Insiders in China & Hong Kong Paying $920,000 to Settle Case with SEC

The Securities and Exchange Commission today announced that two traders in China and Hong Kong have agreed to pay more than $920,000 to settle an insider trading case against them.

Cousins and business associates Zhichen Zhou and Yannan Liu, whose assets were frozen by an emergency court order when the SEC’s complaint was filed against them last month, must disgorge their entire ill-gotten profits of $306,929.59 plus pay penalties of $306,929.59 each. The court approved the settlement today.

The SEC’s complaint alleged that Zhou and Liu traded two health care company stocks (MedAssets Inc. and Chindex International) based on nonpublic information about their impending acquisitions by private equity firms. Liu was a private equity associate at TPG Capital, which had ties to both of the deals, and maintains a personal relationship with at least one current TPG Capital employee.

“Insider trading is more damaging than it is profitable, as experienced by these traders.  First they had their assets frozen by a court order, and now they must pay three times the amount of their insider trading profit to settle the case,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office.

Zhou and Liu, who reside in Beijing and Hong Kong respectively, settled the charges without admitting or denying the allegations.  They consented to the final judgment permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

Source: SEC on 12/28/2015


IRS, States, Industry Continue Progress to Protect Taxpayers from Identity Theft

WASHINGTON —The Internal Revenue Service, state tax administrators and leaders of the tax industry announced today continued progress to expand and strengthen protections against identity theft refund fraud for the 2016 tax season.

The public-private sector partnership announced success in identifying and testing more than 20 new data elements on tax return submissions that will be shared with the IRS and the states to help detect and prevent identity-theft related filings. In addition, the software industry is putting in place enhanced identity requirements and validation procedures for their customers to protect accounts from identity thieves.

“This unprecedented partnership continues to put strong new safeguards in place for the 2016 tax season,” IRS Commissioner John Koskinen said. “We are breaking new ground in the battle against identity theft. Taxpayers will have more protection than ever when they file their tax returns.”   Known as the Security Summit, the unprecedented collaborative effort began in March and culminated in the development of several recommendations in June between the IRS, leaders of tax preparation and software firms, payroll and tax financial product processors and state tax administrators.  Security Summit participants also identified additional topics for collaboration in the months ahead, and have continued to work together as a group to leverage their collective resources and efforts to protect taxpayers.

Koskinen and other leaders met in Washington, D.C. Tuesday to update the effort. To date, 34 state departments of revenue and 20 tax industry members have signed memorandums of understanding regarding roles, responsibilities and information sharing, with more expected to sign later.

As part of the Security Summit process, members from the IRS, states and industry are co-chairing and serving on several teams. The teams have focused on a number of areas including improved validation of the authenticity of taxpayers and information included on tax return submissions, increased information sharing to improve refund fraud detection and expand prevention, as well as more sophisticated threat assessment and strategy development to prevent risks and threats.

The industry and government groups identified numerous new data elements that can be shared at the time of filing with the IRS and states to help authenticate a taxpayer and detect identity theft refund fraud. There are more than 20 new data components that will help detect possible identity theft. The data will be submitted with the tax return transmission for the 2016 filing season, a step that will help detect and prevent refund fraud on both the federal and state level.

Another component will enhance identity validation for taxpayers using tax software. These stronger steps will protect taxpayer accounts by creating stronger verification of customers. This effort will include creation of security questions and device identity recognition at the time of log-on – both steps being used in the financial sector.

“We are taking new steps upfront to protect taxpayers at the time they file and beyond,” Koskinen said. “Thanks to the cooperative efforts taking place between the industry, the states and the IRS, we will have new tools in place this January to protect taxpayers during the 2016 filing season.”

In addition to the states and companies from the private sector, the summit team includes several groups including the Federation of Tax Administrators (FTA) representing the states, the Council for Electronic Revenue Communication Advancement (CERCA) and the American Coalition for Taxpayer Rights (ACTR). A wide variety of groups have also joined in supporting the summit effort, including Free File Inc., the National Association of Computerized Tax Processors, the National Branded Prepaid Card Association and the Financial Services Roundtable.

IRS IR-2015-117