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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-124
June 26, 2008

COMMISSION ANNOUNCEMENTS

Fed Chairman Ben Bernanke meets with SEC Chairman Christopher Cox

Fed Chairman Ben Bernanke and SEC Chairman Christopher CoxFed Chairman Ben Bernanke met with SEC Chairman Christopher Cox at SEC headquarters in Washington on Wednesday, June 25, to discuss the upcoming Memorandum of Understanding between the two agencies.

Chairman Cox said, "Investors and the financial system are best served when government agencies work together in pursuit of common interests. In recent years, the SEC and the Fed have developed a solid working partnership in areas ranging from enforcement to market analysis to supervision. The agreement we are currently working to conclude will strengthen that partnership and improve both the protection of investors and our ability to monitor systemic risk."


RULES AND RELATED MATTERS

Indexed Annuities and Certain Other Insurance Contracts

The Commission has issued a release proposing a new rule that would define the terms "annuity contract" and "optional annuity contract" under the Securities Act of 1933. The proposed rule is intended to clarify the status under the federal securities laws of indexed annuities, under which payments to the purchaser are dependent on the performance of a securities index. The proposed rule would apply on a prospective basis to contracts issued on or after the effective date of the rule. The release also proposes a new rule that would exempt insurance companies from filing reports under the Securities Exchange Act of 1934 with respect to indexed annuities and other securities that are registered under the Securities Act, provided that the securities are regulated under state insurance law, the issuing insurance company and its financial condition are subject to supervision and examination by a state insurance regulator, and the securities are not publicly traded. (Rels. 33-8933; 34-58022)


Extension of Auditor Attestation Report on Internal Control Over Financial Reporting Requirement for Non-Accelerated Filers.

June 26, the Commission approved a one year extension of temporary rule and form amendments that postpone the date by which companies that are non-accelerated filers must begin to comply with the auditor attestation report on internal control over financial reporting (ICFR) mandated by Section 404(b) of the Sarbanes-Oxley Act of 2002. Under the extension, a non-accelerated filer will need to provide its first auditor's attestation report on internal control over financial reporting in an annual report for a fiscal year ending on or after December 15, 2009.

The effective date of the amendments will be 60 days from their publication in the Federal Register. The full text of the amendments will be posted to the SEC Web site as soon as possible. (Rel. 33-8934)


ENFORCEMENT PROCEEDINGS

In the Matter of Certified Services, Inc.

On June 25, the Commission issued an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Order). The Order finds that Certified has failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, while its common stock was registered with the Commission in that it has not filed an annual report on Form 10-K since April 22, 2004 or quarterly reports on Form 10-Q for any fiscal period subsequent to its fiscal quarter ending September 30, 2004.

Based on the above, the Order revokes the registration of each class of Cetified's securities registered pursuant to Section 12 of the Exchange Act. Certified consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. 34-58015; File No. 3-12982)


William E. Caswell, CPA, Reinstated to Appear and Practice Before the Commission as an Accountant

Pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice, William E. Caswell, CPA, has applied for and been granted reinstatement of his privilege to appear and practice before the Commission as an accountant. Mr. Caswell was denied the privilege of appearing or practicing before the Commission on September 30, 2005. His reinstatement is effective immediately. (Rel. 34-58023; AAE Rel. 2842; File No. 3-12065)


Commission Orders Hearings on Registration Revocation Against Nine Delinquent Companies for Failure to Make Required Periodic Filings

The Commission today instituted 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 nine companies for failure to make required periodic filings with the Commission:

  • Borough Corp.
  • Canticle Corp.
  • Emerald Acquisition Corp.
  • Erebus Corp.
  • Forward Acquisition Corp.
  • Hercules Acquisition Corp.
  • Jubilee Acquisition Corp.
  • Proteque Corp.
  • Tecnomatic International Corp.

In this Order, the Division of Enforcement (Division) alleges that the nine issuers 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 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. 34-58026; File No. 3-13082)


Commission Revokes Registration of Securities of Surrey, Inc. (n/k/aWOW Holdings, Inc.) for Failure to Make Required Periodic Filings

On June 26, the Commission revoked the registration of each class of registered securities of Surrey, Inc. (n/k/a WOW Holdings, Inc.) (WOW) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the order, except as to jurisdiction, which it admitted, WOW consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Surrey, Inc. (n/k/a WOW Holdings, Inc.) finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of WOW's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against WOW in In the Matter of Struthers, Inc. (n/k/a Global Marine, Ltd.), et al., Administrative Proceeding File No. 3-13061.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Struthers, Inc. (n/k/a Global Marine, Ltd.), et al., Administrative Proceeding, Exchange Act Release No. 57941 (June 10, 2008). 34-58027; File No. 3-13061)


Final Judgments Entered Against Vaughn A. Reeves, Sr., Vaughn A. Reeves, Jr., Jonathan Christopher Reeves, and Joshua Craig Reeves

On May 19, 2008, the United States District Court for the Southern District of Indiana entered final judgments against Vaughn A. Reeves, Sr., Vaughn A. (Chip) Reeves, Jr., Jonathan Christopher (Chris) Reeves, and Joshua Craig (Josh) Reeves (collectively, Reeves). The final judgments permanently enjoin the Reeves from violating the antifraud provisions of the federal securities laws and require them to collectively pay more than $7.88 million in disgorgement, prejudgment interest and civil penalties for their role in an "affinity fraud" investment scheme involving Alanar, Inc. (Alanar), a broker-dealer that raised at least $120 million from more than 10,000 investors across the United States.

The Commission's Complaint, filed on July 26, 2005, alleged that the Reeves sold church bonds and units of related bond funds to investors by appealing to the investors' Christian faith and then misused the proceeds from the sales by using the proceeds in ways not disclosed to investors. The Commission further alleged that the Reeves improperly diverted investor proceeds to themselves and entities that they controlled. In their consent to the Order of Permanent Injunction and Other Relief that was entered by the Court on July 26, 2005, the Reeves agreed that the Commission's allegations would be accepted and deemed true by the Court for the purposes of determining the appropriate amount of disgorgement and civil penalties against the Reeves.

The Court set forth the findings that formed the basis for the disgorgement and civil penalty amounts contained in the final judgments in its Entry on Plaintiff's Motion for an Order of Disgorgement, Prejudgment Interest, and Civil Penalties against the Reeves Defendants. See SEC v. Alanar, Inc., et al., 2008 WL 1994854. The Court found that "[u]ndoubtedly, the Reeves were enriched through the operation of their scheme," such as by taking substantial undisclosed loans from relief defendant Churchmen's Capital Group, Inc. Id. at *3. The final judgments entered by the Court: (1) permanently enjoin the Reeves from violating Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and Section 17(a) of the Securities Act of 1933; (2) order Vaughn Reeves to pay disgorgement, plus prejudgment interest, in the amount of $3,515,396; (3) order Chip Reeves to pay disgorgement, plus prejudgment interest, in the amount of $2,251,566; (4) order Chris Reeves to pay disgorgement, plus prejudgment interest, in the amount of $1,112,680; (5) order Josh Reeves to pay disgorgement, plus prejudgment interest, in the amount of $524,792; and (6) order each of the Reeves to pay a $120,000 civil penalty. Information concerning the above-referenced order of the Court and other matters pertaining to the court-appointed Receiver in this case are posted on the Receiver's website, located at:

http://www.stewart-irwin.com/clients/public/Alanar/alanar.html. [SEC v. Alanar, Inc., et al., Civil Action No. 1:05-CV-01102 (S.D. Ind.) (Chief Judge David F. Hamilton)] (LR-20629)


SEC Wins Jury Verdict in Insider Trading Case; Six Other Defendants Settle

On June 10, 2008, United States District Court Senior Judge Sterling Johnson, Jr. entered a Final Judgment against Constantine Stamoulis (Stamoulis) ordering him to pay nearly $275,000 after a jury in the Eastern District of New York found him liable for insider trading in the stock of WLR Foods, Inc. (WLRF) in September 2000. The Commission alleged that Stamoulis was tipped about an impending acquisition involving WLRF, and then purchased 10,000 shares of WLRF stock just one day before WLRF announced that it was being acquired by Pilgrim's Pride Corporation. Following the announcement, Stamoulis sold the shares and realized gains of nearly $60,000. The jury found that Stamoulis violated Section 10(b) of the Securities and Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Judge Johnson enjoined Stamoulis from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and ordered Stamoulis to pay disgorgement of his trading profits, prejudgment interest and a penalty three times the amount of his realized gains.

In addition to the jury verdict against Stamoulis, the Commission also announces that defendants Konstantinos Orfanakos (Orfanakos), Dimitrios Kostopoulos (Kostopoulos), Lampros Moumouris (Moumouris), Angelo Rigas (Rigas), Konstantine Drakopoulos (Drakopoulos) and John Tsiforis (Tsiforis) have agreed to settle the insider trading charges for their alleged involvement in trading and/or tipping in WLRF stock.

With the judgment against Stamoulis, the Commission successfully concludes a case that originally involved 14 defendants and 3 relief defendants when the civil injunctive action was filed in April 2002. The Commission's complaint alleged that Eric Patton, a WLRF insider, learned material, non-public information about an impending acquisition of WLRF. According to the complaint, Eric then tipped his brother, Steven Patton who, in turn, tipped his broker, Michael Nicolaou (Nicolaou). The complaint alleged that Nicolaou then tipped, among others, his friends Tsiforis and Drakopoulos, a registered representative, and that Drakopoulos traded on the information and tipped, among others, Kostopoulos, also a registered representative, and Moumouris. As alleged in the complaint, Kostopoulos and Moumouris both traded on the information. The complaint also alleged that Tsiforis tipped Orfanakos and Stamoulis, who both traded on the information, and that Drakopoulos or Kostopoulos tipped Rigas, who traded on the information and tipped his relatives, Gregory Rigas, George Rigas and Antonia Bregianos. The United States Attorney's Office for the Eastern District of New York brought related criminal charges against Stamoulis, Orfanakos, Kostopoulos, Rigas, Moumouris, Drakopoulos and Tsiforis. Orfanakos, Kostopoulos and Drakopoulos each pleaded guilty in the criminal proceeding to conspiracy to commit securities fraud. Tsiforis pleaded guilty to perjury. The criminal charges were dismissed as to Stamoulis, Rigas and Moumouris.

Orfanakos, Kostopoulos, Moumouris, Rigas, Drakopoulos and Tsiforis have agreed, without admitting or denying the Commission's allegations, to settle the Commission's complaint against them under the following terms:

  • Orfanakos consented to the entry of a Final Judgment that permanently enjoins him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Final Judgment further orders him to pay $3,172 in disgorgement, an amount equal to his WLRF trading profits, $579 in prejudgment interest and a one-time civil penalty equal to his disgorgement.
  • Kostopoulos consented to the entry of a Final Judgment that permanently enjoins him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Final Judgment also acknowledges that Kostopoulos disgorged his trading profits as part of the relief ordered in the parallel criminal proceeding.
  • Moumouris consented to the entry of a Final Judgment that permanently enjoins him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Final Judgment further orders Moumouris to disgorge $74,300, the total amount of his WLRF trading profits, to pay prejudgment interest of $15,670, and to pay a civil money penalty of $40,000.
  • Rigas consented to the entry of a Final Judgment that permanently enjoins him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Final Judgment further orders Rigas to disgorge $131,743, the total amount of his trading profits and those of his tippees, and pay prejudgment interest of $8,564. In addition, the Final Judgment orders Rigas to pay a one-time civil money penalty of $18,039, which equals the amount of his personal trading profits.
  • Drakopoulos consented to the entry of a Final Judgment that permanently enjoins him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Final Judgment further orders Drakopoulos to pay a one-time civil money penalty of $14,209, an amount equal to his WLRF trading profits. The Final Judgment does not order Drakopoulos to pay disgorgement because his trading profits were disgorged by another defendant as part of the relief ordered in the parallel criminal proceeding.
  • Tsiforis consented to the entry of a Final Judgment that permanently enjoins him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

The Court entered the Final Judgments as to Orfanakos, Kostopoulos, Moumouris and Rigas on July 11, 2007, the Final Judgment as to Drakopoulos on Feb. 1, 2008, and the Final Judgment as to Tsiforis on March 28, 2008.

Finally, the Commission has dismissed its insider trading charges against defendants Eric Patton, Steven Patton, Gregory Rigas, George Rigas and Antonia Bregianos and relief defendants Maria Rigas, Eugenia Rigas and Kathy Drakopoulos. [SEC v. Eric Patton, et al, Civil Action No. 02 CV 2564] (LR-20630)


SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the Chicago Board Options Exchange regarding fees for the CBOE Stock Exchange (SR-CBOE-2008-63) 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 June 30. (Rel. 34-57994)

A proposed rule change filed by the International Securities Exchange relating to the definition of Qualified Contingent Trade (SR-ISE-2008-45) has become immediately 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 30. (Rel. 34-58005)

A proposed rule change filed by NYSE Arca to amend its Schedule of Fees and Charges for Exchange Services (SR-NYSEArca-2008-64) 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 June 30. (Rel. 34-58006)

A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2008-48) to exempt Executive Floor Governors from Floor Member Continuing Education 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 June 30. (Rel. 34-58013)

A proposed rule change filed by the NASDAQ Stock Market (SR-NASDAQ-2008-056) regarding a clerical change to a NASDAQ rule 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 June 30. (Rel. 34-58017)


Proposed Rule Changes

The Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2008-59) to amend CBOE Rule 8.7 related to the obligations of market-makers. Publication is expected in the Federal Register during the week of June 30. (Rel. 34-57996)

The Chicago Board Options Exchange has filed a proposed rule change (SR-CBOE-2008-30) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to the Hybrid Opening System. Publication is expected in the Federal Register during the week of June 30. (Rel. 34-57997)

The Commission issued notice of filing of a proposed rule change (SR-CBOE-2008-64) submitted by the Chicago Board Options Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, amending CBOE Rules 5.3 and 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 30. (Rel. 34-58007)

The NASDAQ Stock Market filed Commission a proposed rule change under Rule 19b-4 (SR-NASDAQ-2008-055) regarding fees for orders routed via the Options Intermarket Linkage. Publication is expected in the Federal Register during the week of June 30. (Rel. 34-58014)


Accelerated Approval of Proposed Rule Change

The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2008-61) submitted by NYSE Arca under Rule 19b-4 of the Securities Exchange Act of 1934 to list and trade options on reduced values of the FTSE 100 Index and the FTSE 250 Index. Publication is expected in the Federal Register during the week of June 30. (Rel. 34-58008)


Approval of Proposed Rule Change

The Commission granted approval to a proposed rule change filed by the Municipal Securities Rulemaking Board (SR-MSRB-2008-04) under Section 19(b)(2) of the Securities Exchange Act of 1934, relating to MSRB Rule G-34, CUSIP Numbers and New Issue Requirements, to require underwriter registration and testing with Depository Trust and Clearing Corporation's New Issue Information Dissemination System. Publication is expected in the Federal Register during the week of June 30. (Rel. 34-58016)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2008/dig062608.htm


Modified: 06/26/2008