SEC Announces Charges Against N.Y.-Based Brokerage Firm and Founder Despite Attempts to Mislead Examiners
The Securities and Exchange Commission today announced charges against a New York-based brokerage firm and its founder for allegedly violating net capital requirements and falsifying books and records to conceal the capital deficiencies.
The SEC’s Division of Enforcement alleges that Charles “Chuck” Moore and Crucible Capital Group attempted to disguise the firm’s extensive and repeated net capital insufficiencies by improperly off-loading its liabilities onto the books of an affiliated firm and improperly treating non-marketable stock as an allowable asset. Moore went so far as to try to hide Crucible’s true financial condition from SEC examiners by providing them doctored invoices that sought to mask the extent of those liabilities. But SEC examiners and investigators successfully detected that the documents had been fabricated, and referred the matter to criminal authorities for prosecution.
The U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Moore for obstructing the SEC’s examination.
“Moore attempted to mislead SEC examiners by giving them documents he intentionally falsified in an effort to hide Crucible’s severe capital insufficiencies,” said Andrew Ceresney, director of the SEC’s Division of Enforcement. “We will continue to work with our law enforcement partners to pursue parties that try to obstruct or delay the SEC’s critical work in overseeing broker-dealers and other regulated entities.”
According to the SEC’s order instituting administrative proceedings against Crucible and Moore, Crucible entered into an expense-sharing agreement with another firm called Angelic Holdings that also was wholly owned by Moore. Under the agreement, Angelic was obligated to pay Crucible’s expenses, so Moore had Crucible’s vendors bill Angelic for the services they performed for Crucible. When SEC examiners asked for documents concerning Angelic’s liabilities, Moore arranged to provide the examiners with copies of invoices that had been doctored to eliminate significant past due amounts.
The SEC’s Division of Enforcement alleges that Moore knew that the expense-sharing agreement was illegitimate because Angelic did not have the resources to pay the debts to the vendors. And Moore knew that if those liabilities were properly attributed to Crucible, then SEC examiners would learn that Crucible had failed to meet its required minimum net capital over a 10-month period from December 2012 to September 2013
“The net capital rule is a principal tool by which the SEC monitors the financial health of brokerage firms,” said Amelia A. Cottrell, an associate director in the SEC’s New York Regional Office. “It is therefore crucial that SEC examiners have prompt access to accurate and complete information about a firm’s financial condition.”
The SEC’s Division of Enforcement alleges that Crucible violated the net capital rule: Section 15(c)(3) of the Securities Exchange Act of 1934 and Rule 15c3-1. Crucible also allegedly violated Section 17(a)(1) of the Exchange Act and Rules 17a-3(a)(11), 17a-4(b)(3), 17a-4(j),17a-5(a), and 17a-11(b)(1) by failing to maintain and keep accurate records of its aggregate indebtedness and net capital, notify the SEC of its net capital deficiency, file accurate Financial and Operational Combined Uniform Single (FOCUS) reports, and provide the examiners with accurate copies of records evidencing its expenses. Moore is alleged to have aided and abetted and caused each of these violations. The administrative proceedings will determine what, if any, remedial action or financial penalties are appropriate in the public interest against Crucible and Moore.
The SEC’s examination of Crucible was conducted by Christine Bove, William Ostrow, Yvette Panetta, and Linda Lettieri in the New York office’s broker-dealer inspection program. The investigation was conducted by Leslie Kazon and John O. Enright, and supervised by Ms. Cottrell. The Enforcement Division’s litigation will be led by Kevin McGrath and Mr. Enright. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the U.S. Postal Inspection Service.