SEC News Digest

ENFORCEMENT PROCEEDINGS

In the Matter of Paul George Chironis

On April 26, 2010, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 against Paul George Chironis (Chironis). Chironis was previously a broker in the New York office of Capital Growth Financial, Inc. (Capital Growth), a Boca Raton-based broker-dealer which shut down its operations in February 2008.

In the Order, the Division of Enforcement alleges that Chironis defrauded his client, the Sisters of Charity, a congregation of nuns based in Bronx, New York. Between January 2007 - January 2008 the Sisters of Charity maintained two accounts at Capital Growth, for which Chironis served as the registered representative. The accounts held primarily mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, as well as corporate bonds and closed-end bond funds. The Division of Enforcement alleges that Chironis churned the accounts, and charged unreasonable and undisclosed markups and markdowns regarding many of the transactions.

Based on the above, the Division of Enforcement alleges that Chironis willfully violated the antifraud provisions - Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Division of Enforcement seeks a cease-and-desist order, disgorgement, civil penalties, prejudgment interest, and all other remedial sanctions that are appropriate and in the public interest.

The Order directs that a hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Respondent with an opportunity to dispute the allegations, and to determine what, if any, remedial sanctions and penalties are appropriate. The Order also directs the Administrative Law Judge to issue and initial decision no later than 300 days from the date of service of the Order. (Rels. 33-9119; 34-61968; File No. 3-13869)

In the Matter of Beth R. Chapman

On April 23, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Beth R. Chapman. The Order finds that Chapman failed reasonably to supervise, with a view to preventing violations of the federal securities laws, Susan G. Slovak, a registered representative under Chapman's supervision.

On April 23, 2010, the Commission filed a civil injunctive action in the United States District Court for the Northern District of Texas against Slovak alleging, among other things, that Slovak defrauded three customers by misappropriating and misusing funds from their accounts. In the Order, the Commission finds that, when Chapman learned of Slovak's misappropriation from two of the customers, she caused Slovak to reimburse the customers, but misled compliance personnel and one of the customers about the circumstances under which Slovak had sold securities and withdrawn funds from the customers' accounts. The Commission concludes that, as a result of Chapman's misleading statements, and her failure to take appropriate actions in response to Slovak's fraud, Chapman's supervisory response to Slovak's misconduct was not reasonable.

Based on the above, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, the Order bars Chapman from associating in a supervisory capacity with any broker, dealer or investment adviser, and requires her to pay a civil money penalty of $25,000. Chapman consented to the issuance of the Order without admitting or denying the findings in the Order. (Rels. 34-61970; IA-3019; File No. 3-13868)

In the Matter of Tangent Solutions, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Tangent Solutions, Inc., Administrative Proceeding No. 3-13823. The Order Instituting Proceedings alleged that six Respondents failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true. It revokes the registrations of each class of registered securities of Tangent Solutions, Inc., Telzuit Medical Technologies, Inc., Thomaston Mills, Inc., Three D Departments, Inc., Tiger Telematics, Inc., and TIS Mortgage Investment Co. pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61980; File No. 3-13823)

SEC Charges Texas Registered Representative With Misappropriating Hundreds of Thousands of Dollars from Three Customers

On April 23, 2010, the Securities and Exchange Commission filed a settled civil injunctive action against Susan G. Slovak, a former Corsicana, Texas registered representative, accusing her of misappropriating hundreds of thousands of dollars from three customers.

The Commission's civil complaint, filed in federal district court in Dallas, alleges that, between 2005 and 2008, Slovak took more than $330,000 from an 83-year-old customer, by liquidating securities in his brokerage account and transferring the proceeds to her personal bank accounts. According to the complaint, Slovak used the proceeds to pay personal expenses. During the period of her misconduct, Slovak was associated with firms that are registered with the Commission as broker-dealers and investment advisers.

The complaint further alleges that, in 2008, after exhausting almost all of the elderly customer's liquid net worth, Slovak misappropriated an additional $144,000 from the accounts of two other customers, and transferred those funds to the elderly customer's brokerage account. In August 2008, Slovak acknowledged her misconduct to her branch manager and, at the branch manager's insistence, repurchased securities in the customers' accounts. However, according to the complaint, in order to obtain authorization for the repurchases of securities, Slovak made material misstatements and/or omissions to compliance staff and to one of the customers. In particular, she suggested that she had withdrawn the funds by mistake, rather than as a result of deliberate misconduct.

The complaint alleges that, as a result of her misconduct, Slovak violated the antifraud provisions of the Securities Exchange Act of 1934 (Exchange Act) and of the Investment Advisers Act of 1940 (Advisers Act). Slovak has agreed to settle with the Commission without admitting or denying the allegations in the Commission's complaint. She has consented to the entry of a permanent injunction prohibiting her from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 206 of the Advisers Act. She has also agreed to pay a civil money penalty of $25,000 and has acknowledged that the Court will not be imposing a penalty greater than $25,000 based on her sworn representations concerning her financial condition. Finally, she has agreed to an administrative order barring her from association with any broker, dealer or investment adviser. [SEC v. Susan G. Slovak, Civil Action No. 3:10-cv-00826-N (N.D. Tx.)] (LR-21502)

Court Enters Judgment of Permanent Injunction and Other Relief Against Defendant Victor J. Ragucci

The Commission announced that on April 19, 2010, the United States District Court for the Middle District of Florida entered a Judgment of Permanent Injunction and Other Relief against Defendant Victor J. Ragucci. The Judgment, entered with the consent of Ragucci, enjoins him from violations of Section 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Judgment also prohibits Ragucci from acting as an officer or director of any public company. The Judgment sets the issues of disgorgement and a civil penalty for later determination by the Court upon motion by the Commission.

The Commission commenced this action by filing its complaint on Jan. 15, 2009, against Ragucci and the two companies he founded, BarrierMed, Inc. and BarrierMed Glove Co (the Companies). The complaint alleges that Ragucci and the Companies fraudulently raised over $11 million from hundreds of investors nationwide by offering and selling unregistered securities through a series of private offerings. [SEC v. BarrierMed, Inc., BarrierMed Glove Co. and Victor J. Ragucci, Case No. 6:09-CV-102-Orl-28KRS (M.D. Fla.)] (LR-21503)

Court Enters Judgments of Permanent Injunction and Other Relief Against Defendants Darrel West and Own My Travel, LLC

The Commission announced that on Dec. 29, 2009, the United States District Court for the Middle District of Florida entered Judgments of Permanent Injunction and Other Relief against Defendant Darrel West and the company he controlled, Own My Travel, LLC. The Judgments, entered by consent, enjoin the defendants from violation of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Court also ordered the defendants to pay disgorgement, prejudgment interest and civil penalties in amounts to be determined by the Court upon motion by the Commission. Additionally, the Court entered a Judgment of Disgorgement and Other Relief against Relief Defendant Professionally Assisted Marketing, Inc., in an amount to be determined by the Court upon motion by the Commission.

The Commission began this action by filing its complaint on Aug. 14, 2009, against West, Own My Travel and Professionally Assisted Marketing, LLC. The complaint alleges the defendants misrepresented Own My Travel as a legitimate multi-level marketing company when it was actually a fraudulent pyramid scheme premised on the sale of memberships and thus destined to collapse, leaving investors with substantial losses. The complaint also alleges that West and Own My Travel misled investors about Own My Travel's business structure and how it generated revenue, the future commissions investors would purportedly receive on a monthly basis, the risks associated with the Own My Travel investment, and West's failures running a similar predecessor company. [SEC v. Darrel West and Own My Travel, LLC, and Professionally Assisted Marketing, Inc., Case No. 6:09-CV-1419 (M.D. Fla.)] (LR-21504)

Court Enters Final Judgment of Disgorgement and Civil Penalty Agaisnt Defendant Gary J. Gross

The Commission announced that on Nov. 20, 2009, the United States District Court for the Southern District of Florida entered a Final Judgment of Disgorgement and Civil Penalty as to Defendant Gary J. Gross. The Final Judgment, entered by consent, orders Gross to pay $789,879 in disgorgement, $259,704.70 in prejudgment interest, and a civil penalty of $130,000.

On Nov. 25, 2008, the Court had entered a Judgment, by consent, enjoining Gross from violations of Section 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and permanently barring him from participating in any future offerings of penny stock.

The Commission began this action by filing its complaint against Gross on Sept. 22, 2008. The complaint alleged that Gross, a former registered representative, recommended unsuitable securities and engaged in unauthorized and often unsuitable trades in his customers' accounts. Many of these customers were elderly, unsophisticated investors who wanted to preserve their investment principal and grow their portfolios while investing with minimal risk. [SEC v. Gary J. Gross, Case No. 08-81039-CIV-Marra/Johnson (S.D. Fla.)] (LR-21505)

Judgments of Permanent Injunction and Other Relief Entered Against Defendants Neil V. Moody and Christopher D. Moody

The Commission announced that on April 7, 2010, The United States District Court for the Middle District of Florida entered Judgments of Permanent Injunction and Other Relief against Defendants Neil V. Moody and Christopher D. Moody. The Judgments, entered by consent, enjoin the defendants from violation 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 Section 206(4) and Rule 206(4)-8 of the Investment Advisers Act of 1940. The Judgments set the issues of disgorgement and civil penalties for later determination by the Court upon motion by the Commission.

The Commission began this action by filing its complaint on Jan. 11, 2010, against Neil and Christopher Moody in connection with their management and control of three hedge funds from at least January 2003 through January 2009. The complaint alleges that Neil and Christopher Moody distributed materials to investors that overstated the historical returns and asset values of three hedge funds they managed and controlled. The complaint also alleges that the defendants disseminated to investors and prospective investors offering materials, account statements, and newsletters that misrepresented the hedge funds' historical investment returns and overstated their asset values by almost $160 million. [SEC v. Neil V. Moody and Christopher D. Moody (U.S. District Court for the Middle District of Florida, Civil Action No. 8:10-cv-0053-T-33TBM)] (LR-21506)

INVESTMENT COMPANY ACT RELEASES

Pax World Funds Trust II, et al.

A notice has been issued giving interested persons until May 14, 2010, to request a hearing on an application filed by Pax World Funds Trust II, et al. Applicants request an order to amend a prior order that permits: (a) certain open-end management investment companies and their series that are based on equity securities indices to issue shares that can be redeemed only in large aggregations; (b) secondary market transactions in shares to occur at negotiated prices; (c) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of large aggregations of shares; (d) under specified limited circumstances, certain series to pay redemption proceeds more than seven days after the tender of shares; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire shares of the series. Applicants seek to amend the prior order to permit the investment company applicant to offer a new series that is based on an equity securities index for which the entity that may be deemed an index provider also may be deemed an affiliated person of an affiliated person of the investment company applicant. (Rel. IC-29257 - April 26)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the Financial Industry Regulatory Authority (SR-FINRA-2010-019) to extend the implementation period for SR-FINRA-2009-065 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 April 19. (Rel. 34-61948)

A proposed rule change filed by New York Stock Exchange that amends its immediate release policy to remove the address contact information (SR-NYSE-2010-32) 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 April 19. (Rel. 34-61952)

Proposed Rule Changes

The Commission issued notice of a proposed rule change (SR-NYSEArca-2010-22) submitted by NYSE Arca, pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, relating to listing of the Teucrium Corn Fund. Publication is expected in the Federal Register during the week of April 19. (Rel. 34-61954)

BATS Exchange filed a proposed rule change (SR-BATS-2010-008) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to amend BATS Rules 2.5 and 17.2 applicable to registration requirements. Publication is expected in the Federal Register during the week of April 19. (Rel. 34-61960)

Approval of Proposed Rule Change

The Commission approved a proposed rule change (SR-OCC-2010-03) submitted under Rule 19b-4 by The Options Clearing Corporation that clarifies that the term "fund share" in Article I, Section 1 of OCC's By-Laws with regards to option contracts and futures contracts on ETFS Palladium Shares and ETFS Platinum Shares. Publication is expected in the Federal Register during the week of April 19. (Rel. 34-61958)

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