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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-158
August 14, 2008

RULES AND RELATED MATTERS

Proposed Plan for the Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2

The American Stock Exchange, the Boston Stock Exchange, the CBOE Stock Exchange, the Chicago Stock Exchange, Financial Industry Regulatory Authority, the International Securities Exchange, The NASDAQ Stock Market, the National Stock Exchange, the New York Stock Exchange, NYSE Arca, NYSE Regulation, and the Philadelphia Stock Exchange filed a proposed plan for the allocation of regulatory responsibilities pursuant to Rule 17d-2 (File No. 4-566). Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58350)


ENFORCEMENT PROCEEDINGS

In the Matter of Christopher L. Martin

On August 13, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (the Order) in the above-referenced matter against Christopher L. Martin (Martin). The Order finds that, on July 21, 2008, the Commission filed a complaint against Martin in SEC v. Christopher L. Martin (Civil Action No. 4:08-cv-02270), in the United States District Court for the Southern District of Texas. It also finds that, on July 22, 2008, the court entered an order permanently enjoining Martin, by consent, from future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (Securities Act), Sections 13(b)(5) and 16(a) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rules 13b2-1, 13b2-2, and 16a-3, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 14a-3, and 14a-9 thereunder.

Based on the above, the Order suspended Martin from appearing or practicing before the Commission as an attorney for two years from the date of the entry of the Order. Martin consented to the issuance of the Order without admitting or denying any of the allegations in the civil injunctive action, which involved misconduct relating to options backdating at HCC Insurance Holdings, Inc. (Rel. 34-58356; File No. 3-13130)


In the Matter of Mark T. Duboise and Mid Western Natural Gas, Inc.

On August 14, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (the Order) in the above-referenced matter against Mark T. DuBoise (DuBoise) and Mid Western Natural Gas, Inc. (Mid Western). The Order finds that, on May 28, 2008, the Commission filed a complaint against DuBoise and Mid Western in SEC v. Mark T. DuBoise and Mid Western Natural Gas, Inc. (Civil Action No. 6:08-cv-01159), in the United States District Court for the District of Kansas. It also finds that, on May 29, 2008, the court entered an order permanently enjoining DuBoise and Mid Western, by consent, from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(b) of the Securities Exchange Act of 1934, and Rule 10b-5.

Based on the above, the Order finds that Respondents DuBoise and Mid Western, pursuant to Section 15(b)(6) of the Exchange Act, are barred from association with any broker or dealer. DuBoise consented to the issuance of the Order without admitting or denying any of the findings in the civil Order. (Rel. 34-58359; File No. 3-13132)


In the Matter of Bryan S. Behrens

On August 14, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Bryan S. Behrens. The Order finds that on July 28, 2008, a final judgment was entered by consent against Respondent permanently restraining and enjoining him from future violations of 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 the civil action entitled Securities and Exchange Commission v. Bryan S. Behrens, et. al., Civil Action Number 8:08CV13, in the United States District Court for the District of Nebraska.

The Order further finds that the Commission's complaint alleged that from at least year 2002, Behrens operated a fraudulent Ponzi-like investment scheme that succeeded in raising at least $6.5 million from investors, some of whom are senior citizens, and that he misappropriated more than $3.5 million of investor funds for his personal use.

Based on the above, the Order bars Behrens from associating with any broker, dealer, or investment adviser. Behrens consented to the issuance of the Order without admitting or denying any of the findings of the Order. (Rel. 34-58360; IA-2769; File No. 3-13131)


SEC Settles Options Backdating Charges with Former Apple General Counsel for $2.2 Million

The Commission today announced that it has settled options backdating charges against Nancy R. Heinen, the former General Counsel of Apple, Inc. As part of the settlement Heinen, of Portola Valley, California, agreed (without admitting or denying the Commission's allegations) to pay $2.2 million in disgorgement, interest and penalties, be barred from serving as an officer or director of any public company for five years, and be suspended from appearing or practicing as an attorney before the Commission for three years.

The settlement stems from a complaint filed by the Commission in April 2007 in federal court in the Northern District of California. According to the complaint, Heinen caused Apple to fraudulently backdate two large options grants to senior executives of Apple - a February 2001 grant of 4.8 million options to Apple's Executive Team and a December 2001 grant of 7.5 million options to Apple Chief Executive Officer Steve Jobs - and altered company records to conceal the fraud. The complaint alleges that as a result of the backdating Apple underreported its expenses by nearly $40 million.

In the first instance, Apple granted 4.8 million options to six members of its Executive Team (including Heinen) in February 2001. Because the options were in-the-money when granted (i.e. could be exercised to purchase Apple shares at a below market price), Apple was required to report a compensation charge in its publicly-filed financial statements. The Commission alleges that, in order to avoid reporting this expense, Heinen caused Apple to backdate options to January 17, 2001, when Apple's share price was substantially lower. Heinen is also alleged to have directed her staff to prepare documents falsely indicating that Apple's Board had approved the Executive Team grant on January 17. As a result, Apple failed to record approximately $18.9 million in compensation expenses associated with the option grant.

The Commission's complaint also alleges improprieties in connection with a December 2001 grant of 7.5 million options to CEO Steve Jobs. Although the options were in-the-money at that time, Heinen - as with the Executive Team grant - caused Apple to backdate the grant to October 19, 2001, when Apple's share price was lower. As a result, the Commission alleges that Heinen caused Apple to improperly fail to record $20.3 million in compensation expense associated with the in-the-money options grant. The Commission further alleges that Heinen then signed fictitious Board minutes stating that Apple's Board had approved the grant to Jobs on October 19 at a "Special Meeting of the Board of Directors" - a meeting that, in fact, never occurred.

As part of the settlement, Heinen consented (without admitting or denying the allegations) to a court order that:

  • enjoins her from violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5), and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 13b2-2, and 16a-3 thereunder, and from aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, and 14a-9 thereunder;

  • orders her to pay disgorgement of $1,575,000 (representing the in-the-money portion of the proceeds she received from exercising backdated options) plus $400,219.78 in interest;

  • imposes a civil penalty of $200,000; and

  • bars her from serving as an officer or director of any public company for five years.

In addition, Heinen agreed to resolve a separate administrative proceeding against her by consenting to a Commission order that suspends her from appearing or practicing before the Commission as an attorney for three years. [SEC v. Nancy R. Heinen, Case No. C-07-2214 (JF) (N.D. Cal.)] (LR-20683)


SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Changes

The Commission approved a proposed rule change (SR-NASDAQ-2008-053) submitted by the NASDAQ Stock Market under Rule 19b-4 of the Securities Exchange Act of 1934 to modify its definition of "Independent Director." Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58335)

The Commission approved a proposed rule change (SR-NSCC-2007-15) filed by the National Securities Clearing Corporation under Section 19(b)(1) of the Securities Exchange Act of 1934 to establish a policy statement regarding the admission of entities that are organized in a foreign country and are not subject to U.S. federal or state regulation as members of NSCC. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58344)

The Commission approved a proposed rule change (SR-DTC-2007-16) filed by the Depository Trust Company under Section 19(b)(1) of the Securities Exchange Act of 1934 to establish a policy statement regarding the admission as participants of DTC of entities that are organized in a foreign country and are not subject to U.S. federal or state regulation. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58345)

The Commission approved a proposed rule change (SR-OCC-2008-08) filed by the Options Clearing Corporation under Section 19(b)(1) of the Exchange Act relating to its facilities management agreements. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58346)


Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by National Stock Exchange (SR-NSX-2008-14) to amend the NSX BLADESM Fee Schedule to reduce routing 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 August 18. (Rel. 34-58342)

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-15) under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. The proposed rule change, which was effective upon filing with the Commission, will clarify how a listing exchange may define the exercise settlement amount for binary options and that escrow deposits are not permitted in lieu of margin with respect to binary options on any underlying interest. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58349)

A proposed rule change filed by the New York Stock Exchange amending NYSE Rule 104(b) to provide for an automated opening message that will be effectuated through the Specialist Application Programmed Interface to allow specialists to automatically open a security on a trade (SR-NYSE-2008-73) 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 August 18. (Rel. 34-58351)


Proposed Rule Changes

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-09) under Section 19(b) of the Exchange Act relating to eligible margin assets. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58347)

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-16) under Section 19(b) of the Exchange Act relating to the cash dividend threshold. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58353)


Accelerated Approval of Proposed Rule Change

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-17) under Section 19(b)(1) of the Exchange Act allowing OCC to clear and settle options on the realized variance and realized volatility of an index. The Commission has granted accelerated approval of the proposed rule change. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58352)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2008/dig081408.htm


Modified: 08/14/2008