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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2010-46
March 16, 2010

RULES AND RELATED MATTERS

Order Granting Applications for Registration as National Securities Exchanges Under Section 6 of the Securities Exchange Act of 1934

The Commission issued an order granting the applications (File Nos. 10-193 and 10-196) of EDGX Exchange, Inc. and EDGA Exchange, Inc. under the Securities Exchange Act of 1934 (Exchange Act) for registration as national securities exchanges under Section 6 of the Exchange Act. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61698)


ENFORCEMENT PROCEEDINGS

In the Matter of Don C. Weir

On March 15, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against Don C. Weir, who was associated with Huntleigh Capital Management, Inc., an investment adviser, and HFI Securities, Inc., a broker-dealer.

In the Order, the Commission's Division of Enforcement alleges that on Feb. 20, 2009, Weir pled guilty to Counts I and II of a two-count Information charging the felony of Mail Fraud (18 U.S.C. SS1341 and 2) and Criminal Forfeiture before the United States District Court for the Eastern District of Missouri, in U.S. v. Don C. Weir, Case No. 4:09CR00149RWS. The Division alleges that between 2000 and 2008, Weir sold approximately $10.4 million of precious metals belonging to his customers, without the customers' authorization, and used the money for personal and business expenses, and to pay purported profits to certain investors. The allegations add that Weir provided a customer with a fraudulent HFI Securities, Inc. statement which was designed to conceal the misappropriation, and which inflated the market values of the items not yet sold. According to the Division's allegations, Weir was sentenced on Sept. 30, 2009 to six and one-half years imprisonment and three years supervised release, and ordered to pay $12.1 million in restitution.

A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the Respondent an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.

The Order requires the Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-61709; IA-3000; File No. 3-13816)


Securities and Exchange Commission Orders Hearing on Registration Revocation Against Eleven Public Companies for Failure to Make Required Periodic Filings

On March 15, 2010, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of eleven companies for failure to make required periodic filings with the Commission:

  • Lasersight, Inc. (LRST)
  • LifeCo Investment Group, Inc.
  • LifeOne, Inc.
  • LifeF/X, Inc. (LEFX)
  • Lincorp Holdings, Inc. (LCPH)
  • Lionshare Group, Inc.
  • Lite King Corp. (LKNG)
  • Livent, Inc.
  • Loehmann's, Inc.
  • The Loewen Group, Inc.
  • Lorelei Corp.

In this Order, the Division of Enforcement (Division) alleges that the eleven issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-61712; File No. 3-13817)


In the Matter of GPS Partners, LLC and Brett S. Messing

On March 16, 2010, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 and Sections 203(e) and 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and Desist Order (Order) against GPS Partners, LLC and Brett S. Messing (Respondents).

The Order finds that in 2006 and 2007, GPS Partners, LLC, then a registered investment adviser, and Messing violated Rule 105 of Regulation M of the Exchange Act with respect to six secondary offerings. In 2006, Respondents sold securities of five issuers short within five business days before the pricing of an offering and then covered a portion of their short positions with offering shares through sham transactions using market orders and volume weighted average price algorithms. The Order finds that these violative trades resulted in profits of $194,895.

Effective October 2007, the Commission amended Rule 105 to eliminate the covering requirement and to prohibit, with certain exceptions, the purchase of offering shares by any person who sold short the same securities during the five day restricted period.

In November 2007, Respondents sold securities short within five business days before the pricing of an issuer's secondary offering and then purchased shares in that offering which amounted to 23% of the entire offering. The Order finds that this violative trade resulted in profits of $956,376.

Based on the above, the Order censures Respondents and orders them to cease-and-desist from committing or causing any violations and future violations of Rule 105 of Regulation M of the Exchange Act, and to pay disgorgement of $1,151,271, prejudgment interest of $132,900, and a civil penalty of $575,635. Respondents consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 34-61718; IA-3002; File No. 3-13818)


In the Matter of Prime Capital Services, Inc. and Gilman Ciocia, Inc.

On March 16, 2010, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Prime Capital Services, Inc. and Gilman Ciocia, Inc. (Order).

The Order finds that from approximately November 1999 through February 2007, Prime Capital Services, Inc. (PCS), a broker-dealer registered with the Commission, through its associated persons, offered and sold variable annuities to senior citizens in south Florida by means of material misrepresentations and omissions. The Order finds that many of the variable annuities sold were unsuitable investments for elderly customers due to the customers' ages, liquidity and investment objectives. The Order also finds that PCS's parent company, Gilman Ciocia, Inc. (G&C), aided and abetted the broker-dealer's fraud by arranging and marketing free-lunch seminars in the south Florida area at which PCS registered representatives recruited elderly customers whom they later induced to buy variable annuities. The Order further finds that PCS failed to implement the firm's supervisory procedures in a way that reasonably could be expected to detect and prevent the registered representatives' violations of the federal securities laws.

Based on the above, the Commission has issued an Order that censures PCS and G&C, orders PCS to cease and desist from committing or causing any violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 15(c) and 17(a) of the Exchange Act of 1934 and Rules 10b-5 and 17a-3 thereunder, orders G&C to cease and desist from committing or causing any violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(c) of the Exchange Act of 1934 and Rule 10b-5 thereunder, orders PCS to disgorge $97,389.05 plus $46,873.53 in prejudgment interest and orders G&C to pay $1 in disgorgement and a civil monetary penalty of $450,000 to be paid in three installments. In addition, PCS and G&C have agreed to a number of undertakings, including hiring an independent compliance consultant to review and recommend changes to PCS's supervisory procedures; restricting certain associated persons from involvement in variable annuity sales until the independent compliance consultant has completed its review; refunding the variable annuity fees incurred by certain elderly customers of particular registered representatives; and giving notice of the settlement to elderly customers who bought variable annuities from particular registered representatives in the past five years. PCS and G&C consented to the issuance of the Order without admitting or denying any of the findings of the Order. This Order resolves, as to PCS and G&C, the administrative proceedings that were instituted on June 30, 2009. (Rel. 33-9113; 34-61719; File No. 3-13532.)


SEC Obtains Order Freezing Assets of Russian Individual and Entity Suspected of Conducting Account Intrusion Scheme

On Monday, March 15, 2010, the United Securities and Exchange Commission filed an emergency action in the United States District Court for the Southern District of New York to freeze the assets of Defendants, located in Russia, responsible for a hi-tech market manipulation scheme. The Honorable Richard J. Holwell, granted the Commission's request to freeze the Defendants' assets pending a preliminary hearing, including an account that holds assets in excess of $500,000.

The Commission's complaint alleges that BroCo Investments, Inc., its president Valery Maltsev, and/or individuals acting in concert with them hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords and subsequently placed unauthorized trades through the compromised accounts to manipulate the markets of at least thirty-eight issuers between August 2009 and December 2009. In almost every instance, prior to intruding into these accounts, the Defendants acquired positions in their own account. Then, just minutes later, without the accountholders' knowledge, the Defendants, and/or individuals acting in concert with them, placed scores of unauthorized buy orders at above-market prices using the compromised accounts. After these unauthorized buy orders were placed, the Defendants sold the positions held in their own account at the artificially inflated prices. In other instances, the Defendants profited by covering short positions previously established in their account while placing unauthorized sell orders through the compromised accounts at substantially lower prices. This illicit account activity artificially affected the share price and trading volume for each of the thinly-traded issuers and enabled the Defendants to sell their holdings at a substantial profit, realizing at least $255,532 in ill-gotten gains.

The Commission's complaint further alleges that the Defendants violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks permanent injunctions against future violations by the Defendants and disgorgement of all ill-gotten gains, including prejudgment interest and civil penalties.

The SEC's Office of Investor Education and Assistance has previously issued an investor alert, available on the SEC's website, which provides tips for avoiding becoming a victim of an online intrusion. See http://www.sec.gov/investor/pubs/onlinebrokerage.htm. [SEC v. BroCo Investments and Valery Malstev, Civil Action No. 10-CIV-2217 (S.D.N.Y.)] (LR-21452)


Promoter Jonathan Curshen Ordered to Pay Pre-Judgment Interest and a Civil Penalty

The Securities and Exchange Commission announced that on March 11, 2010, the United States District Court for the District of Colorado ordered Jonathan Curshen to pay pre-judgment interest of $50,718.48 and a $66,235 civil money penalty for his participation as a promoter in a "pump and dump" scheme involving Freedom Golf Corporation's common stock.

On March 6, 2009, following a bench trial Curshen was found liable for securities fraud. The Court concluded that in early 2000, Curshen knowingly or recklessly posted on various Internet sites baseless projections and other financial information about Freedom Golf, a now-defunct golf club manufacturer. The Court further found that Curshen knowingly failed to disclose that he was being paid to promote Freedom Golf and was selling the company's stock while touting the company.

According to the Court's findings, Timothy Miles, a principal shareholder of Freedom Golf, arranged for the company to hire Carter Allen Jones and Curshen to promote Freedom Golf. Jones prepared an "investor report" touting Freedom Golf based on information provided by the company's president. The report contained factually baseless profit and revenue projections for Freedom Golf. Curshen posted a link to the report on Internet websites, despite knowing of the company's poor financial condition. Furthermore, the Court found Curshen posted numerous messages touting Freedom Golf on various Internet web sites without disclosing his receipt and sale of Freedom Golf stock in exchange for promoting the company.

The final judgment enjoined Curshen from violations of Sections 17(a) and 17(b) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, and barred him from participating in any penny stock offering. The final judgment also ordered Curshen to pay disgorgement of $66,235, representing profits gained from his participation in the illegal scheme. [SEC v. C. Jones & Company, Carter Allen Jones, Timothy J. Miles, Gaylen P. Johnson, and Jonathan Curshen, Civil Action No. 03-CV-00636-WDM-PAC ( D. Colo.)] (LR-21453)


INVESTMENT COMPANY ACT RELEASES

Integrity Life Insurance Company, et al.

A notice has been issued giving interested persons until April 6, 2010, to request a hearing on an application filed by Integrity Life Insurance Company (Integrity), Separate Account I of Integrity Life Insurance Company (Integrity Separate Account I), Separate Account II of Integrity Life Insurance Company (Integrity Separate Account II), National Integrity Life Insurance Company (National Integrity and together with Integrity, the Integrity Companies), Separate Account I of National Integrity Life Insurance Company (National Integrity Separate Account I), and Separate Account II of National Integrity Life Insurance Company (National Integrity Separate Account II, together with Integrity Separate Account I, Integrity Separate Account II, and National Integrity Separate Account I, the Separate Accounts and collectively, with the Integrity Companies, the Applicants). Applicants seek an order approving the proposed substitution of shares of certain portfolios of the Variable Insurance Products Fund III held by the Separate Accounts for shares of portfolios of Variable Insurance Products Fund III and in the case of the Fidelity Contrafund, shares of Variable Insurance Products Fund II as follows: Fidelity VIP Dynamic Capital Appreciation: Service Class 2 with Fidelity VIP Contrafund: Service Class 2; Fidelity VIP Growth & Income: Service Class 2 with Fidelity VIP Balanced: Service Class 2; Fidelity VIP Growth & Income: Service Class with Fidelity VIP Balanced: Service Class; Fidelity VIP Growth & Income: Initial Class with Fidelity VIP Balanced: Initial Class; Fidelity VIP Growth Opportunities: Service Class 2 with Fidelity VIP Contrafund: Service Class 2; Fidelity VIP Growth Opportunities: Service Class with Fidelity VIP Contrafund: Service Class; Fidelity VIP Growth Opportunities: Initial Class with Fidelity VIP Contrafund: Initial Class; and Fidelity VIP Value Strategies: Service Class 2 with Fidelity VIP Mid Cap: Service Class 2. (Rel. IC-29171 - March 10)


American Vantage Companies

A notice has been issued giving interested persons until April 5, 2010, to request a hearing on an application filed by American Vantage Companies. Applicant requests an order under section 8(f) of the Investment Company Act declaring that American Vantage Companies has ceased to be an investment company. (Rel. IC-29174 - March 11)


SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-ISE-2010-17) filed by the International Securities Exchange relating to customer fees for the Block Order Mechanism has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61675)

A proposed rule change filed by Chicago Board Options Exchange related to FLEX Option pilots (SR-CBOE-2010-026) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61676)

A proposed rule change filed by NASDAQ OMX PHLX relating to fees and rebates for adding and removing liquidity (SR-Phlx-2010-33) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61684)

A proposed rule change filed by NASDAQ OMX PHLX relating to certain exchange fees (SR-Phlx-2010-39) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61685)

A proposed rule change filed by NASDAQ OMX PHLX relating to fees and rebates for adding and removing liquidity (SR-Phlx-2010-41) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61686)

A proposed rule change (SR-ISE-2010-16), filed by the International Securities Exchange relating to payment for order flow fees has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61693)

A proposed rule change filed by The NASDAQ Stock Market to establish an optional non-display usage cap for internal distributors of TotalView and OpenView (SR-NASDAQ-2010-034) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61700)


Proposed Rule Changes

NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-10) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to listing of HTE Global Relative Value ETF. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61683)

NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-12) under Section 19(b)(1) of the Securities Exchange Act of 1934 relating to listing of the One Fund under NYSE Arca Equities Rule 8.600. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61689)

The Commission issued a notice of a proposed rule change, as modified by Amendment No. 3 (SR-NASD-2003-140) filed by the Financial Industry Regulatory Authority pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder, relating to the prohibition of certain abuses in the allocation and distribution of shares in initial public offerings. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61690)

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2010-03) under Section 19(b)(1) of the Securities Exchange Act. The proposed rule change would add ETFS Palladium Shares and ETFS Platinum Shares to the interpretation following the definition of "fund share" in Article I, Section 1 of OCC's By-Laws. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61692)

Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, the New York Stock Exchange filed a proposed rule change (SR-NYSE-2010-18) to amend the Bylaws of NYSE Euronext to adopt a majority voting standard in uncontested elections of directors. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61694)


Approval of Proposed Rule Change

The Commission approved a proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2010-005) to establish strike price intervals and trading hours for options on Index-Linked Securities. Publication is expected in the Federal Register during the week of March 15. (Rel. 34-61696)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2010/dig031610.htm


Modified: 03/16/2010