SEC News Digest

RULES AND RELATED MATTERS

Order Granting Temporary Conditional Exemption for Nationally Recognized Statistical Rating Organizations from Requirements of Rule 17g-5 Under the Securities Exchange Act of 1934 and Request for Comment

On May 19, 2010, the Commission issued an order pursuant to Section 36 of the Exchange Act that conditionally would exempt nationally recognized statistical rating organizations (NRSROs) from Rule 17g-5(a)(3) until Dec. 2, 2010, with respect to structured finance products where: (1) the issuer of the structured finance product is a non-U.S. person; and (2) the NRSRO has a reasonable basis to conclude that the structured finance product will be offered and sold upon issuance, and that any arranger linked to the structured finance product will effect transactions of the structured finance product after issuance, only in transactions that are outside of the U.S. (Rel. 34-62120; File No. S7-04-09)

ENFORCEMENT PROCEEDINGS

In the Matter of Angel Romo

On May 19, 2010, 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 Angel Romo (Romo). The Order finds that on April 21, 2010, Romo consented to the entry of final judgment enjoining him from violations Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and from aiding and abetting future violations of Section 17(a) of the Exchange Act and Rules 17a-3(a)(6) and 17a-3(a)(17) thereunder.

Based on the above, the Order suspends Romo from association with any broker or dealer for a period of 90 days. Romo 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. 34-62137; File No. 3-13905)

In the Matter of J.P. Turner & Company, LLC

An Administrative Law Judge has issued an Initial Decision in J.P. Turner & Company, LLC, Administrative Proceeding No. 3-13550. The Initial Decision finds that Respondent J.P. Turner & Company, LLC (J.P. Turner), willfully violated Rule 30(a), 17 C.F.R. S 248.30(a), of Regulation S-P of the Securities Exchange Act of 1934.

The Initial Decision concludes that J.P. Turner failed to adopt written policies and procedures that address administrative, technical, and physical safeguards for the protection of customer records and information as required by Rule 30(a) from July 2005 through September 2006. Rule 30(a) also requires that a firm's written policies and procedures be reasonably designed to insure the security and confidentiality of customer information and to protect that customer information from threats and unauthorized access. By failing to have complete written procedures, the Initial Decision determines that J.P. Turner did not have reasonably designed policies and procedures for the security and protection of customer information pursuant to Rule 30(a).

As a result of this violation, the Initial Decision orders J.P. Turner to cease and desist from committing or causing future violations of Rule 30(a). The Initial Decision also orders J.P. Turner to pay a first-tier, civil money penalty of $65,000. (Initial Decision No. 395; File No. 3-13550)

SEC Settles Civil Fraud Injunctive Action Against Former McKesson Corporation Chairman

The Securities and Exchange Commission announced that, on May 18, 2010, the United States District Court for the Northern District of California entered a final judgment against Charles McCall, the former Chairman of McKesson Corporation. The court enjoined McCall from future violations of the antifraud and other securities laws noted below and permanently barred him from serving as an officer or director of any public reporting company. The court also ordered McCall to pay a total of $1,878,128 in disgorgement and prejudgment interest.

The judgment was the result of a settlement in which McCall, without admitting or denying the allegations in the Commission's complaint, consented to entry of the judgment against him. McCall was the Chief Executive Officer and Chairman of HBO & Co. (HBOC), an Atlanta, Georgia-based vendor of health care technology company that merged with McKesson in 1999, and then became Chairman of the combined company then known as McKesson HBOC, Inc. The complaint alleged that McCall and other senior executives participated in a long-running fraudulent scheme to inflate the revenue and net income of HBOC and McKesson HBOC. As part of this scheme, McCall personally took part in negotiating at least two contracts with side letter agreements containing cancellation contingencies, one of which was also backdated. As a result of the scheme, according to the complaint, the companies were able to recognize revenue in earlier reporting periods. These practices failed to comply with Generally Accepted Accounting Principles. The fraud enabled HBOC and McKesson HBOC to report falsely in press releases and in periodic reports HBOC filed with the Commission that the companies were having an unbroken run of financial success and had continually exceeded analysts' expectations.

The final judgment against McCall permanently enjoins him from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder. In addition, McCall was permanently barred him from acting as an officer or director of a public company and was ordered to pay a total of $1,878,128 in disgorgement and prejudgment interest. On Nov. 19, 2009, McCall was convicted of securities fraud and related charges arising from the fraud at HBOC and McKesson HBOC. He was sentenced to ten years' incarceration and ordered to pay a $1 million criminal fine. [SEC v. Charles McCall, Case No. C-03-2603 WHA (N.D. Cal.)] (LR-21527; AAE Rel. 3136)

INVESTMENT COMPANY ACT RELEASES

Kinetics Mutual Funds, Inc., et al.

A notice has been issued giving interested persons until June 11, 2010, to request a hearing on an application filed by Kinetics Mutual 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-29270 - May 17)

Claymore Exchange-Traded Fund Trust 3, et al.

An order has been issued on an application filed by Claymore Exchange-Traded Fund Trust 3, et al., to permit: (a) series of certain actively managed open-end management investment companies to issue shares (Shares) redeemable in large aggregations only (Creation Units); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain series to pay redemption proceeds under certain circumstances more than seven days from the tender of Shares for redemption; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; 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. (Rel. IC-29271 - May 18)

SELF-REGULATORY ORGANIZATIONS

Proposed Rule Changes

The NASDAQ Stock Market filed a proposed rule change under Rule 19b-4 (SR-NASDAQ-2010-052) to establish a new service and related fees. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62112)

The International Securities Exchange filed a proposed rule change under Rule 19b-4 (SR-ISE-2010-34) relating to fees for the ISE Order Feed. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62117)

C2 Options Exchange filed a proposed rule change under Rule 19b-4 of the Securities Exchange Act of 1934 relating to corporate structure. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62118)

BATS Exchange filed a proposed rule change (SR-BATS-2010-014) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend BATS Rule 11.18, entitled "Trading Halts Due to Extraordinary Market Volatility." Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62121)

EDGA Exchange filed a proposed rule change (SR-EDGA-2010-01) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend EDGA Rule 11.14, entitled "Trading Halts Due to Extraordinary Market Volatility." Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62122)

EDGX Exchange filed a proposed rule change (SR-EDGX-2010-01) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend EDGX Rule 11.14, entitled "Trading Halts Due to Extraordinary Market Volatility." Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62123)

NASDAQ OMX BX filed a proposed rule change (SR-BX-2010-037) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to adopt Rule 4120(a)(11) concerning individual stock trading pauses and to adopt related IM-4120-3. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62124)

International Securities Exchange filed a proposed rule change (SR-ISE-2010-48) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend ISE Rule 2102 to provide for a trading pause for individual securities when the price moves ten percent or more. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62125)

New York Stock Exchange filed a proposed rule change (SR-NYSE-2010-39) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 adding Rule 80C to provide for a trading pause for individual securities when the price moves 10 percent or more. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62126)

NYSE Amex filed a proposed rule change (SR-NYSEAmex-2010-46) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 adding NYSE Amex Equities Rule 80C to provide for a trading pause for individual securities when the price moves 10 percent or more. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62127)

NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-41) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 adding NYSE Arca Equities Rule 7.11 to provide for a trading pause for individual securities when the price moves 10 percent or more. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62128)

The NASDAQ Stock Market filed a proposed rule change (SR-Nasdaq-2010-061) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to establish a trading pause for individual stocks contained in the Standard & Poor's 500 index that experience a price change of 10% or more during a five-minute period. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62129)

Chicago Stock Exchange filed a proposed rule change (SR-CHX-2010-10) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to establish a trading halt for individual stocks contained in the Standard & Poor's 500 Index. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62130)

National Stock Exchange filed a proposed rule change (SR-NSX-2010-05) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to establish a trading halt for individual stocks contained in the Standard & Poor's 500 Index that experience a 10 percent price change of 10% or more during a five-minute period pursuant to Exchange Rule 11.20. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62131)

Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2010-047) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 related to individual stock trading pauses due to extraordinary market volatility. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62132)

Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2010-25) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to Amend FINRA Rule 6121 (Trading Halts Due to Extraordinary Market Volatility). Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62133)

Immediate Effectiveness of Proposed Rule Change

The Depository Trust Company filed a proposed rule change (SR-DTC-2010-08), which became effective upon filing under Section 19(b)(1) of the Exchange Act, to modify its Procedures regarding the Participant Tender Offer function. Publication is expected in the Federal Register during the week of May 24. (Rel. 34-62119)

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