SEC News Digest

COMMISSION ANNOUNCEMENTS

SEC Announces CCOutreach Regional Seminars for Adviser and Fund Chief Compliance Officers

On April 28, 2009, the Securities and Exchange Commission announced the schedule and start of registration for 11 CCOutreach regional seminars for investment adviser and mutual fund Chief Compliance Officers (CCOs) that will be held in several cities around the country during the next few months.

The CCOutreach program was formed to promote open communications and coordination on mutual fund, investment adviser, and broker-dealer compliance issues. The regional seminars are intended to help CCOs improve their effectiveness for the benefit of investors throughout the country.

"We have crafted this year's agenda around the challenges that compliance professionals may be facing as a result of recent market conditions and events and having limited resources for compliance programs," said Lori Richards, Director of the SEC's Office of Compliance Inspections and Examinations. "Among the focus areas of discussion will be firms' procedures for safeguarding client assets - an area of particular scrutiny for SEC examiners during examinations. The SEC has brought numerous enforcement actions in recent months involving Ponzi schemes and other forms of theft, underscoring the need for advisers to have strong controls to safeguard client assets. We hope the information shared during the regional seminars will help CCOs in their compliance efforts."

The regional seminars will be available via live audio and video webcast and will offer limited in-person attendance. They will take place in Atlanta, Boston, Chicago, Denver, Fort Worth, Los Angeles, Miami, New York, Philadelphia, and San Francisco during the months of May, June, and July. Examination staff from the SEC's regional offices will discuss significant focus areas during examinations of advisers and funds, including how the staff identifies deficient practices and control weaknesses, as well as the controls that advisers have instituted to mitigate and manage risks.

In-person attendance at the seminars is limited, with mutual fund and investment adviser CCOs given priority on a first-come, first-registered basis. Registration instructions for the regional seminars are available on the SEC's Web site at www.sec.gov/info/cco/ccorsgeninfo2009.htm. Closed captioning will be available for all webcasts. For additional information, please e-mail CCOutreach@sec.gov. (Press Rel. 2009-94)

SEC Announces New Initiative to Identify and Assess Risks in Financial Markets

The Securities and Exchange Commission today announced a new effort to identify and assess risks in the financial markets by attracting seasoned industry professionals to the agency's Office of Risk Assessment.

The new Industry and Markets Fellows Program will help the agency expand its ability to oversee complex industry practices and products in today's markets.

"It's a great way to bring in highly-seasoned financial experts who can help us keep pace with the practices of Wall Street and protect investors," said Chairman Mary Schapiro. "Modeled on other successful fellows programs at the SEC, this program will help us strengthen oversight of the securities markets as they evolve, and provide industry veterans the unique opportunity to help us restore confidence in the markets."

The individual fellows who come to the agency through the program will also help familiarize SEC staff with current industry practices and products.

Jonathan Sokobin, Director of the Office of Risk Assessment, said, "The new program will give a tremendous boost to the agency, and will provide staff with new information and perspectives to help them identify emerging issues and understand the ways the industry is changing. The Office of Risk Assessment will work closely with staff in other SEC divisions and offices in integrating the Fellows into the activities of the Commission and its staff."

The SEC will immediately begin recruiting candidates with extensive experience in the financial markets, including but not limited to any of the following: trading in equity and fixed income securities, structured products, complex derivatives, financial analysis and valuation, fund management, investment banking and financial services operations. A statement detailing the fellows' qualifications and duties is available on the SEC Web site. The SEC encourages qualified individuals to apply by June 1, 2009. (Press Rel. 2009-98)

ENFORCEMENT PROCEEDINGS

Commission Revokes Registration of Securities of Complete Management, Inc. for Failure to Make Required Periodic Filings

On April 30, 2009, the Commission revoked the registration of each class of registered securities of Complete Management, Inc. (CPMIQ) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, CPMIQ consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Complete Management, Inc. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of CPMIQ's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against CPMIQ in In the Matter of Childrobics, Inc., et al., Administrative Proceeding File No. 3-13426.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Childrobics, Inc., et al., Administrative Proceeding File No. 3-13426, Exchange Act Release No. 59687 (April 2, 2009). (Rel. 34-59847; File No. 3-13426)

Commission Revokes Registration of Securities of Xino Corp. (n/k/a Asher Xino Corp.) for Failure to Make Required Periodic Filings

On April 30, 2009, the Commission revoked the registration of each class of registered securities of Xino Corp. (n/k/a Asher Xino Corp.) (Xino) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, Xino consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Xino finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Xino's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Pacific Security in In the Matter of Xino Corp. (n/k/a Asher Xino Corp.), et al., Administrative Proceeding File No. 3-13428.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Xino Corp. (n/k/a Asher Xino Corp.), et al., Administrative Proceeding File No. 3-13428, Exchange Act Release No. 59669, April 3, 2009. (Rel. 34-59848; File No. 3-13428)

In the Matter of Paul M. Gozzo

On April 30, 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 Paul M. Gozzo (Gozzo), who had been associated with a number of registered broker-dealers in a variety of capacities between 1999 and 2008. The Order finds that on April 17, 2009, a final judgment was entered by consent against Gozzo, permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in the civil action entitled SEC v. Paul M. Gozzo and PMG Capital, LLC, Civil Action Number 09-80432, in the United States District Court for the Southern District of Florida.

Based on the above, the Order bars Gozzo from association with any broker or dealer. Gozzo consented to the issuance of the Order without admitting or denying any of the findings in the Order; except that he admitted to the entry of the injunction against him. (Rel. 34-59849; File No. 3-13459)

SEC v. Frederick J. Barton, Barton Asset Management, LLC, and TwinSpan Capital Management, LLC

The Securities and Exchange Commission announced today that the Honorable Richard W. Story, United States District Judge for the Northern District of Georgia, entered default judgment as to defendants Frederick J. Barton (Barton), Barton Asset Management, LLC (Barton Asset Management), and TwinSpan Capital Management, LLC (TwinSpan) on April 27, 2009. The judgment restrained and enjoined all of the defendants from future violations of Sections 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and also enjoined defendants Barton and TwinSpan from future violations arising from their violation of Section 10(b) of the Exchange Act and Rule 10b-9 thereunder. The judgment also granted injunctive relief against all of the defendants from future violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

The court ordered disgorgement against Barton in the amount of $3,170,000, of which $1,021,900 is owed jointly and severally with TwinSpan, and $685,000 is owed jointly and severally with Barton Asset Management. The court further ordered prejudgment interest against Barton in the amount of $945,110.92, of which $265,936.86 is owed jointly and severally with TwinSpan, and $106,589.43 is owed jointly and severally with Barton Asset Management. Further, the court ordered Barton, Barton Asset Management and TwinSpan to pay civil penalties in the amounts of $120,000, $60,000 and $60,000, respectively. The defendants were ordered to pay the above amounts within 10 business days after the entry of the default judgment.

The court's judgment specifically found that between approximately May 1999 and December 2003, Barton, acting individually or through Barton Asset Management, misappropriated approximately $970,000 from a single, elderly brokerage customer of his who suffered from diminished mental capacity arising from Alzheimer's disease, and that Barton tricked her into selling the securities in her brokerage account and providing him and Barton Asset Management with the proceeds of those sales. The court also found that between October 2004 and October 2005, Barton and TwinSpan engaged in a $1.515 million offering fraud involving ten investors. Barton and TwinSpan told investors that the funds raised would only be used upon reaching a minimum offering amount and then, would only be used for TwinSpan's general corporate purposes. The court concluded that despite these representations, Barton and TwinSpan diverted at least $493,100 of the offering proceeds for Barton's personal use and used a substantial portion of the offering proceeds in advance of reaching the minimum offering amount. Finally, the court specifically found that, between October 2006 and January 2007, Barton misappropriated $685,000 from an advisory client of TwinSpan. Specifically, Barton, acting through TwinSpan, forged the customer's signature on four wire-transfer authorizations that transferred $185,000 of the client's assets at TwinSpan to a bank account in the name of Barton Asset Management. Shortly thereafter, Barton borrowed an additional $500,000 from this client, without disclosing his earlier theft of her funds. [SEC v. Frederick J. Barton, Barton Asset Management, LLC, and Twinspan Capital Management, LLC, Civil Action No. 1:08-cv-1917 (N.D. Ga.)] (LR-21016)

SEC Halts Beverly Hills Hedge Fund Fraud

On April 29, the Securities and Exchange Commission obtained a court order halting a hedge fund fraud based in Beverly Hills, California. The SEC's complaint, filed in federal court in Los Angeles, alleges that Bradley L. Ruderman (Ruderman) raised at least $38 million from about twenty investors since at least 2002 through his two hedge funds, Ruderman Capital Partners and Ruderman Capital Partners A. The SEC alleges that Ruderman defrauded his hedge fund investors by misrepresenting to them the hedge funds' investment returns and the assets under management.

Specifically, the SEC's complaint alleges that Ruderman falsely told investors that the hedge funds had earned positive returns from 15% to 60% per year and had over $800 million in assets. In reality, the hedge funds lost money and had less than $650,000 in assets. The complaint further alleges that in 2009, Ruderman made at least one Ponzi-like payment, using new investor money to pay returns to an earlier investor, and that Ruderman falsely told prospective investors that Lowell Milken (chairman of the Milken Family Foundation and Michael Milken's younger brother) and Larry Ellison (the CEO of Oracle Corporation) were investors in his hedge funds.

The Honorable Valerie Baker Fairbank, U.S. District Judge for the Central District of California, granted the SEC's request for emergency relief, including an order temporarily enjoining Ruderman, his company Ruderman Capital Management (RCM), and the hedge funds from future violations of the antifraud provisions, freezing their assets, and prohibiting the destruction of documents. The Commission also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against all defendants. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for May 7, 2009, at 1:30 p.m. PDT. [SEC v. Bradley L. Ruderman, Ruderman Capital Management, LLC, Ruderman Capital Partners, LLC, and Ruderman Capital Partners A, LLC, Civil Action No. CV 09-02974 VBF (JCx) (C.D. Cal.)] (LR-21017)

SEC Charges Investment Management Firm and Principal in Kickback Scheme Involving New York Pension Fund

The Securities and Exchange Commission today announced charges against Dallas-based Aldus Equity Partners, L.P. and one of its founding principals, Saul Meyer, in connection with a multi-million dollar kickback scheme involving New York's largest pension fund.

In an amended complaint attached to a motion filed today in federal district court in Manhattan, the SEC alleges that Meyer and Aldus participated in a fraudulent kickback scheme in order to win investment business from the New York State Common Retirement Fund. The SEC previously charged Henry "Hank" Morris and David Loglisci for orchestrating a fraudulent scheme to enrich Morris and other political allies and associates including Raymond Harding and Barrett Wissman, who have also been charged in the case.

The SEC alleges that Meyer caused Aldus to pay a shell company owned by Morris approximately $320,000 in sham finder fees, in exchange for which Loglisci caused the pension fund to invest a total of $375 million with Aldus from 2004 to 2006.

The SEC's amended complaint further alleges that Loglisci ensured that Aldus and certain other investment managers who were willing to make the requisite payments to Morris and others were rewarded with lucrative investment management contracts, while investment managers who declined to make such payments were denied Common Fund business. The scheme corrupted the integrity of the Common Fund's investment processes and resulted in the retirement fund's assets being invested with the undisclosed purpose of enriching Morris and certain others.

The SEC alleges that Loglisci chose Aldus as the Common Fund's emerging fund portfolio manager on the sole basis of Meyer's willingness to pay Morris. Prior to selecting Aldus, the Comptroller's office had been in discussions with another investment manager about creating and managing an emerging fund portfolio for the Common Fund. When that investment manager refused to pay kickbacks to Morris, Loglisci rejected that firm and recruited Aldus to manage the Common Fund's emerging fund portfolio.

According to the SEC's amended complaint, Aldus was serving as the Common Fund's outside consultant at the time, making Aldus a fiduciary of the Common Fund. In the midst of Aldus's negotiations to manage the Common Fund's emerging fund portfolio, a close associate of Morris approached Meyer and assured Meyer that Aldus would win the contract if Aldus agreed to pay Morris a portion of the management fees that Aldus received from the Common Fund. After Morris's friend made clear to Meyer that Aldus would not be hired if Aldus did not retain Morris, Meyer arranged for Aldus to kickback 35 percent of its management fees to a shell entity run by Morris. As a result of the quid pro quo arrangement, Aldus secured the Common Fund's emerging fund portfolio business.

The SEC's amended complaint alleges that Meyer and Aldus violated and/or aided and abetted 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, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The complaint seeks permanent injunctions against future violations of the federal securities laws, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

In a parallel criminal action, the Office of the Attorney General of the State of New York today announced the filing of a criminal complaint against Meyer. The SEC acknowledges the assistance of the Office of the Attorney General of the State of New York.

SEC Files Settled Action Against Golden State Equity Investors, Inc. for Securities Registration Violations

The Securities and Exchange Commission today filed a settled civil action in the United States District Court for the Southern District of Texas against Golden State Equity Investors, Inc., formerly known as Golden Gate Investors, Inc. (GGI), for its alleged violations of the registration provisions of the federal securities laws. The Commission's complaint alleges that, during the period from June 2005 through September 2006, Grifco International, Inc. (Grifco), a publicly-traded company that claims to be an international provider of oil and gas services equipment, issued 15,750,000 purportedly unrestricted, nonexempt securities to GGI. The agreements underlying the unregistered stock transactions provided that Grifco would issue GGI large blocks of Grifco stock in return for an up-front monetary advance and a large percentage of the net sales proceeds after the stock was sold. Shortly after receiving its shares, GGI sold its Grifco stock to the investing public and then returned a portion of the proceeds to Grifco. The complaint alleges that none of the securities transactions were registered with the Commission and the transactions did not satisfy any exemption from registration. The SEC alleges that, as a result of this conduct, GGI received nearly $3.8 million from the sale of newly-issued Grifco stock and remitted approximately $2.3 million of those proceeds to Grifco during 2005 and 2006. As a result, GGI's ill-gotten gains on these unregistered securities transactions were $1,269,907.

GGI, without admitting or denying the allegations in the complaint, consented to the entry of a final judgment enjoining it from violating Sections 5(a) and 5(c) of the Securities Act of 1933. The final judgment also orders it to pay disgorgement of $1,269,907, plus $257,672 in prejudgment interest, and to pay a civil penalty in the amount of $50,000.

The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of Texas, the Federal Bureau of Investigation, and The Harris County (Houston, Texas) District Attorney's Office.

GGI is not affiliated with Golden Gate Capital, a private equity firm based in San Francisco, California. The investigation is ongoing. [SEC v. Golden State Equity Investors, Inc., Case No. 4:09-CV-01037 (S.D. Tex.)] (LR-21019)

SEC Charges Wall Street Investment Banker and Seven Others in Widespread Insider Trading Scheme

On April 30, 2009, the Securities and Exchange Commission filed a civil action in the United States District Court for the Northern District of California against Maher Kara, his brother Michael Kara, and others. The Commission alleges that Maher Kara, a former Citigroup investment banker, repeatedly tipped his brother about upcoming merger deals in an insider trading scheme that involved friends and family throughout Northern California and the Midwest.

The SEC alleges that Maher Kara, a former director in Citigroup Global Markets' investment banking division in New York, repeatedly told his brother Michael Kara of Walnut Creek, Calif., about upcoming deals involving Citigroup's health care industry clients. The SEC further alleges that Michael Kara, in addition to buying stock and options in target companies that were the subject of the Citigroup deals, leaked the information to a network of friends and family who also traded in advance of the deals.

According to the SEC's complaint, Michael Kara is a self-employed environmental clean-up consultant who traded in at least 20 companies that were involved in confidential transactions pending in the Citigroup health care investment banking group where Maher Kara worked. In many cases, Michael Kara also tipped friends and family members in California and Illinois.

The participants in the scheme made their biggest profits trading in the stock and options of San Diego, Calif.-based medical testing company Biosite, Inc., less than three days before a March 25, 2007, announcement that it would be acquired. After the acquisition of Biosite was publicly disclosed days later, the stock price jumped over 50 percent. Michael Kara made illegal profits of more than $1.2 million, while his six tippees together made nearly $4 million.

In addition to the Kara brothers, the SEC complaint also names the following defendants: Emile Jilwan of Pleasanton, Calif. (Michael Kara's friend), who made $2.3 million on Biosite trades; Zahi Haddad of Stockton, Calif. (Michael and Maher Kara's uncle), who made $82,000; Bassam Salman of Orland Park, Ill. (brother of Maher Kara's wife), who passed the information to his brother-in-law; and Karim Bayyouk of Livonia, Mich. (Salman's brother-in-law), who made $950,000 (some of which he returned to Salman).

Two of Michael Kara's tippees, Nasser Mardini of Stockton, Calif. and Joseph Azar of Pleasanton, Calif., have agreed to settle the SEC's charges without admitting or denying the allegations. Mardini has agreed to repay illegal profits and the entry of a permanent injunction against future violations of Section 10(b) and 14(e), and Azar has agreed to repay illegal profits, pay a penalty, and the entry of a permanent injunction against future violations of Section 10(b) and 14(e). In its non-settled enforcement action against the remaining defendants, the SEC seeks disgorgement of illegal profits, financial penalties, and a permanent injunction against future violations. [SEC v. Maher F. Kara, Michael F. Kara, Emile Y. Jilwan, Zahi T. Haddad, Bassam Y. Salman, and Karim I. Bayyouk, Civil Action No. CV-09-1880-PJH, NDCA; SEC v. Joseph Azar, Civil Action No. CV-09-1881-MHP (NDCA)] (LR-21020)

INVESTMENT COMPANY ACT RELEASES

Citibank, N.A.

A notice has been issued giving interested persons until May 22, 2009, to request a hearing on an application filed by Citibank, N.A. Applicant requests an order to exempt an issuer of asset-backed securities that is not registered as an investment company under the Investment Company Act (Act) in reliance on Rule 3a-7 under the Act to appoint the applicant as a trustee to the issuer when the applicant is affiliated with an underwriter for the issuer's securities. (Rel. IC-28717 - April 29)

SELF-REGULATORY ORGANIZATIONS

Proposed Rule Changes

NYSE Amex filed a proposed rule change (SR-NYSEAmex-2009-15) under Section 19(b)(1) of the Securities Exchange Act of 1934 to reduce certain order handling and exposure periods from three seconds to one second. Publication is expected in the Federal Register during the week of May 4. (Rel. 34-59825)

The Commission has published notice of a proposed rule change (FINRA-2009-011) filed by the Financial Industry Regulatory Authority to amend the panel composition rules of the Code of Arbitration Procedure for Industry Disputes. Publication is expected in the Federal Register during the week of May 4. (Rel. 34-59836)

The Commission noticed a proposed rule change (SR-NYSEArca-2009-36) submitted by NYSE Arca pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to NYSE Arca Equities Rule 7.10 governing clearly erroneous executions. Publication is expected in the Federal Register during the week of May 4. (Rel. 34-59838)

Immediate Effectiveness of Proposed Rule Changes

Boston Stock Exchange Clearing Corporation filed a proposed rule change (File No. SR-BSECC-2009-03) under Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934, which proposed rule change became effective upon filing, to amend the Restated Certificate of Incorporation of its parent corporation, The NASDAQ OMX Group, Inc. Publication is expected in the Federal Register during the week of May 4. (Rel. 34-59818)

Stock Clearing Corporation of Philadelphia filed a proposed rule change (SR-SCCP-2009-02) under Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934, which proposed rule change became effective upon filing, to amend the Restated Certificate of Incorporation of its parent corporation, The NASDAQ OMX Group, Inc. Publication is expected in the Federal Register during the week of May 4. (Rel. 34-59819)

A proposed rule change filed by NYSE Amex amending NYSE Amex Equities Rules 1000, 60 and 123C to be more consistent with the trading characteristics of securities traded on NYSE Amex (SR-NYSEAmex-2009-14) 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 May 4. (Rel. 34-59834)

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