Commission Revokes Registration of Securities of Zomex Distribution, Inc. for Failure to Make Required Periodic Filings
On June 26, the Commission revoked the registration of each class of registered securities of Zomex Distribution, Inc. (Zomex) 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, Zomex 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 Zomex Distribution, Inc. 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 Zomex's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Zomex in In the Matter of Xentel Interactive, Inc., et al., Administrative Proceeding File No. 3-13511.
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 Xentel Interactive, Inc., et al., Administrative Proceeding File No. 3-13511, Exchange Act Release No. 60090 (June 10, 2009). (Rel. 34-60178; File No. 3-13511)
Commission Sets Aside Disciplinary Action by Philadelphia Stock Exchange Against Husky Trading, Eugene O'Brien, Michael Inemer and Stephen Floirendo
The Commission set aside disciplinary action by the Philadelphia Stock Exchange against Husky Trading LLC, Eugene O'Brien, Michael Inemer, and Stephen Floirendo for engaging in option transactions in which the execution price traded through the Philadelphia Best Bid and Offer and/or the National Best Bid and Offer, traded ahead of customer orders on the Limit Order Book, and traded ahead of Streaming Quote Traders and/or Remote Streaming Quote Traders with established priority.
The Commission noted that the record was unclear concerning when the trades at issue were executed for purposes of determining the violations. The Commission agreed with PHLX that it was appropriate to separate the elements of Applicants' delta neutral stock-tied transactions and deem execution to occur upon entry of the option leg on PHLX's automatic trading system. It found, however, that there was a question whether Applicants were properly on notice of PHLX's position at the time of the conduct at issue. While the Commission stated that the proper application of PHLX rules is now clarified with the issuance of its opinion, it found that under the circumstances it was appropriate to set aside the PHLX's action. (Rel. 34-60180; File No. 3-13096)
In the Matter of Warren B. Schmidgall
On June 26, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Warren B. Schmidgall. The Order finds that, on June 22, 2009, the United States District Court for the Western District of Missouri entered a final judgment that (1) permanently enjoins Schmidgall from violating certain provisions of the federal securities laws, (2) requires Schmidgall to pay $38,288 in disgorgement and prejudgment interest and a $100,000 civil money penalty, and (3) bars Schmidgall from acting as an officer or director of any public issuer.
According to the Order, the Commission's complaint alleged, among other things, that Schmidgall, former executive vice president and chief financial officer of American Italian Pasta Company (AIPC), engaged in a fraudulent scheme that hid from the investing public the true financial state of the company by filing materially false and misleading statements in the company's annual reports on Forms 10-K, quarterly reports on Forms 10-Q, and current reports on Forms 8-K, for AIPC's fiscal years 2002, 2003, and 2004. The complaint alleged that to meet aggressive external targets, Schmidgall and others engaged in numerous accounting practices that departed from generally accepted accounting principles, including, among other things, capitalizing improperly millions of dollars of normal operating costs; understating improperly millions of dollars of trade promotion expenses; overstating improperly by millions of dollars the company's spare parts inventory; recognizing improperly millions of dollars of current period revenue on sales of products that were not shipped until after the end of the current periods; structuring round-trip cash transactions; eliminating improperly the company's vacation and paid time off liability; failing improperly to expense operating costs; and failing improperly to expense manufacturing variances.
Based on the above, the Order suspends Schmidgall from appearing or practicing before the Commission as an accountant. Schmidgall consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction.
For further information see Litigation Release No. 20715 and Accounting and Auditing Rel. No. 2877 (September 15, 2008) [SEC v. American Italian Pasta Company, Civil Action No. 4:08-cv-00675 (W.D. Mo.); SEC v. Timothy S. Webster, Civil Action No. 4:08-cv-00674 (W.D. Mo.); SEC v. Warren B. Schmidgall and David E. Watson, Civil Action No. 4:08-cv-00677 (W.D. Mo.); SEC v. Stephanie S. Ruskey, Civil Action No. 4:08-cv-00676 (W.D. Mo.); SEC v. Horst W. Schroeder, Civil Action No. 4:09-cv-00470-DW (W.D. Mo.)]. (Rel. 34-60181; AAE Rel. 3002; File No. 3-13529)
INVESTMENT COMPANY ACT RELEASES
Orders of Deregistration Under the Investment Company Act
Orders have been issued under Section 8(f) of the Investment Company Act declaring that each of the following has ceased to be an investment company:
Genworth Life & Annuity VA Separate Account 3
An order has been issued under Section 8(f) of the Investment Company Act declaring that Genworth Life & Annuity VA Separate Account 3 has ceased to be an investment company. (Rel. IC-28800 - June 24)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change filed by Financial Industry Regulatory Authority relating to the application of transaction-related charges for trade reporting to the OTC Reporting Facility (SR-FINRA-2009-043) 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 29. (Rel. 34-60168)
SECURITIES ACT REGISTRATIONS
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