SEC News Digest

COMMISSION ANNOUNCEMENTS

SEC Charges N.Y.-Based Investment Adviser With Fraudulent Management of CDOs Tied to Mortgage-Backed Securities

The Securities and Exchange Commission today charged a New York-based investment adviser and three of his affiliated firms with fraudulently managing investment products tied to the mortgage markets as they came under pressure in 2007.

The SEC alleges that, at the direction of its owner and president Thomas Priore, ICP Asset Management LLC defrauded four multi-billion-dollar collateralized debt obligations (CDOs) by engaging in fraudulent practices and misrepresentations that caused the CDOs to lose tens of millions of dollars. Priore and his companies also improperly obtained tens of millions of dollars in advisory fees and undisclosed profits at the expense of their clients and investors.

"ICP and Priore repeatedly put themselves ahead of their clients," said Robert Khuzami, Director of the SEC's Enforcement Division. "Instead of acting as fiduciaries, they took advantage of a distressed market to line their own pockets."

According to the SEC's complaint, filed in the U.S. District Court for the Southern District of New York, ICP began serving in 2006 as the collateral manager for what were known as the Triaxx CDOs, which invested primarily in mortgage-backed securities. ICP's affiliated broker-dealer ICP Securities LLC and its parent company Institutional Credit Partners LLC also are charged in the SEC's complaint.

The SEC alleges that ICP and Priore directed more than a billion dollars of trades for the Triaxx CDOs at what they knew were inflated prices. ICP and Priore repeatedly caused the Triaxx CDOs to overpay for securities in order to make money for ICP and protect other ICP clients from realizing losses. The prices for such trades often exceeded market prices by substantial margins. In some trades, ICP caused the CDOs to pay a price that was substantially higher than the price another ICP client paid for the security earlier the same day.

George S. Canellos, Director of the SEC's New York Regional Office, said, "The CDOs were complex but the lesson is simple: collateral managers bear the same responsibilities to their clients as every other investment adviser. When they violate their clients' trust, we will hold them accountable."

According to the SEC's complaint, ICP and Priore caused the CDOs to make numerous prohibited investments without obtaining necessary approvals, and they later misrepresented those investments to the trustee of the CDOs and to investors. The prices of many of these investments were intentionally inflated to allow ICP to collect millions of dollars in advisory fees from the CDOs. The SEC further alleges that ICP and Priore executed undisclosed cash transfers from a hedge fund they managed in order to allow another ICP client to meet the margin calls of one of its creditors. Priore subsequently misrepresented the transfers to the hedge fund's investors.

The SEC's complaint charges the defendants with violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(c)(1)(a) of the Securities Exchange Act of 1934 and Rules 10b-3 and 10b-5 thereunder, and Sections 204, 206(1), 206(2), 206(3), and 206(4) of the Investment Advisers Act of 1940 and Rules 204-2, 206(4)-7, and 206(4)-8 thereunder. The SEC's complaint seeks permanent injunctions barring future violations of the federal securities laws, disgorgement of the defendants' ill-gotten gains with pre-judgment interest, and monetary penalties.

Celeste A. Chase, Joseph O. Boryshansky, Susannah M. Dunn, Joshua R. Pater, and Kenneth Gottlieb of the New York Regional Office conducted the SEC's investigation, which is continuing.

For more information about this enforcement action, contact:

George S. Canellos
Regional Director, SEC's New York Regional Office
(212) 336-1020

Andrew M. Calamari
Associate Regional Director, SEC's New York Regional Office
(212) 336-0042

Celeste A. Chase
Assistant Regional Director, SEC's New York Regional Office
(212) 336-0049

(Press Rel. 2010-105) (LR-21563)

Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues Announces Agenda, List of Participants for June 22 Meeting

The Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues today announced the agenda for its public meeting to be held on June 22, 2010.

The Committee is conducting a review of the unusual market events that occurred on May 6, 2010. The Committee will hear from representatives of exchanges and significant market participants about their views and observations relating to market events of that day. At the Committee's next meeting, anticipated to occur in late July, the Committee expects to hear from other market participants, including brokerage houses, issuers, institutional traders and retail investors about the effects of the events of May 6. Securities and Exchange Commission (SEC) Chairman Mary Schapiro and Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler are the co-chairs of the Committee.

"These firsthand accounts will further inform our understanding of what happened," said SEC Chairman Schapiro.

"The insights and views of these market participants will provide the Committee and CFTC and SEC staff with valuable information to aid our regulatory efforts going forward," added CFTC Chairman Gensler.

The meeting at the SEC headquarters building at 100 F Street, N.E., Washington, D.C., will be open to the public with seating on a first-come, first-served basis. The meeting also will be webcast on the SEC's website.

For additional information about the meeting, contact the SEC’s Office of Public Affairs at (202) 551-4120 or the CFTC’s Office of Public Affairs at (202) 418-5080. Directions on submitting comments to the SEC are available here; directions on submitting comments to the CFTC are available at: http://www.cftc.gov/LawRegulation/PublicComments/HowtoSubmit/index.htm.

Joint CFTC-SEC Advisory Committee Meeting Agenda and Panelists

(Press Rel. 2010-106)

ENFORCEMENT PROCEEDINGS

Commission Revokes Registration of Securities of USA Uranium Corp. for Failure to Make Required Periodic Filings

On June 21, 2010, the Commission revoked the registration of each class of registered securities of USA Uranium Corp. (USA Uranium) 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, USA Uranium 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 USA Uranium Corp. 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 USA Uranium's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against USA Uranium in In the Matter of U.S. Biomedical Corp. (f/k/a United Textiles & Toys, Inc.), et al., Administrative Proceeding File No. 3-13793.

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 U.S. Biomedical Corp. (f/k/a United Textiles & Toys, Inc.), et al., Administrative Proceeding File No. 3-13793, Exchange Act Release No. 61597 (Feb. 26, 2010). (Rel. 34-62327; File No. 3-13793)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by International Securities Exchange related to do-not-route orders (SR-ISE-2010-49) 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 June 21. (Rel. 34-62301)

A proposed rule change filed by The NASDAQ Stock Market (SR-NASDAQ-2010-072) clarifying the applicable time period of trading pauses on trading days with an early scheduled close 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 June 21. (Rel. 34-62314)

A proposed rule change filed by International Securities Exchange relating to fees and rebates for adding and removing liquidity (SR-ISE-2010-57) 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 June 21. (Rel. 34-62319)

A proposed rule change (SR-Phlx-2010-83) filed by NASDAQ OMX PHLX to modify its rules relating to Directed Orders and other types of orders 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 June 21. (Rel. 34-62320)

A proposed rule change filed by NYSE Arca (SR-NYSEArca-2010-46) amending Commentary .01 to Rule 5.32 to permit certain FLEX options to trade under the FLEX trading procedures for a limited time on a closing only basis 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 June 21. (Rel. 34-62321)

A proposed rule change filed by the Municipal Securities Rulemaking Board (MSRB) relating to the discontinuation of the MSRB Public Access Facility (SR-MSRB-2010-04) 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 June 21. (Rel. 34-62322)

Proposed Rule Changes

The NYSE Amex filed a proposed rule change (SR-NYSEAmex-2010-25) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to allow exchange systems to provide order imbalance information with respect to market at-the-close and marketable limit at-the-close interest to floor brokers beginning two hours and until fifteen minutes prior to the scheduled close of trading on every trading day. Publication is expected in the Federal Register during the week of June 21. (Rel. 34-62311)

The New York Stock Exchange filed a proposed rule change (SR-NYSE-2010-20) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to allow exchange systems to provide order imbalance information with respect to market at-the-close and marketable limit at-the-close interest to floor brokers beginning two hours and until fifteen minutes prior to the scheduled close of trading on every trading day. Publication is expected in the Federal Register during the week of June 21. (Rel. 34-62312)

Approval of Proposed Rule Changes

The Commission has issued an order approving a proposed rule change by NYSE Arca (SR-NYSEArca-2010-31) to amend NYSE Arca Rule 3.3(a) and Section 401(a) of the Exchange's Bylaws to Eliminate the Exchange's Audit Committee, Compensation Committee, and Regulatory Oversight Committee. Publication is expected in the Federal Register during the week of June 21. (Rel. 34-62304)

The Commission approved a proposed rule change (SR-CBOE-2010-038), as modified by Amendment No. 1 thereto, submitted by Chicago Board Options Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, revising its market turner and modified participation entitlement priority overlays. Publication is expected in the Federal Register during the week of June 21. (Rel. 34-62317)

The Commission approved a proposed rule change (SR-C2-2010-002) filed by C2 Options Exchange under Rule 19b-4 of the Securities Exchange Act of 1934 relating to the corporate structuring of C2 in connection with the demutualization of the Chicago Board Options Exchange, Incorporated. Publication is expected in the Federal Register during the week of June 21. (Rel. 34-62323)

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http://www.sec.gov/news/digest/2010/dig062110.htm