investors. The settlement remains subject to court approval.