Chairman Schapiro Statement on Executive Compensation
Securities and Exchange Commission Mary Schapiro today made the following statement regarding executive compensation:
"Debates over how much corporate executives are paid are not new. The large short term incentive compensation packages of the last few years - juxtaposed with the recent losses in shareholder value - have left many investors asking important questions - questions about their company's compensation practices and whether some incentives are actually undermining shareholder value over the long term.
"At the SEC, our role has not been to set pay scales or cap compensation. Our role is to protect investors by ensuring that they have the information needed to make sound investment decisions, whether those decisions impact proxy voting or a decision to buy or sell a stock.
"Over the years, the manner and types of compensation have continually evolved and become increasingly complex. In response, the Commission has frequently revised its disclosure rules to keep pace with new developments in compensation practices.
"That is why the SEC is actively considering a package of new proxy disclosure rules that will provide further sunshine on compensation decisions. While these proposals would not dictate particular compensation decisions, they would lead companies to analyze how compensation impacts risk taking and the implications for long term corporate health of the behavior they are incenting.
"To achieve this, we will be considering several proposals requiring greater disclosure:
"Knowing this kind of information can be of great benefit to investors, but even disclosure only takes us so far. If investors don't like what they learn, they have two choices: sell their shares or use the proxy process to vote for change. Unfortunately, neither of these options is easy. Selling their stock deprives the investor of the upside value that change can bring. And, under current rules, shareholders who wish to nominate their own candidates must typically launch a costly proxy fight.
"It is for this reason that last month the SEC proposed rules that would enhance the ability of shareholders to exercise their legal rights to nominate directors on corporate boards. Of course, these proposals are just that - "proposals" - and we fully expect to receive many comments about them. I believe the meaningful ability of shareholders to nominate directors is intricately linked to the ability of shareholders to hold directors accountable for their compensation decisions.
"I firmly believe that better disclosure of compensation leads to more informed shareholders and in turn to more accountable corporate directors. This is the foundation of our capital markets." (Press Rel. 2009-133)
In the Matter of I.A. Europe Group, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in I.A. Europe Group, Inc., Administrative Proceeding No. 3-13449. The Order Instituting Proceedings alleged that six Respondents 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 and revokes the registrations of each class of registered securities of I.A. Europe, Inc. (n/k/a Ghost Technology, Inc.), I-Carauction.com, Inc., ICIS Management Group, Inc., iCommerce Group, Inc., IDM Environmental Corp., and Illinois Creek Corp. pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-60082; File No. 3-13449)
SEC Charges New York-Based Investment Adviser for Stealing Client Funds
The Securities and Exchange Commission today charged an investment adviser who lives in Armonk, N.Y., for orchestrating a scheme in which he stole more than $6 million in investor funds for his own personal use, in some instances victimizing clients who were terminally ill or mentally impaired.
The SEC alleges that Matthew D. Weitzman sold securities in clients' brokerage accounts and illegally funneled their money to a bank account that he secretly controlled. While Weitzman spent the money on a multi-million dollar home, cars, and other luxury items, he provided false account statements to clients often showing inflated account balances and securities holdings. Weitzman also submitted to a broker-dealer phony letters from clients that purported to authorize the money transfers. When clients questioned Weitzman about the transfers they did not authorize, he misrepresented that he was withdrawing their funds to make legitimate investments.
According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Weitzman is the co-founder and a principal of AFW Wealth Advisors, the business name for AFW Asset Management, Inc., a registered investment adviser located in Purchase, N.Y., with an office in Natick, Mass. Weitzman also served as AFW's compliance officer.
The SEC alleges that Weitzman either sold securities held in the clients' accounts or redeemed shares held in money market funds in order to acquire cash for the unauthorized transfers, because the clients' brokerage accounts at the broker-dealer generally did not hold more than a minimal amount of cash. He also siphoned money from clients' Individual Retirement Accounts. Once he had the looted funds under his control in the AFW bank account, Weitzman either withdrew the clients' funds or transferred the money directly into one of his personal bank accounts.
According to the SEC's complaint, Weitzman in some instances misappropriated funds from AFW clients who were unlikely to be scrutinizing their account statements. For example, Weitzman misappropriated a total of approximately $430,000 in a series of unauthorized transfers from a client who was terminally ill. Weitzman later misappropriated $85,000 in two separate unauthorized transfers from the account of the client's widow. Furthermore, the SEC alleges that Weitzman targeted an elderly couple with compromised mental capacities, misappropriating approximately $400,000 of their money.
The SEC's complaint charges Weitzman with violating Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and with aiding and abetting violations of Section 204 and Rules 204-2(a)-3 and 204-2(a)(7) also of the Advisers Act. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, an asset freeze, a sworn accounting, an order prohibiting the destruction of documents, and a requirement that Weitzman notify the SEC and obtain approval of the court before he files for bankruptcy protection.
Weitzman agreed to settle the SEC's claims and, without admitting or denying the allegations, consented to the entry of a judgment that will grant the SEC the full relief that it seeks, but will defer the determination of the financial amounts of the settlement until a later date. The agreement to resolve the SEC's action is subject to approval by the court. [SEC v. Matthew D. Weitzman, United States District Court for the Southern District of New York, Civil Action No. 09 CV 5353 (JSR) (S.D.N.Y.)] (LR-21078)
SEC Charges Husband of Former Merrill Lynch Employee and Two Business Associates with Insider Trading
The Securities and Exchange Commission today filed a complaint in the United States District Court for the Southern District of New York alleging that three Canadian citizens, Phillip Macdonald, Martin Gollan, and Michael Goodman, engaged in insider tipping and trading in the securities of several companies ahead of public announcements of business combinations. One of the business combinations involved a tender offer. The Commission alleges that Macdonald, Gollan, and Goodman each violated the antifraud provisions of the Securities Exchange Act of 1934 and that Macdonald and Goodman also violated the tender offer insider trading provisions. The Commission's action seeks injunctive relief; disgorgement of ill-gotten gains, plus prejudgment interest; and civil penalties.
The Commission's complaint alleges that Goodman's wife learned of the business combinations during her employment as an administrative assistant with Merrill Lynch Canada, Inc. The complaint further alleges that Goodman learned the information while discussing with his wife what was happening at her job and that Goodman misappropriated the information by tipping Macdonald and Gollan. Macdonald and Gollan traded on the information. Macdonald made over $900,000 in ill-gotten gains, and Gollan made over $90,000.
Goodman has agreed to settle the Commission's charges against him, without admitting or denying the allegations in the complaint, by consenting to entry of a proposed final judgment permanently enjoining him from further violations of the antifraud and tender offer insider trading provisions and finding him liable for disgorgement of the ill-gotten gains of Macdonald and Gollan, plus prejudgment interest thereon, but waiving payment of those amounts and declining to impose a civil penalty, based on his sworn Statement of Financial Condition. [SEC v. Phillip Macdonald, Martin Gollan, and Michael Goodman, Civil Action No. 09-CV-5352 (HB) (S.D.N.Y.)] (LR-21079)
INVESTMENT COMPANY ACT RELEASES
PowerShares Exchange-Traded Fund Trust, et al.
A notice has been issued giving interested persons until July 6, 2009, to request a hearing on an application filed by PowerShares Exchange-Traded Fund Trust, et al., for an order under Section 6(c) of the Investment Company Act of 1940 (Act) for an exemption from Rule 12d1-2(a) under the Act. The order would permit funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-28760 - June 8)
Immediate Effectiveness of Proposed Rule Changes
The New York Stock Exchange and NYSE Amex filed proposed rule changes (SR-NYSE-2009-50 and SR-NYSEAmex-2009-20) under Section 19(b)(1) of the Exchange Act to add new procedures to use during the comparison stage of settling securities transactions. The proposed rule changes were effective upon filing. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-59997)
The Depository Trust Company filed proposed rule change (SR-DTC-2009-09) under Section 19(b)(1) of the Exchange Act, which became effective upon filing, to establish an alternate choice in DTC's Profile Modification System Indemnity. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60036)
A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2009-44) relating to the cancellation fee 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. 34-60046)
A proposed rule change filed by the Municipal Securities Rulemaking Board relating to the termination of the CDINet System (SR-MSRB-2009-07) 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. 34-60053)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2009-53) extending the moratorium related to the qualification and registration of Registered Competitive Market Makers pursuant to NYSE Rule 107A and Competitive Traders pursuant to NYSE Rule 110 to the Earlier of the Approval of SR-NYSE-2009-08 or June 30, 2009 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. 34-60062)
The Commission issued notice of filing and immediate effectiveness of proposed rule change (SR-NYSEArca-2009-48) filed by NYSE Arca under Rule 19b-4 of the Securities Exchange Act of 1934 amending its schedule of fees and charges for exchange services. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60067)
A proposed rule change filed by the National Stock Exchange (SR-NSX-2009-04) to amend the Fee and Rebate Schedule to (i) increase from 50,000 to 5 million the liquidity adding average daily volume thresholds in the Automatic Execution Mode of order interaction (AutoEx); (ii) include securities less than one dollar in the calculation of liquidity adding and total average volume thresholds in AutoEx; and (iii) eliminate the two lower tiers with respect to the AutoEx liquidity adding zero display order rebate 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. 34-60068)
A proposed rule change filed by the NASDAQ Stock Market to modify pricing for NASDAQ "Flash" functionality for routable orders (SR-NASDAQ-2009-051) 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 June 8. (Rel. 34-60069)
Proposed Rule Changes
NYSE Arca filed a proposed rule change (SR-NYSEArca-2009-45) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to adopt rules to implement the Options Order Protection and Locked/Crossed Market Plan. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60054)
NYSE Amex filed a proposed rule change (SR-NYSEAmex-2009-24) 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. 34-60055)
The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-036) to adopt FINRA Rules 2124 (Net Transactions with Customers), 2220 (Options Communications), 4370 (Business Continuity Plans and Emergency Contact Information) and 5250 (Payments for Market Making) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60066)
The Commission issued notice of a proposed rule change submitted by Financial Industry Regulatory Authority (SR-FINRA-2009-038) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to repeal Incorporated NYSE Rule 134 (Differences and Omissions - Cleared Transactions) and NYSE Rule 440I (Records of Compensation Arrangements - Floor Brokerage) as part of the process to develop the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60070)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change (SR-FINRA-2009-011), filed by the Financial Industry Regulatory Authority to amend the panel composition rules of the Code of Arbitration Procedure for Industry Disputes. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60061)
The Commission granted approval of a proposed rule change, as modified by Amendment No.1 thereto, submitted by NYSE Arca (SR-NYSEArca-2009-30), through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to the adoption of listing standards for Managed Trust Securities and the listing and trading of shares of the iShares(R) Diversified Alternatives Trust. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60064)
Accelerated Approval of Proposed Rule Change
The Commission issued notice of filing and granted accelerated approval of a proposed rule change submitted by NYSE Arca (SR-NYSEArca-2009-47), through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to generic listing rules for Currency Trust Shares. Publication is expected in the Federal Register during the week of June 8. (Rel. 34-60065)
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