Joint Hearing of the U.S. Securities and Exchange Commission and the Department of Labor
On Thursday, June 18, 2009, beginning at 9:00 a.m., a Joint Hearing will take place in the Auditorium of the Department of Labor's headquarters at 200 Constitution Avenue, NW, Washington, D.C. The Joint Hearing will be open to the public with seating on a first-come, first-served basis. Visitors will be subject to security checks.
Discussion topics at the Joint Hearing will include issues related to how target date fund managers determine asset allocations and changes to asset allocations (including glide paths) over the course of a fund's operation; how they select and monitor underlying investments; how the foregoing and related risks are disclosed to investors; and the approaches or factors for comparing and evaluating target date funds. Joint Hearing participants will include representatives of plan participants and beneficiaries, plan sponsors, investor organizations, academia and the financial services industry.
For further information, please contact: The Office of the Secretary at (202) 551-5400.
In the Matter of Wade Cook Financial Corp.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Six Respondents (Default Order) in Wade Cook Financial Corp., Administrative Proceeding No. 3-13461. The Order Instituting Proceedings (OIP) alleged that seven Respondents repeatedly failed to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission (Commission). The Default Order finds these allegations to be true and revokes the registrations of each class of registered securities of Wade Cook Financial Corp., Weldotron Corp., Western Microwave, Inc., Wickes, Inc., Worldwide Technologies, Inc., and Worldwide Xceed Group, Inc. (n/k/a Liquidating WXG, Inc.), pursuant to Section 12(j) of the Securities Exchange Act of 1934.
The Commission previously accepted an Offer of Settlement from Warning Management Services, Inc., the other Respondent named in the OIP. Wade Cook Fin. Corp., Exchange Act Release No. 59968 (May 22, 2009). (Rel. 34-60058; File No. 3-13461)
In the Matter of Evergreen Investment Management Company, LLC, et al.
On June 8, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b)(4) and 21C of the Securities Exchange Act of 1934, Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (Order) against Evergreen Investment Management Company, LLC (EIMCO) and Evergreen Investment Services, Inc. (EIS).
The Order finds that, from February 2007 through its closing on June 18, 2008, the Ultra Fund overstated its net asset value (NAV) by as much as 17%. The Fund overstated its NAV because the Evergreen Adviser did not properly take into account various readily-available information when recommending valuations for certain residential mortgage-backed securities held by the Fund. In addition, the Fund's portfolio management team withheld relevant negative information about similar securities the Fund held.
In addition, the Commission's order finds that, in the days leading up to its closing, the Evergreen Adviser and Evergreen Distributor gave some Ultra Fund shareholders an unfair advantage over other Fund shareholders by disclosing certain information about the reasons for recent declines in the Fund's NAV. In fact, many of the shareholders who received this information then redeemed their Ultra Fund shares prior to the Fund's closing — and at a higher price than those shareholders who held their shares until the end.
In addition, the Order finds that EIMCO's and EIS's procedures were not reasonably designed either to prevent the misuse of material, nonpublic information about the Ultra Fund through the disclosure of information to, among others, registered representatives of an affiliated broker-dealer for the purpose of further disclosing such information to certain Ultra Fund shareholders or to ensure that all shareholders received the material information. The Order also finds that EIMCO engaged in prohibited securities transactions between the various mutual funds it advised and that EIS failed to preserve certain text and instant messages it was required to maintain.
EIMCO and EIS consented to the issuance of the Commission order without admitting or denying any of the findings. EIMCO agreed to pay approximately $3 million in disgorgement and prejudgment interest and a civil penalty of $2 million. EIS also agreed to pay a civil penalty of $2 million. In addition, EIMCO and EIS agreed to jointly make an additional payment of $33 million to compensate shareholders for harm caused by the conduct set forth in the Commission's order. All of these moneys, totaling approximately $40 million, will be distributed to Ultra Fund shareholders pursuant to the provisions of the Commission's order.
In addition, the Order censures EIMCO and EIS, orders EIMCO to cease and desist from committing or causing any violations and any future violations of Sections 204A and 206(2) of the Advisers Act and Sections 17(a) and 34(b) of the Investment Company Act, and Rule 22c-1 promulgated pursuant to Section 22(c) of the Investment Company Act, and orders EIS to cease and desist from committing or causing any violations and any future violations of Sections 15(f) and 17(a) of the Exchange Act and Rule 17a-4 thereunder, Section 206(2) of the Advisers Act, and Rule 22c-1 promulgated pursuant to Section 22(c) of the Investment Company Act. (Rels. 34-60059; IA-2888; IC-28759; 33-9038; 33-9039, 34-60060; File No. 3-13507)
SEC v. Wall Street Communications, Inc., et al.
On June 5, 2009, the Securities and Exchange Commission filed a complaint in the United States District Court for the Middle District of Florida charging Wall Street Communications, Inc., its principal, Howard Scala, and two other individuals, Ross E. Barall and Donald R. McKelvey with securities fraud in connection with a series of stock manipulation schemes and a fraudulent, unregistered distribution of stock.
The Commission's complaint alleges that from at least January through December 2004, Wall Street and Scala acquired large blocks of stock in thinly-traded microcap companies. Wall Street acquired the stock for little or no consideration, based on agreements to find buyers for the shares in exchange for a portion of the sales proceeds. According to the complaint, Wall Street and Scala then created a market for these shares either by causing the release of spam emails touting the stocks or by coordinating manipulative trading with brokerage accounts controlled by Barall. The Commission alleges that after creating an artificially inflated market for the stock, Wall Street and Scala dumped the shares on unsuspecting investors, reaping tens of thousands of dollars in profits each time.
The complaint further alleges that from 2003 through at least July 2004, Wall Street and Scala engaged in another scheme in which they illegally acquired 8.6 million shares of Telco-Technology, Inc. pursuant to Form S-8 registration statements, purportedly in exchange for consulting services. According to the complaint, in fact, Wall Street did not perform any services for which Telco was permitted to issue the S-8 stock to Wall Street. The complaint alleges that almost immediately after obtaining the Telco shares, Wall Street and Scala sold them in a fraudulent unregistered distribution and funneled half of the proceeds to a company controlled by Telco's president, Donald R. McKelvey.
The Commission's complaint charges that: (a) Wall Street and Scala violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, and that they aided and abetted McKelvey's violations of Section 10(b) of the Exchange Act and Rule 10b-5; (b) Barall violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5; and (c) McKelvey violated Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. In its complaint, the Commission seeks permanent injunctions, an accounting, disgorgement plus prejudgment interest, civil penalties, penny stock bars, and an officer and director bar against McKelvey. [SEC v. Commission v. Wall Street Communications, Inc. et al., (U.S. District Court for the Middle District of Florida, Civil Action No. 8:09-CV-1046-T-30-T6W] (LR-21070)
Court Enters Final Judgment Against Alexis Ampudia
The Commission announced that on June 5, 2009, the United States District Court for the Southern District of New York entered a Final Judgment on consent against defendant Alexis Ampudia. The Final Judgment enjoins Ampudia from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, and orders him liable for $156,654.28 in disgorgement and prejudgment interest. Based on Ampudia's sworn Statement of Financial Condition and other documents and information submitted to the Commission, the Court did not order Ampudia to pay a civil penalty and payment of all but $50,430.39 of the disgorgement and prejudgment interest was waived.
The Commission's complaint, filed on April 5, 2007, charged Ampudia, a 22-year old Panamanian citizen and resident of Brooklyn, New York, with conducting a fraudulent scheme involving the manipulation of the prices of numerous securities by using brokerage accounts he had opened in the names of identity theft victims, without their knowledge or consent. The Commission alleged that, since November 2006, Ampudia made at least $140,000 in unlawful profits by manipulating the securities of at least five publicly traded companies.
The Commission acknowledges the assistance of the New York County District Attorney's Office, New York City Police Department, and United States Secret Service in this matter.. [SEC v. Alexis Ampudia, a/k/a Alexis Geancarlos Ampudia Navalo, a/k/a Alexis Emias, a/k/a Alexis Rojas, Civil Action No. 07-CV-2762 (HB) (S.D.N.Y.)] (LR-21071)
SEC v. Robert L. Hollier and Wayne A. Dupuis
On June 8, 2009, the Securities and Exchange Commission filed a Complaint for Injunctive and Other Relief (Complaint) in the United States District Court for the Western District of Louisiana against Robert L. Hollier (Hollier) and Wayne A. Dupuis (Dupuis). This matter involves insider trading in the securities of Warrior Energy Services Corporation (Warrior Energy) by Dupuis, who received tips directly or indirectly from Hollier, a member of Warrior Energy's board of directors.
The Complaint alleges that during the latter part of August 2006, Hollier had knowledge of pending merger talks between Warrior Energy and Superior Energy Services, Inc. (Superior Energy). The information constituted material nonpublic information. Hollier tipped Dupuis about the pending merger during a Canada hunting trip that Hollier and Dupuis both attended. The Complaint further alleges that on Sept. 18, 2006, the day he returned from the hunting trip, Dupuis purchased 5,000 shares of Warrior Energy stock for approximately $85,000. On Sept. 25, 2006, Warrior Energy announced a definitive merger agreement with Superior Energy. Further, the Complaint alleges that the Warrior Energy shares, which were then traded on the Nasdaq National Market, increased in price by almost 70% on the news that day. The Complaint also alleges that on October 3, 2006, Dupuis sold all of his Warrior Energy stock for a profit of approximately $41,800.
The Complaint alleges that the defendants have violated the antifraud provisions of the federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's Complaint seeks (i) a permanent injunction against future violations; (ii) disgorgement of ill-gotten gains plus prejudgment interest; and (iii) imposition of civil penalties. [SEC v. Robert L. Hollier and Wayne A. Dupuis, Civil Action No. 6:09-cv-00928 (W.D. La.)] (LR-21072)
INVESTMENT COMPANY ACT RELEASES
Nuveen Tax-Advantaged Total Return Strategy Fund, et al.
A notice has been issued giving interested persons until June 29, 2009 to request a hearing on an application filed by Nuveen Tax-Advantaged Total Return Strategy Fund, et al. (Funds) for an order (Order) under section 6(c) of the Investment Company Act of 1940 (Act) granting an exemption from sections 18(a)(1)(A) and (B) of the Act for a period from the date of the Order until Oct. 31, 2010. The Order would permit each Fund to issue or incur debt subject to asset coverage of 200% that would be used to refinance the Fund's auction preferred shares issued prior to February 1, 2008 that are outstanding at the time such post-Order debt is issued or incurred. The Order also would permit each Fund to declare dividends or any other distributions on, or purchase, capital stock during the term of the Order, provided that any such debt has asset coverage of at least 200% after deducting the amount of such transaction. (Rel. IC-28758 - June 4)
Proposed Rule Change
New York Stock Exchange filed a proposed rule change (SR-NYSE-2009-55) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 amending Rule 70.25 to permit all available contra-side liquidity to trigger the execution of a d-Quote. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60045)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change filed by the Chicago Board Options Exchange, Incorporated (SR-CBOE-2009-035) 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 June 8. (Rel. 34-60048)
SECURITIES ACT REGISTRATIONS
RECENT 8K FILINGS