SEC Hosts Meeting of Takeover Regulators from Around the World
On May 20, the Securities and Exchange Commission announced the conclusion of an international meeting of regulators to discuss cross-border takeovers of public companies. The meeting was attended by more than 40 officials (from 28 countries) who are responsible for regulating transactions related to attempts to gain control of public companies by acquiring outstanding shares held by investors.
The primary goal of the two-day meeting at the SEC's Washington, D.C., headquarters was to identify ways to increase the effectiveness of the role of regulators in takeover transactions implicating more than one regulatory scheme. Topics discussed at the meeting included ways to increase the inclusion of U.S. and non-U.S. investors in global takeover transactions and steps that can be employed to identify abusive takeover practices.
John White, Director of the SEC's Division of Corporation Finance, said, "Following prior meetings in Australia and South Africa, we are very pleased to have had the opportunity to host this meeting and to communicate with our fellow regulators on issues we commonly face. As our securities markets become increasingly globalized, such contacts become increasingly important as a means to meet our goals of protecting U.S. investors and promoting best practices for effective cross-border transaction oversight."
The meeting follows the May 6 publication by the SEC of proposed rules applicable to cross-border business combination transactions. The proposed rule amendments are intended to facilitate participation by U.S. investors in cross-border business combination transactions.
Jurisdictions represented at the meeting were Austria, Australia, Belgium, Brazil, Canada, Chile, Colombia, Denmark, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, The Netherlands, New Zealand, Norway, Peru, Portugal, Spain, Switzerland, South Africa, Thailand, Trinidad and Tobago, United States and United Kingdom. (Press Rel. 2008-93)
Mutual Fund Investors Could Get Access to "Comparison Shopping" Information
Near-Instant Comparisons of More Than 8,000 Funds Could be Possible Within Two Years
The Securities and Exchange Commission today voted unanimously to formally propose that mutual fund investors get access to key information about fees, performance, and strategies through interactive data, which would permit comparison shopping among thousands of funds with all the ease of conducting an Internet search.
The SEC's proposal would require funds to label data in their public filings using computer tags similar to the bar codes that identify products at stores or packages in the mail. The labeling would allow investors to instantly access and compare investment objectives and strategies, risks, performance, and costs for more than 8,000 mutual funds at the click of a mouse.
"This exciting new technology will enable investors to instantly analyze and compare not just two or three mutual funds, but hundreds or even thousands, and to quickly focus on the particular funds that are right for them," said SEC Chairman Christopher Cox. "Investors will no longer need to wade through lengthy documents to find the relevant details needed to compare funds one at a time."
Andrew J. Donohue, Director of the SEC's Division of Investment Management, said, "This proposal would, if adopted, create an interactive database of key mutual fund information that will enable investors to more easily analyze and compare cost, performance, and other key information across the more than 8,000 available mutual funds. Together with the Commission's recently proposed summary prospectus, this proposal has the potential to transform information access for mutual fund investors."
Mutual funds already have been submitting information to the SEC in interactive data format on a voluntary basis. The SEC's rule proposal would require all mutual funds to provide data-tagged information beginning with registration statement filings that become effective after Dec. 31, 2009. A mutual fund also would be required to post the interactive data on its Web site, if it maintains one.
Mutual funds seeking a head start on data tagging can participate in the SEC's voluntary program for the submission of interactive data. More information is available at: http://www.sec.gov/spotlight/xbrl.shtml. When the SEC's interactive data pilot program began in 2005, it initially covered the financial statements of corporate filers. The program was expanded to cover key mutual fund information in August 2007.
Investors can give mutual fund interactive data a "test drive" by using the Mutual Fund Reader on the SEC Web site to analyze and compare visual charts and graphs of key mutual fund information that has been voluntarily submitted using data tags.
Last week, the SEC proposed a similar rule to help investors by requiring public companies to provide financial information using interactive data beginning next year for the largest companies and within three years for all public companies.
Public comment on the SEC's proposed rule should be received by the Commission no later than August 1. (Press Rel. 2008-94)
SEC Charges Former Director of Corporate Finance and Investor Relations for Provide Commerce with Insider Trading
On May 20, the Commission filed an insider trading action against Gordon C. Bigler, of La Jolla, California, the former director of corporate finance and investor relations for Provide Commerce. The Commission alleges Bigler traded in Provide Commerce stock immediately after learning confidential information about its pending acquisition by Liberty Media.
The SEC's complaint, filed in federal district court in San Diego, California, alleges that Bigler learned of Liberty's proposed acquisition price for Provide Commerce of $33 per share prior to the merger in an email from Provide Commerce's chief financial officer on Nov. 15, 2005. Bigler traded within an hour of receiving the inside information, buying 4,500 Provide Commerce shares. On the first trading day after Provide Commerce publicly announced the acquisition, Provide Commerce's stock price increased more than 10.5 percent, and its trading volume increased 1,045 percent. Shortly after the announcement, Bigler sold his Provide Commerce shares for a profit of $41,622.78.
To settle the SEC's charges, Gordon C. Bigler has consented, without admitting or denying the allegations in the complaint, to a final judgment permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, to pay $41,622.78, representing the disgorgement of his illegal trading profits and prejudgment interest, and to pay a civil penalty of $41,622.78. The settlement is subject to approval by the court.
The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA). [SEC v. Gordon C. Bigler, Civil Action No. - 08 CV-0888 (H(POR) (S.D. Cal..)] (LR-20589)
Former Massachusetts Investment Adviser Found Guilty of Fraud; Louisiana Partner Faces Criminal Charges
The Commission announced today that on May 16, 2008, in a case prosecuted by the United States Attorney for the District of Massachusetts, a federal jury convicted investment adviser Amit Mathur, age 37, of Shrewsbury, Massachusetts, of 20 counts of federal mail and wire fraud for defrauding his investment advisory clients. Also, on Feb. 25, 2008, the United States Attorney for the District of Massachusetts filed a Criminal Information against Mathur's business partner, Rajeev Johar, of West Monroe, Louisiana, concerning the same fraud. The U.S. Attorney's case against Johar is pending. Mathur and Johar operated an advisory firm called Entrust Capital Management, Inc., located in Worcester, Massachusetts. Mathur, Johar, and Entrust were previously named as defendants in a Commission civil action filed in 2005.
Mathur was initially indicted on criminal charges on Sept. 28, 2006. At Mathur's two-week long criminal trial in May 2008, evidence was presented that Mathur, beginning in 2001, raised several million dollars in investor funds and dissipated millions in investor funds through undisclosed trading losses, unauthorized use of investor funds, and use of client funds for Mathur's personal expenditures. According to evidence presented at the criminal trial, Mathur used investor funds to, among other things, buy a Porsche Cayenne, purchase Mercedes Benz luxury vehicles, and fund gambling trips to Las Vegas for Mathur and his friends.
Mathur is currently scheduled to be sentenced on Sept. 5, 2008. The Criminal Information filed against Johar in February 2008 alleged that Johar misappropriated millions in investor funds and misrepresented the nature and performance of investments made on behalf of Entrust investors.
The Commission filed its action against Mathur and Entrust on April 12, 2005 and filed an Amended Complaint adding Johar as a defendant on Sept. 14, 2005. The Commission's Amended Complaint alleged that, from 2000 through 2005, the defendants engaged in a scheme to defraud investors in a purported hedge fund run by Mathur and Johar at Entrust. The Amended Complaint alleged that approximately twenty clients invested over $16 million with Entrust. The Commission alleged that the defendants made material misrepresentations to investors about, among other things, their assets under management and returns that the fund generated. According to the Amended Complaint, the defendants dissipated most of the $16 million invested through undisclosed trading losses and misappropriation of investor funds for the defendants' personal use. The Commission's action against Mathur, Entrust, and relief defendant AMR Realty, LLC, is pending. A Final Judgment by consent was entered against Johar in the Commission action on June 4, 2007, which, among other things, ordered him to pay over $600,000 in disgorgement of ill-gotten gains, prejudgment interest, and penalties. In separate administrative proceedings, the Commission issued an Order by consent on June 26, 2007, barring Johar from association with any investment adviser.
For more information, see Litigation Release Nos. 19181 (April 13, 2005), 19195 (April 20, 2005), 19396 (Sept. 27, 2005), and 20143 (June 5, 2007). See also Advisers Act Release No. 2611 (June 26, 2007). [SEC v. Amit Mathur, et al. (United States District Court for the District of Massachusetts, C.A. No. 05-10729 (MLW); United States v. Mathur (United States District Court for the District of Massachusetts (Worcester), Case No. 4:06-cr-40034FDS)] (LR-20590)
SEC Charges Massachusetts Money Manager with Misappropriating Investor Funds from Elderly and Other Clients
On May 21, the Commission announced that it filed civil fraud charges against Stephen Hochberg of Sudbury, Massachusetts with misappropriating over $1.7 million from clients and using the funds to pay off his own debts and to finance an expensive lifestyle.
The Commission's complaint, filed in the United States District Court for the District of Massachusetts, alleges that, from as early as September 2002 to August 2007, Hochberg obtained at least $1.6 million from seven investors for a purported real estate investment fund, Realty Funding LLC, that did not exist. The complaint also alleges that, in June 2003 and April 2004, Hochberg obtained $150,000 from an elderly widow on fixed income for a purported investment in Massachusetts municipal bonds. According to the Commission's complaint, in both schemes, Hochberg, an accountant turned business consultant and unregistered investment adviser, never invested any funds and used most of the funds for his own personal benefit.
The Commission's complaint alleges that Hochberg's conduct violated the antifraud provisions of the federal securities laws. The Commission is seeking a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, civil penalties, and an order barring Hochberg from serving as an officer or director of a public company. [SEC v. Stephen L. Hochberg, Civil Action No. 08-10848, USDC, D. Mass (Woodlock, J.)] (LR-20591)
SEC Settles Fraud Action Against Former U.S. Foodservice Chief Financial Officer Michael Resnick
The Commission announced today that the Honorable Catherine C. Blake, United States District Judge for the District of Maryland, has entered a final judgment against defendant Michael Resnick. Resnick, who consented to the judgment without admitting or denying the allegations in the Commission's complaint, was the former Chief Financial Officer of U.S. Foodservice (USF). The judgment permanently enjoins Resnick from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5 and 13b2-1 thereunder and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. Resnick was permanently barred from serving as an officer or director of a public company. The judgment also orders Resnick to pay approximately $353,750 in disgorgement and prejudgment interest thereon in the amount of $141,529, but waives payment of all disgorgement and prejudgment interest and does not impose a civil penalty, based on the sworn representations in Resnick's Statement of Financial Condition and other documents and information submitted to the Commission.
The original Complaint was filed on July 27, 2004, in the U.S. District Court for the Southern District of New York. The Commission's Second Amended Complaint, filed on February 16, 2005, alleges that Resnick and others at USF, then a subsidiary of Royal Ahold (Koninklijke Ahold N.V.), participated in a scheme to overstate Royal Ahold's income by $700 million or more in Commission filings and other public announcements for at least fiscal years 2001 and 2002.
The Commission's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Office of the United States Attorney for the Southern District of New York and the New York Office of the Federal Bureau of Investigation. [SEC v. Michael Resnick, et al., Civil Action No. 1:05-cv-01254-CCB (D. Md.)] (LR-20592; AAE Rel. 2830)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the International Securities Exchange (SR-ISE-2008-38) relating to fee changes has become immediately 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 May 19. (Rel. 34-57828)
A proposed rule change (SR-CBOE-2008-46) filed by the Chicago Board Options Exchange related to the Hybrid Agency Liaison 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 May 19. (Rel. 34-57837)
Proposed Rule Change
Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2008-54) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to Sponsored Users. Publication is expected in the Federal Register during the week of May 19. (Rel. 34-57836)
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