Enforcement Director Linda Chatman Thomsen to Leave SEC
The Securities and Exchange Commission announced today that Linda Chatman Thomsen, Director of the Division of Enforcement, plans to return to the private sector. Ms. Thomsen led a historic period of SEC law enforcement during which the Commission brought more than 2,000 enforcement actions and returned billions of dollars to harmed investors. In the past two years, the Commission has brought the second and third-highest number of enforcement actions in agency history.
Among the many precedent-setting enforcement actions led by Ms. Thomsen were:
In addition, under Ms. Thomsen's leadership the Division of Enforcement brought hundreds of financial fraud cases, including those against AIG, Fannie Mae, Nortel, and Tyco, and dozens of insider trading cases. Many of the insider trading cases were brought against securities industry and other professionals, including a case against a Dow Jones board member, another involving two overlapping schemes by securities industry professionals that rivaled cases from the days of Ivan Boesky, and several others involving sophisticated trading rings of global proportion.
"Linda's achievements have been nothing short of extraordinary, even heroic, in an era of unprecedented challenges in our securities markets," said SEC Chairman Mary L. Schapiro. "Linda has distinguished herself in public service through her keen intellect, profound understanding of our securities laws, and relentless pursuit of wrongdoers. While Linda's wisdom, judgment, integrity and humor will be sorely missed by all of her colleagues, the agency and the investors we serve will always be grateful for Linda's service."
Ms. Thomsen said, "Working on the staff of the Commission has been an extraordinary privilege. For nearly 14 years, I have been surrounded by smart, hardworking, creative, wonderful colleagues who have been devoted to public service, this agency, and its essential mission of investor protection. There is no higher honor than to serve the public and I am grateful to have had the opportunity to do so during my time at the Commission."
Ms. Thomsen joined the SEC staff as an Assistant Chief Litigation Counsel in 1995. She served as an Assistant Director, an Associate Director, and Deputy Director of the Division of Enforcement before former Chairman William H. Donaldson appointed her Director in 2005. Before joining the Commission's staff, she was in private practice at the law firm of Davis Polk & Wardwell and served as an Assistant United States Attorney for the District of Maryland. Ms. Thomsen earned her A.B. in Government from Smith College and received her J.D. from Harvard Law School. (Press Rel. 2009-22)
In the Matter of Hafiz Naseem
On February 6, 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) in the above-referenced matter against Hafiz Naseem (Naseem). The Order finds that on, May 3, 2007 the Commission filed a complaint against Naseem in SEC v. One or More Unknown Purchasers of Call Options for the Common Stock of TXU Corp., et al. (Civil Action No. 1:07-cv-1208), in the United States District Court for the Northern District of Illinois. It also finds that, on Jan. 22, 2009, the court entered an order permanently enjoining Naseem, by consent, from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
On Feb. 4, 2008, following a jury trial, Naseem was convicted on conspiracy to commit securities fraud and 28 counts of insider trading in the United States District Court for the Southern District of New York, in United States v. Hafiz Naseem, Case No. 1:07-cr-610. On June 4, 2008, a judgment in the criminal case was entered against Naseem. He was sentenced to a prison term of ten years and, on June 6, 2008, was ordered to forfeit $9 million in illegal trading profits.
Based on the above, the Commission's Order bars Naseem from association with any broker, dealer, or investment adviser. Naseem consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 34-59367; IA-2836; File No. 3-13362)
In the Matter of Carlos Javier Spinelli-Noseda, Esq.
On February 9, the Commission announced issued an Order of Suspension Pursuant to Rule 102(e)(2) of the Commission's Rules of Practice forthwith suspending Carlos Javier Spinelli-Noseda, Esq. from appearing or practicing before the Commission. The Commission's order finds that on Sept. 23, 2008, the First Judicial Department of the New York Supreme Court Appellate Division issued an order directing that: (i) Spinelli's resignation from the practice of law be accepted, and (ii) Spinelli's name be struck from New York's roll of attorneys. Spinelli, who has regularly appeared and practiced before the Commission, admitted in a notarized affidavit filed with the New York court that between July 1998 and February 2008, he improperly billed his clients and his former law firm for more than $500,000 in expenses that were either personal, inflated or false. (Rel. 34-59371; File No. 3-13363)
SEC Brings Fraud Charges Against Lewis E. Graham II and FLOWorks, Inc.
The Commission filed a civil injunctive action on February 6, in the United States District Court for the District of Nevada against defendants Lewis E. Graham II and FLOWorks, Inc. and relief defendant Linworth LLC alleging fraud in connection with the securities of Stanford Square Investors LLC (SSI). Graham, a resident of Las Vegas, Nevada, controls FLOWorks and Linworth. FLOWorks is the manager of SSI, a Nevada limited liability company with approximately 100 investors.
The Commission's complaint alleges that in June 2005, SSI sold its primary asset, a commercial office building in Palo Alto, California. Although SSI's operating agreement provided that the company would terminate upon the sale of substantially all of its assets, in July 2005 Graham and FLOWorks, without the approval of the SSI members, caused SSI to purchase an interest in a commercial property in Eugene, Oregon. According to the complaint, Graham's communications to the SSI investors after the purchase misstated and omitted important information about the nature and tax-free status of the Eugene property transaction, the value of the property, liabilities to be assumed by SSI, and Graham's personal interest in the property's proposed tenant. The Commission contends that these misstatements and omissions were made in connection with an offer by the purported seller of the Eugene property to purchase the membership interest of any investor that did not wish to participate in the new property venture. With respect to those members that elected to sell, the purported buyer has failed to complete these transactions. The Commission asserts that the actions of Graham and FLOWorks have resulted in substantial harm to SSI investors, including millions of dollars in unreported taxable gains, as well as undisclosed liabilities secured by liens on the Eugene property amounting to several million dollars. The Commission contends that Graham misled the SSI investors in order to continue to take substantial fees from SSI and to further his personal financial interests in the new venture.
The Commission's complaint alleges that Graham and FLOWorks violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, and imposition of civil money penalties against Graham and FLOWorks based on their illegal conduct. The Commission also seeks disgorgement of ill-gotten gains from Linworth based upon its improper receipt of funds from SSI. [SEC v. Lewis E. Graham II and FLOWorks, Inc., defendants, and Linworth LLC, relief defendant, Case No. 02:09-CV-00250 (D. Nev.] (LR-20888)
Defendant Bernard L. Madoff Consents to Partial Judgment Imposing Permanent Injunction and Continuing Other Relief
The Commission announced that on February 9, it submitted to the Honorable Judge Louis L. Stanton, a federal judge in the Southern District of New York, the consent of Bernard L. Madoff to a proposed partial judgment imposing a permanent injunction and continuing relief previously imposed in the preliminary injunction order, entered on Dec. 18, 2008. Madoff consented to the partial judgment without admitting or denying the allegations of the SEC's complaint, filed on Dec. 11, 2008. If the partial judgment is entered by the Court, the permanent injunction will continue to restrain Madoff from violating certain antifraud provisions of the federal securities laws. Also, the proposed partial judgment would continue against Madoff the relief imposed in the Dec. 18, 2008 Order, including the order freezing assets. The proposed partial judgment would leave the issues of the amount of disgorgement, prejudgment interest and civil penalty to be imposed against Madoff to be decided at a later time. For purposes of determining Madoff's obligation to pay disgorgement, prejudgment interest and/or a civil penalty, the proposed partial judgment deems the facts of the complaint are established and cannot be contested by Madoff.
The SEC's complaint, filed on Dec. 11, 2008, in federal court in Manhattan, alleges that Madoff and Defendant Bernard L. Madoff Investment Securities LLC have committed a $50 billion fraud and violated 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 206(1) and 206(2) of the Advisers Act of 1940. The complaint alleges that Madoff, just prior to the filing of the complaint on Dec. 11, 2008, informed two senior employees that his investment advisory business was a fraud. Madoff told these employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme." The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the principal received from other, different investors. Madoff admitted in this conversation that the firm was insolvent and had been for years, and that he estimated the losses from this fraud were at least $50 billion. [SEC v. Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, S.D.N.Y. Civ. 08 CV 10791 (LLS)] (LR-20889)
INVESTMENT COMPANY ACT RELEASES
Advisors Asset Management, Inc. and Advisors Disciplined Trust
A notice has been issued giving interested persons until March 3, 2009, to request a hearing on an application filed by Advisors Asset Management, Inc. and Advisors Disciplined Trust for an order under Sections 6(c) and 17(b) of the Act to permit transactions in certain securities between series of registered unit investment trusts. (Rel. IC-28613 - February 6)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change (SR-NYSE-2008-112) filed by the New York Stock Exchange under Section 19(b) of the Exchange Act. The approved rule change discontinues the exchange's policy of prohibiting transfer agents for listed companies from charging fees for the issuance of stock certificates. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59320)
The Commission approved a proposed rule change (SR-NSCC-2008-08) filed by the National Securities Clearing Corporation under Section 19(b)(1) of the Exchange Act. The approved rule change amends its rules to add an agreement that requires NSCC fund members to have taken reasonable steps to validate the accuracy of the data they submit to the Mutual Fund Profile Service database. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59321)
The Commission approved a proposed rule change (SR-NYSEALTR-2008-12) submitted under Rule 19b-4 of the Securities Exchange Act of 1934 by the NYSE Alternext US to establish the Risk Management Gateway Service. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59353)
The Commission approved a proposed rule change (SR-FINRA-2008-051) filed by the Financial Industry Regulatory Authority relating to amendments to the Codes of Arbitration Procedure to require arbitrators to provide an explained decision upon the joint request of the parties. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59358)
The Commission approved a proposed rule change (SR-CBOE-2008-123) submitted by Chicago Board Options Exchange to adopt a Trade, Flash and Cancel order type for CBSX. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59359)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by NYSE Arca to eliminate the $3 underlying price requirement for continued listing and listing of additional series (SR-NYSEArca-2009-07) 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 February 9. (Rel. 34-59349)
A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2009-005) relating to temporary membership status and interim trading permit access fees 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 February 9. (Rel. 34-59357)
A proposed rule change filed by NYSE Alternext US (SR-NYSEALTR-2009-06) amending NYSE Alternext Equities Rules 116 and 123C to create a single closing print to be reported to the Consolidated Tape for each security 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 February 9. (Rel. 34-59360)
A proposed rule change (SR-Phlx-2009-10) filed by NASDAQ OMX PHLX relating to sponsored access 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 February 9. (Rel. 34-59362)
Proposed Rule Change
NYSE Arca filed a proposed rule change (SR-NYSEArca-2009-03) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to establish a technical original listing fee specific to Derivative Securities Products and Structured Products. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59364)
JOINT INDUSTRY PLAN RELEASES
Order Approving Amendment to Joint-SRO Plan Establishing Procedures Under Rule 605 of Regulation NMS
The Commission has issued an order approving an amendment filed by the BATS Exchange, Inc. to join the national market system plan (File No. 4-518) establishing procedures under Rule 605 of Regulation NMS. Publication is expected in the Federal Register during the week of February 9. (Rel. 34-59361)
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