Securities and Exchange Commission Suspends Trading in the Securities of Three Issuers for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on May 5, 2009 and terminating at 11:59 p.m. EDT on May 18, 2009:
The Commission temporarily suspended trading in the securities of these three issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over seven years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by this company.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject company unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of this company that has been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-59859)
Commission Orders Hearings on Registration Suspension or Revocation Against Seven Companies for Failure to Make Required Periodic Filings
In conjunction with today's trading suspension, the Commission today also instituted a public administrative proceeding to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In the Order, the Division of Enforcement (Division) alleges that the respective Respondents 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. 34-59860; File No. 3-13460)
SEC Files First Credit Default Swap Insider Trading Case
The Securities and Exchange Commission filed a civil action in the United States District Court for the Southern District of New York on May 5, 2009, alleging that Renato Negrin, a former portfolio manager at hedge fund investment adviser Millennium Partners, L.P., and Jon-Paul Rorech, a salesman at Deutsche Bank Securities Inc., engaged in insider trading in the credit default swaps of VNU N.V., an international holding company that owns Nielsen Media and other media businesses.
According to the Commission's complaint, Rorech learned information from Deutsche Bank investment bankers about a change to the proposed VNU bond offering that was expected to increase the price of the CDS on VNU bonds. Deutsche Bank was the lead underwriter for a proposed bond offering by VNU. According to the complaint, Rorech illegally tipped Negrin about the contemplated change to the bond structure, and Negrin then purchased CDS on VNU for a Millennium hedge fund. When news of the restructured bond offering became public in late July 2006, the price of VNU CDS substantially increased, and Negrin closed Millennium's VNU CDS position at a profit of approximately $1.2 million.
The Commission's complaint charges violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Commission's complaint seeks a final judgment permanently enjoining Rorech and Negrin from future violations of the federal securities laws, ordering them to pay financial penalties and to disgorge ill-gotten gains with prejudgment interest.
The Commission's investigation is ongoing. [SEC v. Jon-Paul Rorech, et al., Civil Action No. 09 CV 4329 (JGK) (SDNY)] (LR-21023)
SEC v. Albert J. Rasch, Jr., Kathleen R. Novinger, Sandra B. Masino, and 144 Opinions, Inc.
The Securities and Exchange Commission announced today that it has filed a complaint in the United States District Court for the Northern District of Georgia against Albert J. Rasch, Jr. (Rasch) and Sandra B. Masino (Masino) of Costa Mesa, California, Kathleen R. Novinger (Novinger) of Cypress, California, and 144 Opinions, Inc. (144 Opinions) a California corporation formerly headquartered in Newport Beach, California. The complaint alleges that Rasch was the sole partner and owner of the Law Firm of Albert J. Rasch and Associates. Novinger was the sole associate at Rasch and Associates. Masino was the sole owner and employee of 144 Opinions.
The complaint alleges that during 2007, the defendants collectively operated a legal "opinion mill" which issued fraudulent legal opinions used by promoters in a pump-and-dump scheme, and others, to sell securities in violation of the registration provisions of the federal securities laws. Masino and 144 Opinions drafted and Rasch or Novinger executed, at least 24 legal opinion letters concerning the removal of restrictive legends on certificates representing over 22 million shares of Mobile Ready Entertainment Corp. (Mobile Ready). The defendants cited to non-existent documents and misrepresented critical facts in executing the 24 legal opinions. The complaint alleges that the false and misleading statements drafted by Masino and 144 Opinions and thereafter executed by Rasch and Novinger fraudulently induced the transfer agent for Mobile Ready to remove the restrictive legends and permit the illegal sale of over 22 million shares of Mobile Ready in violation of the registration provision of the federal securities laws.
The Complaint alleges that the defendants have violated the registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint also seeks (i) permanent injunctions against future violations; (ii) disgorgement of ill-gotten gains plus prejudgment interest from Rasch and Masino; (iii) imposition of civil penalties as to Rasch, Novinger and Masino; and (iv) an order permanently prohibiting defendants from participating in any offering of penny stock. [SEC v. Albert J. Rasch, Jr., Kathleen R. Novinger, Sandra B. Masino, and 144 Opinions, Inc., Civil Action No. Civil Action No.1:09-CV-1190 (N.D. Ga)] (LR-21024)
SEC Charges Operators of the Reserve Primary Fund Fraud and Seeks Expedited Distribution of Fund's Remaining Assets to Investors
On May 5, the Commission charged entities and individuals who operate The Reserve Primary Fund, including the Reserve Management Company, Inc. (RMCI), its Chairman, Bruce Bent Sr., its Vice Chairman and President, Bruce Bent II, and Resrv Partners, Inc., with fraud for failing to provide key material facts to investors and trustees about the fund's vulnerability as Lehman Brothers Holdings, Inc. sought bankruptcy protection. The Reserve Primary Fund "broke the buck" on Sept. 16, 2008, when its net asset value fell below $1.00 per share, meaning investors in the money market fund would lose money. In bringing the enforcement action, the SEC also seeks to expedite the distribution of the fund's remaining assets to investors.
According to the complaint, defendants failed to provide key material information to the Primary Fund's investors, board of trustees, and ratings agencies after Lehman Brothers filed for bankruptcy protection on September 15. The fund, which held $785 million in Lehman-issued securities, became illiquid on that day when the fund was unable to meet investor requests for redemptions. According to the SEC's complaint, the defendants misrepresented that RMCI would provide the credit support necessary to protect the $1 net asset value of the Primary Fund when, in fact, RMCI had no such intention.
The complaint alleges that RMCI, Resrv Partners and Bruce Bent II violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and that RMCI directly violated and Bruce Bent Sr. and Bruce Bent II directly violated and aided and abetted violations of Sections 206(1), (2) and (4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. The complaint further alleges violations by Bruce Bent Sr. and Bruce Bent II of Section 10(b) and Rule 10b-5 thereunder as aiders and abettors and control persons.
The complaint names the Reserve Primary Fund as a relief defendant and seeks an order pursuant to Section 25(c) of the Investment Company Act and Section 21(d)(5) of the Exchange Act compelling a pro rata distribution of remaining fund assets which would release a significant amount of money that is currently being withheld from investors pending the outcome of numerous lawsuits against the fund, the trustees and other officers and directors of the Reserve entities.
The SEC's complaint seeks a final judgment permanently enjoining the defendants from future violations of the federal securities laws and ordering them to pay civil penalties and disgorgement of ill-gotten gains plus prejudgment interest. [SEC v. Reserve Management Company, Inc., Resrv Partners, Inc., Bruce Bent Sr. and Bruce Bent II, Civil Action No. 09-CV-4346 (S.D.N.Y.) (LR-21025)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change filed by NYSE Arca (SR-NYSEArca-2009-29) that suspends NYSE Arca's stock price continued listing standard 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 May 4. (Rel. 34-59854)
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