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COMMISSION ANNOUNCEMENTSSEC Announces $67 Million Fair Fund Distribution to Harmed Investors in McAfee Financial Fraud SettlementThe Securities and Exchange Commission today announced the distribution of approximately $67 million to more than 16,000 investors in connection with McAfee, Inc. financial fraud settlements. The Fair Fund was created after McAfee (formerly Network Associates, Inc.), agreed to pay approximately $50 million in penalties and disgorgement to settle SEC charges in 2006 that it defrauded investors by overstating its revenues and earnings. Subsequently, the proceeds from three other settled SEC enforcement actions related to the McAfee financial fraud were added to the Fair Fund: Ingram Micro; Eric G. Borrmann; and Terry W. Davis. Settlements in these actions added more than $16 million to the Fair Fund. "The McAfee Fair Fund distribution demonstrates the Commission's continuing commitment to using the Fair Fund provisions of the Sarbanes-Oxley Act of 2002 to return money to investors injured by securities law violators," said Antonia Chion, Associate Director of the SEC's Division of Enforcement. The Distribution Agent responsible for the McAfee distribution is Jeffrey Plotkin. Investor questions regarding the distribution may be directed to Mr. Plotkin at 1-800-893-4359. Information regarding the distribution also can be obtained at http://www.McAfeeSECsettlement.com. For more information about these enforcement actions, contact: Antonia Chion Yuri B. Zelinsky Additional materials:
(Press Rel. 2010-22) ENFORCEMENT PROCEEDINGSIn the Matter of Donald CunninghamOn Feb. 22, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Order) against Donald Cunningham (Cunningham), a former registered representative of eWealth Securities, Inc. (eWealth). In the Order, the Division of Enforcement (Division) alleges that the United States District Court for the Southern District of New York entered a permanent injunction by consent against Cunningham on January 14, 2010 in the civil action entitled Securities and Exchange Commission v. eWealth, et al., 02-CV-8626 (SHS). The injunction enjoined Cunningham from future violations of Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Division further alleges that the Commission's complaint in the civil action alleged that from January 2000 through July 2002 Cunningham participated in the fraudulent offer and sale of over $7 million in unregistered eWealth Holdings, Inc. securities to approximately one hundred individuals. A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Cunningham an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions against Cunningham are appropriate and in the public interest pursuant to Section 15(b) of the Exchange Act. The Commission directed that an Administrative Law Judge shall issue an initial decision in this matter within 210 days from the date of service of the Order. (Rel. 34-61551; File No. 3-13785) Commission Revokes Registration of Securities of Lifesmart Nutrition Technologies, Inc. for Failure to Make Required Periodic FilingsOn Feb. 22, 2010, the Commission revoked the registration of each class of registered securities of Lifesmart Nutrition Technologies, Inc. (Lifesmart Nutrition) 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, Lifesmart Nutrition 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 Lifesmart Nutrition Technologies, 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 Lifesmart Nutrition's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Lifesmart Nutrition in In the Matter of L. Luria & Son, Inc., et al., Administrative Proceeding File No. 3-13768. 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 L. Luria & Son, Inc., et al., Administrative Proceeding File No. 3-13768, Exchange Act Release No. 61442, Jan. 29, 2010. (Rel. 34-61552; File No. 3-13768) Commission Revokes Registration of Securities of Lightning Rod Software, Inc. for Failure to Make Required Periodic FilingsOn Feb. 22, 2010, the Commission revoked the registration of each class of registered securities of Lightning Rod Software, Inc. (Lightning Rod Software) 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, Lightning Rod Software 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 Lightning Rod Software, 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 Lightning Rod Software's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Lightning Rod Software in In the Matter of L. Luria & Son, Inc., et al., Administrative Proceeding File No. 3-13768. 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 L. Luria & Son, Inc., et al., Administrative Proceeding File No. 3-13768, Exchange Act Release No. 61442, Jan. 29, 2010. (Rel. 34-61553; File No. 3-13768) Commission Revokes Registration of Securities of Management Graphics, Inc. for Failure to Make Required Periodic FilingsOn Feb. 22, 2010, the Commission revoked the registration of each class of registered securities of Management Graphics, Inc. (Management Graphics) 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, Management Graphics 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 Management Graphics, 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-16 thereunder and revoking the registration of each class of Management Graphics' securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Management Graphics in In the Matter of Management Graphics, Inc., et al., Administrative Proceeding File No. 3-13772. 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 Management Graphics, Inc., et al., Administrative Proceeding File No. 3-13772, Exchange Act Release No. 61453, Feb. 1, 2010. (Rel. 34-61554; File No. 3-13772) Broker-Dealer's Registration RevokedThe registration of Aura Financial Services, Inc. (Aura), as a broker-dealer has been revoked. The sanction was ordered in an administrative proceeding before an administrative law judge, following a court-ordered injunction against it. In October 2009, Aura, a Birmingham, Alabama, broker-dealer, was enjoined from violating the antifraud provisions of the federal securities laws based on its fraudulent sales practices in churning customer accounts, thereby enriching itself and depleting the customers' balances through trading losses and excessive transaction costs. (Rel. 34-61555; File No. 3-13685) In the Matter of Salvatore F. SodanoOn Feb. 22, 2010, the Commission announced the settlement of the matter instituted against Salvatore F. Sodano, the former Chairman and CEO of the American Stock Exchange LLC, on March 22, 2007. Pursuant to the settlement, the Commission issued an Order Making Findings Pursuant to Section 19(h) of the Securities Exchange Act of 1934. On March 22, 2007, the Commission instituted and settled proceedings against American Stock Exchange LLC and Richard Robinson, a former Amex vice president for their roles in the Amex's failure to enforce compliance with federal securities laws and Amex rules. (Release Nos. 34-61562). The Order finds that the Amex failed adequately to enforce certain order handling rules and to comply with its record keeping obligations. As the Amex's Chairman and Chief Executive Officer (CEO), Sodano was one of the individuals who had an obligation to enforce compliance during the relevant period by the Amex's members and associated persons with the Exchange Act, the Exchange Act rules and regulations, and the Amex's own rules. From at least 1999 through June 2004, the Amex had critical deficiencies in its surveillance, investigative, and enforcement programs for assuring compliance with its rules as well as the federal securities laws. These regulatory deficiencies resulted in part from Sodano's failure to take adequate steps to ensure that he and the Amex were meeting their regulatory obligations. As a result of the Amex's failure adequately to surveil for and investigate violations of, and to enforce, certain options order handling rules, the Amex violated Section 19(g) of the Exchange Act. The Order finds that Sodano, as CEO, without reasonable justification or excuse, failed to enforce compliance by Amex's members and associated persons with the Exchange Act, the Exchange Act rules and regulations, and the Amex's own rules, within the meaning of Section 19(h)(4) of the Exchange Act. (Rel. 34-61562; File No. 3-12596) Securities and Exchange Commission v. Steve W. SalutricThe Securities and Exchange Commission announced that, on Feb. 8, 2010, pursuant to a motion by the SEC, the Honorable Robert M. Dow Jr., United States District Court, Northern District of Illinois, appointed Ira Bodenstein, Esq. as the Receiver over all assets under the possession, custody or control of Defendant Steve W. Salutric (Salutric) of Carol Stream, Illinois. In addition, Mr. Bodenstein was authorized by the Court to take actions necessary and appropriate to preserve investor assets. Previously, on Jan. 8, 2010, the SEC filed an emergency action against Salutric alleging that Salutric operated a fraudulent scheme in which, through forgery and other fraudulent means, he misappropriated millions dollars from his clients at Results One Financial, LLC, an investment advisory firm in Elmhurst, Illinois. As part of that action, the SEC obtained a temporary restraining order, an asset freeze and other emergency relief against Salutric. According to the SEC complaint, Salutric violated 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. According to the SEC's filings in support of its motion for a receiver, evidence indicates that the Defendant misappropriated at least $6.97 million from his clients and that his fraud began as early as 2001 and continued until late 2009. Evidence also indicates that the Defendant has used a complex web of entities as conduits to misappropriate, launder, and conceal client funds. Further, evidence indicates that, in the midst of the SEC's investigation and even after this Court's issued its temporary restraining order, the Defendant was still contacting defrauded clients in an attempt to placate them with lies and deceit. Mr. Bodenstein can be reached at the law firm of Shaw Gussis, 312 North Clark Street, Suite 800, Chicago IL 60654, phone: 312-541-0151, email ibodenstein@shawgussis.com. [SEC v. Steve W. Salutric, Civil Action No. 1:10-cv-00115 (N.D. Ill.)] (LR-21418) SEC Files Subpoena Enforcement Action Against Staten Island Resident Christian GalloThe Securities and Exchange Commission announced today that, on Feb. 11, 2010, it filed an application in the United States District Court for the Southern District of Florida for an order enforcing administrative subpoena served on Christian Gallo of Staten Island, New York. The Commission's application and supporting papers allege that, on Feb. 5, 2009, the Commission issued a Formal Order of Private Investigation entitled, In the Matter of BIH Corporation. BIH is a Nevada corporation based in Fort Myers, Florida, which purports to be a holding company in the restaurant and hospitality industry. Its stock is publicly trading in the over-the-counter markets. BIH's stock is not registered with the Commission, nor does the company file reports with the Commission. According to the Commission's application and supporting papers, its staff is investigating, among other things, whether any persons or entities, including but not limited to Gallo, committed violations of the registration and antifraud provisions of the federal securities laws relating to the offer, purchase or sales of BIH securities. According to the Commission's application, BIH's press releases claim that a Cris Galo is its president and chief executive officer. However, during the Commission's investigation it was alleged that Gallo is BIH's president and chief executive officer. On Sept. 22, 2009, and again on Nov. 4, 2009, the Commission issued investigative subpoenas to Gallo in the course of its investigation into possible violations of the antifraud and securities registration provisions of the federal securities laws. The subpoenas required Gallo to produce documents relevant to the investigation and to appear before the Commission staff for testimony. The Commission alleges that Gallo, as of the date of its application, failed to produce any of the subpoenaed documents and failed to appear for testimony. According to the Commission's application, Gallo has no valid justification for his failure to comply with the subpoenas, and a court order is necessary to compel him to produce the subpoenaed documents and to appear for testimony. A hearing on the Commission's application has not yet been scheduled. [SEC v. Christian Gallo, Docket No. 1:10-mc-20444 USDC, S.D. Fla.] (LR-21420) SEC v. Kay Services, LLC, et al.The Securities and Exchange Commission announced today that, on Feb. 17, 2010, the United States District Court for the District of New Jersey entered a default judgment against defendant Kay Services LLC, a New Jersey company, in an action filed in August 2008 by the Commission. The Hon. Susan D. Wigenton issued an order permanently enjoining Kay Services from future violation of the Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment further provides that Kay Services will disgorge its ill-gotten gains in the amount of $2,984,895 and prejudgment interest thereon in the amount of $397,273, and that Kay Services will be subject to a civil penalty of $450,000. The Commission's complaint alleges Kay Services and its sole owner and officer, Marcia Sladich, orchestrated a Ponzi scheme raising more than $10 million from at least 1,000 victims, many of whom were members of the Family Federation for World Peace, formerly known as the Unification Church. Sladich falsely told investors that their money would be invested in domestic and international real estate that would generate substantial returns and promised them a 50-100% guaranteed return on their investment in one year. She also promised investors additional payments for every investor they referred. Contrary to Sladich's representations, Kay Services had no revenue-generating business or assets. Instead of investing in real estate, Sladich used investor money: (1) to pay Kay Services' obligations to existing investors; (2) to pay Sladich's personal expenses; and (3) to purchase real property and other assets for Sladich and her relatives. In May 2009, the Commission obtained a separate consent judgment against Sladich in the same matter. Without admitting or denying the allegations of the Commission's complaint, Sladich consented to the entry of judgment by Judge Wigenton permanently enjoining Sladich from future violations of the Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment further requires Sladich to disgorge her ill-gotten gains and prejudgment interest, and to pay a civil money penalty, in amounts to be determined by the Court. For further information, see Litigation Release No. 20682 (Aug. 12, 2008). [SEC v. Kay Services, LLC, et al., Civil Action No. 08-CV-4016 (SDW)(MCA) (D.N.J.)] (LR-21421) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangesA proposed rule change filed by Chicago Board Options Exchange relating to reduction of the customer transaction fee for OEX and XEO Weeklys options (SR-CBOE-2010-011) 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 February 22. (Rel. 34-61533) A proposed rule change (SR-BX-2010-014) filed by NASDAQ OMX BX relating to order routing on the Boston Options Exchange Facility 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 February 22. (Rel. 34-61536) Approval of Application for ExemptionThe Commission granted approval of an application for exemption pursuant to Section 36(a) of the Securities Exchange Act of 1934 submitted by BATS Exchange from the rule filing requirements of Section 19(b) of the Securities Exchange Act of 1934 with respect to certain rules incorporated by reference. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61534) Approval of Proposed Rule ChangesThe Commission approved a proposed rule change (SR-FINRA-2009-095) submitted by the Financial Industry Regulatory Authority to adopt NASD Rule 2370 (Borrowing From or Lending to Customers) as FINRA Rule 3240 (Borrowing From or Lending to Customers) in the Consolidated FINRA Rulebook. The rule change also deletes Incorporated NYSE Rules 352(e) (Limitations on Borrowing From or Lending to Customers), (f) (Loan Procedures) and (g). Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61537) The Commission approved a proposed rule change (SR-FINRA-2009-081) submitted under Rule 19b-4 of the Securities Exchange Act of 1934 by the Financial Industry Regulatory Authority to adopt FINRA Rule 2261 (Disclosure of Financial Condition) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61540) The Commission approved a proposed rule change (SR-FINRA-2009-093) submitted by the Financial Industry Regulatory Authority to repeal NASD Rule 2450 (Installment or Partial Sales), NASD Interpretive Material 2830-2 (IM-2830-2) (Maintaining the Public Offering Price) and Incorporated NYSE Rule 413 (Uniform Forms) as part of the process of developing a consolidated FINRA rulebook. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61542) Proposed Rule ChangesNYSE Amex filed a proposed rule change (SR-NYSEAmex-2010-14) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder amending position limits for certain Exchange Traded Funds. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61535) The Commission issued notice of filing of a proposed rule change (SR-Phlx-2010-20) submitted by NASDAQ OMX PHLX pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, to expand the number of components in the PHLX Semiconductor Sector known as SOX, on which options are listed and traded. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61539) Order of Summary AbrogationThe Commission, pursuant to Section 19(b)(3)(C) of the Securities Exchange Act of 1934, has issued an order of summary abrogation of three proposed rule changes (SR-Phlx-2009-104, SR Phlx-2009-116, as modified by Amendment No. 1 thereto, and SR-Phlx-2010-14) submitted by NASDAQ OMX PHLX to amend its schedule of fees. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61547) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig022210.htm
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