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RULES AND RELATED MATTERSNotice of Effectiveness of Rating and Investment Information, Inc.'s ("R&I") Withdrawal from Registration as a Nationally Recognized Statistical Rating Organization ("NRSRO") in Issuers of Asset-Backed Securities Ratings ClassOn Sept. 24, 2007, the Commission issued an order granting the registration of R&I as an NRSRO in the following classes of credit ratings: (1) financial institutions; (2) insurance companies; (3) corporate issuers; (4) issuers of asset-backed securities; and (5) issuers of government securities. On May 14, 2010, R&I furnished to the Commission on Form NRSRO a notice of withdrawal from registration in the category of issuers of asset-backed securities. Pursuant to Rule 17g-1 under the Exchange Act, R&I's withdrawal from registration in the category of issuers of asset-backed securities became effective on June 28, 2010, 45 days after the notice was furnished to the Commission. Thus, as of June 28, 2010, R&I should not be treated as an NRSRO with respect to credit ratings for issuers of asset-backed securities. ENFORCEMENT PROCEEDINGSIn the Matter of Stephen HozieOn June 29, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Stephen Hozie (Hozie). On June 7, 2010, the United States District Court for the Southern District of New York entered a final judgment permanently enjoining Hozie, by consent, from violating Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2 and from aiding and abetting violations by American Home Mortgage (AHM) of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13 thereunder and barring him from acting as an officer or director for a period of five years. Hozie was also ordered to pay a civil penalty of $225,000 and disgorgement of one dollar. Hozie consented to the entry of final judgment without admitting or denying the allegations in the complaint. Hozie fraudulently understated AHM's first quarter 2007 loan loss reserves by tens of millions of dollars, converting the company's loss into a fictional profit. Hozie made misleading disclosures concerning the company's financial condition including misrepresenting the company's liquidity and failing to adequately disclose the riskiness of the mortgages American Home Mortgage originated and held. Hozie also misled American Home Mortgage's auditor about the adequacy of the reserves, among other violations. Based on the above, the Order suspends Hozie from appearing or practicing before the Commission as an accountant with a right to reapply after five years. Hozie 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 injuinction. For further information, please see Litigation Release No. 21014 (Apr. 28, 2009). [SEC v. Michael Strauss, et al., Civ. No. 09-CV-4150 (S.D.N.Y.)]. (Rel. 34-62401; AAE Rel. 3148; File No. 3-13952) SEC Charges Two Canadians With Fraudulently Touting Penny Stocks on a Website, Facebook and TwitterOn June 23, 2010, The Securities and Exchange Commission obtained an emergency asset freeze against a Canadian couple, Carol McKeown and Daniel F. Ryan, and their two companies who fraudulently touted penny stocks through their website, www.pennystockchaser.com, Facebook and Twitter. The SEC alleges that since at least April 2009, Montreal residents McKeown and Ryan have touted U.S. microcap companies for compensation paid to defendants Downshire Capital Inc., and Meadow Vista Financial Corp. McKeown and Ryan sold their compensatory shares on the open market while PennyStockChaser simultaneously predicted massive price increases for the issuers. The SEC's complaint charges McKeown, Ryan, Downshire Capital Inc. and Meadow Vista Financial Corp. with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; and also charges McKeown, Ryan and Meadow Vista Financial Corp. with violating Section 17(b) of the Securities Act of 1933. The Commission seeks preliminary and permanent injunctions, disgorgement plus prejudgment interest, a financial penalty and other relief. The SEC's investigation is continuing. [SEC v. Carol McKeown, Daniel F. Ryan, Meadow Vista Financial Corp., and Downshire Capital Inc., Civil Action No.10-80748-CIV-COHN (S.D. Fla.)] (LR-21580) In the Matter of Veraz Networks, Inc.The Securities and Exchange Commission today filed a settled federal court action against San Jose, California-based telecommunications company Veraz Networks, Inc., alleging that Veraz violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA). The alleged violations stemmed from improper payments made by Veraz to foreign officials in China and Vietnam after the company went public in 2007. The SEC alleges that Veraz engaged a consultant in China who in 2007 and 2008 gave gifts and offered improper payment together valued at approximately $40,000 to officials at a government controlled telecommunications company in China in an attempt to win business for Veraz. A Veraz supervisor who approved the gifts described them in an internal Veraz email as the "gift scheme." Similarly in 2007 and 2008, the SEC alleges that a Veraz employee made improper payments to the CEO of a government controlled telecommunications company in Vietnam to win business for Veraz. According to the SEC's complaint, filed in U.S. District Court for the Northern District of California, Veraz violated the books and records and internal controls provisions of the FCPA by failing to accurately record the improper payments on its books and records, and failing to devise and maintain a system of effective internal controls to prevent such payments. Veraz, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a final judgment permanently enjoining Veraz from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering Veraz to pay a penalty of $300,000. The SEC acknowledges the assistance of the U.S. Department of Homeland Security during the investigation. [SEC v. Veraz Networks, Inc., Case No. CV-10-2849 (PVT) (N.D. Cal.)] (LR-21581) SEC Charges Southern California Investment Adviser and Its Principal With Fraud and Breach of Fiduciary DutyOn June 28, 2010, the Securities and Exchange Commission filed a civil action in the United States District Court for the Central District of California charging Life Wealth Management, Inc. and its owner Jeffery S. Preston with fraud and breach of fiduciary duty for placing clients in unsuitable investments and misrepresenting and failing to disclose the risks of these investments. The SEC alleges that Life Wealth and Preston invested $6.9 million of client funds in unsecured promissory notes issued by Atherton-Newport Investments, LLC, a real estate company that buys and renovates distressed properties and is headquartered in Irvine, Calif. Beginning in or about October 2005, Preston recommended the notes to Life Wealth clients even though the notes were not suitable to the clients' risk tolerances. Preston also characterized the notes as a "solid" and "strong" investment without disclosing the risks inherent in an unsecured loan. Atherton-Newport defaulted on all of the outstanding notes in September 2007, which amounted to almost total losses for Life Wealth clients. According to the SEC's complaint, Preston recommended the Atherton-Newport unsecured promissory notes to his clients despite the fact that in July 2005, Life Wealth's attorney had cautioned him about the "enormous risk" of such an investment. Nevertheless, not only did Preston recommend the notes to clients, he also falsely reassured clients that their principal would be safe. Even though Preston began to doubt the viability of Atherton-Newport in early 2007, he did not disclose his concerns to Life Wealth clients. Preston then redeemed his own unsecured promissory note several weeks before Atherton-Newport defaulted on all of the outstanding notes. Even after Atherton-Newport defaulted on the notes, Preston persuaded three Life Wealth clients to invest $235,000 in unsecured promissory notes issued by Atherton-Newport. In addition, Preston recommended the notes to clients even though the investment was highly unsuitable for many of them, such as one client who invested 86.2 per cent of her total net worth in the notes. The SEC's complaint charges Life Wealth and Preston with violating 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. The SEC is seeking permanent injunctions barring future violations of the federal securities laws, disgorgement of the defendants' ill-gotten gains with prejudgment interest, and monetary penalties. [SEC v. Life Wealth Management, Inc. and Jeffery S. Preston, United States District Court for the Central District of California, Civil Action No. CV-10-4769 RSWL (MANx)] (LR-21582) Court Enters Final Judgments Against Rockwall, Texas Resident Carl Q. Lee and His Company Carl Lee and Associates, Inc.The Securities and Exchange Commission announced today that on June 23, 2010, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against Carl Q. Lee, of Rockwall, Texas, and Carl Lee and Associates, Inc. (CLA), Lee's business. The final judgment: (1) enjoined Lee and CLA from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, Rules 10b-5 and 10b-10 promulgated thereunder, and enjoined Lee from aiding and abetting violations of Rule 10b-10 of the Exchange Act; (2) ordered Lee and CLA to pay disgorgement in the amount of $1,416,557.82, plus prejudgment interest of $603,088.00, for a total of $2,019,645.82; and (3) ordered Lee to pay a civil penalty in the amount of $120,000. The SEC's complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Lee and CLA, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Leases. Universal Lease investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC's complaint alleges that from 1999 until 2005, Kelly and others, including Lee and CLA, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Lee and CLA, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges, the leasing agent was a small Panamanian travel agency controlled by Kelly, and for most of the scheme its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and the other defendants, including Lee and CLA, failed to disclose key facts about the Universal Lease investment, including the risks of the investment and that Kelly was paying commissions as high as 27% to the selling brokers. The SEC's action against the remaining defendants is pending. For further information, see Litigation Release Nos. 20267 (Sept. 5, 2007), 20573 (May 14, 2008) , 20578 (May 15, 2008), 20579 (May 15, 2008), 20664 (July 31, 2008), 20679 (Aug. 12, 2008), 20708 (Sept. 9, 2008); 20709 (Sept. 9, 2008), 20799 (Nov. 6, 2008), 21003 (April 15, 2009) and 21481 (April 8, 2010); [SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois] (LR-21583) INVESTMENT COMPANY ACT RELEASESLazard Global Total Return and Income Fund, Inc., et al.A notice has been issued giving interested persons until July 20, 2010 to request a hearing on an application filed by Lazard Global Total Return and Income Fund, Inc., et al., under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order would permit certain registered closed-end investment companies to make periodic distributions of long-term capital gains with respect to their outstanding common stock as frequently as monthly in any taxable year, and as frequently as distributions are specified by or in accordance with the terms of any outstanding preferred stock that such investment companies may issue. (Rel. IC-29331 - June 24) Korea Finance CorporationA notice has been issued giving interested persons until July 19, 2010, to request a hearing on an application filed by Korea Finance Corporation, a policy finance institution established by the government of the Republic of Korea for an order under Section 6(c) of the Investment Company Act for an exemption from all provisions of the Act in connection with the offer and sale of its debt securities in the United States. (Rel. IC-29332 - June 25) Notices of Deregistration under the Investment Company ActFor the month of June 2010, a notice has been issued giving interested persons until July 20, 2010, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act declaring that the applicant has ceased to be an investment company:
(Rel. IC-29333 - June 25) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangesA proposed rule change filed by NYSE Arca (SR-NYSEARCA-2010-52) amending NYSE Arca Equities Rule 7.11 to set forth how the Exchange will handle order flow during a regulatory halt for a security listed on an exchange other than NYSE Arca 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 28. (Rel. 34-62368) A proposed rule change filed by NASDAQ OMX BX (SR-BX-2010-038) to eliminate certain rule text which has been made unnecessary due to the Decommissioning of the OCC Hub 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 28. (Rel. 34-62373) A proposed rule change filed by NYSE Amex to amend the Bylaws of NYSE Euronext to adopt a majority voting standard in uncontested elections of directors (SR-NYSEAmex-2010-58) 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 28. (Rel. 34-62376) A proposed rule change filed by NYSE Arca to amend the Bylaws of NYSE Euronext to adopt a majority voting standard in uncontested elections of directors (SR-NYSEArca-2010-55) 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 28. (Rel. 34-62377) A proposed rule change (SR-CBOE-2010-061) filed by the Chicago Board Options Exchange relating to deletion of obsolete CBOE Rule 2.50 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 28. (Rel. 34-62378) A proposed rule change filed by NASDAQ OMX PHLX relating to fees for FLEX Equity Options (SR-Phlx-2010-87) 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 28. (Rel. 34-62379) A proposed rule change (SR-CBOE-2010-058) filed by the Chicago Board Options Exchange relating to conforming changes in connection with demutualization 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 28. (Rel. 34-62382) A proposed rule change (SR-CBOE-2010-060) filed by the Chicago Board Options Exchange relating to the establishment of the initial fees for post-demutualization trading permits, tier appointments and bandwidth packets 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 28. (Rel. 34-62386) A proposed rule change filed by International Securities Exchange (SR-ISE-2010-63) to list options on Trust Issued Receipts in $1 strike intervals 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 28. (Rel. 34-62389) Proposed Rule ChangesThe Options Clearing Corporation filed a proposed rule change (SR-OCC-2010-04) and an amendment thereto under Section 19(b)(1) of the Exchange Act that would revise its By-Laws and Rules to establish a clearing fund amount intended to support losses under a defined set of default scenarios. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62371) The Depository Trust Company filed a proposed rule change (SR-DTC-2010-09) under Section 19(b)(1) of the Exchange Act that would allow DTC to revise its Procedures regarding securities delivered to or from Participant accounts through the Automated Customer Account Transfer Service of National Securities Clearing Corporation. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62384) National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2010-05) under Section 19(b)(1) of the Exchange Act that would enhance the process for transfers through the Automated Customer Account Transfer Service. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62385) The Commission issued notice of a proposed rule change submitted by NASDAQ OMX BX (SR-BX-2010-043) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to pricing for direct circuit connections. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62393) The Commission issued notice of a proposed rule change submitted by NASDAQ OMX PHLX (SR-Phlx-2010-89) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to pricing for direct circuit connections. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62394) Approval of Proposed Rule ChangesThe Commission approved a proposed rule change filed under Rule 19b-4 by the NASDAQ Stock Market to establish the Nasdaq Short Sale Volume and Monthly Short Sale Transaction Service and related fees (SR-NASDAQ-2010-052). Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62380) The Commission approved a proposed rule change submitted by NASDAQ OMX PHLX pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 (SR-Phlx-2010-18) to codify prices for its co-location services. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62395) The Commission approved a proposed rule change submitted by NASDAQ OMX BX pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 (SR-BX-2010-012) to codify prices for its co-location services. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62396) The Commission approved a proposed rule change submitted by the International Securities Exchange (SR-ISE-2010-34) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to fees for the ISE Order Feed. Publication is expected in the Federal Register during the week of June 28. (Rel. 34-62399) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig062910.htm
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