SEC News Digest

ENFORCEMENT PROCEEDINGS

Investment Adviser Gabelli Funds, LLC Settles Enforcement Action for Failure to Disclose Source of Distributions to Shareholders

On January 12, the Commission instituted a settled enforcement action against investment adviser Gabelli Funds, LLC (Gabelli) for violations of Section 19(a) of the Investment Company Act of 1940 (Investment Company Act) and Investment Company Act Rule 19a-1. Section 19(a) of the Investment Company Act and Investment Company Act Rule 19a-1 require a fund to provide shareholders contemporaneous notices identifying the sources of shareholder payments if any portion of those payments is from sources other than the fund's accumulated net income. The Commission found that from January 2002 to December 2003, two publicly-traded, closed-end funds Gabelli managed, the Gabelli Utility Trust and the Gabelli Convertible and Income Securities Fund Inc., made a total of 31 shareholder distributions that were funded in part from shareholder capital and capital gains. None of those distributions to shareholders were accompanied by the required Section 19(a) notice even though Gabelli was obligated to send such notices.

Without admitting or denying the Commission's findings, Gabelli has consented to an order finding that it willfully aided and abetted and caused the funds' violations of Investment Company Act Section 19(a) and Rule 19a-1 thereunder and ordering Gabelli to cease and desist from causing any violations and any future violations of Investment Company Act Section 19(a) and Rule 19a-1 thereunder. Pursuant to the order, Gabelli will pay a penalty of $450,000. (Rels. IA-2827; IC-28580; File No. 3-13332)

In the Matter of Peter J. Dawson

On January 12, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against Peter J. Dawson. The Order finds that a final judgment was entered by consent against Dawson, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 in the civil action entitled Securities and Exchange Commission v. Peter J. Dawson, et al., No. 06 Civ. 6360 (JFB)(WDW), in the United States District Court for the Eastern District of New York. The Order further finds that, previously, on December 13, 2007, Dawson pled guilty to two counts of Grand Larceny in violation of Section 155.40(1) of the New York Penal Law and one count of Scheme to Defraud in violation of Section 190.65(1) of the New York Penal Law in People v. Peter Dawson, Docket No. 31496/06. The counts to which Dawson pled guilty alleged, inter alia, that Dawson defrauded investors and obtained money and property by means of materially false and misleading statements. Based on Dawson's guilty plea and the Judgment entered in the Commission's civil injunctive action against him, the Order bars Dawson from association with any broker-dealer. Dawson consented to the issuance of the Order without admitting or denying any of the findings in the Order except as to the Commission's jurisdiction over him and the subject matter of these proceedings, his consent to a final judgment against him in the Commission's civil injunctive action against him, and his guilty plea in the criminal matter. (Rel. 34-59232; File No. 3-13333)

In the Matter of Diane M. Keefe

On January 13, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Sections 9(b) and 9(f) of the Investment Company Act of 1940, Section 203(f) of the Investment Advisers Act of 1940 and Section 15(b) of the Securities Exchange Act of 1934 against Diane M. Keefe.

The Division of Enforcement (Division) alleges in the Order that in 2003, when Keefe was the portfolio manager of the Pax World High Yield Fund, she created and labeled a set of notes "investment committee meeting" and represented them to be notes of nine Pax World High Yield Fund investment committee meetings that purportedly occurred from February 1999 to August 2003. The Division further alleges that these notes, which reflected investment advice, were false in that they consisted of notes of three-way conversations that never occurred. In fact, according to the Order, the date of the first purported meeting reflected in the notes Keefe created pre-dates Keefe's employment at Pax World by at least two months; those notes nevertheless represent that an investment committee meeting occurred and that Keefe was in attendance. The Division further alleges that Keefe created the notes after Pax World's compliance liaison asked Keefe in August 2003 for notes of the Fund's investment committee meetings in connection with a routine examination being conducted by the Commission staff at that time. The Division also alleges that these false investment committee notes remained in the Fund's files maintained by Pax World for approximately one year. As a result of this conduct, the Division alleges that Keefe violated Section 34(b) of the Investment Company Act, which prohibits the making of any untrue statement of material fact in any document the keeping of which is required pursuant to Section 31(a). Rule 31a-1(b)(11) requires that every registered investment company maintain files of all advisory material received from the investment adviser, any advisory board or advisory committee, or any other persons from whom the investment company accepts investment advice. The Division alleges that Keefe was a person from whom the Fund accepted investment advice and that the investment committee notes constitute advisory material for purposes of Rule 31a-1(b)(11). (Rel. IA-2828; IC-28582; 34-59237; File No. 3-13337)

In the Matter of Peter Sherlock

On January 13, the Commission issuedan Order Instituting Administrative Proceedings Pursuant to 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanction (Order) against Peter Sherlock, age 37 and a resident of East Norwich, New York. The Order finds that from October 1994 to June 2007, Sherlock was a securities lending representative and a registered representative associated with Morgan Stanley & Co., Inc., a broker-dealer registered with the Commission. The Order further finds that on March 13, 2008, Sherlock pled guilty to one count of conspiracy to commit securities fraud and wire fraud in violation of Title 18 United States Code, Section 1349 before the United States District Court for the Eastern District of New York, in United States v. Peter Sherlock, Crim. Indictment No. 07-CR-688. The count of the criminal indictment to which Sherlock pled guilty alleged, inter alia, that in or about and between September 2001 and December 2005, Sherlock, together with others, did knowingly and intentionally conspire to execute a scheme and artifice to defraud Morgan Stanley of money and property in connection with securities of issuers with a class of securities registered under Section 12 of the Securities Act of 1934.

Based on the above, the Order bars Sherlock from association with any broker or dealer. Sherlock consented to the issuance of the Order without admitting or denying any of the Commission's findings, except he admits to the Commission's jurisdiction over him and the subject matter of the proceedings and his guilty plea on March 13, 2008. (Rel. 34-59239; File No. 3-13338)

Order Making Findings and Revoking Registrations by Default as to Four Respondents in American Custom Components, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Four Respondents (Default Order) in American Custom Components, Inc., Administrative Proceeding No. 3-13295. The Order Instituting Proceedings alleged that five Respondents each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission (Commission).

The Default Order finds these allegations to be true as to four Respondents. It revokes the registrations of each class of registered securities of ClearLogic, Inc., Creditgroup Com, Inc. (n/k/a Tradex Global Financial Services, Inc.), Frederick Brewing Co., and Infinicall Corp., pursuant to Section 12(j) of the Securities Exchange Act of 1934.

The Commission previously accepted a settlement offer from the fifth Respondent, American Custom Components, Inc. (Rel. 34-59245; File No. 3-13295)

In the Matter of Steven Altman, Esq.

An Administrative Law Judge has issued an Initial Decision in Steven Altman, Esq., Admin. Proc. No. 3-12944, finding that Steven Altman (Altman) committed improper professional conduct, violating Section 4C of the Securities Exchange Act of 1934 and Securities and Exchange Commission (Commission) Rule of Practice 102(e). The Initial Decision finds that Altman, while representing a witness in a Commission administrative proceeding, sought benefits for his client in exchange for behavior and/or testimony by the client that would have adversely impacted that proceeding. Based on the findings of improper professional conduct and public interest factors, Chief Administrative Law Judge Brenda P. Murray has suspended Altman from practicing as an attorney before the Commission for a period of nine months. (Initial Decision No. 367; File No. 3-12944)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-NYSE-2008-138) filed by the New York Stock Exchange to memorialize an interpretation of the Listed Company Manual concerning shareholder approval requirements and to describe a certain application of its audit committee rule has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59217)

A proposed rule change filed by the New York Stock Exchange adopting a temporary equity transaction fee for shares executed on the NYSE MatchPointSM System (SR-NYSE-2009-01) has become immediately 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 January 19. (Rel. 34-59229)

A proposed rule change filed by New York Stock Exchange (SR-NYSE-2008-143) amending NYSE Rule 103B ("Security Allocation and Reallocation") to: 1) prohibit DMM Units from communicating with issuers after receipt of notice from the Exchange of the issuer's impending listing; 2) provide DMM Unit marketing materials to the issuer prior to the scheduled interview rather than the day before; and 3) allow an issuer transferring from NYSE Alternext US LLC to the NYSE to retain its DMM Unit if such DMM Unit is an approved and registered DMM on the NYSE 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 January 19. (Rel. 34-59231)

A proposed rule change filed by NYSE Alternext US (SR-NYSEALTR-2008-21) amending NYSE Alternext Equities Rule 103B to conform to amendments filed by the New York Stock Exchange to: 1) prohibit DMM Units from communicating with issuers after receipt of notice from the Exchange of the issuer's impending listing; and 2) provide DMM Unit marketing materials to the issuer prior to the scheduled interview rather than the day before 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 January 19. (Rel. 34-59233)

Approval of Proposed Rule Change

The Commission approved a proposed rule change (SR-NSCC-2006-17) filed by the National Securities Clearing Corporation under Section 19(b)(1) of the Exchange Act that allows NSCC to reorganize its Rules and Procedures related to membership standards and membership requirements to conform them to current practice and to harmonize them with similar rules of NSCC's affiliate, the Fixed Income Clearing Corporation. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59238)

JOINT INDUSTRY PLAN RELEASES

Immediate Effectiveness of Amendment No. 1 to the National Market System Plan for the Selection and Reservation of Securities Symbols

Amendment No. 1 to the National Market System Plan for the Selection and Reservation of Securities Symbols, filed by NASDAQ OMX BX, the Chicago Stock Exchange, the Chicago Board Options Exchange, the International Securities Exchange, the Financial Industry Regulatory Authority, the National Stock Exchange, the NASDAQ Stock Market, the New York Stock Exchange, NYSE Alternext Exchange US, NYSE Arca, and the NASDAQ OMX PHLX, to modify certain effective dates in the Plan, has become effective pursuant to Section 11A of the Securities Exchange Act of 1934 and Rule 608 thereunder. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59225)

Notice of Filing of the Thirteenth Substantive Amendment to the Second Restatement of the Consolidated Tape Association Plan and The Ninth Substantive Amendment to the Restated Consolidated Quotation Plan

Pursuant to Rule 608 under the Securities Exchange Act of 1934, the Consolidated Tape Association has filed amendments to the CTA and CQ Plans (Plans) (SR-CTA/CQ-2008-05) to provide that the Network A Administrator be paid a fixed annual fee rather than calculating operating expenses each year. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59230)

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