SEC News Digest

COMMISSION ANNOUNCEMENTS

SEC Proposes Joint Rules With CFTC to Define Swap Related Terms

On December 3, the Securities and Exchange Commission voted unanimously to propose joint rules with the Commodity Futures Trading Commission (CFTC) that would further define a series of terms related to the security-based swaps market, including "swap dealer," "security-based swap dealer," "major swap participant," "major security-based swap participant" and "eligible contract participant."

SEC Chairman Mary L. Schapiro said, "Today's proposals lay out objective criteria, but they are just a first step, as we seek public comment to help us appropriately address the market impacts and potential risks posed by these entities."

The SEC is seeking public comment on the proposed rules for a period of 60 days following their publication in the Federal Register. (Press Rel. 2010-237)

CFTC, SEC to Host Joint Public Roundtable to Discuss Issues Related to Capital and Margin for Swaps and Security-Based Swaps

Staff from the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) will hold a public roundtable on Dec. 10, 2010, from 1:00 p.m. to 5:00 p.m., to discuss issues related to capital and margin requirements for swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants. The roundtable will assist the agencies in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The roundtable will be held in the Lobby Level Hearing Room at the CFTC's Headquarters, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. The discussion will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen by telephone and should be prepared to provide their first name, last name, and affiliation.

The dial-in information for the roundtable is:

• U.S. Toll-Free: 877-951-7311
• International Toll: 1-203-607-0666
• Conference ID: 8978249

A transcript of the public roundtable discussion will be published at http://www.cftc.gov/LawRegulation/DoddFrankAct/OTC_5_CapMargin.html. Members of the public wishing to submit their views on the topics addressed at the roundtable may email their submissions to:

CFTC - CapMargin@CFTC.gov. All emails must reference Dodd-Frank Capital and Margin Roundtable in the subject field.

SEC - rule-comments@sec.gov or through the comment form available on the SEC website.

All submissions provided to the CFTC or SEC in any electronic form or on paper may be published on the website of the respective agency, without review and without removal of personal identifying information.

1:00 p.m.

Panel One: Margin

1:15 p.m. - 3:00 p.m.

• Margin methodologies and margin requirements for uncleared swaps (including initial and variation margin).
• Portfolio margining.
• Margin and end-users.
• Requirements for form and location of collateral including issues related to portfolio margining.
• Legacy swap agreements, such as pre-existing swaps and security-based swaps.

3:00 p.m. - 3:15 p.m.

Panel Two: Capital

3:15 p.m. - 5:00 p.m.

• Establishing capital requirements for jointly registered entities, including broker-dealers, futures commission merchants, swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants.
• Non-financial firms registered as swap entities.
• "Methods for computing regulatory capital, including models (proprietary and standardized) and standard haircuts.
• Capital requirements for legacy swap positions.
• Capital requirements for major swap participants and major security-based swap participants.

5:00 p.m.

Media Contact - CFTC (Office of Public Affairs)

(202) 418-5080

Media Contact - SEC (Office of Public Affairs)

(202) 551-4120

(Press Rel. 2010-238)

Request for Public Submissions on a Study Mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 719(b)

On December 3, the Securities and Exchange Commission, in coordination with the Commodity Futures Trading Commission (CFTC), published a Notice and Request for Comment to assist in the preparation of a study on the feasibility of requiring the derivatives industry to adopt standardized computer-readable algorithmic descriptions that may be used to describe complex and standardized derivatives and calculate net exposures. The study will also consider the extent to which the algorithmic descriptions, together with standardized and extensible legal definitions, may serve as the binding legal definition of derivative contracts. Section 719(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the two Commissions to conduct this study. Comments must be received on or before Dec. 31, 2010, and can be submitted to the CFTC's website, www.cftc.gov, or via a link to the CFTC's website on the Commission's website at www.sec.gov. A copy of the release is available at http://www.sec.gov/rules/other/2010/34-63423.pdf. (Rel. 34-63423; File No. 4-620)

ENFORCEMENT PROCEEDINGS

Delinquent Filer's Stock Registration Revoked

The registration of the registered securities of Tagalder Global Investment, Inc., has been revoked. The company had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, it violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocation was ordered in an administrative proceeding before an administrative law judge. (Rel. 34-63433; File No. 3-14126)

Securities and Exchange Commission Orders Hearing on Registration Revocation Against Five Public Companies for Failure to Make Required Periodic Filings

Today 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:

• Apex Capital Group, Inc.
• Applied Carbon Technology, Inc. (n/k/a Merchant Capital Group, Inc.)
• Ardeo PLC
• Asia Fiber Holdings Ltd. (AFBR)
• Atlas Consolidated Mining & Development Corp.

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 or 13a-16 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. 34-63438; File No. 3-14151)

SEC Charges Three with Promoting and Selling Forex Offering

On November 30, the Securities and Exchange Commission filed a civil action in the United States District Court for the District of Utah against Clifton Oram, Don Winkler and William Michael for their respective roles in the offer and sale of investments in a foreign currency exchange trading or Forex program issued by a Mexican entity known as MexGroup or MexBank.

The Commission alleges that since at least 2007, Oram, Winkler and Michael collectively raised tens of millions from investors nationwide for the MexGroup Forex trading program. In early December 2008, however, investors learned that their accounts were virtually wiped out in the previous month. The Commission alleges that beyond the fact that none of the defendants understood how the Forex market or Forex trading functioned, neither Oram, Winker or Michael took any significant steps to investigate MexGroup, its principals, or the viability of the investment. Instead, they blindly accepted MexGroup's representations about its background, veracity, and track record. Further, Michael made misleading representations and omissions regarding his own Forex trading experience. Even more egregious, Winkler and Oram continued to offer and sell the MBFX offering even after the November 2008 collapse.

The SEC's complaint alleges that the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and is seeking permanent injunctions, disgorgement plus pre-judgment interest and penalties from all three defendants.

This action arose from a joint SEC cooperative enforcement investigation with the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS) and the U.S. Commodities Futurues Trading Commission (CFTC). Notably, on November 30, 2010, the CFTC filed a complementary action in the U.S. District Court for the District of Utah, entitled CFTC v. MXBK Group S.A. de C.V., which alleges violations of U.S. federal commodities laws MXBK and MBFX, associated entities of MexGroup. The SEC thanks the FBI, the IRS and the CFTC for their assistance. [SEC v. Clifton K. Oram, et al., Case No. 2:10-CV-01173-DB, USDC, D. Utah] (LR-21761)

Court Enters Final Judgment Against Former Massachusetts Investment Adviser

The Commission announced today that, on Dec. 3, 2010, the United States District Court for the District of Massachusetts entered a final judgment by consent against Stephen F. Clifford, formerly an investment adviser based in Plymouth, Massachusetts. Without admitting or denying the allegations in the Commission's complaint, Clifford agreed to the entry of a final judgment permanently enjoining him from future violations of 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 Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

The Commission filed its action against Clifford on June 17, 2008. The Commission's complaint alleged that, between at least July 2004 and June 2008, while acting as an investment adviser, Clifford defrauded nearly a dozen investors of nearly $3 million and misappropriated investor funds for his personal use. On Dec.16, 2009, the United States Attorney's Office for the District of Massachusetts filed a criminal action against Clifford, making substantially similar charges.

On May 4, 2010, Clifford pled guilty to one count of willfully violating Sections 206 and 217 of the Advisers Act, one count of wire fraud, one count of mail fraud, and three counts of subscribing to false tax returns. On Oct. 26, 2010, Clifford was sentenced to serve more than eight years in federal prison, followed by three years of supervised release, and to pay restitution of over $4.5 million. Clifford's federal prison term will run consecutively to a state prison term he is currently serving for a separate offense.

On June 2, 2010, based on his guilty plea in the federal criminal action, the Commission instituted and simultaneously settled public administrative proceedings against Clifford and barred him from association with any broker, dealer, or investment adviser.

The Commission acknowledges the assistance of the Massachusetts Securities Division, the United States Postal Inspection Service, and the United States Attorney's Office for the District of Massachusetts.

For more information, see Litigation Release Nos. 20622 (June 18, 2008), 21343 (Dec. 18, 2009), 21518 (May 6, 2010), and 21711 (Oct. 27, 2010), and Exchange Act Release No. 62208 (June 2, 2010) [U.S. v. Stephen Clifford, No. 09-CR-10387-NG (D. Mass)]. [SEC v. Stephen F. Clifford d/b/a Clifford Financial Assocs., No. 08-CV-11023-RGS (D. Mass.)] (LR-21762)

SEC Charges Penny Stock Promoters in Fraudulent Kickback and Bribery Schemes

The Securities and Exchange Commission today charged penny stock promoters Joshua Konigsberg and Louis Fischler with securities fraud for their roles in various illicit schemes to manipulate the volume and price of four microcap stocks and illegally generate stock sales. The SEC also charged microcap company MediSys Corp., of which defendant Konigsberg is the president and chief executive officer, in connection with one of those schemes.

The SEC worked closely with the U.S. Attorney's Office for the Southern District of Florida and the Federal Bureau of Investigation as the schemes were uncovered through FBI undercover operations conducted so that no investors suffered harm. The U.S. Attorney today announced criminal charges against the same two individuals facing SEC civil charges.

The SEC's complaint, filed in the United States District Court for the Southern District of Florida, alleges that Konigsberg and Fischler sought to manipulate the volume and price of four different microcap stocks and to generate stock sales through the payment of illegal kickbacks and bribes. Konigsberg and Fischler thought they were paying-off a corrupt pension fund employee, stockbroker, and middlemen. In reality, the pension fund employee and the stockbroker were fictitious persons, and the middlemen were an undercover FBI agent and a cooperating witness.

According to the SEC's complaint, two of the schemes involved Konigsberg and Fischler paying kickbacks to a purported corrupt pension fund employee to buy restricted shares of stock in two microcap companies, MediSys Corp. and Casino Management of America, Inc., n/k/a Crosslands Energy Corp. The SEC's complaint alleges Konigsberg and Fischler understood they needed to disguise the kickbacks as payments to a phony consulting company that they knew would perform no actual work. According to the complaint, in two other schemes, Konigsberg and Fischler paid bribes to a purported corrupt stockbroker, who in return would use his clients' accounts to purchase the publicly traded stock of microcap issuers Pavillion Energy Resources, Inc. and Xtreme Motorsports International, Inc. The fraudulent buying would create the false impression in the market that these companies were developing active trading supporting a rising stock price.

The SEC's complaint charges the defendants with violating Section 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The SEC is seeking permanent injunctions, financial penalties, and disgorgement plus prejudgment interest against all three defendants, and penny stock bars against Konigsberg and Fischler.

Previously, on October 7, 2010, the SEC filed eight separate civil actions stemming from the FBI undercover operation, charging a dozen penny stock promoters and their companies for their roles in schemes to manipulate the volume and price of various microcap stocks and illegally generate stock sales. The same day, the U.S. Attorney's Office for the Southern District of Florida announced the filing of criminal charges against the same individual defendants stemming from the same conduct underlying the SEC's actions. [SEC v. Joshua Konigsberg, Louis Fischler, and MediSys Corp., Civil Action No. 10-cv-62364 (U.S. District Court for the Southern District of Florida)] (LR-21764)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-NSX-2010-15) filed by the National Stock Exchange to effectuate an amendment to Bylaws of NSX Holdings, Inc. 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 December 6. (Rel. 34-63405)

A proposed rule change (SR-Phlx-2010-164) filed by NASDAQ OMX PHLX relating to routing fees 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 December 6. (Rel. 34-63412)

National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2010-17), which became effective upon filing pursuant to Section 19(b)(3)(A) of the Exchange Act, to discontinue the Cost Basis Reporting Service. Publication is expected in the Federal Register during the week of December 6. (Rel. 34-63417)

A proposed rule change filed by NYSE Amex to eliminate market and stop orders in Nasdaq-listed securities traded on the exchange (SR-NYSEAmex-2010-108) 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 December 6. (Rel. 34-63418)

A proposed rule change (SR-NASDAQ-2010-149), filed by the NASDAQ Stock Market relating to routing fees 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 December 6. (Rel. 34-63419)

A proposed rule change (SR-CBOE-2010-105) filed by the Chicago Board Options Exchange relating to extension of waiver of transaction fee for public customer orders in SPDR options executed in open outcry or in the Automated Improvement Mechanism 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 December 6. (Rel. 34-63422)

A proposed rule change filed by the NASDAQ Stock Market to amend NASDAQ Rules 2270 and 2910 to reflect changes to corresponding FINRA Rule (SR-NASDAQ-2010-156) 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 December 6. (Rel. 34-63425)

A proposed rule change (SR-CBOE-2010-107) filed by the Chicago Board Options Exchange relating to amendment of the Hybrid Agency Liaison Step-Up Rebate 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 December 6. (Rel. 34-63426)

A proposed rule change (SR-EDGA -2010-19) filed by the EDGA Exchange to amend EDGA Rule 11.9 to offer Anti-Internalization Qualifier functionality to Exchange Users 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 December 6. (Rel. 34-63427)

A proposed rule change (SR-EDGX -2010-18) filed by the EDGX Exchange to amend EDGX Rule 11.9 to offer Anti-Internalization Qualifier functionality to Exchange Users 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 December 6. (Rel. 34-63428)

Proposed Rule Change

The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2010-16) pursuant to Section 19(b)(1) of the Act that would amend Procedure II (Trade Comparison and Recording Service) of the NSCC Rules & Procedures to modify the money tolerance comparison provisions for fixed income securities. Publication is expected in the Federal Register during the week of December 6. (Rel. 34-63404)

Order Approving and Declaring Effective a Plan for the Allocation of Regulatory Responsibilities Relating to Regulation NMS Rules

The Commission approved and declared effective a proposed plan between the BATS Exchange, BATS Y-Exchange, Chicago Board Options Exchange, Chicago Stock Exchange, EDGA Exchange, EDGX Exchange, Financial Industry Regulatory Authority, the NASDAQ Stock Market, NASDAQ OMX BX, NASDAQ OMX PHLX, National Stock Exchange, New York Stock Exchange, NYSE Amex, and NYSE Arca for the allocation of regulatory responsibilities pursuant to Rule 17d-2 (File No. 4-618). Publication is expected in the Federal Register during the week of December 6. (Rel. 34-63430)

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http://www.sec.gov/news/digest/2010/dig120610.htm