Closed Meeting - Tuesday, July 28, 2009 - 3:00 p.m.
The subject matter of the Closed Meeting scheduled for Tuesday, July 28, 2009, will be: a litigation matter; and consideration of amicus participation.
At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551-5400.
RULES AND RELATED MATTERS
SEC Approves Amendments to Regulation SHO
On July 27, 2009, the Commission adopted as a final rule, Rule 204 of Regulation SHO. The final rule makes permanent the close-out requirements contained in Interim Final Temporary Rule 204T. The final rule will become effective on July 31, 2009. Publication is expected in the Federal Register during the week of July 27, 2009. (Rel. 34-60388)
In the Matter of Chandrashekhar Gopinathan
On July 27, 2009, the Commission issued a settled Order Making Findings, Imposing Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, and Imposing a Cease-and-Desist Order as to Chandrashekhar Gopinathan. The Administrative Proceeding arose out of what the Order describes as materially misleading statements and omissions in offering documents in connection with a private securities offering backed by a portfolio of regional aircraft manufactured by Bombardier, Inc. (Bombardier). RASPRO Trust 2005 (RASPRO), a special purpose entity created by Bombardier, sponsored the $1.67 billion offering and Wachovia Capital Markets, LLC. (Wachovia) served as the underwriter. On September 23, 2005 the offering closed. The Order finds that within the first three months after closing, Bombardier discovered that RASPRO would have to draw on a liquidity reserve to make the first payment on one of the three tranches of securities involved in the offering, the B Notes, and that a guarantor would have to step in and purchase the B Notes in the fifth year of the 18-year transaction.
According to the Order, Gopinathan, a vice-president, and a junior associate served on the Commercial Aviation Team of Wachovia's Structured Asset Finance Group, and were responsible for preparing the cash flow models for the transaction. One of the purposes of the models was to show that the transaction would have sufficient liquidity to pay interest and principal when due. According to the Order, Gopinathan, the junior associate, and a managing director - the three members of the Commercial Aviation Team - were aware of the potential shortfalls as early as July 2005, but did not tell anyone else at Wachovia. The Order finds that instead, Gopinathan and the junior associate, on the managing director's orders, manipulated certain payment assumptions in order to hide the shortfalls. As a result, according to the Order, the offering memorandum provided materially false and incomplete information about the liquidity of the B Note transaction.
Based on the above, the Order imposes the following sanctions: that Gopinathan cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; that Gopinathan be barred from association with any broker or dealer, with a right to reapply after one year; and that Gopinathan pay a civil money penalty in the amount of $15,000. Gopinathan consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 33-9057; 34-60389; File No. 3-13470)
In the Matter of the New York Stock Exchange LLC (f/k/a "The New York Stock Exchange, Inc.")
On July 28, 2009, the Commission issued an Order Amending Order Instituting Public Administrative Proceedings Pursuant to Sections 19(h)(1) and 21C of the Securities Exchange Act of 1934, Making Findings, Ordering Compliance with Undertakings, and Imposing a Censure and a Cease-and-Desist Order (Administrative Proceeding File No. 3-11892). The Order removes the requirement for NYSE operate an on-floor video and audio surveillance program to track floor trading activity at NYSE trading posts, operated as a pilot, pursuant to the April 12, 2005 Order. (Rel. 34-60391; File No. 3-11892)
In the Matter of Avery Dennison Corporation
The Securities and Exchange Commission today filed two settled enforcement proceedings against Avery Dennison Corporation (Avery), a Pasadena, California-based multinational corporation, alleging violations of the Foreign Corrupt Practices Act (FCPA) in connection with improper payments and promises of improper payments to foreign officials by Avery's Chinese subsidiary and several entities Avery acquired.
The SEC filed a civil action in the United States District Court for the Central District of California charging Avery with violations of the books and records and internal controls provisions of the FCPA and seeking a civil penalty. The SEC also issued an administrative order finding that Avery violated the same provisions of the FCPA. In the administrative proceeding, the SEC ordered Avery to cease and desist from such violations, and to disgorge $273,213, together with $45,257 in prejudgment interest. In the federal civil action, Avery agreed to the entry of a final judgment requiring it to pay a civil penalty in the amount of $200,000.
The SEC's complaint and administrative order charge that, from 2002 through 2005, the Reflectives Division of Avery (China) Co. Ltd. (Avery China) paid or authorized the payments of kickbacks, sightseeing trips, and gifts to Chinese government officials. The amount of illegal payments actually paid amounted to approximately $30,000. In one transaction, Avery China secured a sale to a state-owned end user by agreeing to pay a Chinese official a kickback of nearly $25,000 through a distributor. Avery China realized $273,213 in profit from this transaction, which it inaccurately booked as a sale to the distributor rather than to the end user. In addition, after Avery acquired a company in June 2007, employees of the acquired company continued their pre-acquisition practice of making illegal petty cash payments to customs or other officials in several foreign countries, resulting in illegal payments of approximately $51,000. Avery failed to accurately record these payments and gifts in the company's books and records, and failed to implement or maintain a system of internal accounting controls sufficient to detect and prevent such illegal payments or promises of illegal payments.
As a result of the conduct described above, the SEC charged that Avery violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Avery consented to the ordered relief without admitting or denying either the findings contained in the SEC's administrative order, or the allegations of the SEC's complaint.
The SEC acknowledges the assistance of the United States Department of Justice. (Rel. 34-60393; AAE Rel. No. 3021; File No. 3-13564); [SEC v. Avery Dennison Corporation, Civil Action No. CV09-5493 DSF (CWx) (C.D. Cal.)] (LR-21156)
SEC Charges Khaled Al Hashemi With Insider Trading in Connection With Announcement of Merger of Nova Chemicals Corporation and International Petroleum Investment Company
The Commission today announced the filing of an emergency action in the United States District Court for the Southern District of New York against Khaled Al Hashemi, a citizen and resident of Abu Dhabi, United Arab Emirates, for engaging in unlawful insider trading in the securities of Nova Chemicals Corporation (Nova) before a Feb. 23, 2009 merger announcement with International Petroleum Investment Company (IPIC). The Commission's complaint alleges that Hashemi reaped $458,760 in profits by unlawfully trading in advance of the merger announcement. The Commission also obtained a temporary restraining order freezing Hashemi's assets as well as other emergency relief.
According to the Commission's complaint, Nova, which had principal executive offices in Pittsburgh, Pennsylvania and Alberta, Canada, is a producer of plastics and chemicals. Its common stock was traded on the New York Stock Exchange and Toronto Stock Exchange until July 2009, when the merger with IPIC became effective.
The complaint alleges that Hashemi purchased 120,000 shares of Nova common stock through his online brokerage account in the two weeks leading up to the merger announcement. These purchases began to accelerate as the merger date approached, as he made 54 percent of his total purchases on the last trading day before the announcement. Hashemi funded these purchases by liquidating nearly 80 percent of the value of his stock portfolio, and by wiring approximately $100,000 into his trading account. The complaint also alleges that, immediately prior to the merger announcement, Hashemi placed pre-market limit orders to sell some of the Nova stock that he had purchased in the preceding weeks at prices significantly higher than the previous trading day's closing price. On February 23, after the merger was announced, Nova's stock price increased 289 percent, and Hashemi sold his entire Nova position.
As a result of the conduct described in the complaint, the Commission alleges that Hashemi violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks a permanent injunction, disgorgement of his unlawful trading profits, together with prejudgment interest, and civil monetary penalties from Hashemi.
The Commission acknowledges the assistance of New York Stock Exchange Regulation in this matter. [SEC v. Khaled Mohammed Sharif Al Sayed Al Hashemi a.k.a. Khaled Al Hasehmi, Civil Action No. 09-CV-6650) (S.D.N.Y.) (HB)] (LR-21154)
SEC v. John J. Bravata, et al.
On July 27, 2009, the Honorable David M. Lawson of the United States District Court for the Eastern District of Michigan issued a temporary restraining order and asset freeze against John J. Bravata (John Bravata) of Brighton, Michigan, Richard J. Trabulsy (Trabulsy) of Northville, Michigan, BBC Equities, LLC (BBC Equities) and Bravata Financial Group, Inc. (Bravata Financial), companies formed, owned and controlled by John Bravata and Trabulsy. The Court also issued an asset freeze against Antonio M. Bravata (Antonio Bravata), John Bravata's son, and John Bravata's wife, Shari A. Bravata (Shari Bravata), a Relief Defendant.
The SEC alleges that Bravata and Trabulsy raised more than $50 million from at least 440 investors by offering them membership interests in a purported real estate investment fund with promised annual returns of 8 to 12 percent. The SEC's complaint alleges that the defendants told prospective investors that BBC Equities was a real estate investment fund and safe investment vehicle. However, the SEC alleges that no more than $20.7 million of the more than $50 million raised since May 2006 through the sale of membership interests in BBC Equities was actually spent on real estate acquisitions. Furthermore, this real estate portfolio is highly leveraged with mortgages and other liabilities exceeding $128 million, and BBC Equities has never been profitable.
The SEC alleges that John Bravata and Trabulsy spent approximately $7.2 million of investor money for their own personal benefit. In order to keep their scheme afloat, they paid out $11.3 million in Ponzi payments by using new investment proceeds to pay distributions to earlier investors. They also spent $14 million soliciting and marketing the offering in order to continue the scheme.
The SEC's complaint charges John Bravata, Trabulsy, and Bravata Financial with violating Sections 5 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 thereunder. The complaint charges BBC Equities with violating Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. The complaint also charges Antonio Bravata with violating Section 5 of the Securities Act and Section 15(a) of the Exchange Act. The SEC's complaint seeks permanent injunctive relief and disgorgement from all of the Defendants, and civil penalties from John Bravata, Trabulsy, and Antonio Bravata. The SEC's complaint further seeks disgorgement of all investor funds or assets acquired with investor funds from Relief Defendant Shari Bravata. A hearing on the SEC's motion for a preliminary injunction and a receiver has been set for Aug. 4, 2009 at 10:00 a.m. [SEC v. John J. Bravata, et al., Case No. 09 CV 12950, United States District Court for the Eastern District of Michigan] (LR-21155)
INVESTMENT COMPANY ACT RELEASES
Federated Core Trust III and Federated Investment Management Company
An order has been issued on an application filed by Federated Core Trust III and Federated Investment Management Company. The order exempts applicants from Section 22(e) of the Investment Company Act and from Rule 22c-1 under the Act. The order permits the series of a registered open-end management investment company whose outstanding securities are owned exclusively by persons who are qualified purchasers, as defined in Section 2(a)(51) of the Act, to operate as an extended payment fund. (Rel. IC-28837 - July 27)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change filed by Financial Industry Regulatory Authority, as amended (SR-FINRA-2009-031), under Section 19(b)(2) of the Securities Exchange Act of 1934, relating to the reporting of over-the-counter transactions in equity securities executed outside normal market hours. Publication is expected in the Federal Register during the week of July 27. (Rel. 34-60377)
The Commission approved a proposed rule change (SR-NYSEAmex-2009-26) submitted under Rule 19b-4 of the Securities Exchange Act of 1934 by NYSE Amex to charge a $500 monthly fee to recipients of the NYSE Amex Order Imbalance Information datafeed. Publication is expected in the Federal Register during the week of July 27. (Rel. 34-60385)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the NYSE Amex implementing the Schedule of Fees and Charges for Exchange services (SR-NYSEAmex-2009-38) has become immediately 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 July 27. (Rel. 34-60378)
A proposed rule change filed by the NYSE Arca amending the Schedule of Fees and Charges for Exchange services (SR-NYSEArca-2009-62) has become immediately 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 July 27. (Rel. 34-60379)
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2009-12) under Section 19(b)(3)(A)(ii) of the Securities Exchange Act of 1934, which became effective upon filing, relating to clearing cash-settled foreign currency index options. Publication is expected in the Federal Register during the week of July 27. (Rel. 34-60380)
A proposed rule change filed by the NASDAQ Stock Market to modify its optional anti-internalization functionality (SR-NASDAQ-2009-071) 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 July 27. (Rel. 34-60384)
A proposed rule change filed by the Options Clearing Corporation (SR-OCC-2009-13) to clear and settle treasury futures contracts effected by ELX Futures, L.P., has become effective pursuant to Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of July 27. (Rel. 34-60386)
A proposed rule change filed by BATS Exchange to amend BATS Rule 11.9, entitled "Orders and Modifiers" (SR-BATS-2009-025) 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 July 27. (Rel. 34-60387)
SECURITIES ACT REGISTRATIONS
RECENT 8K FILINGS