Securities and Exchange Commission Suspends Trading in Three Issuers for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading of the securities of the following issuers, commencing at 9:30 a.m. EDT on June 19, 2008, and terminating at 11:59 p.m. EDT on July 2, 2008:
The Commission temporarily suspended trading in the securities of these three 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 six 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. 34-57988)
Commission MeetingsFollowing is a schedule of Commission meetings, which will be conducted under provisions of the Government in the Sunshine Act. Meetings will be scheduled according to the requirements of agenda items under consideration. Open meetings will be held in the Auditorium, Room L-002 at the Commission's headquarters building, 100 F Street, N.E., Washington, D.C. Visitors are welcome at all open meetings, insofar as space is available. Persons wishing to photograph or videotape Commission meetings must obtain permission in advance from the Secretary of the Commission. Persons wishing to tape record a Commission meeting should notify the Secretary's office 48 hours in advance of the meeting. Any member of the public who requires auxiliary aids such as a sign language interpreter or material on tape to attend a public meeting should contact SECInterpreter@SEC.gov at least three business days in advance. For any other reasonable accommodation related disability contact DisabilityProgramOfficer or call 202-551-4158.
Open Meeting - Wednesday, June 25, 2008 -10:00 a.m.The subject matter of the open meeting scheduled for June 25, 2008, will be:
Closed Meeting - Thursday, June 26, 2008 - 10:00 a.m.
The subject matter of the closed meeting scheduled for June 26, 2008, will be: formal orders of investigation; institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; adjudicatory 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 Orders Hearings on Registration Suspension or Revocation Against Six Companies for Failure to Make Required Periodic Filings
In conjunction with today's trading suspension, the Commission also instituted a public administrative proceeding to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities six companies for failure to make required periodic filings with the Commission:
In the Order, the Division of Enforcement (Division) alleges that the respective respondents 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 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 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. 34-57989; File No. 3-13075)
SEC Charges Two Former Bear Stearns Hedge Fund Portfolio Managers With Securities Fraud
On June 19, the Commission charged two former Bear Stearns Asset Management (BSAM) portfolio managers for fraudulently misleading investors about the financial state of the firm's two largest hedge funds and their exposure to subprime mortgage-backed securities before the collapse of the funds in June 2007.
The SEC's complaint alleges that when the hedge funds took increasing hits to the value of their portfolios during the first five months of 2007 and faced escalating redemptions and margin calls, then-BSAM senior managing directors Ralph R. Cioffi and Matthew M. Tannin deceived their own investors and certain institutional counterparties about the funds' growing troubles until they collapsed and caused investor losses of approximately $1.8 billion.
The SEC's action was conducted through its Enforcement Division's subprime working group, which is aggressively investigating possible fraud, market manipulation, and breaches of fiduciary duty that may have contributed to the recent turmoil in the credit markets.
In a related criminal action, the U.S. Attorney's Office for the Eastern District of New York announced the indictment of Cioffi and Tannin on conspiracy and fraud charges.
According to the SEC's complaint, filed in the U.S. District Court for the Eastern District of New York, the Bear Stearns High-Grade Structured Credit Strategies Fund and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund collapsed after taking highly leveraged positions in structured securities based largely on subprime mortgage-backed securities. According to the complaint, Cioffi acted as senior portfolio manager and Tannin acted as portfolio manager and chief operating officer for the funds, and they misrepresented the funds' deteriorating condition and the level of investor redemption requests in order to bring in new money and keep existing investors and institutional counterparties from withdrawing money. The complaint alleges that, for example, Cioffi misrepresented the funds' April 2007 monthly performance by releasing insufficiently qualified estimates - based only on a subset of the funds' portfolios - that projected essentially flat returns. The complaint alleges that final returns released several weeks later revealed actual April losses of 5.09 percent for the High-Grade Structured Credit Strategies Fund and 18.97 percent for the High-Grade Structured Credit Strategies Enhanced Leverage Fund.
The SEC's complaint alleges that Cioffi and Tannin also misrepresented their funds' investment in subprime mortgage-backed securities. According to the complaint, monthly written performance summaries highlighted direct subprime exposure as typically about 6 to 8 percent of each fund's portfolio. As alleged in the complaint, however, after the funds had collapsed, the BSAM sales force was ultimately told that total subprime exposure - direct and indirect - was approximately 60 percent.
The SEC further alleges that Cioffi and Tannin continually exaggerated their own investments in the funds while using their personal stake as a selling point to investors. The complaint alleges that Tannin repeatedly told investors, directly and through the Bear Stearns sales force, that he was adding to his own stake in the funds in order to take advantage of the buying "opportunity" presented by the funds' losses. As alleged in the complaint, Tannin never actually added to his investment and he mocked as "silly" at least one investor who sought to redeem instead of following Tannin's supposed example. Meanwhile, as the complaint alleges, Cioffi redeemed $2 million, which was more than one-third of his personal investment in the funds at the end of March 2007. According to the complaint, Cioffi transferred it to another BSAM fund that he described as "short sub prime," which he knew was profitable at the time.
The Commission alleges in its complaint that Cioffi and Tannin violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In its complaint, the Commission seeks permanent injunctive relief, disgorgement of all illegal profits plus prejudgment interest, and the imposition of civil monetary penalties.
The Commission appreciates the cooperation of the U.S. Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation, which conducted a separate, parallel investigation.
The Commission's investigation is continuing. [SEC v. Ralph R. Cioffi and Matthew M. Tannin, Civil Action No. 08 2457 (FB) (E.D.N.Y.)] (LR-20625)
Approval of Proposed Rule Change
The Commission approved a proposed rule change filed by the NASDAQ Stock Market (SR-NASDAQ-2008-037) under Rule 19b-4 of the Securities Exchange Act of 1934 to modify certain of Nasdaq's initial and continued listing requirements to replace the round lot requirement in the minimum holder requirements to either total or public shareholders. Publication is expected in the Federal Register during the week of June 23. (Rel. 34-57981)
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