Commission Declares Decision as to Meditecnic, Inc. Final
The decision of an administrative law judge with respect to Meditecnic, Inc. has become final. The law judge found that Meditecnic violated Section 13(a) of the Securities Exchange Act of 1934, and Exchange Act Rules 13a 1 and 13a 13 by failing to file annual reports on Form 10 KSB and quarterly reports on Form 10 QSB for the period ended Sept. 30, 2004.
Although during the proceeding Meditecnic had attempted to file certain past due reports, those filings were materially deficient. The law judge revoked the registered securities of Meditecnic, Inc. (Rel. 34-59411; File No. 3 13184)
Commission Revokes Registration of Securities of Legal Club of America, Inc. for Failure to Make Required Periodic Filings
On February 18, the Commission revoked the registration of each class of registered securities of Legal Club of America, Inc. (Legal Club) 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, Legal Club 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 Legal Club 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 Legal Club's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Legal Club In the Matter of Leading Edge Packaging, Inc., et al., Administrative Proceeding File No. 3-13354.
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 Leading Edge Packaging, Inc., et al., Administrative Proceeding File No. 3-13354, Exchange Act Release No. 59315, January 29, 2009. (Rel. 34-59412; File No. 3-13354)
District Court Denies Motions to Dismiss SEC's Amended Complaint in Biovail Matter
The Commission announced that the United States District Court for the Southern District of New York has entered an order denying in all respects the motions to dismiss filed by defendants Brian Crombie, Biovail's former chief financial officer; John Miszuk, the company's former controller; and Kenneth G. Howling, its former chief financial officer. In a Memorandum Order, the court stated it "has considered defendants' contentions and concluded they are without merit." Former Biovail chief executive officer Eugene Melnyk is a defendant in the action but did not file a motion to dismiss the SEC's amended complaint. As a result of the court's order, the SEC's fraud claims will proceed against all four defendants.
The Commission's amended complaint alleges, among other things, that the company and individual defendants engaged in fraudulent activity. In particular, the complaint alleges fraud in connection with press releases and other public statements concerning a truck accident in October 2003 as well as three accounting schemes that affected reporting periods from 2001 to 2003.
Biovail previously settled with the Commission by consenting to a judgment that, among other things, permanently enjoined it from violating antifraud and other provisions of the federal securities laws, imposed a $10 million civil penalty, and ordered it to pay disgorgement of $1. Earlier this month, the Court entered a stipulated judgment against Melnyk on charges that he violated shareholder disclosure provisions by failing to include in his Schedule 13D filings Biovail shares held by several off-shore trusts that Melnyk controlled. That judgment permanently enjoins Melnyk from future violations of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 and imposes a civil penalty in the amount of $1,000,001.
The litigation remains pending against Crombie, Miszuk, and Howling on the claims alleged against each of them and against Melnyk on the securities fraud claim. [SEC v Biovail Corporation, Eugene Melnyk, Brian Crombie, John Miszuk, and Kenneth G. Howling, 08 Civ. 02979 (LAK) (S.D.N.Y.)] (LR-20903)
SEC Charges Former Registered Representative William L. Walters With Fraud Arising From Ponzi Scheme
The Commission announced that it has filed securities fraud and other charges against former registered representative, William L. Walters, formerly of Lone Tree, Colorado for operating a Ponzi scheme promising annual returns ranging from 20% to 40%.
According to the Complaint, from 2003 through 2006, Walters raised approximately $16.8 million from more than 80 investors under the false pretense that he would invest their funds in day trading in the securities markets. As set forth in the Complaint, Walters lured investors with the promise of high returns which he falsely claimed he could achieve based on his personal expertise and prior success in day trading. In reality, the Commission alleges, Walters deposited only a small fraction of investor funds into brokerage accounts, conducted very little trading in these accounts, and sustained heavy losses on the trading he did conduct. The Commission further alleges that Walters used approximately $11.4 million of investor funds to pay off prior investors in a classic Ponzi scheme pattern, using the rest largely to support his lavish lifestyle, with expensive cars and homes in Colorado and Hawaii.
The Commission's Complaint, filed in federal district court for the District of Colorado, charges Walters with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 15(a) and 10(b) of the Securities Exchange of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Commission seeks the entry of an injunction, an accounting, disgorgement, and civil monetary penalties.
The Commission acknowledges and appreciates the assistance of the Colorado Division of Securities, the Colorado Attorney General's Office and the Hawaii Department of Commerce and Consumer Affairs in connection with this matter. SEC v. William L. Walters (United States District Court for the District of Colorado, Civil Action No. 09-cv-00337 REB-MEH)] (LR-20904)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by New York Stock Exchange (SR-NYSE-2009-07) amending NYSE Rule 123E (DMM Combination Review Policy) to be more consistent with the Exchange's current Designated Market Maker (DMM) system. Publication is expected in the Federal Register during the week of February 16. (Rel. 34-59383)
A proposed rule change, as modified by Amendment No. 1 thereto, filed by NASDAQ OMX PHLX relating to reformatting its fee schedule (SR-Phlx-2009-08) 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 16. (Rel. 34-59402)
A proposed rule change filed by the NASDAQ Stock Market (SR-NASDAQ-2009-008) to modify Rule 7050 governing pricing for Nasdaq members using the NASDAQ Options Market (NOM) 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 16. (Rel. 34-59405)
NASDAQ OMX BX filed a proposed rule change (SR-BX-2009-008) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 allowing entry of orders into the PIP at a price matching the national best bid or offer. Publication is expected in the Federal Register during the week of February 16. (Rel. 34-59407)
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