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COMMISSION ANNOUNCEMENTSCommission MeetingsClosed Meeting - Thursday, August 20, 2009 - 2:00 p.m.The subject matter of the Closed Meeting scheduled for Thursday, Aug. 20, 2009, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; and other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400. ENFORCEMENT PROCEEDINGSIn the Matter of James C. DawsonOn August 12, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing against James C. Dawson. The Division of Enforcement (Division) alleges in the Order that on July 24, 2009, the District Court entered an order by consent enjoining Dawson from future violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 promulgated thereunder, and Sections 206(1) and 206(2) of the Advisers Act in the civil action entitled Securities and Exchange Commission v. James C. Dawson, 08 CV 7841 (S.D.N.Y.) Dawson, 63, of Rye, New York, is the investment adviser to a hedge fund, Victoria Investors, LP, and to individual clients. The Commission's complaint before the District Court alleged the following: Dawson intentionally engaged in a cherry-picking scheme between April 2003 and October 2005. It alleged that Dawson intentionally cherry-picked profitable trades for his own account by purchasing securities in a suspense account and then disproportionately allocating the profitable trades to his personal account, and allocating unprofitable trades to his advisory clients, by transmitting his allocation decisions to his prime broker at some time after the close of the market. It further alleged that between April 2003 and October 2005, Dawson allocated approximately 400 trades to his personal account, approximately 393 of which were profitable on the first day, for a success rate of approximately 98.3%. In contrast, Dawson allocated approximately 2,880 trades to his hedge fund and individual client accounts, approximately 1,489 of which were profitable on the first day, for a success rate of approximately 51.7%. The Commission's complaint also alleged that between 2003 and 2005, Dawson also used Victoria Investors' funds to pay for personal and family expenses. A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Dawson an opportunity to dispute the allegations, and to determine what, if any, remedial action is appropriate and in the public interest. The Order requires the Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of the Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. For more information about this matter, please see Litigation Release Number 20707 / Sept. 8, 2008. (Rel. IA-2914; File No. 3-13579) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Seven Public Companies for Failure to Make Required Periodic FilingsToday the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission. In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-60489; File No. 3-13580) In the Matter of Robert J. ZannottiOn August 13, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 (Order) against Robert J. Zannotti. The Order finds that Zannotti, a former registered representative with former broker dealer Kimball & Cross Investment Management Corporation (K&C), participated in a scheme to defraud investors in a purported unregistered fund (now defunct) known as Entrust Capital Management, Inc. (Fund) by, among other things, kicking back to the Fund's principals ninety percent of the brokerage commissions Zannotti earned on trades executed by K&C for the Fund, moving certain profitable trades from the Fund's account to other K&C customer accounts belonging to friends and family members of the Fund's principals and of Zannotti, and knowingly distributing materially false and misleading information concerning the Fund's assets under management to potential investors. Based on the above, the Order finds (1) that Zannotti willfully violated, and orders him to cease and desist from violating, Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (2) bars Zannotti from association with any broker or dealer; (3) orders Zannotti to pay disgorgement in the amount of $182,721.20, plus prejudgment interest in the amount of $54,451.16, but waives payment of all but $171,800 based on Zannotti's sworn Statement of Financial Condition; and (4) does not impose a civil monetary penalty based on Zannotti's sworn Statement of Financial Condition. Zannotti consented to the issuance of the Order without admitting or denying any of the findings. (Rel. 33-9060; 34-60490; File No. 3-13581) Initial Decision Barring Donald R. Foley, II, Scott G. Hunt, Frank A. Delaney, IV, James V. Parolisi, Robert W. Luckow, Robert A. Johnson, Jr., Richard P. Volpe, and Robert A. Scavone, Jr., Declared FinalThe Commission declared final the initial decision of a law judge. The law judge found that Donald R. Foley, II, Scott G. Hunt, Frank A. Delaney, IV, James V. Parolisi, Robert W. Luckow, Robert A. Johnson, Jr., Richard P. Volpe, and Robert A. Scavone, Jr., violated NYSE Rules 92, 104, and 401, and barred them from association with any broker or dealer. (Rels. 33-9061; 34-60498; File No. 3-11893) Delinquent Filer's Stock Registration RevokedThe registration of the stock of Fortel, Inc., now known as Envit Capital Group, Inc., has been revoked. The company had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, it violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocation was ordered in an administrative proceeding before an administrative law judge. (Initial Decision No. 385; File No. 3-13465) SEC Charges Ohio-Based Investment Advisers Robert Pinkas and His Firm for Fraudulently Overstating AssetsThe Securities and Exchange Commission today charged Ohio-based investment advisers Robert Pinkas and his firm Brantley Capital Management (BCM) with securities fraud for overvaluing assets in an investment portfolio they managed in order to generate higher investment advisory fees. The SEC also charged another BCM official. The SEC alleges that BCM, Pinkas, and its former part-time CFO Tab Keplinger substantially overstated the value of equity and debt investments in two failing private companies that represented more than half of the investment portfolio of Brantley Capital Corporation, a New York-based investment company. The SEC further alleges that BCM, Pinkas, and Keplinger made material misrepresentations and failed to make required disclosures about the two companies to Brantley Capital's board of directors, independent auditors, and investors. During the alleged misconduct from 2002 to 2005, BCM was the investment advisory firm that managed the investment portfolio of Brantley Capital. According to the SEC's complaint, Pinkas was the CEO of both Brantley Capital and BCM, and directed all of BCM's investment decisions and valuation recommendations. Keplinger was the part-time CFO of both entities and generally acted at the direction of Pinkas. The SEC's complaint, filed in U.S. District Court for the Northern District of Ohio, alleges that BCM, through Pinkas and Keplinger, advised Brantley Capital's board that its equity investment in Flight Options International (FOI) was worth $32.5 million. The value of Brantley Capital's interest in FOI, which represented approximately 50 percent of its total investment portfolio, was derived primarily from FOI's ownership interest in Flight Options LLC, a private airline that was consistently losing millions of dollars. The SEC alleges that Pinkas and Keplinger understood that Flight Options faced severe financial difficulties, and Pinkas knew that it was able to remain in business only because another investor in Flight Options repeatedly loaned it money. Pinkas and Keplinger not only failed to disclose these financial difficulties to Brantley Capital's board and investors, but they also misrepresented the financial performance of Flight Options to Brantley Capital's board and its independent auditors, cited various false rationales to support their $32.5 million valuation, and concealed third-party valuations of Flight Options indicating that Brantley Capital's investment in FOI was worth substantially less than what Pinkas and Keplinger were representing. The SEC's complaint also alleges that BCM, through Pinkas and Keplinger, directed Brantley Capital to overstate the value of its debt investments in Disposable Products Company (DPC), a now-defunct company that comprised 4 to 8 percent of Brantley Capital's total investment portfolio. Pinkas and Keplinger repeatedly advised Brantley Capital's board that DPC would repay most of these loans, when in fact DPC could not repay the loans because the company was losing ever-increasing amounts of money. DPC also consistently missed its financial targets by large margins, remained in business only because Brantley Capital continued to loan it money, and lacked sufficient assets to cover Brantley Capital's loans in the event of liquidation. Despite knowing these facts and that the value of Brantley Capital's loans to DPC were essentially worthless, Pinkas and Keplinger advised Brantley Capital's board that only relatively minor write-downs of its loans to DPC were required. From 2002 to 2005, BCM received more than $6.4 million in investment advisory fees from Brantley Capital, which were calculated as a percentage of Brantley Capital's net asset value. BCM and Pinkas are contesting the SEC's charges. Keplinger has agreed to settle the SEC's charges without admitting or denying the allegations. He consented to the entry of a judgment enjoining him from violating the antifraud and other provisions of the securities laws, requiring him to pay a $50,000 penalty, and barring him from serving as an officer or director of any public company for five years. Keplinger also consented to the entry of a Commission order that will suspend him for five years from appearing or practicing before the Commission as an accountant and bar him for one year from associating with an investment adviser. The Commission's complaint specifically alleges that BCM violated Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5 and 13b2-1 thereunder; Investment Advisers Act Sections 206(1) and 206(2); and that he aided and abetted violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 13a-1 and 13a-13 thereunder. The Commission's complaint specifically alleges that Pinkas violated Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder; Investment Advisers Act Sections 206(1) and 206(2); and that he aided and abetted violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 13a-1 and 13a-13 thereunder; and Investment Advisers Act Sections 206(1) and 206(2). The Commission's complaint specifically alleges that Keplinger violated Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder; and that he aided and abetted violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 13a-1 and 13a-13 thereunder; and Investment Advisers Act Sections 206(1) and 206(2). [SEC v. Brantley Capital Management, LLC, Robert Pinkas, and Tab Keplinger, 1:09-cv-01906 (JSG) (N.D. Ohio)] (LR-21178) INVESTMENT COMPANY ACT RELEASESGE Asset Management Incorporated and GE Investment Distributors, Inc.The Commission has issued a temporary order to GE Asset Management Incorporated (GEAM) and GE Investment Distributors, Inc. (GEID) under Section 9(c) of the Investment Company Act with respect to an injunction issued against General Electric Company (GE) by the U.S. District Court for the District of Connecticut on Aug. 11, 2009. The temporary order exempts GEAM and GEID, as well as companies of which GE is or becomes an affiliated person, from the provisions of Section 9(a) of the Act until the Commission takes final action on an application for a permanent order. The Commission also has issued a notice giving interested persons until Sept. 8, 2009, to request a hearing on the application filed by applicants for a permanent order under Section 9(c) of the Act. (Rel. IC-28845 - August 11) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangesA proposed rule change (SR-NYSE-2009-76) filed by New York Stock Exchange deleting NYSE Rule 409A and adopting new Rule 2266 to correspond with rule changes recently filed by the Financial Industry Regulatory Authority, Inc. 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 August 17. (Rel. 34-60457) A proposed rule change (SR-NYSEAMEX-2009-52) filed by NYSE Amex deleting Rule 409A - NYSE Amex Equities and adopting new Rule 2266 - NYSE Amex Equities to conform to proposed rule changes submitted in a companion filing by the New York Stock Exchange LLC 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 August 17. (Rel. 34-60458) A proposed rule change filed by Chicago Board Options Exchange (SR-CBOE-2009-056) Related to the Hybrid Matching Algorithms has become immediately 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 August 17. (Rel. 34-60476) A proposed rule change (SR-Phlx-2009-67) filed by NASDAQ OMX PHLX relating to Firm Proprietary Facilitation Orders 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 August 17. (Rel. 34-60477) A proposed rule change filed by New York Stock Exchange extending until Aug. 21, 2009, the operation of Interim NYSE Rule 128 which permits the Exchange to cancel or adjust clearly erroneous executions if they arise out of the use or operation of any quotation, execution or communication system owned or operated by the Exchange, including those executions that occur in the event of a system disruption or system malfunction, (SR-NYSE-2009-81) 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 August 17. (Rel. 34-60478) A proposed rule change filed by Chicago Board Options Exchange (SR-CBOE-2009-058) related to the Hybrid matching algorithms 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 August 17. (Rel. 34-60479) A proposed rule change filed by NASDAQ OMX PHLX relating to settlement of FLEX Currency Options (SR-Phlx-2009-68) 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 August 17. (Rel. 34-60486) Proposed Rule ChangesNASDAQ OMX BX filed a proposed rule change (SR-BX-2009-041) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to eliminate Chapter V, Section 13 (Unusual Market Conditions) of the BOX Trading Rules and to modify related rules. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60465) The Commission has published notice of a proposed rule change (SR-FINRA-2009-047), filed by the Financial Industry Regulatory Authority to adopt FINRA Rule 3160 in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60475) 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 amendments to Rule G-11(i) (Settlement of Syndicate or Similar Account), Rule G-11(j) (Payment of Designations), and Rule G-12(i) (Settlement of Joint or Similar Account) (SR-MSRB-2009-12). Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60487) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2009/dig081309.htm
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