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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-222
November 17, 2008

ENFORCEMENT PROCEEDINGS

In the Matter of Victor Novosselov (a/k/a David Markowitz)

On November 14, the Commission issued an Order Making Findings and Imposing Remedial Sanctions against Viktor Novosselov (a/k/a David Markowitz) (Novosselov) pursuant to an offer of settlement in the administrative proceeding instituted against him on September 8, 2008. The order against Novosselov alleged that he pled guilty to a criminal conviction in federal district court based on his activities with respect to unregistered broker-dealer Blue Square Management, Inc. (Blue Square). In addition, the order against Novosselov alleged that he consented to the entry of a judgment for injunctive relief in a parallel civil action brought by the Commission.

The Order finds that according to the Commission's complaint and the criminal information to which he pled guilty, Novosselov orchestrated a fraudulent offering of "pre-IPO" stock via the purported New York City-based venture capital firm Blue Square from January 2001 through February 2004. The Commission's complaint and criminal information alleged that Blue Square raised a total of approximately $3.7 million from over 280 people nationwide in this fraudulent offering of securities.

Based on the above, the settled order bars Novosselov from association with any broker or dealer. Novosselov consented to the issuance of the order without admitting or denying any of its findings, except he admitted to the entry of the injunction and the criminal conviction. (Rel. 34-58954; File No. 3-13168)


In the Matter of Daryl Anderson

On November 14, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 against Daryl Anderson (Anderson) of Las Vegas, Nevada. The Order is based on the entry of a permanent injunction against Anderson in the civil action entitled SEC v. CMKM Diamonds, Inc., et al., Civil Action No. 02:08-cv-00437-LRH-RJJ in the U.S. District Court for the District of Nevada. In the Order, as a remedial sanction, the Commission barred Anderson from association with a broker or dealer.

In the Order, the Commission found that on Aug. 7, 2008, the U.S. District Court for the District of Nevada entered a Judgment of Permanent Injunction by Consent against Anderson, permanently enjoining him from violating Sections 5(a) and 5(c) of the Securities Act of 1933.

The Order also found that the Commission's complaint in the civil action alleged that, among other things, from March 2003 until May 2005, Anderson improperly sold more than 259 billion shares of unregistered securities of CMKM Diamonds, Inc. in 569 separate transactions, which generated more than $53.3 million in proceeds and yielded approximately $2.3 million in commissions for Anderson. (Rel. 34-58958; File No. 3-13156)


In the Matter of R2 Medical Sys., Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in R2 Medical Sys., Inc., Administrative Proceeding No. 3-13229. The Order Instituting Proceedings alleged that five Respondents each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true. It revokes the registrations of each class of registered securities of R2 Medical Systems, Inc., Rachel's Gourmet Snacks, Inc., Rain City Enterprises, Inc., Range Petroleum Corp. (n/k/a Range Energy, Inc.), and RecordLab Corp. pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-58961; File No. 3-13229)

Securities and Exchange Commission Orders Hearing on Registration Revocation Against Five Public Companies for Failure to Make Required Periodic Filings

On November 17, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of five companies for failure to make required periodic filings with the Commission:

  • Graystone World Wide, Inc.
  • Keratoplanetes Corp.
  • Lighthouse Partners, Inc.
  • Maritime Partners, Ltd.
  • Myrient, Inc. (MYNT)

In this Order, the Division of Enforcement (Division) alleges that the five 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 each class 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. 34-58962; File No. 3-13290)


Securities and Exchange Commission Orders Hearing on Registration Revocation Against Seven Public Companies for Failure to Make Required Periodic Filings

On November 17, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:

  • Baldwin Piano & Organ Co.
  • Banner Holding Corp.
  • Be Safe Services, Inc.
  • Belmoral Mines Ltd.
  • Benefund, Inc.
  • Benz Energy Ltd. (n/k/a Benz Energy, Inc.)
  • Beyond Belief, Inc.

In this Order, the Division of Enforcement (Division) alleges that the seven 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 or 13a-6 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class 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. 34-58963; File No. 3-13291)


Securities and Exchange Commission Orders Hearing on Registration Revocation Against Three Public Companies for Failure to Make Required Periodic Filings

On November 17, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of three companies for failure to make required periodic filings with the Commission:

  • Pacific Industrial Corp.
  • Pacific Security Companies, Inc.
  • Pandora Industries, Inc. (n/k/a Creston Moly Corp.)

In this Order, the Division of Enforcement (Division) alleges that the three 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 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class 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 34-58964; File No. 3-13292)


SEC Files Insider Trading Charges Against Mark Cuban

The Commission announced that it filed insider trading charges today against Mark Cuban, the owner of the NBA's Dallas Mavericks franchise, in the U.S. District Court for the Northern District of Texas. The Commission's complaint alleges that Cuban violated the antifraud provisions of the federal securities laws by engaging in illegal insider trading in the securities of Mamma.com Inc. (Mamma.com), a publicly traded company (now known as Copernic Inc.) based in Montreal, Canada. According to the complaint, in June 2004, Cuban sold his entire 600,000 share position in Mamma.com on the basis of material, non-public information concerning an impending PIPE (private investment in public equity) offering by the company. The complaint alleges that Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the PIPE offering.

According to the complaint, Cuban was Mamma.com's largest known shareholder during the relevant time period. On June 28, 2004, the complaint alleges, Mamma.com's then-chief executive officer -- after securing Cuban's agreement to keep the information confidential -- invited Cuban to invest in the PIPE offering. The complaint further alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders. According to the complaint, later that day, Cuban called his broker and -- in breach of his agreement to keep the information confidential -- instructed him to sell out his entire position in the company. That afternoon (June 28), and over the next day (June 29), the broker liquidated Cuban's entire 600,000 share position. After the markets closed on June 29, 2004, Mamma.com publicly announced the PIPE offering. The next day, Mamma.com's stock price opened at $11.89, down $1.215 or 9.3%, from the prior day's closing price of $13.105. According to the complaint, Cuban thereby avoided losses in excess of $750,000 by selling on the basis of material, non-public information concerning the PIPE offering.

The complaint alleges that by engaging in illegal insider trading, Cuban violated the antifraud provisions of both the Securities Act of 1933 (Section 17(a)) and the Securities Exchange Act of 1934 (Section 10(b) and Rule 10b-5 thereunder). The Commission's complaint seeks to permanently enjoin Cuban from future violations of the applicable provisions of the federal securities laws, disgorgement (with prejudgment interest thereon), and a civil penalty. [SEC v. Mark Cuban, Civil Action No. 3-08-CV-2050-D (SF)] (LR-20810)


SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-ISE-2008-83) filed by the International Securities Exchange relating to market maker trading licenses for foreign currency options 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 November 17. (Rel. 34-58940)

A proposed rule change filed by the Boston Stock Exchange to enable the listing and trading on BOX of options on index-linked securities (SR-BSE-2008-50) 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 November 17. (Rel. 34-58941)

A proposed rule change filed by Boston Stock Exchange (SR-BSE-2008-49) to extend a pilot program that allows for no minimum size order requirement for the price improvement period process on the Boston Options Exchange Facility 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 November 17. (Rel. 34-58942)

A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2008-78) to temporarily increase the number of additional quarterly options series in exchange-traded fund options 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 November 17. (Rel. 34-58943)

A proposed rule change filed by National Stock Exchange to amend NSX Rule 11.23(a) which defines the phrase "Riskless Principal Transaction" (SR-NSX-2008-20) 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 November 17. (Rel. 34-58953)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2008/dig111708.htm


Modified: 11/17/2008