Washington, D.C., Feb. 6, 2012 — The Securities and Exchange Commission today charged London-based medical device company Smith & Nephew PLC with violating the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business.

Smith & Nephew PLC and its U.S. subsidiary Smith & Nephew Inc. agreed to pay more than $22 million in agreements with the SEC and U.S. Department of Justice. The charges stem from the SEC’s and DOJ’s ongoing proactive global investigation of bribery of publicly-employed physicians by medical device companies.

The SEC’s complaint against Smith & Nephew PLC alleges that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.

“Smith & Nephew’s subsidiaries chose a path of corruption rather than fair and honest competition,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior.”

According to the SEC’s complaint against Smith & Nephew PLC filed in federal court in Washington D.C., U.S. subsidiary Smith & Nephew Inc. and German subsidiary Smith & Nephew Orthopaedics GmbH has sold orthopedic products in Greece since the 1970s through the Greek distributor. Greece has a national health care system in which most Greek hospitals are publicly-owned and operated, and doctors who work at those publicly-owned hospitals are government employees and “foreign officials” as defined in the FCPA.

The SEC alleges that the misconduct began in 1997, when Smith & Nephew’s subsidiaries developed a scheme to make payments to three shell entities in the United Kingdom controlled by the distributor. Those funds were used by the distributor to pay bribes to the Greek doctors on behalf of the Smith & Nephew subsidiaries. Smith & Nephew failed to act on numerous red flags of bribery as employees at the company and its subsidiaries became aware of the payments. In one e-mail exchange between employees at the U.S. subsidiary and the distributor concerning whether to reduce the distributor’s commissions, the distributor stated, “… In case it is not clear to you, please understand that I am paying cash incentives right after each surgery…” Smith & Nephew Inc. determined not to reduce the commissions.

Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Its subsidiary Smith & Nephew Inc. agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the Department of Justice. Smith & Nephew PLC consented without admitting or denying the SEC’s allegations, to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering it to retain an independent compliance monitor for a period of 18 months to review its FCPA compliance program.

The SEC’s investigation was conducted by Tracy L. Price of the Enforcement Division’s FCPA Unit along with Brent S. Mitchell and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice Fraud Section and the Federal Bureau of Investigation. The SEC’s investigation into the medical device industry is continuing.

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For more information about this enforcement action, contact:

Kara Novaco Brockmeyer
Chief, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4767

Tracy L. Price
Assistant Director, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4490

Washington, D.C., Feb. 3, 2012 – The Securities and Exchange Commission today announced that it has named Jeanette M. Franzel to be a member of the Public Company Accounting Oversight Board (PCAOB). Ms. Franzel, currently a Managing Director of the U.S. Government Accountability Office (GAO) with over 20 years of public service, will replace Daniel L. Goelzer, one of the founding members and a former interim Chairman of the five-member Board.

The Sarbanes-Oxley Act of 2002 created the PCAOB to provide independent oversight of audits of public companies and broker-dealers. The Board is responsible for setting audit standards and for registering, inspecting, and disciplining public accounting firms. The SEC oversees the PCAOB and appoints its members.

“Jeanette’s commitment to the public trust and America’s investors is demonstrated by her life-long public service and her constant dedication to increasing accountability, audit quality and audit standards,” said SEC Chairman Mary L. Schapiro. “She has extensive hands-on experience leading financial audits and deep expertise in audit quality control which will serve the PCAOB well as it continues to execute a rigorous standard-setting, inspections, and enforcement agenda.”

“I would like to thank Dan Goelzer for nearly a decade of service at the PCAOB and for continuing to serve while the search for a new member of the Board was underway,” Chairman Schapiro added. “I wish him the very best in his future endeavors.”

SEC Chief Accountant James L. Kroeker said, “We look forward to working with Jeanette on the PCAOB’s important statutory mission of overseeing the auditors of public companies and SEC-registered broker-dealers. Her qualifications as a nationally and internationally recognized expert in auditing standards will benefit the PCAOB as it works to protect the interests of investors and strengthen audit quality.”

Ms. Franzel currently leads all aspects of GAO’s financial audit oversight of the U.S. federal government. She heads a team of approximately 250 staff that focuses on financial and performance audits, proper use of federal funds, internal control, financial systems, and federal audit and financial management policy. Ms. Franzel is a Certified Public Accountant (CPA), Certified Internal Auditor (CIA), Certified Management Accountant (CMA), and Certified Government Financial Manager (CGFM). She received her bachelor’s degree from the College of St. Teresa and holds an M.B.A. from George Mason University.

“I am honored to continue serving the public interest in my new role as a member of the PCAOB. I look forward to advancing the agenda to strengthen investor protection through high quality audits of public companies and broker-dealers,” said Ms. Franzel.

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Washington, D.C., Feb 1, 2012 – The Securities and Exchange Commission today charged four former veteran investment bankers and traders at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

The SEC alleges that Credit Suisse’s former global head of structured credit trading Kareem Serageldin and former head of hedge trading David Higgs along with two mortgage bond traders deliberately ignored specific market information showing a sharp decline in the price of subprime bonds under the control of their group. They instead priced them in a way that allowed Credit Suisse to achieve fictional profits. Serageldin and Higgs periodically directed the traders to change the bond prices in order to hit daily and monthly profit targets, cover up losses in other trading books, and send a message to senior management about their group’s profitability. The SEC alleges that the mispricing scheme was driven in part by these investment bankers’ desire for lavish year-end bonuses and, in the case of Serageldin, a promotion into the senior-most echelon of Credit Suisse’s investment banking unit.

“The stunning scale of the illegal mismarking in this case was surpassed only by the greed of the senior bankers behind the scheme,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “At precisely the moment investors and market participants were urgently seeking accurate information about financial institutions’ exposure to the subprime market, the senior bankers falsely and selfishly inflated the value of more than $3 billion in asset-backed securities in order to protect their bonuses and, in one case, protect a highly coveted promotion.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Serageldin oversaw a significant portion of Credit Suisse’s structured products and mortgage-related businesses. The traders reported to Higgs and Serageldin. As the subprime credit crisis accelerated in late 2007 and 2008, Serageldin frequently communicated to Higgs the specific profit & loss (P&L) outcome he wanted. Higgs in turn directed the traders to mark the book in a manner that would achieve the desired P&L. However, under the relevant accounting principles and Credit Suisse policy, the group was required to record the prices of these bonds to accurately reflect their fair value. Proper pricing would have reflected that Credit Suisse was incurring significant losses as the subprime market collapsed.

The SEC alleges that the scheme reached its peak at the end of 2007, when the group recorded falsely overstated year-end prices for the subprime bonds. Just days later in a recorded call, Serageldin and Higgs acknowledged that the year-end prices were too high and expressed a concern that risk personnel at Credit Suisse would “spot” their mispricing. Despite acknowledging that the subprime bonds were mispriced, Serageldin approved his group’s year-end results without making any effort to correct the prices. When the mispricing was eventually detected in February 2008, Credit Suisse disclosed $2.65 billion in additional subprime-related losses related to the investment bankers’ misconduct.

The SEC’s complaint alleges that Serageldin, Higgs, and the traders Faisal Siddiqui and Salmaan Siddiqui violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted pursuant to Section 20(e) of the Exchange Act violations of Sections 10(b) and 13(a) and 13(b)(2) of the Exchange Act and Rules 10b-5 12b-20 and 13a-16 thereunder.

Under the SEC’s Statement on the Relationship of Cooperation to Agency Enforcement Decisions (Seaboard Report) and the Enforcement Division’s Cooperation Initiative, entities can benefit from acting swiftly to detect, report, and remediate misconduct and cooperate robustly with the SEC’s investigation. The SEC’s decision not to charge Credit Suisse was influenced by several factors, including the isolated nature of the wrongdoing and Credit Suisse’s immediate self-reporting to the SEC and other law enforcement agencies as well as prompt public disclosure of corrected financial results. Credit Suisse voluntarily terminated the four investment bankers and implemented enhanced internal controls to prevent a recurrence of the misconduct. Credit Suisse also cooperated vigorously with the SEC’s investigation of this matter, providing SEC enforcement officials with timely access to evidence and witnesses. The SEC’s investigation also was assisted by cooperation provided by Higgs, Faisal Siddiqui, and Salmaan Siddiqui.

The SEC’s investigation was conducted by Staff Accountant Kenneth Gottlieb, Senior Counsel Kristine Zaleskas, Senior Specialized Examiner Michael Fioribello, Assistant Regional Director Michael Paley, and Assistant Regional Director Michael Osnato, Jr. in the SEC’s New York Regional Office. Senior Trial Counsel Howard Fischer will lead the SEC’s litigation efforts.

The SEC thanks the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, and United Kingdom Financial Services Authority for their assistance in this matter.

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For more information about this enforcement action, contact:

Andrew M. Calamari
Associate Regional Director, SEC’s New York Regional Office
(212) 336-0042

Michael J. Osnato, Jr.
Assistant Regional Director, SEC’s New York Regional Office
(212) 336-0156

Washington, D.C., Jan. 31, 2012 – The Securities and Exchange Commission today charged two brothers living in Chicago and New York with naked short selling for failing to locate and deliver shares involved in short sales to broker-dealers.

Short sellers sell borrowed shares in hopes of profiting from declining prices. While short selling is legal, SEC rules require short sellers to locate shares to borrow before selling them short, and they must deliver the borrowed securities by a specified date. Market makers are excepted from the locate requirement when selling short in connection with bona-fide market making activities in the security for which the exception is claimed. Naked short selling occurs without having borrowed the securities to make delivery.

According to the SEC’s order instituting administrative proceedings against Jeffrey A. Wolfson and Robert A. Wolfson, they generated more than $17 million in ill-gotten gains from naked short selling transactions involving such stocks as Chipotle Mexican Grill Inc., Fairfax Financial Holdings Ltd., Novastar Financial Inc., and NYSE Group. As Jeffrey Wolfson stated in a recorded telephone conversation, “What I sell them is not guaranteed, it never gets delivered, it’s funny paper.”

The SEC’s Division of Enforcement alleges that Jeffrey Wolfson engaged in illegal naked short sales while working as a broker-dealer himself and later as the principal trader at a Chicago-based broker-dealer that is no longer in business. He also taught his brother and others how to do it. Robert Wolfson conducted illegal naked short sales while trading through an account at New York-based broker-dealer Golden Anchor Trading II LLC, which also has been charged in the SEC’s enforcement action. The firm has changed its name to Barabino Trading LLC.

“By engaging in naked short selling, the Wolfsons had a major advantage over competitors who complied with the law and incurred the costs associated with actually borrowing the securities,” said George S. Canellos, Director of the SEC’s New York Regional Office. “The SEC is committed to recovering substantial ill-gotten proceeds made by traders who seek to circumvent important short selling regulations.”

According to the SEC’s order, the Wolfsons engaged in two types of transactions from July 2006 to July 2007 in violation of Regulation SHO. The first type of transaction – a “reverse conversion” or “reversal” – involves selling stock short and simultaneously selling a put option and buying a call option on the stock. The Wolfsons did not locate the stock before the sale, nor did they deliver the shares when sold or make a bona fide purchase of the stock when required to close out their resulting fail-to-deliver position. They were not entitled to the market maker exception to Regulation SHO because the short sales were not made in connection with bona-fide market making activities.

The SEC's order states that the second type of transaction was a stock and option combination that created the illusion that the party subject to a close-out obligation had satisfied that obligation by buying the same kind and quantity of securities it had sold short. However, the stock was always sold back either the next day or within several days, and the Wolfsons knew or had reason to know that the shares ostensibly purchased in these sham transactions would never be delivered because they were purchased from another naked short seller who did not have the stock either. The Wolfsons entered into a significant number of these sham "reset" transactions with each other and also took the other side of the "reset" trades done by each other as well those done by other market participants.

The SEC's Division of Enforcement alleges that by engaging in the misconduct described in the order, Jeffrey Wolfson willfully violated and willfully aided and abetted and caused BMR's violations of Rule 203(b)(1) of Regulation SHO, and willfully violated and willfully aided and abetted and caused others' violations of Rule 203(b)(3) of Regulation SHO. It further alleges that Golden Anchor willfully violated, and Robert Wolfson willfully aided and abetted and caused Golden Anchor's violations of Rules 203(b)(1) and 203(b)(3) of Regulation SHO. The administrative proceedings will determine what relief, if any, is in the public interest against Jeffrey Wolfson, Robert Wolfson and Golden Anchor, including disgorgement of ill-gotten gains, prejudgment interest, financial penalties, a censure or a suspension or bar from association with any broker-dealer.

The SEC’s investigation was conducted by Steven Rawlings, Peter Altenbach, Daniel Marcus and Layla Mayer and the litigation effort will be led by Kevin McGrath. They work in the New York Regional Office. The SEC’s investigation into violations of Regulation SHO is continuing.

The SEC acknowledges the assistance of the Chicago Board Options Exchange and the Financial Industry Regulatory Authority in this matter.

# # #

For more information about this enforcement action, contact:

Andrew M. Calamari
Associate Director, SEC’s New York Regional Office
(212) 336-0042

Steven G. Rawlings
Assistant Director, SEC’s New York Regional Office
(212) 336-0149

Washington, D.C., Jan. 30, 2012 – The Securities and Exchange Commission today charged four former senior executives and accountants at the British subsidiary of an Indiana-based manufacturer of medical devices and aerospace products for their roles in an accounting fraud that was so pervasive that it distorted the financial statements of the parent company.

The SEC also reached settlements with the company’s former CEO and current CFO, who were not involved or aware of the scheme at the subsidiary, to recover bonus compensation and stock profits they received while the fraud was occurring and inflating company profits.

The SEC alleges that vice president for European operations Richard J. Senior, finance director Matthew Bell, controller Lynne Norman, and management accountant Shaun P. Whiteley orchestrated and carried out the fraud at Thornton Precision Components (TPC), which is the Sheffield, England-based subsidiary of NYSE-listed Symmetry Medical Inc. The accounting scheme involved the systematic understatement of expenses and overstatement of assets and revenues at TPC, and materially distorted Symmetry’s financial statements for a three-year period.

The four executives and accountants, as well as Symmetry in a separate administrative proceeding, agreed to settle the SEC’s charges, and the subsidiary’s two outside auditors formerly of Ernest & Young LLP UK agreed to suspensions for their deficient audits.

“The accounting fraud orchestrated by TPC executives had a ripple effect right up to the financials of the parent company. Symmetry shareholders were investing their money – and Symmetry and TPC executives were collecting their bonuses – based in part on inflated numbers,” said Stephen Cohen, Associate Director of the SEC’s Division of Enforcement. “We also found significant failures by two outside auditors, which helped this fraud to continue undetected. Accountants who practice before the SEC, including those who audit foreign subsidiaries of U.S. registrants, need to make sure their audits conform to U.S. auditing standards or they won’t be allowed to practice before the SEC.”

According to the SEC’s complaint filed in federal court in South Bend, Ind., Symmetry’s annual financial statements for 2005 and 2006 as well as other reporting periods were materially misstated as a result of misconduct in the reporting of TPC’s financials. Senior, Bell and Norman made false certifications as to the accuracy of the financial information reported to Symmetry by TPC, and lied to TPC’s outside auditors. Meanwhile, Senior and Bell each received bonuses and sold Symmetry stock at prices they knew or recklessly disregarded were fraudulently inflated by the accounting fraud taking place at TPC.

In a separate complaint also filed in the same federal court, the SEC is seeking reimbursement for bonuses and other incentive-based and equity-based compensation received by Symmetry’s former CEO Brian S. Moore under Section 304 of the Sarbanes-Oxley Act. Under the settlement, subject to court approval, Moore agreed to reimburse $450,000 to Symmetry.

The SEC also instituted separate settled administrative proceedings against Symmetry and its CFO Fred L. Hite. The SEC finds that Hite failed to provide an internal audit status report concerning TPC to Symmetry’s Audit Committee in July 2006. Although the internal audit status report had not uncovered the fraud at TPC, it did raise the potential for deeper problems there. Hite also failed to reimburse Symmetry for bonuses, other compensation, and Symmetry stock-sale proceeds he received while the fraud occurred at the subsidiary (as required by SOX Section 304). Hite agreed to pay a $25,000 penalty and reimburse $185,000 to Symmetry. For its part, Symmetry agreed to a cease-and-desist order against future financial reporting, books-and-records and internal controls violations.

The SEC separately instituted and settled administrative proceedings against two associate chartered accountants in the United Kingdom – Christopher J. Kelly and Margaret Hebb née Whyte – who were the former audit partner and audit manager on Ernest & Young LLP UK’s audits of TPC for its 2004 to 2006 fiscal years (in the case of Kelly) and its 2005 and 2006 fiscal years (in the case of Hebb). The SEC’s order finds that Kelly and Hebb engaged in improper professional conduct by, among other things, failing to properly audit TPC’s accounts receivable balances and inventory. The order suspends both Kelly and Hebb from appearing or practicing before the SEC as accountants, with the opportunity to seek reinstatement after two years.

The SEC acknowledges the assistance of the United Kingdom’s Financial Services Authority in this matter.

# # #

For more information about this enforcement action, contact:

Stephen L. Cohen
Associate Director, SEC’s Division of Enforcement
202-551-4472

Washington, D.C., Jan. 27, 2012 — The Securities and Exchange Commission announced today that Noelle Maloney will serve as interim Inspector General for the agency following the departure of Inspector General H. David Kotz to join a private investigative services firm. Mr. Kotz’s last day at the Commission was Friday, Jan. 27.

Ms. Maloney will head the SEC’s Office of Inspector General (OIG) while the Commission searches for a permanent head. The 2010 Dodd-Frank Act requires the Inspector General to report to all SEC Commissioners, so SEC Chairman Mary Schapiro has directed the staff to work with the Commissioners to create a consensus process that will involve all the Commissioners in the hiring.

Ms. Maloney has been Deputy Inspector General at the agency since July 2008. In that role, she oversees the OIG’s Office of Investigations and the OIG’s Office of Audits, which conducts independent audits and evaluations of SEC programs and operations. Ms. Maloney also is responsible for supervising the OIG’s administrative, financial, and personnel matters, information systems management, strategic planning, and policy development.

Ms. Maloney joined the SEC in January 2005 as a Senior Counsel in the Office of the General Counsel of the SEC. In that capacity, Ms. Maloney served as an agency subject matter expert on issues of privacy and information sharing.

Before coming to the SEC, Ms. Maloney was the Director of Policy and Public Information for the Peace Corps, where she supervised the audit and evaluation of agency policy, operating plans, and programs, and the drafting of new policy. She also served as the agency’s Freedom of Information and Privacy Act Officer. Ms. Maloney began her federal career at the National Institutes of Health, where she worked in offices of administration and management as well as legislative and intergovernmental affairs.

Ms. Maloney received her bachelor’s degree in English from the College of New Jersey, and her law degree from Rutgers School of Law-Camden, where she graduated with awards for her pro bono work and brief writing. Before moving to Washington, D.C., to begin her federal career, Ms. Maloney clerked for the Honorable Donald A. Smith, Jr., Presiding Civil Judge of the New Jersey Superior Court, and was an associate at the law firm of Sterns & Weinroth, PC.

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Washington, D.C., Jan. 26, 2012 — The Securities and Exchange Commission announced today that its Advisory Committee on Small and Emerging Companies will meet on Wednesday, February 1, beginning at 10 a.m. EST.

The meeting will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public, with seating on a first-come, first-served basis. It also will be webcast live on the SEC’s website, www.sec.gov, and archived for later viewing.

The committee will discuss potential recommendations to the Commission on issues relevant to small and emerging companies and hear presentations on the report of the IPO Task Force, “Rebuilding the IPO On-Ramp,” which was presented to the U.S. Department of the Treasury in October 2011.

The Advisory Committee was formed last year to provide a formal mechanism for the SEC to receive advice and recommendations on privately held small businesses and publicly traded companies with a market capitalization less than $250 million. More information about the committee and its members is available at http://www.sec.gov/info/smallbus/acsec.shtml.

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Agenda

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Washington, D.C., Jan. 26, 2012 – The Securities and Exchange Commission today charged a Fort Lauderdale-based firm and its founder with conducting a fraudulent boiler room scheme in which they hyped stock in two thinly-traded penny stock companies while behind the scenes they sold the same stock themselves for illegal profits.

The SEC alleges that First Resource Group LLC and its principal David H. Stern employed telemarketers who fraudulently solicited brokers to purchase stock in TrinityCare Senior Living Inc. and Cytta Corporation. While recommending the securities in these two microcap companies, Stern sold First Resource’s shares of TrinityCare and Cytta stock unbeknownst to investors who were purchasing them – a practice known as scalping. As Stern was selling the stocks, he also purchased small amounts in order to create the false appearance of legitimate trading activity and induce investors to purchase shares in both companies.

“First Resource and Stern used a telephone sales boiler room to make inflated claims and defraud investors while simultaneously manipulating the price of the stocks and making profits for themselves,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The SEC will continue to aggressively pursue perpetrators of microcap stock fraud schemes that hound potential investors to buy stock.”

Since the beginning of fiscal year 2011, the SEC has filed more than 50 enforcement actions for misconduct related to microcap stocks, and issued 63 orders suspending the trading of suspicious microcap issuers. Microcap stocks are issued by the smallest of companies and tend to be low priced and trade in low volumes. Many microcap companies do not file financial reports with the SEC, so investing in microcap stocks entails many risks. The SEC has published a microcap stock guide for investors and an Investor Alert about avoiding microcap fraud perpetrated through social media.

According to the SEC’s complaint filed against Stern and First Resource in U.S. District Court for the Southern District of Florida, they violated federal securities laws by acting as unregistered broker-dealers. Stern hired and trained First Resource’s salespeople and gave them information about TrinityCare to prepare sales scripts and pitch the stock to potential investors. Stern reviewed the draft scripts, made edits, and approved the scripts before the salespeople were allowed to use them.

The SEC alleges that Stern gave the salespeople a list of potential investors to cold call and pitch the stocks. First Resource’s salespeople falsely claimed TrinityCare stock “is going to be $5-7 in 6-12 months” and the company “is going to be a half-a-billion dollar company in five years or roughly a $40 stock.” Stern also disseminated a research report on Cytta to investors and falsely touted: “Sales projections for 2010-2014 should exceed $500 million with a pre-tax net of over $400 million.”

The SEC’s complaint alleges that First Resource Group and Stern violated Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and financial penalties as well as a penny stock bar against Stern.

The SEC’s investigation was conducted by Jorge L. Riera under the supervision of Elisha L. Frank in the SEC’s Miami Regional Office in coordination with an examination of First Resource conducted by Anson Kwong, Michael J. Nakis, George Franceschini, and Nicholas A. Monaco of the SEC’s Miami office. Edward D. McCutcheon will lead the SEC’s litigation efforts.

The SEC’s investigation is continuing.

# # #

For more information about this enforcement action, contact:

Eric I. Bustillo, Regional Director
Glenn S. Gordon, Associate Regional Director
Elisha L. Frank, Assistant Regional Director
Edward D. McCutcheon, Senior Trial Counsel
SEC Miami Regional Office
(305) 982-6300

Washington, D.C., Jan. 26, 2012 – The Securities and Exchange Commission today charged a trader in Latvia for conducting a widespread online account intrusion scheme in which he manipulated the prices of more than 100 NYSE and Nasdaq securities and caused more than $2 million in harm to customers of U.S. brokerage firms.

The SEC also instituted related administrative proceedings today against four electronic trading firms and eight executives charged with enabling the trader’s scheme by allowing him anonymous and unfiltered access to the U.S. markets.

According to the SEC’s complaint filed in federal court in San Francisco, Igors Nagaicevs broke into online brokerage accounts of customers at large U.S. broker-dealers and drove stock prices up or down by making unauthorized purchases or sales in the hijacked accounts. This occurred on more than 150 occasions over the course of 14 months. Nagaicevs – using the direct, anonymous market access provided to him by various unregistered firms – traded those same securities at artificial prices and reaped more than $850,000 in illegal profits.

“Nagaicevs engaged in a brazen and systematic securities fraud, repeatedly raiding brokerage accounts and causing massive damages to innocent investors and their brokerage firms,” said Marc J. Fagel, Director of the SEC’s San Francisco Regional Office.

According to the SEC’s orders instituting administrative proceedings against the four electronic trading firms, they allowed Nagaicevs to trade through their electronic platforms without first registering as brokers. Each of the trading firms provided him online access to trade directly in the U.S. markets through an account held in the firm’s name. These firms gave Nagaicevs a gateway to the U.S. securities markets while circumventing the protections of the federal securities laws, including requirements for brokers to maintain and follow adequate procedures to gather information about customers and their trading.

“These firms provided unfettered access to trade in the U.S. securities markets on an essentially anonymous basis,” said Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit. “By failing to register as brokers, the firms and principals in this case exposed U.S. markets to real harm by evading crucial safeguards of the federal securities laws. We will not allow firms like these to fly under the radar and become safe havens for market abuse.”

The electronic trading firms and individuals named in the SEC’s administrative proceedings are:

• Alchemy Ventures, Inc. of San Mateo, Calif.
  • Mark H. Rogers, the firm’s president, who lives in San Carlos, Calif.
  • Steven D. Hotovec, the firm’s vice president, who lives in Redwood City, Calif.
• KM Capital Management, LLC of Philadelphia
  • Joshua A. Klein, the firm’s founder and co-owner, who lives in Philadelphia.
  • Yisroel M. Wachs, the firm’s co-owner, who lives in Philadelphia.
• Zanshin Enterprises, LLC of Boise, Idaho
  • Frank K. McDonald, managing member of the firm, who lives in Boise.
  • Richard V. Rizzo, an associate of the firm, who lives in Oceanside, N.Y.
• Mercury Capital of La Jolla, CA
  • Lisa R. Hyatt, the firm’s president, who lives in Escondido, Calif.
  • Douglas G. Frederick, an associate of the firm, who lives in Brighton, Mich.

Mercury Capital, Hyatt, and Rizzo each agreed to a settlement in which they consented to SEC orders finding that they committed or aided and abetted and caused broker registration violations. Hyatt and Rizzo each agreed to pay a $35,000 penalty.

The SEC’s administrative action will determine whether the non-settling trading firms and principals violated the broker registration provision of the federal securities laws, or whether the non-settling principals aided and abetted and caused the firms’ violations, and what sanctions, if any, are appropriate as a result. The SEC’s complaint alleges that Nagaicevs violated the antifraud provisions of the federal securities laws and seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties.

The SEC’s Market Abuse Unit, headed by chief Daniel M. Hawke and deputy chief Sanjay Wadhwa, conducted the investigation in this matter jointly with the agency’s San Francisco Regional Office under the leadership of Director Marc J. Fagel and Associate Director Michael S. Dicke. Jina L. Choi and Steven D. Buchholz – members of the Market Abuse Unit in San Francisco – together with Alice Jensen of the San Francisco Regional Office conducted the agency’s investigation, which is ongoing. The SEC’s litigation effort will be led by Lloyd A. Farnham and John S. Yun of the San Francisco Regional Office.

The SEC thanks the Financial Industry Regulatory Authority (FINRA), Cyprus Securities Commission, and Latvia Financial and Capital Market Commission for their assistance.

# # #

For more information about this enforcement action, contact:

Daniel M. Hawke
Chief, Market Abuse Unit, SEC’s Division of Enforcement
(215) 597-3191

Sanjay Wadhwa
Deputy Chief, Market Abuse Unit, SEC’s Division of Enforcement
(212) 336-0181

Jina L. Choi
Assistant Director, Market Abuse Unit and SEC’s San Francisco Regional Office
(415) 705-2500

Washington, D.C., Jan. 23, 2012 — The Securities and Exchange Commission today announced that Diamondback Capital Management LLC has agreed to pay more than $9 million to settle insider-trading charges brought by the Commission on Jan. 18. The proposed settlement is subject to the approval of Judge Paul G. Gardephe of the U.S. District Court for the Southern District of New York. As part of the proposed settlement, the Stamford, Conn.-based hedge fund adviser also has submitted a statement of facts to the SEC and federal prosecutors, and entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York.

Under the proposed settlement, Diamondback will give up more than $6 million of allegedly ill-gotten gains and pay a $3 million civil penalty. In addition, Diamondback consented to a judgment that permanently enjoins it from future violations of federal anti-fraud laws. The proposed settlement would resolve charges of insider trading by Diamondback in shares of Dell Inc. and Nvidia Corp. in 2008 and 2009.

“We are pleased to have reached a prompt resolution of the charges against Diamondback,” said George S. Canellos, Director of the SEC’s New York Regional Office. “If approved by the court, we believe that the proposed settlement appropriately sanctions the misconduct while giving due credit to Diamondback for its substantial assistance in the government’s investigation and the pending actions against former employees and their co-defendants.”

Last week, the SEC filed insider-trading charges against Diamondback, a second hedge fund advisory firm, and seven individuals, including a former Diamondback analyst and former Diamondback portfolio manager. In reaching the proposed settlement announced today, the SEC considered the substantial cooperation that Diamondback provided, including conducting extensive interviews of staff, reviewing voluminous communications, analyzing complex trading patterns to determine suspicious trading activity, and presenting the results of its internal investigation to federal investigators.

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For more information about this enforcement action, contact:

George Canellos
Director, SEC’s New York Regional Office
212-336-1020
Sanjay Wadhwa
Associate Director, SEC’s New York Regional Office and Deputy Chief, Market Abuse Unit 
212-336-0181
David Rosenfeld
Associate Director, SEC’s New York Regional Office
212-336-0153
Joseph G. Sansone
Assistant Director, SEC’s New York Regional Office and Market Abuse Unit
212-336-0517

Washington, D.C., January 20, 2012 — The Securities and Exchange Commission today announced that on February 21, 2012 the fees rates applicable to most securities transactions will decrease from $19.20 per million dollars to $18.00 per million dollars. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction.

The Commission determined these new rates in accordance with Section 31 of the Securities Exchange Act of 1934 (“Exchange Act”). Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment. These adjustments do not affect the amount of funding available to the Commission. A copy of the Commission’s order, including the calculation methodology, is available at http://www.sec.gov/rules/other/2012/34-66202.pdf.

Please note that the fee rates for fiscal year 2012 previously announced on May 2, 2011 never became effective. As stated in that announcement, those fee rates would never become effective if, as was the case, a regular appropriation to the Commission for fiscal year 2012 was not enacted by October 1, 2011. Instead, the Commission is now issuing revised fee rates in accordance with the amendments to Section 31 of the Exchange Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Office of Interpretation and Guidance in the Commission’s Division of Trading and Markets is available for questions on Section 31 at (202) 551-5777, or by e-mail at tradingandmarkets@sec.gov.

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Washington, D.C., Jan. 18, 2012 — The Securities and Exchange Commission today announced that it has obtained an emergency court order to freeze the assets of St. Louis-based private investment funds and management firms after suing them and their principal for a scheme to defraud investors.

The SEC alleges that Burton Douglas Morriss diverted more than $9 million of investors’ money to himself without their knowledge or consent, and he mischaracterized the transfers as ‘loans” in his companies’ books. Morriss misused the money for alimony payments, interest on personal loans, and costly vacations including an African safari.

“Morriss attempted to hide his illegal transfers of investor funds by calling them ‘loans’ when in reality he had no intention of paying back the money and instead went on a spending spree,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “It is fraud, pure and simple.”

The SEC’s complaint filed Tuesday in federal court in St. Louis charges Morriss, his two private investment funds MIC VII LLC and Acartha Technology Partners LP, and his management firms, Gryphon Investments III LLC and Acartha Group LLC. Morriss Holdings LLC, an entity to which Morriss transferred some of the investor funds, is named as a relief defendant.

The SEC alleges that Morriss raised $88 million from investors who were told their funds would be invested in emerging financial services and technology companies. Instead, the SEC said Morriss transferred millions to himself and Morriss Holdings and used them for personal expenses.  In an attempt to conceal his scheme, the fraudulent transfers that Morriss made to himself were recorded as “loans” on the books of Morriss’s companies. However, the transfers were never truly loans because Morriss did not intend to repay them. Morriss also recruited new investors for one of his funds without the unanimous consent of existing investors as required, thereby diluting their holdings.

On Tuesday, the Honorable Carol E. Jackson granted the SEC’s request for asset freezes, the appointment of a receiver, and other emergency relief to prevent further dissipation of investor assets. The SEC seeks to bar Morriss from serving as a public company officer or director; it also seeks permanent injunctive relief and financial penalties against Morriss and the entity defendants, and disgorgement of all ill-gotten gains from them and relief defendant Morriss Holdings.

The SEC’s investigation was conducted by Brian T. James, Trisha D. Sindler, and Michelle Lama under the supervision of Chedly C. Dumornay in the Miami Regional Office. Adam Schwartz and Robert K. Levenson will litigate the case.

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For more information about this enforcement action, contact:

Eric I. Bustillo, Regional Director
Glenn S. Gordon, Associate Regional Director
Chedly C. Dumornay, Assistant Regional Director
Adam Schwartz, Senior Trial Counsel
SEC’s Miami Regional Office
(305) 982-6300

Washington, D.C., Jan. 18, 2012 — The Securities and Exchange Commission today charged the holding company for one of Florida’s largest banks and its top executive with misleading investors about growing problems in one of its significant loan portfolios early in the financial crisis.

The SEC alleges that BankAtlantic Bancorp and its CEO and chairman Alan Levan made misleading statements in public filings and earnings calls in order to hide the deteriorating state of a large portion of the bank’s commercial residential real estate land acquisition and development portfolio in 2007. BankAtlantic and Levan then committed accounting fraud when they schemed to minimize BankAtlantic’s losses on their books by improperly recording loans they were trying to sell from this portfolio in late 2007.

“BankAtlantic and Levan used accounting gimmicks to conceal from investors the losses in a critical loan portfolio," said Robert Khuzami, Director of the SEC's Division of Enforcement. "This is exactly the type of information that is important to investors, and corporate executives who fail to make that required disclosure will face severe consequences."

According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, BankAtlantic and Levan knew that a large portion of the loan portfolio — which consisted primarily of loans on large tracts of lands intended for development into single family housing and condominiums — was deteriorating in early 2007 because many of the loans had required extensions due to borrowers’ inability to meet their loan obligations. Some loans were kept current only by extending the loan terms or replenishing the interest reserves from an increase in the loan principal. Levan knew this negative information in part from participating in the bank’s Major Loan Committee that approved the extensions and principal increases. BankAtlantic and Levan also were aware that many of the loans had been internally downgraded to non-passing status, indicating the bank was deeply concerned about those loans.

“BankAtlantic and Levan publicly minimized the risks in the bank’s commercial residential loan portfolio when in reality, they had significant concerns about the borrowers’ ability to pay,” said Eric I. Bustillo, Miami Regional Office Director. “Investors had a right to know this key information.”

The SEC alleges that despite this knowledge, BankAtlantic’s public filings in the first two quarters of 2007 made only generic warnings of what may occur in the future if Florida’s real estate downturn continued. BankAtlantic failed to disclose the downward trend already occurring in its own portfolio. The steady deterioration of this portfolio constituted a known trend that should have been disclosed in the Management’s Discussion and Analysis (MD&A) section of BankAtlantic’s filings, which were signed by Levan. During earnings calls in the same time period, Levan made further misleading statements to investors about the portfolio. BankAtlantic finally acknowledged the problems in the third quarter of 2007 by announcing a large unexpected loss. The investing public did not expect a loss of that magnitude, and BankAtlantic’s share price immediately dropped 37 percent.

According to the SEC’s complaint, BankAtlantic and Levan attempted to sell some of the deteriorating loans after this announcement. However, they failed to account for them properly as being “held for sale,” which is required by Generally Accepted Accounting Principles (GAAP). BankAtlantic concealed the attempted sales from auditors and investors alike, because proper accounting would have required BankAtlantic to write them down and incur immediate additional losses. Instead, BankAtlantic schemed to understate its net loss by more than 10 percent in its 2007 annual report.

The SEC’s complaint seeks financial penalties and permanent injunctive relief against BankAtlantic and Levan to enjoin them from future violations of the federal securities laws. The complaint also seeks an officer and director bar against Levan.

The SEC’s investigation was conducted by Senior Counsel Brian P. Knight and Senior Accountant Fernando Torres under the supervision of Assistant Regional Director Thierry Olivier Desmet in the Miami Regional Office. C. Ian Anderson and Adam L. Schwartz will lead the SEC’s litigation efforts.

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For more information about this enforcement action, contact:

Eric I. Bustillo, Regional Director
Glenn S. Gordon, Associate Regional Director
Thierry Olivier Desmet, Assistant Regional Director
C. Ian Anderson, Senior Trial Counsel
SEC Miami Regional Office
(305) 982-6300

Washington, D.C., Jan. 18, 2012 – The Securities and Exchange Commission today published on its website a request for public comment on financial literacy and investor disclosure issues that it is studying as part of a review mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Section 917 of the Dodd-Frank Act directs the SEC to conduct a study of retail investors’ financial literacy and submit its findings to Congress by July 21, 2012. The SEC is using qualitative and quantitative research, including investor testing, to help inform the study. To supplement its research, the SEC also is seeking public comment on financial literacy and investor disclosure issues.

Consistent with the Dodd-Frank Act’s specifications for the study, the SEC is seeking comment on methods to improve the timing, content, and format of disclosures to investors regarding financial intermediaries, investment products, and investment services. It also requests comment on information that retail investors need to make informed financial decisions on hiring a financial intermediary or purchasing an investment product or service typically sold to retail investors, including mutual funds. In addition, the SEC seeks comment on how to make investment expenses and conflicts of interest in investment transactions more transparent to investors.

“Many of the issues that the Dodd-Frank Act identified for Commission study directly affect individual investors. As a result, we are especially interested in receiving comments from individual retail investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.

The public comment period will remain open for 60 days, following publication of the request in the Federal Register.

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Washington, D.C., Jan. 18, 2012 – The Securities and Exchange Commission today charged two multi-billion dollar hedge fund advisory firms as well as seven fund managers and analysts involved in a $78 million insider trading scheme based on nonpublic information about Dell’s quarterly earnings and other similar inside information about Nvidia Corporation.

The charges stem from the SEC’s ongoing investigation into the trading activities of hedge funds. The U.S. Attorney for the Southern District of New York today announced criminal charges against the same seven individuals.

The SEC alleges that a network of closely associated hedge fund traders at Stamford, Conn.-based Diamondback Capital Management LLC and Greenwich, Conn.-based Level Global Investors LP illegally obtained the material nonpublic information about Dell and Nvidia. Investment analyst Sandeep “Sandy” Goyal of Princeton, N.J., obtained Dell quarterly earnings information and other performance data from an insider at Dell in advance of earnings announcements in 2008. Goyal tipped Diamondback analyst Jesse Tortora of Pembroke Pines, Fla., with the inside information, and Tortora in turn tipped several others, leading to insider trades on behalf of Diamondback and Level Global hedge funds.

“These are not low-level employees succumbing to temptation by seizing a chance opportunity. These are sophisticated players who built a corrupt network to systematically and methodically obtain and exploit illegal inside information again and again at the expense of law-abiding investors and the integrity of the markets,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

According to the SEC’s complaint filed in federal court in Manhattan, the illicit gains in the Dell insider trades exceeded $62.3 million, and the illicit gains in the Nvidia insider trades exceeded $15.7 million. For his role in the scheme, Goyal was paid $175,000 in soft dollar payments that were deposited in a brokerage account of an individual affiliated with him.

The SEC alleges that after obtaining the inside information from Goyal in advance of Dell’s first and second quarter earnings announcements in 2008, Tortora tipped his portfolio manager at Diamondback, Todd Newman of Needham, Mass. Newman traded on the information on behalf of the Diamondback hedge funds he controlled. Tortora also tipped Spyridon “Sam” Adondakis, an analyst at Level Global. Adondakis tipped his manager Anthony Chiasson, who then traded on the inside information on behalf of Level Global hedge funds. During this time period, both Adondakis and Chiasson lived in New York City.

According to the SEC’s complaint, Tortora also tipped two others at firms other than Diamondback or Level Global with the Dell inside information: Jon Horvath of New York City and Danny Kuo of San Marino, Calif. Horvath caused insider trades at his firm that resulted in approximately $1.4 million of illicit gains. Kuo similarly caused the firm where he worked to execute profitable insider trades in Dell securities.

The SEC further alleges that Kuo also obtained inside information about Nvidia Corporation’s calculation of its revenues, gross profit margins, and other financial metrics in advance of the company’s first quarter 2010 earnings announcements, which was made in May 2009. Kuo again caused his firm to trade on inside information. Kuo’s insider trades in Dell and Nvidia resulted in approximately $270,000 in ill-gotten gains. Kuo also tipped Tortora at Diamondback and Adondakis at Level Global with the nonpublic information about Nvidia. Tortora again tipped Newman, who made more insider trades on behalf of the Diamondback hedge funds. The illegal trades in Dell and Nvidia securities resulted in $3.9 million in illicit gains for Diamondback. At Level Global, Adondakis tipped Chiasson who made the insider trades on behalf of those hedge funds. Chiasson’s insider trades in Dell and Nvidia resulted in approximately $72.6 million of illicit gains for the Level Global hedge funds.

The SEC’s complaint charges each of the defendants with violations of 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, additionally, charges Goyal, Tortora, Newman, Adondakis, Chiasson, Horvath and Kuo with aiding and abetting others’ violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC’s complaint seeks a final judgment ordering the defendants to disgorge their ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws.

The SEC’s investigation, which is continuing, has been conducted by Joseph Sansone, Daniel Marcus and Stephen Larson – members of the SEC’s Market Abuse Unit in New York – and Matthew Watkins, Neil Hendelman, Diego Brucculeri and James D’Avino of the New York Regional Office. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in the matter.

# # #

For more information about this enforcement action, contact:

George Canellos
Director, SEC’s New York Regional Office
212-336-1020

Sanjay Wadhwa
Associate Director, SEC’s New York Regional Office and Deputy Chief, Market Abuse Unit
212-336-0181

David Rosenfeld
Associate Director, SEC’s New York Regional Office
212-336-0153

Joseph G. Sansone
Assistant Director, SEC’s New York Regional Office and Market Abuse Unit
212-336-0517

Washington, D.C., Jan. 17, 2012 – The Securities and Exchange Commission today announced that Jane A. Norberg has been appointed as Deputy Chief of the Office of the Whistleblower, which oversees the agency’s whistleblower program.

Under that program established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, individuals can receive awards if, among other things, they voluntarily provide the SEC with original information that leads to successful SEC enforcement actions. Staff in the Office of the Whistleblower helps ensure that whistleblower complaints are handled appropriately, and recommends to the Commission whether an individual is eligible for an award.

“Jane has extensive experience in both the private and public sectors, particularly with regard to corporate governance, compliance and disclosure matters,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower. “With the experience she brings, Jane will help us to fulfill our mission of administering a vigorous whistleblower program will help the SEC identify and halt frauds early and quickly to minimize investor losses.”

Ms. Norberg comes to the SEC after 14 years of experience at her own law firm and at Shearman & Sterling. In these capacities, Ms. Norberg advised major public corporations regarding executive compensation disclosure, corporate governance issues and other securities laws matters. She also negotiated and drafted severance arrangements for senior executive officers and provided guidance regarding non-competition and non-solicitation covenants.

Prior to her private law experience, Ms. Norberg served as a special agent for the U.S. Secret Service where she worked with confidential informants in planning, organizing, and conducting investigations of federal crimes including telecommunications and bank fraud, counterfeiting of U.S. currency, and forgery of federal checks and bonds.

“The whistleblower program is an important component of the SEC’s efforts to stop those who prey on investors and destroy the public’s trust in our capital markets,” said Ms. Norberg. “I am honored and excited to join the Commission staff and look forward to helping the agency build on the success achieved in the short time since the program was established.”

Ms. Norberg is a cum laude graduate of St. John’s University School of Law, where she served as an editor of the law review and was a merit scholarship recipient. She received her bachelor’s degree from Bloomsburg University of Pennsylvania.

Under the SEC’s whistleblower program, the SEC is authorized to pay 10 to 30 percent of money collected from enforcement actions involving a whistleblower whose information led to the successful enforcement of an action in which sanctions exceeding $1 million were imposed. The statute and rules implementing the program also include anti-retaliation protections for individuals who provide information to the Commission with a reasonable belief that the information relates to a possible securities law violation that has occurred, is ongoing, or is about to occur. For more information or to access forms to submit information or apply for an award, visit www.sec.gov/whistleblower.

# # #

Washington, D.C., Jan. 17, 2012 — The Securities and Exchange Commission today announced that Inspector General H. David Kotz will leave the agency at the end of January to join a private investigative services firm. Since he was appointed in December 2007, Mr. Kotz directed many important investigations and audits that led to significant improvements of the agency’s operations.

“David has been a committed public servant who has served the agency with great distinction for the past four years,” said SEC Chairman Mary L. Schapiro. “His work helped us to identify areas where we needed to improve the way we operate, bolster our resources, and upgrade our technology.”

Mr. Kotz said, “I am tremendously proud of the accomplishments of my office and the agency over the past four years. The reports we have issued have not only been significant to the agency, Congress and the investing public, but they have also directly resulted in a transformation of many of the divisions and offices of the Commission. While I will miss doing this important work, I am gratified knowing that nearly every aspect of the SEC has been significantly improved in the four years since I was named Inspector General. I owe particular thanks to Chairman Schapiro for her leadership and support of the Office of Inspector General.”

Mr. Kotz intends to join the investigative services firm of Gryphon Strategies as a Managing Director in its Washington D.C. office. He plans to focus on conducting corporate fraud investigations as well as assisting whistleblowers in exposing fraud and improving government accountability.

Mr. Kotz previously served as the Inspector General of the Peace Corps and worked in several other senior level capacities for the U.S. Agency for International Development (USAID). Prior to his government service, Mr. Kotz practiced at private law firms, including Pepper Hamilton LLP in Washington D.C. Mr. Kotz graduated cum laude from the University of Maryland in 1987 with a BA in Government and Politics, and earned his JD at Cornell Law School in 1990.

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Washington, D.C., Jan. 17, 2012 – The Securities and Exchange Commission today charged an investment advisory arm of UBS with failing to properly price securities in three mutual funds that it managed, resulting in a misstatement to investors of the net asset values (NAVs) of those funds. The misconduct was revealed during the course of an SEC examination, minimizing investor harm.

The SEC’s Enforcement Division began investigating UBS Global Asset Management (UBSGAM) following a referral from SEC examiners who conducted a routine exam of the firm, which is an SEC-registered investment adviser. The SEC’s investigation further determined that during a two-week period, UBSGAM did not follow the mutual funds’ fair valuation procedures in pricing certain illiquid fixed-income securities in the portfolios of the mutual funds.

UBSGAM agreed to pay $300,000 to settle the SEC’s charges.

“UBS Global Asset Management failed to fulfill one of its core delegated responsibilities on behalf of mutual funds it advises – to price securities in the mutual funds accurately,” said Merri Jo Gillette, Regional Director of the SEC’s Chicago Regional Office. “Fortunately this misconduct was brought to light quickly, so the duration was short and the harm to investors minimal.”

According to the SEC’s order instituting administrative proceedings against UBSGAM, the firm purchased on behalf of the mutual funds approximately 54 complex fixed-income securities in June 2008 at an aggregate purchase price of approximately $22 million. Most of the securities were part of subordinated tranches of nonagency mortgage-backed securities whose underlying collateral generally consisted of mortgages that did not conform to the requirements necessary for inclusion in mortgage-backed securities guaranteed or issued by Ginnie Mae, Fannie Mae, or Freddie Mac. The securities purchased also included asset-backed securities and collateralized debt obligations.

The SEC’s order finds that following the purchases, all but six of the securities were then valued at prices substantially in excess of the transaction prices, including many at least 100 percent higher. The valuations used by UBSGAM were provided by pricing sources (broker-dealers or a third-party pricing service) that did not appear to take into account the prices at which the mutual funds had purchased the securities. Some of the broker-dealer quotations were based on the previous month-end pricing; other quotes were stale and not priced daily. UBSGAM did not price the securities at fair value until it held a meeting of the firm’s Global Valuation Committee more than two weeks after UBSGAM began receiving “price tolerance reports” identifying the discrepancies between the purchase prices and the valuation of the securities based on the pricing sources. By using the valuations provided by broker-dealers or a third-party pricing service instead of the transaction prices, UBSGAM caused the mutual funds to not follow their own written valuation procedures. These procedures required the securities to be valued at the transaction price until UBSGAM received a response to a price challenge based on the discrepancy identified in the price tolerance report, or UBSGAM made a fair value determination. The procedures provided that the transaction price could be used for up to five business days until a decision needed to be made to determine the fair value. By failing to implement these procedures, UBSGAM aided and abetted and caused the funds to violate Rule 38a-1 under the Investment Company Act.

The SEC’s order further finds that because the securities were not properly or timely priced at fair value, the NAVs of the funds were misstated between one cent and 10 cents per share for several days in June 2008. Consequently, the mutual funds sold, purchased, and redeemed their shares based on inaccurately high NAVs on those days. UBSGAM thus aided and abetted and caused the funds to violate Rule 22c-1 adopted pursuant to Section 22(c) of the Investment Company Act.

In settling the charges without admitting or denying the SEC’s findings, UBSGAM agreed to be censured and to pay a $300,000 penalty, and also consented to a cease-and- desist order from committing or causing violations of Rules 22c-1 and 38a-1 under the Investment Company Act. The SEC acknowledges the assistance and cooperation of UBSGAM during the examination and investigation.

The SEC’s investigation was conducted by Jamie Davidson, Marlene Key, Steven Levine, and Eric Phillips of the Chicago Regional Office. The SEC examination team that referred the matter to enforcement officials included Maureen Dempsey, Matthew Harris, Leora Hughes, Stanton Nelson, and Susan Weis of the Chicago Regional Office.

# # #

For more information about this enforcement action, contact:

Robert Burson
Senior Associate Regional Director, SEC’s Chicago Regional Office
312-353-7428

Washington, D.C., Jan. 12, 2012 – The Securities and Exchange Commission today announced that a former audit partner at accounting and consulting firm BDO USA LLP has pled guilty to criminal charges for lying to SEC enforcement staff during investigative testimony.

Ronald C. Machen Jr., the U.S. Attorney for the District of Columbia, filed the criminal charges against certified public accountant Bryan N. Polozola, who lives in Richardson, Texas.

According to the criminal information filed in U.S. District Court for the District of Columbia, the SEC issued subpoenas last year to BDO and Polozola, who was responsible for auditing several hedge funds managed by an investment adviser that the SEC is investigating. The criminal information states that the audit is a central issue in the SEC inquiry, and investigators took testimony from Polozola to obtain information about his role in the audit process and assess his credibility. Polozola was the subject of a 2005 NASD (now FINRA) proceeding alleging that he took $49,350 in funds from a former employer for his personal use. Polozola neither admitted nor denied NASD’s allegations in consenting to a bar from associating with any NASD firm.

The criminal information alleges that during questioning in September 2011, Polozola falsely testified to SEC staff that he was not aware of a $49,350 payment made on his behalf to his former employer. In fact, Polozola was aware that his attorney had repaid the $49,350 to the former employer as reimbursement of the funds he had allegedly taken for his personal use. The payment was made at Polozola’s direction and with Polozola’s funds.

“Truth in testimony is the first principle of a fair and effective enforcement program,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This guilty plea is a stark reminder that those who lie in SEC investigations will face an SEC committed to working closely with the criminal authorities to ensure that they are held accountable.”

Polozola pled guilty to a one-count information charging him with making a false statement to government officials in violation of 18 U.S.C. § 1001.

The SEC thanks the U.S. Attorney’s Office for the District of Columbia for its efforts in prosecuting the case.

# # #

For more information about this enforcement matter, contact:

Robert B. Kaplan (202) 551-4969 and Bruce Karpati (212) 336-0104
Co-Chiefs of the SEC’s Enforcement Division’s Asset Management Unit

Julie M. Riewe
Assistant Director, SEC Enforcement Division’s Asset Management Unit
(202) 551-4546

Washington, D.C., Jan. 12, 2012 – The Securities and Exchange Commission today announced that Robert M. Fisher has been named a Deputy Director in the SEC’s Office of International Affairs.

Dr. Fisher, who earned his Ph. D. in economics from Duke University, joined the SEC staff in 2002 as a financial economist in the Office of Economic Analysis. He later became an Assistant Director in the Office of International Affairs, where he has been responsible for the SEC’s international technical assistance program for emerging and recently-emerged markets. In being elevated to a Deputy Director position, Dr. Fisher will now oversee policy issues for the office.

“Rob brings to this position an extraordinary blend of skills as both an attorney and an economist that will serve the Commission well in a time of rapidly changing global markets,” said Ethiopis Tafara, Director of the SEC’s Office of International Affairs. “His extensive experience both in the private sector and at the SEC is a valuable asset as we continue to confront new and evolving regulatory challenges.”

The SEC’s Office of International Affairs advises the Commission on cross-border enforcement and regulatory matters, and engages in regulatory dialogues with authorities outside the U.S. The office also provides technical assistance and is responsible for the SEC’s participation in multilateral standard setting bodies such as the Financial Stability Board and International Organization of Securities Commissions.

Prior to joining the SEC staff, Dr. Fisher worked as an attorney in Washington, D.C. He also was employed as a Practice Manager at the Corporate Executive Board.

Dr. Fisher earned his law degree at Harvard University. Among his various academic experiences, he has served as an Adjunct Professor of Law at the Georgetown University Law Center where he co-taught a course on global securities markets. Dr. Fisher once clerked for Judge Stephen F. Williams at the U.S. Court of Appeals, D.C. Circuit.

# # #

Washington, D.C., Jan. 5, 2012 — The Securities and Exchange Commission today announced that Administrative Law Judge Robert G. Mahony has retired from the federal government after 46 years of public service, including more than 14 years at the SEC.

During his tenure with the SEC, Judge Mahony presided over and issued initial decisions in administrative proceedings brought by the SEC's Division of Enforcement. His initial decisions covered a broad range of alleged violations of securities law, including insider trading, the sale of unregistered securities, delinquent filings, failure to supervise, and disciplinary actions involving corporate officers and directors, brokers, accountants, auditors, and other financial professionals.

Before coming to the SEC, Judge Mahony spent 20 years as an Administrative Law Judge at the U.S. Department of Labor. He served as a temporary member of the Labor Department’s Benefits Review Board from 1986 to 1987. He began his career as a trial attorney in the Criminal Division of the U.S. Justice Department in Washington, D.C.

Judge Mahony graduated from the University of Notre Dame in 1961, and received his law degree from Loyola University of Chicago in 1965. He served in active duty in the U.S. Army from 1965 to 1967.

###

Washington, D.C., January 4, 2012 – The Securities and Exchange Commission Advisory Committee on Small and Emerging Companies will hold a public meeting by conference telephone call on Friday, January 6.

The meeting will begin at 1:00 p.m. EST, and an audio webcast will be available on the SEC’s website at www.sec.gov. The agenda includes discussion of a recommendation to the Commission on relaxing restrictions on general solicitation and advertising of securities offerings that are exempt from registration.

The advisory committee was formed last year to provide a formal mechanism for the Commission to receive advice and recommendations on privately held small businesses and publicly traded companies with a market capitalization less than $250 million. The advisory committee is expected to provide input to the Commission on this issue as well as many others over time.

More information about the SEC's Advisory Committee on Small and Emerging Companies is available at http://www.sec.gov./info/smallbus/acsec.shtml.

###

Washington, D.C., Jan. 4, 2012 — The Securities and Exchange Commission today charged an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn and it issued two alerts in an agency-wide effort to highlight the risks investors and advisory firms face when using social media.

The SEC’s Division of Enforcement alleges that Anthony Fields of Lyons, Ill. offered more than $500 billion in fictitious securities through various social media websites. For example, he used LinkedIn discussions to promote fictitious “bank guarantees” and “medium-term notes.” The postings resulted in interest from multiple purported potential buyers.

“Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes,” said Robert B. Kaplan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Social media is no exception, and today’s enforcement action reflects our determination to pursue fraudulent activity on new and evolving platforms.”

According to the SEC’s order instituting administrative proceedings against Fields, he made multiple fraudulent offers through his two sole proprietorships – Anthony Fields & Associates (AFA) and Platinum Securities Brokers. Fields provided false and misleading information concerning AFA’s assets under management, clients, and operational history to the public through its website and in SEC filings. Fields also failed to maintain required books and records, did not implement adequate compliance policies and procedures, and held himself out to be a broker-dealer while he was not registered with the SEC.

One of the alerts issued today – a National Examination Risk Alert titled “Investment Adviser Use of Social Media” – provides staff observations based on a review of investment advisers of varying sizes and strategies that use social media. In growing numbers, registered investment adviser firms are using social media to communicate with existing and potential clients, promote services, educate investors, and recruit new employees.

“As investment advisers increasingly utilize social media to communicate with clients and potential clients, firms need to be mindful of the applicable standards governing those communications,” said Carlo di Florio, Director of the Office of Compliance Inspections and Examinations (OCIE).

The alert reviews concerns that may arise from use of social media by firms and their associated persons, and offers suggestions for complying with the antifraud, compliance, and recordkeeping provisions of the federal securities laws. The alert notes that firms should consider how to implement new compliance programs or revisit their existing programs in the face of rapidly changing technology.

The SEC also issued an Investor Alert titled “Social Media and Investing: Avoiding Fraud” prepared by the Office of Investor Education and Advocacy. The alert aims to help investors be better aware of fraudulent investment schemes that use social media, and provides tips for checking the backgrounds of advisers and brokers. A new Investor Bulletin titled “Social Media and Investing: Understanding Your Accounts” contains best practices including privacy settings, security tips, and password selection aimed to help social media users protect their personal information and avoid fraud.

“More and more, investors are using social media to help them with investment decisions. While social media can provide many benefits for investors, it also makes an attractive target for fraudsters. The Investor Alert provides some useful tips to help investors look out for securities fraud online,” said Lori J. Schock, Director of the Office of Investor Education and Advocacy.

For additional information on avoiding securities fraud, visit the SEC’s website for individual investors: www.investor.gov.

The SEC’s investigation of Anthony Fields was conducted by Donna K. Norman and Julie M. Riewe. The SEC’s litigation effort will be led by Duane K. Thompson. The National Examination Risk Alert was prepared by Mavis Kelly and George Kramer of OCIE in consultation with other Commission staff, notably Catherine A. Courtney and Natasha Vij Greiner. The Investor Alert was prepared by M. Owen Donley III and Rahman Harrison.

# # #

For more information about the enforcement action, contact:

Robert B. Kaplan (202) 551-4969 and Bruce Karpati (212) 336-0104
Co-Chiefs of the SEC’s Asset Management Unit

Julie M. Riewe
Assistant Director, Asset Management Unit
(202) 551-4546

Washington, D.C., Jan. 3, 2012 — The Securities and Exchange Commission today charged Texas-based financial services firm Life Partners Holdings Inc. and three of its senior executives for their involvement in a fraudulent disclosure and accounting scheme involving life settlements.

The SEC alleges that Life Partners chairman and CEO Brian Pardo, president and general counsel Scott Peden, and chief financial officer David Martin misled shareholders by failing to disclose a significant risk to Life Partners’ business: the company was systematically and materially underestimating the life expectancy estimates it used to price transactions. Life expectancy estimates are a critical factor impacting the company’s revenues and profit margins as well as the company’s ability to generate profits for its shareholders.

The SEC alleges that Life Partners and the three executives were involved in disclosure violations and improper accounting that Life Partners used to overvalue assets held on the company’s books and create the appearance of a steady stream of earnings from brokering life settlement transactions. The SEC further charged Pardo and Peden with insider trading in their shares of Life Partners stock while in possession of material, non-public information indicating that the company had systematically and materially underestimated life expectancy estimates.

“Life Partners duped its shareholders by employing an unqualified medical doctor to assign baseless life expectancy estimates to the underlying insurance policies,” said Robert Khuzami, Director of the SEC's Division of Enforcement. “This deception misled shareholders into thinking that the company's revenue model was sustainable when in fact it was illusory.”

David Woodcock, Director of the SEC’s Fort Worth Regional Office, added, “The senior-most executives at Life Partners concealed significant risks to the business, manipulated financial statements with improper accounting, and knowingly profited from their misconduct by executing insider trades based on information that was not available to the public.”

Life Partners is a Nasdaq-traded company that generates virtually all of its revenues from brokering life settlements. Life settlements involve the purchase and sale of fractional interests of life insurance policies in the secondary market. In life settlement transactions, life insurance policy owners sell their policies to investors in exchange for a lump-sum payment. The dollar amount offered by the investor takes into account the insured’s life expectancy and the terms and conditions of the insurance policy.

According to the SEC’s complaint filed in federal district court in Waco, Texas, Life Partners misrepresented and failed to disclose in public filings with the SEC that the company’s systematic use of materially underestimated life expectancy estimates constituted a material risk to the company’s revenues. Beginning in 1999, the company used life expectancy estimates provided by Dr. Donald T. Cassidy, a Reno, Nev.-based doctor with no actuarial training or prior experience rendering life expectancy estimates. The SEC alleges that Life Partners and Pardo failed to conduct any meaningful due diligence on Cassidy’s qualification to act as a life expectancy underwriter and instructed the doctor to use a life expectancy methodology that was created by the company’s former underwriter, a part-owner of Life Partners. Pardo, Peden, and Martin were aware that the Cassidy-rendered life expectancy estimates were systematically and materially short.

The SEC alleges that Life Partners materially misstated net income from fiscal year 2007 through the third quarter of fiscal year 2011 by prematurely recognizing revenues and understating impairment expense related to its investments in life settlements. Life Partners improperly accelerated revenue recognition from the closing date to the date it obtained a non-binding agreement with the policy owner to sell a life settlement. Life Partners use of Cassidy’s life expectancy estimates as part of its impairment calculations caused the company to understate millions of dollars in impairment expense.

The SEC further alleges that during this time, Pardo and Peden sold approximately $11.5 million and $300,000 respectively of Life Partners stock at inflated prices while in possession of material non-public information about the company’s dependency on short life expectancy estimates to generate revenues.

In addition to the alleged violations of the antifraud and reporting provisions of the federal securities laws by Life Partners, Pardo, Peden and Martin, the SEC’s complaint also seeks repayment to the company of stock sales profits and bonuses received by Pardo and Martin pursuant to Section 304 of the Sarbanes Oxley Act of 2002.

The SEC’s investigation is continuing.

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For more information about this enforcement action, contact:

David Woodcock
Regional Director, SEC’s Fort Worth Regional Office
817-900-2623

Michael King
Assistant Director, SEC’s Fort Worth Regional Office
817-978-1405

Washington, D.C., Jan. 3, 2012 — The Securities and Exchange Commission today announced that Pamela A. Gibbs has been named as the inaugural Director of the Office of Minority and Women Inclusion, which oversees diversity in the agency’s employment, management, and business activities.

The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that federal financial regulators each establish an office devoted to workforce diversity, the use of minority and women-owned service providers, and the assessment of the diversity policies and practices of the businesses each regulates. In July, after receiving congressional approval to fund the office, the SEC appointed Alta G. Rodriguez, Director of the SEC’s Office of Equal Employment Opportunity, as interim director.

“I am pleased to announce that Pamela Gibbs will be the first director of our Office of Minority and Women Inclusion,” said SEC Chairman Mary Schapiro. “I’m confident that given Pamela’s extensive experience, her leadership will ensure this office’s success.”

Ms. Gibbs comes to the SEC from the Commodity Futures Trading Commission, where she has served since October 2009 as the Director of its Office of Diversity and Inclusion. In that role, Ms. Gibbs was the principal advisor to the CFTC Chairman on equal employment and diversity matters, and oversaw outreach and recruitment of minority and women’s groups. She also worked with the agency’s Office of General Counsel and Office of Human Resources to ensure fairness and consistency in the agency’s personnel policies and practices.

“It’s an honor to be chosen to head the SEC’s Office of Minority and Women Inclusion, and I look forward to working with my new colleagues on the important task Congress has set out for us,” Ms. Gibbs said.

Prior to the CFTC, Ms. Gibbs spent 18 years at the U.S. Department of Labor, where she started in 1991 as a trial attorney in the Civil Rights Division. She later was Acting Deputy Director for Program Operation in the Office of Federal Contract Compliance Programs, and was Director of the Equal Employment Opportunity Unit in the Employment Standards Administration from April 2006 to October 2009.

Ms. Gibbs is a graduate of Georgetown University Law Center. She received her bachelor’s degree from the University of Virginia and holds a master’s degree in public administration from George Mason University.

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