Securities Law Prof Blog

SEC Obtains Preliminary Injunction Against Co-Founder of Canopy Financial

The SEC announced that on December 8, 2009, the U.S. District Court of the Northern District of Illinois entered a preliminary injunction order enjoining Jeremy J. Blackburn, a co-founder and former President and Chief Operating Officer of privately-held Canopy Financial, Inc. (Canopy), from violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)] and the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder] (Preliminary Injunction Order). Blackburn consented to the entry of the Preliminary Injunction Order. The asset freeze order entered by the Court on November 30, 2009, freezing Blackburn's assets continues.

Filed on November 30, 2009, in an emergency TRO action, the Commission's complaint alleges that Blackburn engaged in a scheme to defraud investors in a $75 million private placement offering and as part of the scheme misappropriated investor funds. The Commission's Complaint seeks, among other things, permanent injunctions against Blackburn and Canopy. The Commission's Complaint also seeks the disgorgement of ill-gotten gains, plus prejudgment interest thereon, and civil penalties.

Blackburn was charged in a federal criminal complaint unsealed on December 2, 2009, in the Northern District of Illinois.

SEC Finds Trautman Wasserman CEO Participated in Market Timing, Late Trading of Mutual Funds

The SEC found that Gregory O. Trautman, who was co founder, president, and chief executive officer of Trautman Wasserman & Company (TWCO), a registered broker dealer, willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b 5 by participating in a scheme involving deceptive market timing and illegal late trading of mutual fund shares. The Commission found that Trautman, as TWCO's president and chief executive officer, engaged in numerous deceptive acts as part of the scheme: he personally engaged in the late trading of mutual funds on behalf of several customers; he deceptively sought market timing capacity from mutual funds by materially misrepresenting the nature of TWCO's trading and its impact on the funds; and he fraudulently induced customers to invest or to continue investing with TWCO by falsely assuring them of the legality of the late trading. In addition, the Commission found that Trautman willfully aided and abetted, and was a cause of, TWCO's violations of Exchange Act Section 15(c) and Exchange Act Rule 10b 3, which prohibit broker dealers from effecting transactions in, or inducing or attempting to induce, the purchase or sale of securities by means of a manipulative, deceptive, or other fraudulent device or contrivance.

For these violations, which the Commission noted "generated at least $22 million in illicit profits for TWCO and caused dilution losses to mutual fund shareholders of more than $102 million," Trautman was barred from association with any broker or dealer, ordered to cease and desist from committing future violations of the relevant federal securities law provisions, ordered to pay $608,886 in disgorgement plus prejudgment interest, and assessed a $120,000 civil money penalty.

SEC Adopts New Disclosures on Compensation and Corporate Governance

The SEC today adopted amendments to its disclosure rules that will enhance information provided in connection with proxy solicitations and in other reports filed with the Commission. The amendments will require registrants to make new or revised disclosures about: compensation policies and practices that present material risks to the company; stock and option awards of executives and directors; director and nominee qualifications and legal proceedings; board leadership structure; the board’s role in risk oversight; and potential conflicts of interest of compensation consultants that advise companies and their boards of directors. The amendments will be applicable to proxy and information statements, annual reports and registration statements under the Securities Exchange Act of 1934, and registration statements under the Securities Act of 1933 as well as the Investment Company Act of 1940. The SEC is also transferring from Forms 10-Q and 10-K to Form 8-K the requirement to disclose shareholder voting results.

EFFECTIVE DATE: February 28, 2010

SEC Adopts Safeguards to Protect Assets of Investment Adviser Clients

The SEC today adopted rules designed to increase the protections for investors who turn their money and securities over to an investment adviser registered with the SEC. The new rules provide safeguards where there is a heightened potential for fraud or theft of client assets.  Most investment advisers do not maintain physical custody of their clients’ assets. Instead, those assets are held by a qualified third-party custodian, such as a regulated bank or a broker-dealer. However, in frauds like Bernard Madoff's, advisers have access to their clients’ assets and often cover up their misuse by distributing false account statements to their clients reflecting assets that didn’t really exist. The SEC’s new rules are intended to help prevent that from happening.

The SEC’s custody rule as amended today would promote independent custody and require the use of independent public accountants as third-party monitors. Depending on the investment adviser’s custody arrangement, the rules would require the adviser to be subject to a surprise exam and custody controls review that are generally not required under existing rules.

Surprise Exam — The adviser is now required to engage an independent public accountant to conduct an annual “surprise exam” to verify that client assets exist. Such a surprise examination would provide another set of eyes on the client’s assets, and provide additional protection against theft or misuse. The accountants would have to contact the SEC if they discovered client assets were missing.

Custody Controls Review — When the adviser or an affiliate serves as custodian of client assets, the adviser is now required to obtain a written report — prepared by an accountant that is registered with and subject to regular inspection by the PCAOB — that, among other things, describes the controls in place at the custodian, tests the operating effectiveness of those controls and provides the results of those tests. These reports are commonly known as SAS-70 reports. Requiring that the accountant be registered with and subject to inspection by the PCAOB provides greater confidence regarding the quality of these reports.

The new rules also will impose an important new control on advisers to hedge funds and other private funds that comply with the custody rule by obtaining an audit of the fund and delivering the fund's financial statements to fund investors. The rule will require that the auditor of such a private fund be registered with and subject to regular inspection by the PCAOB.

The new rules also require that the adviser reasonably believe that the client’s custodian delivers the account statements directly to the client, to provide greater assurance of the integrity of these account statements. It also will enable clients to compare the account statement they receive from their adviser to determine that the account transactions are proper.

The rule amendments adopted today are effective 60 days after their publication in the Federal Register.

The full text of the final rule amendments will be posted to the SEC Web site as soon as possible.

SC Charges Two Former Employees at Financial Services Firms with Insider Trading

The SEC today charged Vinayak S. Gowrish, a former associate at multi-billion dollar private equity firm TPG Capital L.P., and Adnan S. Zaman, a former vice president and investment banker at Lazard Frères & Co. LLC, and two of their friends in a serial insider trading scheme to profit on confidential merger and acquisition information.  According to the SEC, Gowrish and Zaman stole confidential information from their firms in connection with five deals and tipped two friends in exchange for kickbacks. Pascal S. Vaghar and Sameer N. Khoury both then traded stock and options on the basis of the nonpublic information and made nearly $500,000 in illicit profits.

According to the SEC's complaint, filed in U.S. District Court for the Northern District of California, Gowrish misappropriated and illegally tipped material, nonpublic information that TPG was in negotiations to acquire Sabre Holdings Corp., TXU Corp., and Alliance Data Systems Corp. Gowrish illegally tipped this information to Zaman, who then tipped the inside information to Vaghar and Khoury. The SEC further alleges that Zaman misappropriated and illegally tipped material, nonpublic information that Lazard clients were in negotiations to acquire webMethods, Inc. and Myogen, Inc. Zaman tipped the information to Vaghar and Khoury through in-person meetings or by writing trading instructions — including the ticker symbol of the call option (or stock) and the number of contracts (or shares) to purchase — on yellow sticky notes. Coded text messages were used to exchange trading instructions. In exchange for the confidential information, Gowrish received cash kickbacks from Vaghar, and Zaman received kickbacks in the form of cash, free rent, and other items of value from Vaghar and Khoury totaling approximately $70,000.

Zaman, Vaghar, and Sameer Khoury have offered to settle to full injunctive relief and disgorgement, and Zaman has agreed to be permanently barred from associating with any broker or dealer. In addition, Sameer Khoury's brother, Elias Khoury, who is not accused of any wrongdoing, consented to the entry of a final judgment ordering him, as a relief defendant, to disgorge the profits from trades Sameer Khoury executed in his account. The Commission is seeking permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and the imposition of financial penalties against Gowrish.

SEC and Former COO of Ark Asset Management Settle Trade Allocation Charges

The SEC and Stephen Jay Mermelstein settled charges under the Investment Advisers Act that Mermelstein, the former Chief Operating Officer of a formerly registered investment adviser, Ark Asset Management, Co., Inc. (Ark), failed reasonably to supervise a portfolio manager who engaged in fraudulent trade allocation practices during the years 2000 through 2003. As a result of this fraudulent conduct, Ark realized at least $19 million of ill-gotten gains.  The SEC's order suspends Mermelstein from association in a supervisory capacity with any investment adviser for a period of six months and orders Mermelstein to pay a civil penalty of $50,000. 

In a related proceeding, the SEC instituted an administrative proceeding against against Ark Asset Management Co., Inc. (Ark). It alleges that Ark engaged in fraudulent trade allocation practices by favoring certain proprietary accounts over certain client accounts in the allocation of securities between 2000 and 2003 and realized at least $19 million of ill-gotten gains in the form of performance fees from the proprietary accounts. Additionally, Ark's Form ADV filings during the relevant period were materially misleading. Ark also committed books and records violations by failing to make and keep true and accurate order memoranda.

Based on the above, the Order directs that a public hearing shall be convened at a time and place to be fixed not earlier than 30 days nor later than 60 days after service of the notice before an Administrative Law Judge to take evidence and determine whether the allegations are true, and that an Administrative Law Judge shall issue an initial decision within 300 days of the date of service of the Order. (Rel. IA-

SEC Charges Former Pride Int'l Officer with FCPA Violations

On December 11, 2009, the SEC charged Bobby Benton, a former officer of Pride International, Inc. (Pride), with violations relating to bribes paid to foreign officials in Mexico and Venezuela. The complaint alleges that in December 2004, Benton authorized the bribery of a Mexican customs official in return for favorable treatment regarding customs deficiencies identified during an inspection of a supply boat. The complaint further alleges that Benton had knowledge of a second bribe paid to a different Mexican customs official that same month. It is also alleged that from approximately 2003 to 2005, a manager of a Pride subsidiary in Venezuela authorized the bribery of an official of Venezuela's state-owned oil company in order to secure extensions of three drilling contracts. Benton, in an effort to conceal these payments, redacted references to bribery in an action plan responding to an internal audit report and signed two false certifications in connection with audits and reviews of Pride's financial statements denying any knowledge of bribery.

The SEC's complaint charges Benton with violating Sections 13(b)(5) and 30A of the Securities Exchange Act of 1934 and Rules 13b2-1 and 13b2-2 thereunder, and aiding and abetting violations of Sections 13(b)(2)(A), 13(b)(2)(B), and 30A of the Securities Exchange Act of 1934. The SEC's action seeks a permanent injunction, a civil penalty, and the disgorgement of ill-gotten gains plus prejudgment interest.

SEC Re-opens Comment Period for Shareholder Director Nomination Proposal

The SEC announced that it is re-opening the public comment period for its shareholder director nomination proposal to seek views on additional data and related analyses received by the Commission at or after the close of the original public comment period on August 17.  The SEC proposed changes to the federal proxy rules in June to facilitate the rights of shareholders to nominate directors on corporate boards.  In the release, the SEC specifically mentioned the following:

• Report on Effects of Proposed SEC Rule 14a-11 on Efficiency, Competitiveness and Capital Formation, in Support of Comments by Business Roundtable, NERA Economic Consulting (submitted on August 17, 2009 by the Business Roundtable);

•Why Did Some Banks Perform Better During the Credit Crisis? A Cross-Country Study of the Impact of Governance and Regulation, Andrea Beltratti and Rene M. Stulz (submitted on September 11, 2009 by the Business Roundtable);

The Limits of Private Ordering: Restrictions on Shareholders’ Ability to Initiate Governance Change and Distortions of the Shareholder Voting Process, The Corporate Library (submitted on November 18, 2009 by the Shareowner Education Network and the Council of Institutional Investors); and

• Supplemental analysis of share ownership and holding period patterns from Form 13F data by the Commission’s Division of Risk, Strategy, and Financial Innovation, dated November 24, 2009.

The SEC staff continues to expect to make a final recommendation to the Commission early next year.

In addition to re-opening the shareholder director nominations comment period, the Commission will consider final action Wednesday on its proposal to improve the disclosure of information that public companies provide to their shareholders in proxy statements. The proposed rules apply to executive compensation, qualifications of directors and nominees, and other proxy disclosures.

At its December 16 meeting, the Commission also will consider adopting proposed measures to strengthen safeguards of investor funds controlled by investment advisers.

Former Ropes & Gray Attorney Charged in Insider Trading Scheme

The SEC today announced insider trading charges against Brien P. Santarlas — a former attorney at Ropes & Gray LLP — for his alleged role in the insider trading ring that made over $20 million trading ahead of corporate acquisition announcements using inside information tipped by Santarlas and his colleague at Ropes & Gray, Arthur J. Cutillo, in exchange for cash kickbacks. The SEC alleges that Santarlas misappropriated from his law firm material, nonpublic information concerning at least two corporate acquisitions involving Ropes & Gray clients — 3Com Corp. and Axcan Pharma Inc.  The U.S. Attorney's Office for the Southern District of New York also announced today criminal charges against Santarlas in connection with the above insider trading scheme.

The complaint alleges that Santarlas gained access to material, nonpublic information by, among other means, accessing Ropes & Gray's computer network and viewing confidential deal documents. The SEC alleges that, using attorney Jason Goldfarb as a conduit, Santarlas and Cutillo tipped inside information concerning these corporate acquisitions to Zvi Goffer ("Zvi"), a proprietary trader at Schottenfeld Group, LLC ("Schottenfeld"). The complaint further alleges that Zvi traded on this information for Schottenfeld, and had numerous downstream tippees who also traded on the information, including other professional traders and portfolio managers at hedge fund advisers. The SEC previously charged Cutillo, Goldfarb, Zvi, and six others in connection with this insider trading scheme on November 5, 2009. See SEC v. Cutillo, et al., 09-CV-9208 (S.D.N.Y.) (LAK)/Lit. Rel. 21283.

The Commission's complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and the imposition of civil monetary penalties.

SEC Settles Fraud Claims Involving How-to-Trade Workshops

The SEC today filed a settled civil injunctive action against Investools Inc., Michael J. Drew and Eben D. Miller. According to the SEC's complaint, from 2004 to approximately June 2007, at Investools how-to-trade-securities workshops former Investools employees Drew and Miller misleadingly portrayed themselves as expert investors who made their living trading securities. They did so to mislead investors into believing that they too would make extraordinary profits trading securities if they purchased expensive Investools instructional courses and other products and followed Investools' securities trading strategies. The complaint further alleges that in reality, neither Drew nor Miller made the trading profits they claimed.

The complaint also alleges that Investools is liable for the fraudulent conduct of its sales personnel as a "controlling person" under the federal securities laws.

Investools agreed to a civil injunction and to pay a $3 million civil penalty. Drew and Miller agreed, respectively, to pay civil penalties of $380,000 and $130,000, and to be enjoined from violating the antifraud provisions of the federal securities laws. Drew and Miller additionally agreed to be enjoined, for five years, from receiving compensation for their participation in, among other related activities, the sale of classes, workshops, or seminars given to actual or prospective securities investors concerning securities trading. In settling the matter, Investools, Drew and Miller neither admitted nor denied the allegations in the Commission's complaint.

SEC Enforcement Director Testifies on Mortgage Fraud

Robert Khuzami, SEC Director, Division of Enforcement, testified yesterday on Mortgage Fraud, Securities Fraud, and the Financial Meltdown: Prosecuting Those Responsible before the United States Senate Committee on the Judiciary.

SEC Open Meeting Dec. 16

The SEC announced an Open Meeting - Wednesday, December 16, 2009 - 10:00 a.m.  The subject matter of the Open Meeting will be:

Item 1: The Commission will consider whether to adopt amendments to rules and forms under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 to enhance the disclosures that registrants are required to make about compensation and other corporate governance matters.

Item 2: The Commission will consider whether to adopt amendments to the investment adviser custody rule (rule 206(4)-2) under the Investment Advisers Act of 1940) and related forms and rules. The amendments would enhance the protections provided advisory clients when they entrust their funds and securities to an investment adviser.

SEC Obtains Asset Freeze Against Alleged Ponzi Schemer

The SEC today halted a Ponzi scheme involving a New York firm that solicited investments involving personal injury lawsuit settlements but instead shipped the money overseas. The SEC obtained a court order freezing the assets of the firm, Rockford Funding Group LLC, its president, and several companies holding money from the scam that began several months ago.  The SEC alleges that Rockford used cold calling and a Web site to raise at least $11 million from more than 200 investors in 41 different states and Canada since March 2009. Rockford Group falsely touted itself as a leading private equity firm with an $800 million pipeline of investments and many Fortune 500 companies as clients, and told investors their money would be safely invested in structured settlements in private lawsuits.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Rockford Group does not appear to engage in any investment activity that would generate any returns for investors, let alone its claimed returns of at least 15 percent annually. Instead, dividend payments made to investors have been funded by other investors' contributions, and Rockford Group transferred most of the money collected from investors to banks in Latvia and Hong Kong.

"The SEC alleges that Rockford Group lured investors by promising high returns and falsely assuring investors that it is a member of the Securities Investor Protection Corporation (SIPC) with up to $4 million in insurance to meet customer claims. According to the SEC's complaint, however, Rockford Group is not a member of SIPC.

SEC Charges Brookstreet Securities and CEO with Unsuitable Sales of CMOs

The SEC today charged Brookstreet Securities Corp. and its President and CEO Stanley C. Brooks with fraud for systematically selling risky mortgage-backed securities to customers with conservative investment goals. The fraud cost many Brookstreet investors their savings, homes, or retirement cushions, and eventually caused the firm to collapse. The SEC alleges that Brookstreet and Brooks developed an internal program through which the firm’s registered representatives sold particularly risky and illiquid types of Collateralized Mortgage Obligations (“CMOs”) to more than 1,000 seniors, retirees, and others for whom they were unsuitable. The SEC further alleges that Brookstreet continued to promote and sell risky CMOs to retail investors even after Brooks received numerous indications and personal warnings that these were “dangerous” investments that could become worthless overnight. Finally, in a last-ditch effort to save Brookstreet from failing during the financial crisis, Brooks directed the unauthorized sale of CMOs from Brookstreet customers’ cash-only accounts, causing substantial investor losses.

According to the SEC’s complaint, filed in federal district court in Santa Ana, Calif., Brookstreet customers invested approximately $300 million through the firm’s CMO program between 2004 and 2007. The SEC previously charged 10 Brookstreet registered representatives with making misrepresentations to investors related to the sale of risky CMOs.

SEC Extends Exemptions to Permit ICE Trust to Operate as Central Couunterparty for CDSs

On Dec. 4, 2009, the SEC approved an extension and modification of temporary exemptions that allow ICE Trust U.S. LLC (f/k/a ICE US Trust LLC) to operate as a central counterparty for clearing credit default swaps. On March 6, 2009, the SEC previously granted ICE Trust a similar exemption that was scheduled to expire on Dec. 7, 2009. The SEC's December 4th action extends the exemptions that were set to expire and expands them to address additional credit default swap clearing arrangements.

The SEC is soliciting public comment on all aspects of these exemptions to assist in its consideration of any further action that may be needed in this area. (Rel. 34-61119)

SEC Releases Enforcement and Market Data for Fiscal 2009

The SEC posted on its website its Select SEC and Market Data for Fiscal 2009, which includes information on enforcement actions.  The SEC reports that it obtained disgorgement orders of approximately $2.09 billion and penalty orders of about $345 million.  It also sought orders barring 90 individuals from serving as officers or directors of public companies.

SEC Charges Former New Century Financial Officers with Securities Fraud

The SEC today charged three former top officers of New Century Financial Corporation with securities fraud for misleading investors as New Century’s subprime mortgage business was collapsing in 2006. At the time of the fraud, New Century was one of the largest subprime lenders in the nation. The SEC’s complaint names as defendants: former CEO and co-founder Brad A. Morrice, former CFO Patti M. Dodge, and former Controller David N. Kenneally.  In its complaint, the SEC alleges that New Century disclosures generally sought to assure investors that its business was not at risk and was performing better than its peers. Defendants, however, failed to disclose important negative information, including dramatic increases in early loan defaults, loan repurchases, and pending loan repurchase requests. Defendants knew this negative information from numerous internal reports they regularly received, including weekly reports that Morrice ominously entitled “Storm Watch.”

The complaint also alleges that Dodge and Kenneally fraudulently accounted for expenses related to bad loans that it had to repurchase. In the face of dramatically increasing loan repurchases and a huge, undisclosed backlog of repurchase demands, Kenneally, with Dodge’s knowledge, made changes to New Century’s accounting for loan repurchases in both the second and third quarters of 2006. These undisclosed accounting changes violated generally accepted accounting principles and resulted in New Century’s improperly avoiding substantial repurchase expenses and materially overstating its financial results.

The complaint, filed in federal court in the Central District of California, seeks permanent injunctions against future violations, disgorgement with prejudgment interest, officer and director bars, and civil penalties.

New SEC Portal Devoted to XBRL

The SEC has created on its website a portal devoted to XBRL.  The page provides links from the SEC website to sources of information about XBRL technology, as well as creating and submitting XBRL-tagged interactive data files in compliance with Commission rules.

SEC Charges Bio-Diesel Fuels Company with Fraud

The SEC charged a purported bio-diesel fuels company with making false statements regarding its purported emissions-free coal conversion technology and financial condition.  The Commission's complaint names Nova Gen Company ("Nova Gen") of San Diego, Calif., its current CEO, Margaret Grey ("Grey"), and a sales agent, Paul Randall Fraley ("Fraley"). The complaint alleges that Grey, of San Diego, Calif. and widow of the company's founder, has continued in Nova Gen's unregistered fraudulent securities offering since she assumed control over the company in June 2009.

According to the complaint filed in U.S. District Court in San Diego, Nova Gen falsely claimed to have technology capable of converting coal into bio-diesel fuel, virtually emissions free, and even touted a plant that was up and running. The complaint further alleges Nova Gen disseminated financial statements to investors that depicted $27 million in a brokerage account and net operating income of $21 million. The complaint alleges that, in fact, Nova Gen's technology was not "ready to go," and that it did not have any plant, did not own any brokerage account, and had not generated revenue at any time. The complaint further alleges that Fraley, of Hewitt, W.Va., located potential investors and received sales commissions for his efforts, and falsely told investors that Nova Gen was about to become a publicly-traded company that would pay a guaranteed 11% dividend.

The Commission's complaint charges the defendants with violating the securities registration provisions, Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act"), the broker-dealer registration provisions, Section 15(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and the antifraud provisions, Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, of the federal securities laws. The Commission's complaint seeks permanent injunctions, disgorgement, prejudgment interest, and financial penalties.

SEC Obtains Asset Freeze in $485 Million Ponzi Scheme

On December 3, 2009, the SEC obtained a temporary restraining order and emergency asset freeze against Joseph S. Blimline relating to his involvement in a $485 million offering fraud and Ponzi scheme. The scheme was orchestrated by Joseph S. Blimline, Paul R. Melbye, Brendan W. Coughlin and Henry D. Harrison through a company they owned and controlled, Provident Royalties LLC. The Commission had previously filed a complaint against Melbye, Coughlin and Harrison and on July 7, 2009, obtained a temporary restraining order, asset freeze and appointment of a receiver with respect to those defendants. In addition to the asset freeze against Blimline, the court has extended the authority of the receiver over the newly-frozen assets.

The Commission alleges in its amended complaint that Provident advanced approximately $93 million of investor funds to Blimline and entities he controlled. The funds were for the purported purchase of oil and gas interests, or loans, to which Provident often never received title or repayment. The amended complaint also alleges that in presentations to investors and representatives of broker-dealers marketing Provident securities, Blimline failed to disclose his receipt of such funds, his involvement in the management of Provident and a prior sanction imposed against him by the Michigan securities authorities for prior conduct.

The Commission's amended complaint charges the defendants with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The amended complaint seeks a temporary restraining order and preliminary and permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and financial penalties. Officer and director bars are sought against Blimline, Melbye, Harrison and Coughlin. An additional 36 affiliated entities that did not sell securities are named as relief defendants in the amended complaint for purposes of disgorgement.