Securities And Exchange Commission Suspends Trading In Eleven Issuers For Failure To Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on May 27, 2008 and terminating at 11:59 p.m. EDT on June 9, 2008.
The Commission temporarily suspended trading in the securities of these eleven issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by this company.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject company unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of this company that has been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-57867)
SEC Secretary Nancy Morris To Leave Commission
The Securities and Exchange Commission announced today that SEC Secretary Nancy Morris is leaving the Commission to become an Executive Vice President at Allianz Global Investors of America, where she will have broad U.S. legal compliance responsibilities.
Since she was appointed SEC Secretary by SEC Chairman Christopher Cox in early 2006, Ms. Morris has overseen the legal review of all SEC documents submitted to and approved by the Commission, including rulemaking releases and enforcement orders. She also has provided advice to the Commission and its staff on practice and procedure.
Ms. Morris also has led an ongoing effort to help investors gain easier and quicker access to current SEC information and historic documents and records. Under her leadership, the SEC significantly enhanced search capabilities on the SEC Web site, launched RSS document feeds, and archived online several historic collections including SEC Annual Reports and speeches by Commissioners and staff. Ms. Morris also established a new SEC Archivist position to help oversee and enhance the records management process. Today is her final day of work at the SEC.
"The Secretary is central to the Commission's operations, and in this key role, Nancy Morris has set an exemplary standard for public service on behalf of America's investors and capital markets," said Chairman Cox. "Nancy's legal acuity, professionalism, and management skills have been matched by her cheerful manner and bright sense of humor. The Commission, and the investors and markets we serve, owe a profound debt of gratitude for Nancy's service. We wish her every success and happiness in the next phase of her remarkable career."
Ms. Morris said, "It has been my high honor and privilege to have served this great agency and the everyday Americans who depend on the SEC's vigorous commitment to fair markets, capital formation, and investor protection. I am grateful to Chairman Cox and his fellow Commissioners past and present for their leadership, and for affording me this opportunity to work with the SEC's extraordinary staff on behalf of investors."
Prior to becoming Secretary, Ms. Morris had been an Attorney-Fellow in the SEC's Division of Investment Management from May 2004 to January 2006. In that capacity, she was responsible for developing rules, interpretations, policy, and research to support Commission action.
During a previous tour of duty with the SEC from 1985 to 1992, Ms. Morris served as an attorney in the Office of General Counsel (1985-1987), Counsel to Commissioner Joseph Grundfest (1987-1988), and Deputy Chief Counsel for the Division of Investment Management (1988-1992).
In the private sector, Ms. Morris served more than a decade as Vice President and Associate Legal Counsel to T. Rowe Price Associates, and as an attorney for Fidelity Investments. She also was an associate for Sutherland, Asbill & Brennan in Washington D.C.
Ms. Morris holds a J.D. from the University of Idaho College of Law, where she was Editor-in-Chief of the Idaho Law Review. She holds a B.A. (cum laude) from Hartwick College in Oneonta, N.Y. She is a Member of the District of Columbia Bar. (Press Rel. 2008-96)
Closed Meeting - Tuesday, June 3, 2008 - 2:00 p.m.
The subject matter of the closed meeting scheduled for June 3, 2008, will be: formal orders of investigation; institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; resolution of litigation claims; collection matters; and other matters related 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.
Commission Sanctions Impax Laboratories, Inc.
The Commission found that Impax Laboratories, Inc. violated Section 13(a) of the Securities Exchange Act of 1934 and Rules 13a-1 and 13a-13 thereunder by failing to file annual and quarterly reports due for any period after September 30, 2004. The Commission determined that a necessary and appropriate sanction for the protection of investors, the standard set forth in Exchange Act Section 12(j), is revocation of the registration of Impax's common stock. The Commission found that Impax's conduct with respect to its reporting obligations was serious and recurrent and that Impax did not credibly identify when it will become current on its reporting obligations despite its concerted efforts to avoid and correct its reporting failures. In ordering revocation, the Commission observed that the "[f]ailure to file periodic reports violates a central provision of the Exchange Act." (Rel. 34-57864)
Commission Orders Hearings on Registration Suspension or Revocation Against Eleven Companies for Failure to Make Required Periodic Filings
In conjunction with this trading suspension, the Commission today also instituted two separate public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of eleven companies for failure to make required periodic filings with the Commission:
In the Matter of e.Spire Communications, Inc., et al., Administrative Proceeding File No. 3-13045
In the Matter of GSI Securitization Ltd. (n/k/a GSI Securitization, Inc.), et al., Administrative Proceeding File No. 3-13044
In each Order, the Division of Enforcement (Division) alleges that the respective respondents are delinquent in their required periodic filings with the Commission.
In each of these proceedings, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the 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 judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of the securities of these respondents should be revoked, or in the alternative, suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in each proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-57868; File No. 3-13045 and 3-13044)
First Southwest Company Settles Charges Concerning It's Conduct In The Auction Rate Securities Market
On May 27, the Commission announced the institution of proceedings concerning First Southwest Company's violative practices in the auction rate securities market during 2003 and 2004. Auction rate securities are municipal bonds, corporate bonds or preferred stocks with interest rates or dividend yields that are periodically re-set through Dutch auctions. Simultaneously with the institution of the proceedings, First Southwest, without admitting or denying the findings in the order, consented to the entry of an SEC cease-and-desist order providing for a censure, a $150,000 penalty, and undertakings.
The SEC order finds that, between January 2003 and June 2004, First Southwest, without adequate disclosure, intervened in auctions by bidding for its proprietary account to prevent failed auctions and to prevent all-hold auctions. In those instances when these practices affected the clearing rate of an auction, investors received a lower or higher rate of return on their investments. To the extent that these practices affected the clearing rate, investors may not have been aware of the liquidity and credit risks associated with certain securities. By engaging in these practices, First Southwest willfully violated Section 17(a)(2) of the Securities Act of 1933, which prohibits material misstatements and omissions in any offer or sale of securities.
The Commission aims to promote voluntary disclosures in industry-wide investigations and to encourage firms to provide comprehensive information to the staff in such investigations. See In the Matter of Bear, Stearns & Co., Inc., Securities Act Release No. 8684 (May, 31, 2006). In determining the size of the penalty in this matter, the Commission considered First Southwest's cooperation afforded the Commission staff and its relatively small share of the auction rate securities markets. The Commission, however, also considered that First Southwest did not report its practices to the Commission. (Rel. 33-8919; 34-57869; File No. 3-13046)
Former Connetics Corp. Executive Settles Charges with SEC for Illegally Tipping and Trading on Inside Information
On May 23, the Honorable Colleen McMahon, U. S. District Judge for the Southern District of New York, entered a Final Judgment as to defendant Alexander Yaroshinsky in SEC v. Yaroshinsky, restraining and enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Yaroshinsky consented to the entry of the judgment without admitting or denying any of the allegations of the Commission's complaint. Yaroshinsky is liable for disgorgement in the amount of $354,927, plus prejudgment interest thereon in the amount of $84,275, and a civil penalty of $283,798.
The Second Amended Complaint in this matter alleges that Yaroshinsky, a former Vice President of Clinical Operations and Biostatistics for California-based Connetics Corporation, learned material non-public information concerning the FDA staff's preliminary analysis of the carcinogenicity tests of Velac Gel, an acne drug then being developed by Connetics. The Second Amended Complaint alleges that Yaroshinsky tipped his co-defendant Victor Zak to this information and then traded on it himself. In the end, Zak profited substantially from his illegal trading. Zak settled charges related to this case last year, and agreed to disgorge $863,830 in illicit profits, along with an injunction against future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission waived payment of $216,358 of that figure based on Zak's sworn financial statements and other documents submitted to the Commission.
To settle the matter against him, Yaroshinsky is paying disgorgement of $138,569 for his own trades, plus an equal civil penalty of $138,569 and prejudgment interest of $32,902. He is also paying the $216,358 in disgorgement that Zak was unable to pay, plus prejudgment interest thereon of $51,373 and a civil penalty of $145,229.
The Second Amended Complaint alleges that on April 13, 2005, at 2:15 p.m. Yaroshinsky and other representatives of Connetics participated on a conference call in which the FDA staff told Connetics that the FDA's Executive Carcinogenicity Assessment Committee had concluded that the Velac Gel vehicle may be a "tumor promoter or a carcinogen" and that "this is a serious issue for a topical product for the treatment of acne . . . ." Shortly after the call, Yaroshinsky called Zak, his friend and former neighbor, and told him what he had just learned from the FDA staff. Minutes later, Zak, who had maintained a 5,000 share long position in Connetics before April 13, began executing transactions that positioned him to benefit from a drop in Connetics' share price.
The Second Amended Complaint further alleges that between April 13 and June 10, Yaroshinsky and Zak executed numerous trades. Yaroshinsky bought put contracts in his own account and in a nominee account opened in the name of his mother-in-law and sold shares of Connetics common stock in his own account. Zak bought put contracts, sold short Connetics shares, and sold his long position of Connetics shares. All of the trading by defendants was conducted in advance of a June 13, 2005 public announcement by Connetics stating that it had received a "not approvable" letter from the Food and Drug Administration (FDA) concerning Velac Gel. After the announcement, Connetics' stock price fell 27%. Specifically, the Second Amended Complaint alleges that Yaroshinsky and Yaroshinsky violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. Among other relief, the Second Amended Complaint seeks a permanent injunction, disgorgement of all illegal profits, prejudgment interest and the imposition of civil monetary penalties.
The Commission expresses its appreciation to the Chicago Board Options Exchange and to the Financial Industry Regulatory Authority for their assistance in the investigation of this matter. [SEC v. Alexander J. Yaroshinsky, Civil Action No. 06CV2401 (S.D.N.Y.)] (LR-20601)
INVESTMENT COMPANY ACT RELEASES
ING USA Annuity And Life Insurance Company, Et Al.
An order has been issued pursuant to Section 26(c) of the Investment Company Act of 1940 on an application filed by ING USA Annuity and Life Insurance Company, Separate Account B of ING USA Annuity and Life Insurance Company, Reliastar Life Insurance Company of New York, Reliastar Life Insurance Company of New York Separate Account NY-B and ING Variable Portfolios, Inc. The order permits the substitution of the ING Russell Small Cap Index Portfolio for shares of the ProFund VP Small-Cap. (Rel. IC-28285 - May 23)
American International Group, Inc., Et Al.
A notice has been issued giving interested persons until June 17, 2008 to request a hearing on an application filed by American International Group, Inc. (AIG), et al. for an order to exempt certain limited partnerships and other investment vehicles formed for the benefit of eligible employees of AIG and its affiliates from certain provisions of the Investment Company Act of 1940 (Act). Each partnership or other investment vehicle will be an "employees' securities company" within the meaning of Section 2(a)(13) of the Act.(Rel. 28286 - May 23)
Proposed Rule Changes
The Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2008-16) under Section 19(b)(1) of the Securities Exchange Act of 1934 to reduce certain order exposure times from three seconds to one second. Publication is expected in the Federal Register during the week of May 26. (Rel. 34-57849)
The Chicago Board Options Exchange filed a proposed rule change, and Amendment No. 1 thereto, under Rule 19b-4 (SR-CBOE-2008-02) to replace references to certain committees with the exchange. Publication is expected in the Federal Register during the week of May 26. (Rel. 34-57865)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-CBOE-2006-105), as modified by Amendment No. 2, filed by the Chicago Board Options Exchange under Section 19(b)(1) of the Securities Exchange Act of 1934 to list and trade binary options on broad-based security indexes. Publication is expected in the Federal Register during the week of May 26. (Rel. 34-57850)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the American Stock Exchange relating to position and exercise limits for options on the DIAMONDS Trust (SR-Amex-2008-41) 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 26. (Rel. 34-57852)
A proposed rule change filed by the International Securities Exchange to amend its Schedule of Fees to establish fees for transactions in options on one Premium Product (SR-ISE-2008-40) 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 May 26. (Rel. 34-57854)
A proposed rule change filed by the American Stock Exchange relating to its Fixed Return Option transaction fees (SR-Amex-2008-38) 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 May 26. (Rel. 34-57856)
The Commission issued notice of immediate effectiveness of a proposed rule change (SR-BSE-2008-30) filed by the Boston Stock Exchange under Rule 19b-4 of the Securities Exchange Act of 1934 relating to obvious errors on the Boston Options Exchange. Publication is expected in the Federal Register during the week of May 26. (Rel. 34-57858)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2008-42) to enhance its NYSE OpenBook product offerings 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 26. (Rel. 34-57861)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2008-41) to amend Rule 15 (Pre-Opening Indications) and Rule 123C (Market On The Close Policy And Expiration Procedures) 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 26. (Rel. 34-57862)
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