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COMMISSION ANNOUNCEMENTSFee Rate Advisory #2 for Fiscal Year 2011When fiscal year 2011 starts on Oct. 1, 2010, the Securities and Exchange Commission expects to be operating under a continuing resolution that will extend through Dec. 3, 2010. During this period, fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e), 14(g) and 31 of the Securities Exchange Act of 1934 will remain at their current rates. As previously announced, 30 days after the date of enactment of the Commission's regular fiscal year 2011 appropriation, the Section 31 fee rate applicable to securities transactions on the exchanges and in the over-the-counter markets will increase from their current rate of $16.90 per million dollars to a new rate of $19.20 per million dollars. The assessment on security futures transactions under Section 31(d) will remain unchanged at $0.0042 for each round turn transaction. In addition, five days after the date of enactment of the Commission's regular appropriation, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities, and the Section 14(g) fee rate applicable to proxy solicitations and statements in corporate control transactions will increase from their current rate of $71.30 per million dollars to a new rate of $116.10 per million dollars. The Division of Trading and Markets Office of Interpretation and Guidance is available for questions relating to Section 31, at (202) 551-5777 or at tradingandmarkets@sec.gov. A copy of the Commission's April 29, 2010, order regarding fee rates for fiscal year 2011 is available at http://www.sec.gov/rules/other/2010/33-9122.pdf. The Commission will issue further notices as appropriate to keep the public informed of developments relating to enactment of the Commission's regular appropriation and the effective dates for the above fee rate changes. These notices will be posted at the SEC's website at http://www.sec.gov. (Press Rel. 2010-173) Commission AnnouncementsClosed Meeting - Wednesday, October 6, 2010 - 1:00 p.m.The subject matter of the Closed Meeting scheduled for Wednesday, October 6, 2010 will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; and other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400. RULES AND RELATED MATTERSSEC Adopts Amendments to Remove the Exemption for Credit Rating Agencies from Regulation FDThe Commission adopted amendments to Regulation FD to remove the specific exemption from the rule for disclosures made to nationally recognized statistical rating organizations and credit rating agencies for the purpose of determining or monitoring credit ratings as required by Section 939B of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. (Rels. 33-9146; 34-63003; IC-29448; S7-23-10) ENFORCEMENT PROCEEDINGSIn the Matter of Valentine Capital Asset Management, Inc. and John Leo ValentineThe Securities and Exchange Commission today charged a Bay Area investment adviser with switching his clients between two related investments without disclosing that the switch would boost the commissions they had to pay. According to the SEC, San Ramon-based Valentine Capital Asset Management (VCAM) and its principal John Leo Valentine failed to disclose material conflicts of interest when they advised clients to exchange one series of an investment fund for another series in the same fund, which had the effect of increasing VCAM and Valentine's commission stream. Without admitting or denying the Commission's findings, VCAM and Valentine have agreed to return over $400,000 in excess commissions to their clients and to pay a $70,000 civil penalty. In an administrative proceeding instituted today, the SEC finds that in mid-2005, Valentine advised his clients to invest in Series A of a managed futures fund. Investors paid a 4% annual commission, which terminated once an investor paid 10% in total commissions (i.e. in approximately 2.5 years). By the end of 2007, many clients had reached or were close to reaching the 10% threshold when they would no longer have to pay commissions. According to the SEC, in December 2007, Valentine began advising many of his clients to exchange at least some portion of their Series A holdings for Series B of the same fund - a largely identical investment but with higher leverage. By making the switch, clients would restart making the 4% annual commission payments. As a result of Valentine's recommendation, approximately 140 clients switched from Series A to Series B. The vast majority of these clients had reached or were close to reaching the 10% commissions cap. This switching activity generated over $400,000 in additional commissions for VCAM and Valentine. The SEC found that VCAM and Valentine did not clearly disclose their conflict of interest in advising clients to make a fund switch that would restart their commission charges. The SEC's order instituting proceedings finds that VCAM and Valentine breached their fiduciary duties to their advisory clients. In settling the case, VCAM and Valentine have agreed to cease and desist from committing or causing any violations of and any future violations of Section 206(2) of the Investment Advisers Act (an antifraud provision), pay back over $400,000 in excess commissions to their clients, receive censures, and pay a $70,000 civil penalty. Sahil W. Desai, Sheila O'Callaghan and Cary Robnett of the San Francisco Regional Office conducted the SEC's investigation. (Rels. 34-63006; IA-3090; File No. 3-14072) In the Matter of Guillermo D. ClamensGuillermo D. Clamens, Former President of FTC Capital Markets, Inc., Barred from Association With Any Broker or DealerOn September 29, 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 (the Order) against Guillermo D. Clamens (Clamens). The Order finds that on August 26, 2010, a final judgment was entered by consent against Clamens, in the civil action entitled Securities and Exchange Commission v. FTC Capital Markets, Inc., et al., Civil Action Number 09 Civ. 4755 (PGG), in the United States District Court for the Southern District of New York, permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, and from aiding and abetting violations of Sections 15(a) and 15(c) of the Exchange Act. The Order further finds that during the relevant period, Clamens was a registered representative, and the president and chairman, of FTC, and that the Commission's complaint in the district court action alleged that Clamens engaged in a fraudulent scheme through FTC in which he engaged in tens of millions of dollars of unauthorized securities trading in the accounts of two FTC customers, and concealed those transactions from the customers by sending them fake account statements, and that he did so in part to conceal his prior fraudulent sale of $50 million in non-existent securities to a customer of FTC Emerging Markets, Inc., also d/b/a FTC Group, another Clamens-controlled entity, which illegally acted as an unregistered broker-dealer. Based on the above, the Order bars Clamens from association with any broker or dealer. Clamens consented to the issuance of the Order without admitting or denying any of the findings, except he admitted the Commission's jurisdiction and the entry of the injunction. (Rel. 34-63008; File No. 3-14073) In the Matter of Lina Lopez a/k/a Nazly Cucunuba LopezLina Lopez Barred from Association Wth Any Broker or DealerOn September 29, 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 (the Order) against Lina Lopez a/k/a Nazly Cucunuba Lopez (Lopez). The Order finds that on August 26, 2010, a final judgment was entered by consent against Lopez, in the civil action entitled Securities and Exchange Commission v. FTC Capital Markets, Inc., et al., Civil Action Number 09 Civ. 4755 (PGG), in the United States District Court for the Southern District of New York, permanently enjoining her from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, and from aiding and abetting violations of Sections 15(a) and 15(c) of the Exchange Act. The Order further finds that during the relevant period, Lopez was an employee of FTC, and that the Commission's complaint in the district court action alleged that Lopez engaged in a fraudulent scheme through FTC in which she concealed tens of millions of dollars of unauthorized securities trading in the accounts of two FTC customers by creating and sending the customers fake account statements, and that she also prepared monthly account statements for customers of another FTC entity, which illegally acted as an unregistered broker-dealer. Additionally, the Order finds that Lopez pleaded guilty to federal criminal charges in connection with the fraudulent scheme underlying the Commission's complaint. Based on the above, the Order bars Lopez from association with any broker or dealer. Lopez consented to the issuance of the Order without admitting or denying any of the findings, except she admitted the Commission's jurisdiction and the entry of the injunction and her guilty plea. (Rel. 34-63009; File No. 3-14074) In the Matter of Ark Asset Management Co., Inc.The Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 203(k) of the Investment Advisers Act of 1940 (Order) against Ark Asset Management Co., Inc. The Order finds that Ark engaged in fraudulent trade allocation practices by favoring certain proprietary accounts over certain client accounts in the allocation of securities between 2000 and 2003. Ark did not disclose this scheme to its clients. As a result of this fraudulent conduct, Ark realized at least $19 million of ill-gotten gains in the form of performance fees from the proprietary accounts. Additionally, Ark's Form ADV filings during the relevant period were materially misleading. Ark also committed books and records violations by failing to make and keep true and accurate order memoranda. Based on the above, the Order directs Ark to pay $19,800,000 in disgorgement, but deems such disgorgement obligation satisfied by the payment of $750,000 to the Commission within five days of issuance of the Order in view of the fact that Ark is liquidating under the supervision of a Chapter 7 bankruptcy trustee and has limited assets available for distribution to creditors. Ark consented to the issuance of the Order without admitting or denying any of the Commission's findings in the Order except as to jurisdiction, which is admitted. (Rel. IA-3091; File No. 3-13714) Securities and Exchange Commission Orders Hearing on Registration Suspension or Revocation Against Seven Public Companies for Failure to Make Required Periodic FilingsToday the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission. In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-63011; File No. 3-14075) Securities and Exchange Commission Orders Hearing on Registration Suspension or Revocation Against Five Public Companies for Failure to Make Required Periodic FilingsToday the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of five companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the five issuers are delinquent in their required periodic filings with the Commission. In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-63012; File No. 3-14076) In the Matter of Stephen Durland (CPA)On September 29, the Commission issued an Order Instituting Public Administrative Proceedings and Imposing Temporary Suspension Pursuant to Rule 102(e)(3) of the Commission's Rules of Practice (Order) against Stephen Durland (CPA). The Order finds that on September 28, 2010, the United States District Court for the Northern District of California entered a judgment against Stephen Durland in SEC v. Pegasus Wireless Corp. (Civil Action No. CV 09-2302) permanently enjoining him from future violations, direct or indirect, of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5), and 16(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 13a-14, 13b2-1, 13b2-2 and 16a-3 thereunder and from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Durland is a CPA licensed in New York and the CFO of Pegasus Wireless Corporation. The Commission's complaint alleged, among other things, that Durland and another Pegasus officer defrauded investors by creating backdated promissory notes memorializing a phony debt, which they used to get unrestricted shares of Pegasus stock into the hands of individuals and entities they controlled. Durland caused Pegasus to issue nearly 480 million shares - 75% of its outstanding shares - based on the fake, backdated promissory notes, resulting in massive dilution of the existing shareholders' ownership interest. The individuals and entities who received shares dumped the stock on the open market and funneled many millions in proceeds to Durland and the other Pegasus officer. Durland also made numerous misrepresentations and omissions in SEC filings about Pegasus' financing for acquisitions. Based on the above, the Order temporarily suspends Durland from appearing or practicing before the Commission. The Order further directs that Durland may within thirty days after service file a petition with the Commission to lift the temporary suspension. If the Commission within thirty days after service of the Order receives no petition, the suspension shall become permanent pursuant to Rule 102(e)(3)(ii). If a petition is received within thirty days after service of the Order, the Commission shall, within thirty days after the filing of the petition, either lift the temporary suspension, or set the matter down for hearing at a time and place to be designated by the Commission, or both. If a hearing is ordered, following the hearing, the Commission may lift the suspension, censure the petitioner, or disqualify the petitioner from appearing or practicing before the Commission for a period of time, or permanently, pursuant to Rule 102(e)(3)(iii). (Rel. 34-63013; AAE Rel. 3190; File No. 3-14077) SEC Charges Massachusetts-Based Investment Adviser With FraudThe Securities and Exchange Commission announced that it filed a civil injunctive action today in federal district court in Massachusetts against Sage Advisory Group, LLC, an investment adviser registered with the Commission and its sole principal, owner, and employee Benjamin Lee Grant. The Commission's complaint alleges that starting on or about October 4 2005, Grant, a resident of Boston, Massachusetts, made material misrepresentations and omissions to his former brokerage customers in order to induce them to transfer their assets to Sage, his new advisory firm. The Commission's complaint alleges that prior to October 2005, Grant was a registered representative of broker-dealer Wedbush Morgan Securities and had more than 300 customer accounts, representing more than $100 million in assets, virtually all of which were managed by California-based investment adviser First Wilshire Securities Management. According to the complaint, Grant resigned from Wedbush on September 30, 2005 so that he could operate Sage, his own investment advisory firm. The complaint alleges that, in a letter dated October 4, 2005, Grant told his Wedbush customers that Sage had been formed to handle their investments and that, at the suggestion of First Wilshire, their accounts were being moved from Wedbush to a discount broker. The complaint alleges that the letter told Grant's customers that the charge for their accounts was changing from a 1% management fee paid to First Wilshire plus Wedbush's brokerage commissions to a 2% "wrap fee" paid to Sage, and that First Wilshire had indicated that the wrap fee had been historically less expensive than the previous arrangement. According to the complaint, the letter also told Grant's customers that if they wanted to avoid any disruption in First Wilshire's management of their assets, they had to sign and return the new advisory and custodial account documents as soon as possible. According to the complaint, in subsequent communication with customers, Grant told them that First Wilshire was no longer willing to manage their assets at Wedbush and that they had to transfer to Sage. According to the Complaint, however, these statements were materially false and misleading because First Wilshire had not suggested a transfer from Wedbush and had not refused to manage assets at Wedbush. Moreover, according to the complaint, Grant knew that the wrap fee would not be less expensive than the previous arrangement. The complaint further alleges that Grant failed to disclose that the switch from Wedbush to the discount broker would result in significant savings that would flow to Grant and Sage rather than to the advisory clients and that, as a result, Grant and Sage's compensation would be substantially increased. Indeed, once Grant's customers transferred their accounts from Wedbush to Sage, Grant more than doubled his own compensation. The Commission's complaint alleges that Sage and Grant violated Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 204A, 206, 207 of the Investment Advisers Act of 1940 and Rules 204A-1 and 206(4)-7 thereunder. The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Sage and Grant. [SEC v. Sage Advisory Group, LLC and Benjamin Lee Grant 10-CA-11665 (D. Mass.)] (LR-21672) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig092910.htm
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