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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22133 / October 19, 2011

Securities and Exchange Commission v. Long Term-Short Term, Inc. and Freddie Rick, Civil Action No. 1:11-cv-1127 (E.D.Va)

SEC Charges Long Term-Short Term, Inc., d/b/a BetterTrades, and Its President with Securities Law Violations

On October 18, 2011, the Securities and Exchange Commission filed a settled civil injunctive action against Long Term-Short Term Inc., d/b/a BetterTrades, and Freddie Rick, the Company's co-founder and president. Without admitting or denying the allegations in the complaint, the defendants consented to judgments enjoining them from violating the antifraud provisions of the federal securities laws. The Company and Rick also agreed to pay, respectively, civil penalties of $750,000 and $150,000, and agreed to continue enforcing internal compliance guidelines designed to prevent future violations. BetterTrades sells products designed to teach how to trade options, including seminars, workshops and software that facilitates options trading. The Commission's complaint alleges that from at least 2007 and continuing through at least 2008, certain BetterTrades instructors falsely claimed to be highly successful options traders using the strategies taught by BetterTrades. In marketing materials, the defendants also claimed that certain Company instructors were successful, active traders. The complaint alleges that the defendants acted recklessly in making these claims without verifying their accuracy, despite red flags that the claims were false. The complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5.

The complaint also alleges that certain Company marketing materials claimed that Rick became wealthy through his options trading. According to the complaint, the Company knew or was reckless in not knowing that Rick's wealth came primarily from Company operations. The complaint also alleges that Rick allowed infomercials to air that incorrectly implied that his wealth came from trading.

In determining to accept the defendants' settlement offers, the SEC took into account the defendants' voluntary remediation efforts. The Company retained counsel to review how it promoted and sold its classes, products and services, and it adopted policies that set forth standards of behavior expected from instructors, including mandatory instructor training on Company policies and interpretive guidelines, collection of instructor trading records, and vetting of any instructor claims of trading success against trading records. The Company also instituted policies and detailed guidelines regarding, among other things, review and revision of marketing materials, and required student claims of trading success to be vetted against trading records. The Company also took disciplinary actions against instructors who failed to adhere to Company policies.

The Commission's settlements with the defendants are subject to the approval of the U.S. District Court for the Eastern District of Virginia.

 

http://www.sec.gov/litigation/litreleases/2011/lr22133.htm


Modified: 10/19/2011