In the Matter of Jamie L. Solow
On June 12, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Jamie L. Solow. The Division of Enforcement alleges in the Order that on May 14, 2008, in a matter entitled SEC v. Jamie L. Solow, Civil Action No. 06-81041-Civ-Middlebrooks (S.D. Fla.), the United States District Court for the Southern District of Florida entered a final judgment that permanently enjoined Solow from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act of 1933 (Securities Act), and ordered Solow to disgorge $3,424,788.90 in ill-gotten gains (including prejudgment interest) from his violations and to pay a civil penalty in the amount of $2,646,485.99, based upon a jury verdict that had been returned against Solow in January 2008. The Court's order also enjoined Solow from aiding and abetting violations of various broker-dealer net capital, books and records, and reporting provisions and from attempting to register as a broker-dealer or investment adviser or being associated with or seeking to be associated with a broker-dealer or investment adviser.
The Commission's complaint alleged that in 2003, while associated as a registered representative with Archer Alexander Securities Corp. (Archer Alexander), Solow engaged in a fraudulent trading scheme involving inverse floating rate collateralized mortgage obligations (inverse floaters), a highly complex, risky, and volatile type of mortgage-backed security derivative. The Commission's complaint also alleged that during 2003 to 2006, while associated with Archer Alexander and another registered broker-dealer, SAMCO Financial Services, Inc. (SAMCO), Solow sold inverse floaters to retail investors with conservative to moderate investment objectives or low net worth for whom these complicated, volatile, and risky securities were unsuitable investments. Solow defrauded his customers by grossly understating the risks of investing in inverse floaters.
A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true, to provide Solow an opportunity to establish any defenses to these allegations, and to determine what, if any, remedial action is appropriate in the public interest. The Order directed the Administrative Law Judge to issue an initial decision within 210 days from the date of service of the Order. (Rel. 34-57960; File No. 3-13066)
In the Matter of DKR Oasis Management Company, L.P.
On June 12, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940 (Order) against DKR Oasis Management Company, L.P. (DKR Oasis). The Order finds that DKR Oasis participated in an offering in May 2005, in which it sold securities short during the restricted period before the pricing of the offering and then covered its short positions with securities purchased in the offering. These transactions violated Rule 105 of Regulation M and allowed DKR Oasis to make profits of $185,000 for the fund it advised.
Based on the above, the Order censures DKR Oasis, requires it to cease-and-desist from committing or causing any violations, or any future violations, of Rule 105 of Regulation M, requires DKR Oasis to disgorge $185,000 plus prejudgment interest of $37,413.06 and pay a $60,000 civil money penalty. DKR Oasis consented to the issuance of the Order without admitting or denying any of the Commission's findings. (Rel. 34-57961; IA-2744; File No. 3-13067)
SEC Settles Enforcement Action Against Joshua M. Eudowe
The Commission filed a settled enforcement action today in U.S. District Court for the S.D.N.Y. against Joshua M. Eudowe alleging that he purchased, without authorization, several thousand shares of thinly-traded stocks in the client accounts of his employer, who ran a registered broker-dealer and managed various investment partnerships, and then sold several thousand shares of these same stocks that he held in his personal account at the artificially inflated prices caused by his unauthorized trading.
The complaint alleges that, from December 26 through December 29, 2006, Eudowe engaged in a fraudulent trading scheme whereby he made five unauthorized purchases of two thinly-traded stocks, FRMO Corp. (FRMO) and CreditRiskMonitor.com, Inc. (CRMZ), in the client accounts of investment partnerships managed by his employer. Eudowe's unauthorized trading caused the stock prices of FRMO and CRMZ to spike, with both stocks exceeding 52-week highs. The complaint further alleges that Eudowe then sold several thousand shares of FRMO and CRMZ from his personal brokerage account at the inflated prices caused by his trading, thereby profiting from his scheme.
Eudowe, without admitting or denying the allegations in the complaint, has consented to the entry of a final judgment permanently enjoining him from committing future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 10b-5. The final judgment also requires Eudowe to pay $8,059 of disgorgement, pre-judgment interest of $766 and a $50,000 civil penalty, for a total payment of $58,825. [SEC v. Joshua M. Eudowe, Civil Action No. 08 CV 5386 (HB), USDC, SDNY] (LR-20617)
Proposed Rule Changes
The Commission issued notice of a proposed rule change (SR-NYSEArca-2008-57) submitted by NYSE Arca, pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, amending NYSE Arca Rule 5.3 and Rule 5.4 to enable the listing and trading of options on index-linked securities. Publication is expected in the Federal Register during the week of June 16. (Rel. 34-57950)
The Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2008-26) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to list and trade options on the BXM Index (1/10th Value). Publication is expected in the Federal Register during the week of June 16. (Rel. 34-57946)
Immediate Effectiveness Of Proposed Rule Changes
A proposed rule change (SR-ISE-2008-42), filed by the International Securities Exchange relating to payment for order flow 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 June 16. (Rel. 34-57951)
A proposed rule change filed by the Philadelphia Stock Exchange (SR-Phlx-2008-45) increasing the maximum number of quoters in options overlying the SPDR Gold Trust 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 June 16. (Rel. 34-57953)
The Commission issued notice of immediate effectiveness of a proposed rule change (SR-NYSEArca-2008-59) filed by NYSE Arca, under Rule 19b-4 of the Securities Exchange Act of 1934, relating to the elimination of obsolete rules related to the PCX Plus system. Publication is expected in the Federal Register during the week of June 16. (Rel. 34-57954)
A proposed rule change filed with the Commission by NYSE Arca relating to position and exercise limits for options on the DIAMONDS Trust (SR-NYSEArca-2008-60) 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 June 16. (Rel. 34-57957)
Temporary Registration as Clearing Agency Extended
The Commission issued a notice and order soliciting comments and extending the Fixed Income Clearing Corporation's temporary registration as a clearing agency through June 30, 2009. Publication is expected in the Federal Register during the week of June 16. (Rel. 34-57949)
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