Touting firm cited for deceiving investors
SEC charges SeeThruEquity over “independent” reports
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.