SEC News Digest

COMMISSION ANNOUNCEMENTS

Order of Suspension of Trading in the Securities of Continan Communications, Inc.

The Securities and Exchange Commission announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act), of trading of the securities of Continan Communications, Inc. (Continan), of Marina del Rey, California commencing at 9:30 a.m. EDT on April 1, 2009, and terminating at 11:59 p.m. on April 15, 2009.

In its Order suspending trading in the securities of Continan, the Commission found that the public interest and the need to protect investors require a suspension of trading in the securities of Continan. Questions have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things, the current liabilities of the company.

The Commission cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company. (Rel. 34-59668)

ENFORCEMENT PROCEEDINGS

In the Matter of Deborah Galas

On April 1, 2009, 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 Deborah Galas. The Order finds that from March 2004 to April 2007, and from July 2007 to January 2008, Galas, age 51, was a registered representative associated with a series of broker-dealers registered with the Commission. The Order further finds that on Jan. 25, 2008, Galas terminated her association with the last in that series of registered broker-dealers and since that time has not been a registered representative associated with any broker-dealer. The Order also finds that on Feb.17, 2009, a final judgment was entered by consent against Galas that permanently enjoined her from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Watermark Financial Services Group, Inc., et al., Civil Action Number 08-CV-361, in the United States District Court for the Western District of New York.

According to the Order, the Commission's amended complaint alleges, among other things, that from at least May 2005 to May 2008, Galas and others solicited approximately 90 investors, a number of whom are senior citizens, to invest at least $5.1 million in "convertible debentures" by falsely stating to investors that their funds would be used to purchase or develop real estate and that their investments were guaranteed. The amended complaint further alleges that, from April to June 2007, and after January 2008, Galas sold the debentures when she was neither registered as a broker or dealer nor an associated person acting under the supervision of a registered broker or dealer. The amended complaint also alleges that the debentures offering was not registered with the Commission at any time.

Based on the above, the Order bars Galas from association with any broker or dealer. Galas consented to the issuance of the Order without admitting or denying any of the findings in the Order, except she admits the entry of the injunction. (Rel. 34-59670; File No. 3-13423)

In the Matter of Thomas Brick

On April 1, 2009, 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 Thomas Brick (Brick). The Order finds that from June 2002 to April 2007, and from July 2007 to January 2008, Brick, age 56, was a registered representative associated with a series of broker-dealers registered with the Commission. The Order further finds that on Jan. 25, 2008, Brick terminated his association with the last in that series of registered broker-dealers and since that time has not been a registered representative associated with any broker-dealer. The Order also finds that on Feb. 17, 2009, a final judgment was entered by consent against Brick that permanently enjoined him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Watermark Financial Services Group, Inc., et al., Civil Action Number 08-CV-361, in the United States District Court for the Western District of New York.

According to the Order, the Commission's amended complaint alleges, among other things, that from at least May 2005 to May 2008 Brick and others solicited approximately 90 investors, a number of whom are senior citizens, to invest at least $5.1 million in "convertible debentures" by falsely stating to investors that their funds would be used to purchase or develop real estate and that their investments were guaranteed. The amended complaint further alleges that from April to June 2007, and after January 2008, Brick sold the debentures when he was neither registered as a broker or dealer nor an associated person acting under the supervision of a registered broker or dealer. The amended complaint also alleges that the debentures offering was not registered with the Commission at any time.

Based on the above, the Order bars Brick from association with any broker or dealer. Brick consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-59671; File No. 3-13424)

In the Matter of Inviva, Inc. and Jefferson National Life Insurance Company

The Securities and Exchange Commission has accepted an amended Offer of Settlement from Inviva, Inc. and Jefferson National Life Insurance Company (Respondents) and issued an Amended Order thereby amending its Aug. 9, 2004 Order against Respondents to alter the terms of Respondents' undertaking to undergo periodic compliance reviews. Under the terms of the 2004 Order, Respondents undertook to retain a compliance consultant to conduct a review of their compliance policies and procedures, and undertook to undergo, at least every other year, a compliance review by a third party concerning Respondents' "supervisory, compliance, and other policies and procedures designed to prevent and detect market timing and related practices that may violate the federal securities laws as they apply to Respondents' variable annuity business."

The Amended Order relieves Respondents of their obligation to continue to have a third party periodically review their compliance controls. All other provisions of the 2004 Order remain in effect. (Rels. 33-9021; 34-59674; IC-28684; File No. 3-11579)

Take-Two Pays $3 Million Penalty to Settle Options Backdating Charges

The Securities and Exchange Commission today announced the filing of a civil action against video and computer game publisher and distributor Take-Two Interactive Software, Inc. (Take-Two), alleging that during a seven year period, Take-Two defrauded investors by granting backdated, undisclosed "in the money" stock options to officers, directors, and key employees while failing to record required non-cash charges for option-related compensation expenses.

The Complaint alleges that on over 100 occasions from 1997 through September 2003, Take-Two looked back and picked grant dates for the Company's incentive stock options, resulting in grants of "in-the-money" options. According to the Complaint, Take-Two used several means to backdate options, including pre-priced option pools, backdating of employment agreements, and "pick-a-date" backdating, whereby a set exercise price for the grants was chosen, and then a past grant date was selected when Take-Two's stock price most closely corresponded to the set exercise price. On at least 26 occasions, the backdated grant dates coincided with dates of historically low annual and quarterly closing prices for Take-Two's common stock. These "fortuitous" grant dates, the complaint alleges, could not have been selected so consistently without the benefit of hindsight. According to the Complaint, Take-Two granted these options without complying with its own stock option plans and, generally, without the Board or a Committee thereof approving the grant dates or exercise prices. Company documents falsely indicated that the option grants had been made on earlier dates when Take-Two's stock price had closed lower.

The Complaint alleges that because of the undisclosed backdating scheme, Take-Two filed with the Commission and disseminated to investors current, quarterly and annual reports, proxy statements and registration statements that contained materially false and misleading statements concerning the true grant dates and proper exercise prices of stock options. In doing so, Take-Two created the false and misleading impression that stock options were granted in accordance with the terms of the applicable stock option plans. According to the Complaint, Take-Two materially understated its compensation expenses and materially overstated its quarterly and annual pre-tax earnings and earnings per share in its financial statements. On February 28, 2007, Take-Two restated historical financial results for multiple years to record additional non-cash charges for option-related compensation expenses totaling $42.1 million net of tax.

Without admitting or denying the allegations of the Commission's Complaint, Take-Two consented to the entry of an order: (1) permanently enjoining it from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13 and 14a-9; and (2) requiring it to pay a $3 million civil penalty. The settlement is subject to the approval of the United States District Court for the Southern District of New York.

The Commission previously settled with former Chief Executive Officer and Chairman Ryan Brant for his alleged role as the architect of the fraudulent options backdating scheme. SEC v. Ryan Ashley Brant., Civil Action No. 1:07 CV 1075 (DLC) (S.D.N.Y. 2007) (filed February 14, 2007), Litigation Release No. 20003. In that action, Brant was permanently enjoined from violating and/or aiding and abetting violations of the antifraud, reporting, record-keeping, internal controls and securities ownership reporting provisions of the federal securities laws; permanently barred from serving as an officer or director of any public company; and ordered to pay disgorgement of $4,118,093, prejudgment interest of $1,143,000, and a civil penalty of $1 million. Brant also pled guilty to felony criminal charges of Falsifying Business Records in the First Degree and paid $1 million in lieu of fines and forfeiture to state and local New York authorities.

The Commission acknowledges the assistance of the New York County District Attorney's Office, which conducted a separate, parallel investigation.

The Commission's investigation is continuing. [SEC v. Take-Two Interactive Software, Inc., Civil Action No. 1:09-CV-03113 (S.D.N.Y.)] (LR-20982; AAE Rel. 2957)

SEC Obtains Emergency Asset Freeze To Halt Multimillion Dollar Ponzi Scheme

The Securities and Exchange Commission today charged Edward T. Stein with securities fraud and froze his assets to halt an ongoing alleged Ponzi scheme. The Court also froze the assets of seven entities, which Stein controlled, and the Commission charged as relief defendants, including investment funds Gemini Fund I, L.P. (Gemini) and DISP LLC (DISP), as well as, Prima Capital Management Corp. (Prima), Edward T. Stein Associates, Ltd., Vibrant Capital Corp. (Vibrant), Vibrant Capital Funding I LLC, and G&C Partnership Joint Venture.

In its action, filed in federal court in Manhattan, the Commission alleges that Stein is operating a Ponzi scheme and has moved more than $55 million in investor funds through the accounts of his investment funds, Gemini and DISP. The complaint alleges that Stein made material misrepresentations and omissions to induce individuals to invest in Gemini and DISP and then deceived investors by producing false statements reflecting healthy returns over the life of their investments. The Commission further alleges that in the past several months, Stein has turned to stealing client funds to keep his scheme going. Beginning in May 2008 and continuing into March 2009, Stein converted millions of dollars from a single client to pay off investors and pay personal expenses, including the purchase of a million dollar Manhattan condominium.

The Commission alleged the following. In 1992, Stein set up Gemini as an investment fund, which he claimed was a feeder fund to other investment vehicles engaging in arbitrage and hedge trading. Instead, the primary investment Stein made with Gemini money was in Detour Media Group, Inc., an entity that published a fashion magazine called Detour. In a petition signed by Stein as its President, Detour Media filed for protection under Chapter 7 of the bankruptcy laws in 2003. However, Stein continued to solicit investments in Gemini and has continued to issue statements to his investors reflecting healthy returns over the life of their investments.

In 2002, Stein set up DISP as an investment fund to invest in life settlement policies. While DISP did buy some life insurance policies with investor funds, it has not bought any since at least 2004 and Stein transferred the portfolio of policies DISP held to Vibrant, a Stein controlled entity, without disclosing the transfer to existing or prospective DISP investors. Stein also used DISP investor funds to pay off Gemini investors.

The Commission's complaint charges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and Sections 206(1), 206(2) and 206(4) the Investment Advisers Act.

Judge Lynch of the U.S. District Court for the Southern District of New York granted the Commission's request for an order temporarily restraining Stein, freezing his assets and those of the relief defendants, and ordering accountings of Stein and the relief defendants. The SEC's complaint also seeks a final judgment permanently enjoining Stein from future violations of the federal securities laws, ordering him to pay financial penalties and to disgorge ill-gotten gains with prejudgment interest.

The United States Attorney's Office for the Eastern District of New York (USAO) announced criminal charges against Stein.

The Commission's investigation is ongoing. The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the Eastern District of New York in the investigation of this matter. [SEC v. Edward T. Stein, et. al., Civil Action No. 09-3125 (GEL) SDNY] (LR-20983)

INVESTMENT COMPANY ACT RELEASES

First American Strategy Funds, Inc., et al.

A notice has been issued giving interested persons until April 27, 2009, to request a hearing on an application filed by First American Strategy Funds, Inc., et al. for an order under Section 6(c) of the Investment Company Act for an exemption from Rule 12d1-2(a) under the Act. The order would permit funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-28683 - March 31)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by NYSE Amex (SR-NYSEAmex-2009-06) amending the Option Trading Rules in order to extend the Penny Pilot Program 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 March 30. (Rel. 34-59642)

A proposed rule change filed by the NYSE Alternext US, as modified by Amendment No. 1, (SR-NYSEAmex-2009-01) amending its Schedule of Fees and Charges for Exchange Services 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 March 30. (Rel. 34-59658)

A proposed rule change (SR-NASDAQ-2009-026) filed by the NASDAQ Stock Market to extend the temporary suspension of the continued listing requirements related to bid price and market value of publicly held shares for listing on the Nasdaq Stock Market through July 19, 2009 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 March 30. (Rel. 34-59661)

A proposed rule change by the NASDAQ Stock Market (SR-NASDAQ-2009-018) relating to revisions and restructuring of the NASDAQ Listing Rules 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 March 30. (Rel. 34-59663)

Proposed Rule Changes

The Commission issued a notice of filing of a proposed rule change by the Municipal Securities Rulemaking Board pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, relating to the establishment of a Pilot Phase of its upcoming Continuing Disclosure Service of the Electronic Municipal Market Access system (EMMA(R)) (SR-MSRB-2009-03). Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59643)

NYSE Arca filed a proposed rule change (SR-NYSEArca-2009-24) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to enable the Exchange to adopt a policy with respect to the treatment of aberrant trades. Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59650)

NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, has filed a proposed rule change (SR-NYSEArca-2009-22) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to List and Trade Shares of the Grail American Beacon Large Cap Value ETF. Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59651)

The Commission issued notice of a proposed rule change submitted by New York Stock Exchange (SR-NYSE-2009-25), as modified by Amendment No. 2, pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, changing certain NYSE rules and rule interpretations to harmonize them with changes to corresponding rules recently filed by the Financial Industry Regulatory Authority, Inc. Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59655)

The Commission issued notice of a proposed rule change submitted by NYSE Alternext US (SR-NYSEALTR-2009-26), as modified by Amendment No. 1, pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, changing certain NYSE Amex Equities Rules to conform them with changes to corresponding rules submitted in a companion filing by the New York Stock Exchange LLC (SR-NYSE-2009-25). Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59656)

Accelerated Approval of Proposed Rule Changes

The Commission noticed and granted accelerated approval to a proposed rule change (SR-NASDAQ-2009-027) submitted by the NASDAQ Stock Market pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to extend the pilot program for NASDAQ Last Sale Data Feeds and to reduce the monthly cap on fees. Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59652)

The Commission noticed and granted accelerated approval to a proposed rule change (SR-NYSE-2009-34) as modified by Amendment No. 1 thereto submitted by the New York Stock Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to extend the pilot period for the NYSE Realtime Reference Prices pilot program. Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59653)

The Commission noticed and granted accelerated approval to a proposed rule change (SR-NYSEArca-2009-25) as modified by Amendment No. 2 thereto submitted by NYSE Arca pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to extend the pilot period for the NYSE Arca Realtime Reference Prices pilot program. Publication is expected in the Federal Register during the week of March 30. (Rel. 34-59662)

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