SEC to Receive Diversity Award
The Securities and Exchange Commission has been selected to receive the Distinguished in Diversity Award by GAYLAW, the Gay, Lesbian, Bisexual and Transgender Attorneys of Washington, in recognition of the agency's commitment to diversity in the workplace.
In a letter to SEC Chairman Christopher Cox, the organization's co-presidents Kristin R. Muenzen and Jeremy Brumbelow wrote, "Many of the developments for which the SEC will be recognized have transpired during your tenure as Chairman and because of your leadership." The letter calls the SEC a "model employer."
The SEC is the first public sector employer to receive the annual award.
"The SEC's leadership on diversity in the workplace is one of the reasons we have been consistently ranked in the top five 'Best Places to Work' in the federal government since 2005," said Chairman Cox. "This award recognizes the agency's genuine commitment to recognizing the hard work and contributions made by every member of the SEC family. The diversity of SEC employees is one of the hallmarks of the agency's enduring success in serving investors everywhere."
The SEC has been ranked among the top five best places to work in the federal government consistently since 2005 by the Partnership for Public Service and American University's Institute for the Study of Public Policy Implementation (ISPPI). For 2007, the SEC placed third in the Best Places to Work, its highest rating ever. The rankings use data from a federal government survey administered by the Office of Personnel Management. They are compiled every other year.
The SEC will formally receive the diversity award during a ceremony on December 5. (Press Rel. 2008-263)
SEC Approves a National Market System Plan for the Selection and Reservation of Securities Symbols
The Securities and Exchange Commission has approved a plan that establishes a process for reserving, selecting, and allocating securities symbols. The exchanges that list securities and the Financial Industry Regulatory Authority, Inc. (FINRA) must join the plan within 60 days.
"Securities symbols are a key element in the operation of the markets, and the plan approved by the Commission will ensure the fair and orderly dissemination of information in a common format that is clear to investors," said Erik Sirri, Director of the SEC's Division of Trading and Markets.
There is a limited supply of securities symbols - particularly one-, two-, and three-character symbols. As the exchanges expand the number of securities listed and compete for new listings, the supply of available symbols has decreased and the need for a fair and transparent process to reserve and select securities symbols has grown.
The plan approved by the Commission establishes a process for exchanges that list equity securities and for FINRA, which designates symbols for quoting unlisted securities in the over-the-counter market, to reserve symbols. If an issuer transfers its listing to another exchange, the new exchange would automatically have the right to use the symbol. In addition, a centralized symbol database of securities symbols will be maintained by a third-party processor.
The plan approved by the Commission was filed by the Chicago Stock Exchange, Inc., The Nasdaq Stock Market, Inc., National Association of Securities Dealers, Inc. (n/k/a FINRA), National Stock Exchange, Inc., and Philadelphia Stock Exchange, Inc. The Commission previously solicited comment on this proposed plan, as well as another proposed plan filed by the American Stock Exchange (n/k/a NYSE Alternext US), Boston Stock Exchange, Chicago Board Options Exchange, International Securities Exchange, New York Stock Exchange LLC, and Pacific Exchange (n/k/a NYSE Arca, Inc.). The notices of these proposals can be found at: http://www.sec.gov/rules/sro/nms/2007/34-56037.pdf and http://www.sec.gov/rules/sro/nms/2008/34-57171.pdf.
The full text of the Commission's order will be posted to the SEC Web site as soon as possible. (Press Rel. 2008-264)
John White, Director of Division of Corporation Finance, to Leave SEC After Leading Unprecedented Rulemaking to Enhance Disclosure to Investors
The Securities and Exchange Commission announced today that John W. White, Director of the Division of Corporation Finance, will leave the agency at the end of this year after successfully leading the Division through one of the most significant and prolific rulemaking periods in its history to improve and modernize disclosure to investors.
Since joining the agency in March 2006, Mr. White helped the SEC meet the challenges of increasing globalization of the capital markets and utilize rapidly changing technology for the benefit of investors. He particularly guided the SEC's accomplishments in several areas:
Mr. White also played an integral role in the SEC's response to recent market events, ensuring that the Division acted swiftly and appropriately to facilitate strategic transactions and access to capital for public companies. In addition, under his leadership, the Division has asked financial institutions to enhance disclosure regarding off-balance sheet arrangements and the application of fair value to financial instruments.
"John White's leadership of the Division of Corporation Finance has resulted in many substantial achievements for investor protection," said SEC Chairman Christopher Cox. "Thanks to his visionary work, investors for the first time are able to see the full amount that top executives are paid, and they are gaining far greater access to corporate disclosure through the introduction of interactive data and the availability of searchable information on the Web for proxy statements and other filings. John's work has increased transparency for investors when that is what our markets have needed most. The SEC and America's investors could not have had a better leader during these challenging times."
Mr. White said, "I am honored to have had the opportunity to lead the Division of Corporation Finance during this time of globalization, technological change, and recent market challenges. It has been a privilege to serve under Chairman Cox and the other members of the Commission and alongside the agency's talented and dedicated staff - they are among the government's finest. The Division of Corporation Finance has a long and proud tradition of excellence, and I am grateful to have been a part of that tradition over the past few years."
Mr. White brought his expertise, commitment, and leadership to a broad array of groundbreaking SEC disclosure, financial reporting, and international initiatives, recommending more than 60 rulemaking releases to the Commission for action since March 2006.
Executive Compensation. After leading the Commission's 2006 adoption of far-reaching changes in executive and director compensation disclosure, Mr. White then focused the Division's efforts on ensuring effective implementation of the new requirements, conducting a detailed review of 350 companies' first-year disclosures under the new rules, publishing a report sharing the staff's observations, providing implementation guidance in Division interpretations and speeches and, most recently, preparing for upcoming disclosures triggered by market events and the new Troubled Asset Relief Program.
Sarbanes-Oxley Act Section 404. Mr. White was instrumental in crafting the "next steps" plan the Commission announced in May 2006 to improve implementation of Section 404. He worked with the Commission as well as the PCAOB board members and staff to roll out this plan, under which the Commission issued for the first time guidance regarding management's report on internal control over financial reporting, worked with the PCAOB to issue a new audit standard for internal controls, and phased in the Commission's rules implementing Section 404 to accommodate smaller companies.
Globalization. Mr. White has helped the SEC meet the challenges of the globalization of securities markets and the growing movement toward international accounting standards. In addition to spearheading the Commission's groundbreaking adoption of new rules to accept IFRS from foreign issuers, Mr. White led the Division in developing the recommendation of a multi-year roadmap for use of IFRS by U.S. issuers.
Mr. White also led the Division staff in four Commission rulemaking projects that modernized many of the Commission's requirements that apply to foreign issuers and U.S. investors in foreign companies. These efforts included the simplification of deregistration by foreign issuers, improvements to the cross-border tender offer rules to facilitate participation by U.S. investors, enhancements to the foreign issuer reporting regime, and revision of the exemption from registration for foreign private issuers.
Technology. Throughout his tenure, Mr. White focused on effectively exploiting advances in technology to improve disclosure and investor access. In addition to helping facilitate the Commission's publication of a proposal that all U.S. public companies use interactive data in their filings, he also led Commission actions on electronic delivery of proxy materials and disclosure of information through corporate Web sites. Mr. White worked closely with the SEC's Advisory Committee on Improvements to Financial Reporting (CIFiR) in development of CIFiR's recommendations, and has guided the process of implementing these recommendations. His contributions also were invaluable in the development of the SEC's 21st Century Disclosure Initiative.
In addition, under Mr. White's leadership, the Division responded to recommendations of the SEC's Advisory Committee on Smaller Public Companies, with the Commission substantially updating and streamlining its rules concerning private offerings and capital raising and reporting by smaller public companies. He also led the Division in crafting proposed updates to the Commission's oil and gas reporting requirements to reflect changes in technology and industry practice.
Mr. White focused particularly on the Division's statutory responsibilities as well as the transparency of its operations. Under his leadership, the Division successfully met its mandate under Sarbanes-Oxley to review on a regular and systematic basis the disclosures of the approximately 12,000 reporting companies it oversees, with 5,000 reviews in the most recent year. Mr. White also brought greater transparency to the work of the Division by leading efforts to consolidate, revise, and update hundreds of Division interpretations, re-launch its Web page, provide electronic access to a vast array of new information, and publish guidance on the review process for reporting companies and accessing Division resources.
Mr. White will rejoin the law firm of Cravath, Swaine & Moore LLP as a partner in its New York office. Prior to coming to the SEC, during more than 25 years as a partner at Cravath, he represented public companies and financial advisors on a wide variety of matters including public financings, public reporting obligations, corporate governance issues, restatements, and other financial crises. Mr. White earned a B.S. in Accounting with honors from the University of Virginia in 1970. In 1973, he received his J.D. magna cum laude from New York University School of Law. Mr. White currently serves as Chairman of the Securities Regulation Institute, sponsored by Northwestern University School of Law. (Press Rel. 2008-265)
In the Matter of Ronald B. Hogan
On November 6, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Sections 15(b) and 17A(c) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Ronald B. Hogan. The Order finds that a final judgment was entered by consent against Hogan, permanently 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. Karnig H. Durgarian, Jr., et al., Civil Action No. 05-12618-NMG, in the United States District Court for the District of Massachusetts.
Based on the above, the Order suspends Hogan from association with any broker, dealer, or transfer agent for twelve months. Hogan consented to the issuance of the Order without admitting or denying any of the findings except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.2 of the Order, which are admitted. (Rel. 34-58907; File No. 3-13286)
In the Matter of Karnig H. Durgarian, Jr.
On November 6, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Sections 15(b) and 17A(c) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Karnig H. Durgarian, Jr. The Order finds that a final judgment was entered by consent against Durgarian, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 34(b) and 37 of the Investment Company Act of 1940 in the civil action entitled Securities and Exchange Commission v. Karnig H. Durgarian, Jr., et al., Civil Action No. 05-12618-NMG, in the United States District Court for the District of Massachusetts.
Based on the above, the Order bars Durgarian from association with any broker, dealer, or transfer agent, with the right to reapply for association after three years to the appropriate self-regulatory organization, or if there is none, to the Commission. Durgarian consented to the issuance of the Order without admitting or denying any of the findings except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.2 of the Order, which are admitted. (Rel. 34-58908; File No. 3-13287)
Court Permanently Enjoins Bulverde, Texas Resident George "Lin" Phelps from Violating Certain Antifraud and Registration Provisions
The Commission announced that on November 3, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered an order permanently enjoining George L. Phelps (Phelps) of Bulverde Texas from violating certain of the antifraud and registration provisions of the federal securities laws. Phelps is also known as "Lin" Phelps and also did business under the name "Safe Estate Plans." The order, entered with Phelps' consent, permanently enjoins him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, and Rules 10b-5 and 10b-10 promulgated thereunder, and from aiding and abetting violations of Rule 10b-10 of the Exchange Act.
The SEC's complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Phelps, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Lease investments. Universal Leases were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC's complaint alleges that from 1999 until 2005, Kelly and others, including Phelps, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Phelps, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges the leasing agent was a small Panamanian travel agency controlled by Kelly and for most of the scheme its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and others, including Phelps, failed to disclose key facts about the Universal Lease investments, including the risks of the investments and that more than $72 million in investor funds were used to pay commissions as high as 27% to the selling brokers. The SEC continues to pursue its claims against Phelps for disgorgement and civil penalties. The SEC's action against the remaining defendants is also pending.
For additional information, see Litigation Release Nos. 20267 (Sept. 5, 2007), 20573 (May 14, 2008), 20578 (May 15, 2008), 20579 (May 15, 2008), 20664 (July 31, 2008), 20679 (August 12, 2008), 20708 (Sept. 9, 2008) and 20709 (Sept. 9, 2008). [SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois] (LR-20799)
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