Tout­ing firm cited for de­ceiv­ing in­vestors

SEC charges SeeThruEquity over “in­de­pen­dent” re­ports

Stockwatch Daily - - FRONT PAGE - By Mike Caswell

THE U.S. Se­cu­ri­ties and Ex­change Com­mis­sion has filed civil fraud charges against a New York tout­ing firm, SeeThruEquity LLC, claim­ing that it mis­led in­vestors with in­flated stock price tar­gets, among other things. The firm held it­self out as of­fer­ing un­bi­ased rec­om­men­da­tions while fail­ing to dis­close pay­ments that it re­ceived for its ef­forts, the SEC says. The firm’s own­ers also se­cretly sold shares in the com­pa­nies it cov­ered, ac­cord­ing to the SEC.

The case comes just one day af­ter the SEC halted Van­cou­ver-linked Vi­tal­ity Bio­pharma Inc., one of many com­pa­nies that SeeThruEquity touted. The SEC cited a po­ten­tial ma­nip­u­la­tion at Vi­tal­ity

Bio­pharma. On the day of the halt, SeeThruEquity had as­signed the stock a $3.50 tar­get price. (All fig­ures are in U.S. dol­lars.) The price would have given Vi­tal­ity Bio­pharma a $127-mil­lion mar­ket cap­i­tal­iza­tion, when it had $182,706 in as­sets.

The SEC’s case is con­tained in a civil com­plaint that the reg­u­la­tor filed on Thurs­day, Nov. 8, in New York. It tar­gets SeeThruEquity and its two founders, broth­ers Ajay and Amit Tan­don. The broth­ers, 41 and 47, are res­i­dents of New York. The younger brother, Ajay, is a for­mer bro­ker and the older one, Amit, is a lawyer.

The al­le­ga­tions cen­tre on the steady stream of “re­search re­ports” that the firm has been is­su­ing for sev­eral years.

The re­ports, sup­pos­edly un­bi­ased, usu­ally con­tain a tar­get price for a stock. One of the many prob­lems that the SEC sees with the re­ports is that the tar­get prices only point in one di­rec­tion. “Ev­ery sin­gle pur­port­edly ob­jec­tive price tar­get that STE has ever pub­lished has been higher than the stock in ques­tion’s then-cur­rent trad­ing price,” the com­plaint states. In par­tic­u­lar, the reg­u­la­tor cites an Oct. 5, 2017, re­port in which SeeThruEquity as­signed a $6.45 tar­get price to a Nas­daq com­pany, Cemtrex Inc., when it was trad­ing at $2.84. (The stock never came any­where near the tar­get, and was last at $1.27.)

The SEC fur­ther claims that ev­ery re­search re­port is­sued by SeeThruEquity un­til March 30, 2018, con­tained the claim that the firm had not re­ceived any pay­ment for its re­port. This was en­tirely un­true, ac­cord­ing to the com­plaint. The SEC says that SeeThruEquity re­ceived sev­eral thou­sand dol­lars for each re­port it pre­pared. To ob­scure their com­pen­sa­tion, the Tan­don broth­ers of­fered to make a paid pre­sen­ta­tion at an in­vestor con­fer­ence, and in re­turn would pro­vide a “free” re­search re­port, the SEC says. The broth­ers charged be­tween $4,000 and $7,000 for each pre­sen­ta­tion. Over a pe­riod of nearly five years, SeeThruEquity re­ceived $500,000 for its work, the com­plaint states.

In ad­di­tion, the sup­pos­edly un­bi­ased re­search from SeeThruEquity in­cluded in­put di­rectly from the com­pa­nies that were the sub­ject of the cov­er­age, ac­cord­ing to the com­plaint. With one com­pany, Quad­rant 4 Sys­tems Corp., SeeThruEquity ini­tially planned to is­sue a re­port with a $2.26 price tar­get. Be­fore send­ing the re­port, the firm ran the price tar­get past Quad­rant 4’s chief ex­ec­u­tive of­fi­cer, who “ex­pressed dis­plea­sure” with the tar­get, the com­plaint states. The rec­om­men­da­tion that SeeThruEquity even­tu­ally is­sued con­tained a $5.25 tar­get. (The stock never traded any­where close to $5.25, and is now de­funct.)

Also false, ac­cord­ing to the SEC, was SeeThruEquity’s claim that it fol­lowed “cus­tom­ary in­ter­nal trad­ing re­stric­tions.” This dis­claimer gave the im­pres­sion it did not trade the stocks it cov­ered. In re­al­ity, the firm had no such re­stric­tions, the com­plaint states. The SEC cites 11 stocks that Ajay Tan­don traded while SeeThruEquity was rec­om­mend­ing the stock. In most of the in­stances that the com­plaint lists Mr. Tan­don had a profit of at least $1,000 on the trade.

In all, the SEC claims that SeeThruEquity touted at least 240 stocks over a five-year pe­riod. The SEC is seek­ing penny stock bans as well as ap­pro­pri­ate fi­nan­cial penal­ties for the Tan­dons and SeeThruEquity.

The SEC’s com­plaint does not men­tion the re­cently halted Vi­tal­ity Bio­pharma (nor does men­tion most of the other stocks that

SeeThruEquity touted). The com­pany, which touts it­self as a de­vel­oper of “cannabi­noid pro­drug phar­ma­ceu­ti­cals,” lists Van­cou­ver-area doc­tor Av­tar Dhillon as its chair­man and co-founder. In halt­ing the stock, the SEC said that there were ques­tions about undis­closed con­trol per­sons and cited a po­ten­tial ma­nip­u­la­tion of the stock. The reg­u­la­tor has not ac­cused Vi­tal­ity or Mr. Dhillon of any wrong­do­ing, nor are they de­fen­dants in this ac­tion or any other.

(*SEC)

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