SEC News Digest

COMMISSION ANNOUNCEMENTS

SEC Proposes End-User Requirements Under Dodd-Frank Act for Security-Based Swaps Exempt From Mandatory Clearing

The Securities and Exchange Commission today voted unanimously to propose requirements of end-users when they engage in a security-based swap transaction that is not subject to mandatory clearing.

The proposed rule, required under the Dodd-Frank Act, specifies the steps that end-users must follow to notify the SEC of how they generally meet their financial obligations when engaging in a security-based swap transaction exempt from the mandatory clearing requirement.

The SEC also sought comment on whether to provide an additional exemption for certain financial institutions that would permit those institutions to use the exception to mandatory clearing that is available to end-users.

"This proposal lays out the critical types of information that entities must provide in order to qualify for the end-user exception," said SEC Chairman Mary L. Schapiro. "Importantly, the proposal seeks to prevent abuse of the end-user clearing exception by requiring a non-financial entity to notify the SEC each time it elects to use the exception. Together with today's mandatory clearing rules, we are fulfilling key requirements under the Dodd-Frank Act."

Public comments on the proposed rules should be received by the Commission within 45 days after their publication in the Federal Register. (Press Rel. 2010-244)

SEC Proposes Specialized Disclosure of Use of Conflict Minerals Under Dodd-Frank Act

The Securities and Exchange Commission today voted unanimously to propose measures, as mandated by the Dodd-Frank Act, which would require new disclosures by reporting issuers concerning conflict minerals that originated in the Democratic Republic of the Congo or an adjoining country.

Specifically, companies would be required to disclose annually whether they use "conflict minerals" that are "necessary to the functionality or production" of a product that they either manufacture or contract to be manufactured that originate from the Democratic Republic of the Congo or adjoining countries. The conflict minerals are cassiterite, columbite-tantalite, gold, wolframite or their derivatives. These minerals are essential to many products - from jewelry to cell phones to jet engines.

"In adopting this statute, Congress expressed its hope that the reporting requirements of the securities laws will help to curb the violence in the eastern Democratic Republic of the Congo," said SEC Chairman Mary L. Schapiro. "Because expertise about these events does not reside within the SEC, we have drafted these proposed rules carefully to follow the direction of Congress and look forward to the additional insights and perspective from public comments."

Public comments on the proposed rules should be received by the Commission by Jan. 31, 2011. (Press Rel. 2010-245; 34-63547)

SEC Proposes Specialized Disclosure of Mine Safety Information Under Dodd-Frank Act

The Securities and Exchange Commission today voted to propose rules outlining the way in which mining companies must disclose to investors certain information about mine safety and health standards.

The proposed rules would implement Section 1503 of the Dodd-Frank Act, which requires mining companies to include information about mine safety and health standards in their annual and quarterly reports filed with the SEC. Mining companies also would be required to file a Form 8-K with the SEC when they receive certain notices from the Mine Safety and Health Administration.

"Congress has determined that investors will benefit from disclosure of the health and safety records of mining companies," said SEC Chairman Mary L. Schapiro. "We look forward to hearing from commenters as to whether these rules address the informational needs of investors."

Public comments on the proposed rules should be received by the Commission by Jan. 31, 2011. (Press Rel. 2010-246; 33-9164; 34-63548)

SEC Proposes Rules for Resource Extraction Issuers Under Dodd-Frank Act

The Securities and Exchange Commission today voted to propose rules mandated by the Dodd-Frank Act to require resource extraction issuers to disclose payments made to the U.S. or foreign governments.

Under the proposed rules, any resource extraction issuer would be required to disclose payments made to governments if the issuer:

• Is required to file an annual report with the SEC, and
• Engages in the commercial development of oil, natural gas, or minerals.

The rules would apply to domestic and foreign issuers and to smaller reporting companies that meet the definition of resource extraction issuer.

Public comments on the proposed rules should be received by the Commission by Jan. 31, 2011. (Press Rel. 2010-247; 34-63549)

ENFORCEMENT PROCEEDINGS

SEC Charges Nevada Securities Lawyer and Associates for Roles in Registration and Fraud Violations

On December 14, 2010, the Securities and Exchange Commission filed a civil action in the U.S. District Court of Nevada charging Marcus Luna, Nathan Montgomery, Adam Daskivich, David Murtha, St. Paul Venture Fund LLC (St. Paul VF), Minnesota Venture Capital, Inc. (Minnesota VC), Real Estate of Minnesota, Inc. (Real Estate MN) and Matrix Venture Capital, Inc. (Matrix VC) for their roles in a multi-million dollar scheme and for selling shares of Axis Technologies Group, Inc. stock in a public distribution without registration with the Commission.

The Commission's complaint alleges that:

• Luna drafted and issued a legal opinion letter to a transfer agent that falsely stated the shares of Axis were unrestricted because they were issued pursuant to a valid exemption from registration under Rule 504 of Regulation D.
   
• Luna further misrepresented that St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC were accredited investors in Minnesota, and claimed that Minnesota state law permitted an exemption allowing accredited investors to purchase unrestricted shares from Axis.
   
• These entities were not accredited investors, and moreover were simply conduits for distribution of the stock to the public. Soon after these alleged accredited investors received their shares, they transferred shares to promoters and sold the remaining shares to the public.
   
• Luna, Montgomery, Daskivich and Murtha received profits totaling $6.88 million from St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC sales of their shares of Axis stock.

The Commission's complaint alleges that Luna violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder, and Luna, Montgomery, Daskivich, Murtha and their entities violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act.

The Commission's complaint seeks from Montgomery, Daskivich, Murtha, St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC: (1) a permanent injunction; (2) disgorgement of profits, including prejudgment interest; (3) a civil penalty; and (4) a penny stock bar. In addition, as to Luna, it seeks an order prohibiting Luna from providing professional legal services to any person in connection with the offer or sale of securities pursuant to, or claiming, an exemption under Regulation D, including, without limitation, participating in the preparation or issuance of any opinion letter related to such offerings.

The Commission acknowledges the assistance of the Financial Industry Regulatory Authority. [SEC v. Marcus Luna, Nathan Montgomery, Adam Daskivich, David Murtha, St. Paul Venture Fund LLC, Minnesota Venture Capital, Inc., Real Estate of Minnesota, Inc., Matrix Venture Capital, Inc., Civil Case No.10-CV-02166, USDC NV] (LR-21779)

INVESTMENT COMPANY ACT RELEASES

ETSpreads, LLC, et al.

An order has been issued on an application filed by ETSpreads, LLC, et al. to permit: (a) series of certain open-end management investment companies whose portfolios will consist of the component securities of certain domestic, global or international fixed income securities indexes 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 after 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-29525 - December 14)

Fifth Street Finance Corp., et al.

An order has been issued on an application filed by Fifth Street Finance Corp. (Fifth Street), et al. under Section 6(c) of the Investment Company Act for an exemption from Sections 18(a), 55(a), and 61(a) of the Act. The order (1) permits Fifth Street to look to the assets of its wholly-owned subsidiaries, rather than Fifth Street's interest in the subsidiaries themselves, in determining whether Fifth Street meets certain requirements under the Act, and (2) permits Fifth Street to adhere to a modified asset coverage requirement. (Rel. IC-29526 - December 14)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the International Securities Exchange (SR-ISE-2010-114) relating to fees and rebates for adding and removing liquidity 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 13. (Rel. 34-63534)

A proposed rule change filed by NASDAQ OMX BX (SR-BX-2010-080) to continue the practice governing the Exchange's Directed Order process on BOX and maintain the effective date until December 31, 2010 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 13. (Rel. 34-63540)

A proposed rule change filed by NYSE Amex amending NYSE Amex Equities Rule 123C(9)(a)(1) to extend the operation of a pilot operating pursuant to the rule until June 1, 2011 (SR-NYSEAmex-2010-113) 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 13. (Rel. 34-63541)

A proposed rule change filed by New York Stock Exchange amending NYSE Rule 123C(9)(a)(1) to extend the operation of a pilot operating pursuant to the rule until June 1, 2011 (SR-NYSE-2010-79) 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 13. (Rel. 34-63542)

Proposed Rule Change

NASDAQ OMX BX filed a proposed rule change (SR-BX-2010-079) to amend Chapter IV of the BOX Rules to Allow Executing Participants to Provide BOX a List of the Order Flow Providers for which the Executing Participants will provide Directed Order Services. Publication is expected in the Federal Register during the week of December 13. (Rel. 34-63539)

SECURITIES ACT REGISTRATIONS

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http://www.sec.gov/news/digest/2010/dig121510.htm