The Securities and Exchange Commission has lodged charges against SeeThruEquity LLC, a stock research firm, and its co-founders, Ajay and Amit Tandon, accusing them of defrauding investors.
US regulators allege that the Tandons, who are brothers and the founders of SeeThruEquity, deceived investors by issuing reports claiming to be based on “unbiased” and “not paid for” research when in reality they received thousands of dollars from issuers for providing each report.
According to the SEC’s complaint, SeeThruEquity LLC and the Tandons camouflaged the payments by inviting companies to make a “presentation” at an investor conference in order to receive a research report for free.
SeeThru and the Tandons allegedly collected up to several thousand dollars in conference presentation fees per company, and the issuers regularly had input into the substance of the supposedly unbiased research reports, even including the price targets at times.
SeeThru swapped higher-price targets for current trading prices
The SEC alleges that the Tandons often instructed SeeThru analysts to use different, higher-price targets for covered issuers than those yielded through purported quantitative analysis, and the price targets contained in SeeThru’s reports were typically more than four times higher than the current trading price of the stock.
The SEC further alleges that CEO Ajay Tandon frequently traded in the same stocks that SeeThru was evaluating, despite stating in published interviews and elsewhere that neither the firm nor its principals traded in securities for which they published research.
According to the SEC, Ajay Tandon also engaged in scalping, which is a form of securities fraud that occurs when a perpetrator makes a stock recommendation to investors and trades against that very recommendation in the open market without adequate disclosure.
“There is a clear line between paid advertising and unbiased research coverage, and we allege that SeeThru and its co-founders crossed it to deceive investors and make money,” said Richard Best, director of the SEC’s Atlanta Regional office. “According to our complaint, Ajay Tandon even scalped multiple issuers, further revealing the biased nature of SeeThru’s research reports.”
The SEC’s complaint, which was filed in federal court in Manhattan, charges Ajay Tandon and SeeThru with violating the anti-fraud provisions of the federal securities laws and charges Ajay and Amit Tandon with aiding and abetting certain violations by SeeThru.
SEC looks to bar Tandons from promoting issuers of securities
The SEC is seeking permanent injunctions that would bar the Tandons and their New York research firm from promoting the issuer of any security, and disgorgement of ill-gotten gains plus interest, penalties, officer-and-director bars and penny stock bars.
Ajay and Amit Tandon couldn’t immediately be reached for comment.
Contact Ellen Kelleher at [email protected]