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RULES AND RELATED MATTERSNationally Recognized Statistical Rating OrganizationsThe Commission is adopting amendments to certain of its rules and forms to remove references to credit ratings issued by nationally recognized statistical rating organizations (NRSROs). The Commission believes that the references to credit ratings in these rules and forms are no longer warranted as serving their intended purposes. The amendments are designed to address concerns that references to NRSRO ratings in Commission rules may have contributed to an undue reliance on those ratings by market participants. The amendments would remove references to NRSRO ratings from: (i) Rules 300, 301(b)(5) and 301(b)(6) of Regulation ATS, Forms ATS-R and PILOT and Rule 3a1-1 under the Securities Exchange Act; and (ii) Rules 5b-3 and 10f-3 under the Investment Company Act. The rule and form amendments will be effective November 12, 2009. The full text of the release adopting the rule and form amendments is available on the SEC website. (Rels. 34-60789, IC-28939; File Nos. S7-17-08, S7-19-08) The Commission also is re-opening the comment period on certain of the proposed rule amendments to remove references to NRSRO ratings proposed in Release Nos. 33-8940 [73 FR 40106 (July 11, 2008)], 34-58070 [73 FR 40088 (July 11, 2008)], and IC-28327 [73 FR 40124 (July 11, 2008)]. The comment period is reopened for: (i) Items 10, 1100, 1112 and 1114 of Regulation S-K, Forms S-3, S-4, F-1, F-3, F-4 and F-9 and Rules 134, 138, 139, 168, 415 and 436 under the Securities Act; (ii) Rules 101(c)(2) and 102(d)(2) of Regulation M, Schedule 14A and Rules 10b-10 and 15c3-1 under the Securities Exchange Act; (iii) Rules 3a-7 and 5b-3 under the Investment Company Act; and (iv) Rule 206(3)-3T under the Investment Advisers Act. The full text of the release re-opening the comment period is available on the SEC website. (Rels. 33-9069, 34-60790, IA-2932, IC-28940; File Nos. S7 17 08, S7 18 08, S7 19 08) ENFORCEMENT PROCEEDINGSIn the Matter of Michael J. Moore, CPA and Moore & Associates CharteredOn October 6, 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 Michael J. Moore (Moore) and Moore & Associates Chartered (M&A). The Order finds that on September 25, 2009, a final judgment was entered against Moore and M&A, permanently enjoining them from future violations of Sections 10(b), 10A(a), and 10A(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Regulation S-X Rules 2-02(b)(1) and 2-06, in the civil action entitled SEC v. Michael J. Moore, et al., Civil Action Number 2:09-cv-01637-LDG-GWF, in the United States District Court for the District of Nevada. Based on the above, the Commission suspended Moore and M&A from appearing or practicing before the Commission as accountants. Moore and M&A consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. 34-60792; AAE Rel. 3056; File No. 3-13640) Federal Judge Enters Final Judgment Against Third-Party Vendor Joe E. Penland in Fraudulent Accounting SchemeOn October 2, the Honorable Carl Barbier, United States District Judge for the Eastern District of Louisiana entered a final judgment of permanent injunction and other relief on behalf of the Honorable Martin L.C. Feldman, to whom the case is assigned. The final judgment is against defendant Joe E. Penland, a Texas resident and the owner of a third-party vendor of Newpark Resources, Inc. (Newpark), an oil and gas company based in Houston, Texas. Penland was the principal of Quality Mat Company, a Newpark vendor, and was charged in the complaint along with Newpark principals for violations of the federal securities laws. The final judgment permanently enjoined Penland from future violations of the antifraud provision of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and from future violations of Exchange Act Rule 13b2-2, which prohibits lying to auditors. The final judgment also permanently enjoined Penland from aiding and abetting accounting violations of others as set forth in Sections13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The final judgment ordered that Penland pay a civil penalty in the amount of $70,000. Penland consented to the entry of the order without admitting or denying the allegations of the Commission's complaint. According to the Commission's Complaint, Matthew W. Hardey, a former Chief Financial Officer for Newpark, and L. Cyrus DeBlanc, a former Chief Financial Officer for Newpark subsidiary Soloco LLC, conspired with Quality Mat president Joe E. Penland to engage in a fraudulent accounting scheme that allowed Newpark in fiscal year 2003 to avoid writing off approximately $4.2 million in aging debt. As a result, Newpark reported approximately $500,000 of net income instead of a significant loss for that fiscal year. The Commission's Complaint alleged that, in 2002 and 2003, Newpark recognized $4.2 million in revenue based on sales of its primary product - industrial mats used to lay temporary roads at drilling sites - to Quality Mat and another vendor, Easy Frac. The Complaint alleged that neither vendor had made any payment on the sales through the end of 2003, and that Hardey, DeBlanc and Penland devised and executed a scheme to funnel money to Quality Mat and Easy Frac through sham transactions that would then allow the vendors to pay their debts to Newpark. According to the Complaint, one of the sham transactions took place in 2004 and involved Dura-Base Nevada, LLC and Dura-Base de Mexico, two Newpark subsidiaries created to begin mat rentals in Mexico. The Complaint asserted that Newpark purchased the entire initial inventory of mats for the Dura-Base business from Quality Mat, and that the decision to purchase the approximately 6,175 mats from Quality Mat was a pretext meant to give the appearance of a legitimate business transaction to Newpark's repurchase, at the original sales price, of 1,500 mats sold to Quality Mat in 2002 and 600 mats sold to Easy Frac in 2003. The Complaint claimed that, in an attempt to perpetuate the pretext, Hardey also misled Newpark's auditors about the basis for buying the Dura-Base inventory from Quality Mat by falsely claiming that Quality Mat had contractual rights in Mexico that Newpark would have to buy in order for the Dura-Base venture to go forward. According to the Complaint, this ruse was necessary to allow Newpark to buy back the mats at the original sales price without suffering any adverse accounting consequences. Under this scheme, Newpark could account for the repurchases as if they had taken place at Newpark's manufacturing cost, but still pay Quality Mat the original purchase price for the mats by assigning the difference in value to the intangible asset allegedly created by the repurchase of Quality Mat's contract rights. The Complaint alleged that the other sham transaction, which took place during 2004 and 2005, involved Quality Mat sending fictitious invoices to Newpark purportedly for bulk lumber sales. According to the Complaint, in early 2004, Penland agreed to convert Quality Mat's outstanding debt from the 2002 sales to notes receivable. One of the notes required monthly payments of $52,409, which Quality Mat began making in March 2004. Between May 2004 and July 2005, the bulk lumber invoices, which were sent monthly, averaged $52,409, but there were no purchase orders or delivery tickets backing up the alleged sale. The Complaint alleged that Hardey, DeBlanc and Penland devised this scheme to provide Quality Mat with funds to continue making payments on this note, thus allowing Newpark to keep the debt on its books. For further information see L.R. 21137 (July 16, 2009). [SEC v. Matthew W. Hardey, L. Cyrus DeBlanc and Joe E. Penland, Civil Action No. 09-cv-4414 (E.D. La.) [LR-21236; AAE Rel. 3055) SEC v. John J. Bravata, et al.On October 5, the Honorable Judge David M. Lawson issued an Order of Contempt holding John Bravata in civil contempt for violating the Court's asset freeze orders of July 27 and August 4, 2009. Specifically, Judge Lawson found that John Bravata willfully violated those asset freeze orders by taking loans against two life insurance policies in excess of $37,000. Judge Lawson ordered that John Bravata purge his contempt by repaying the borrowed funds by noon on October 8, 2009, or report to the custody of the U.S. Marshals Service. Judge Lawson further ordered that John Bravata not leave the Eastern District of Michigan until his contempt has been purged. The SEC previously filed a complaint against John Bravata and other defendants on July 26, 2009. The SEC's complaint charges John Bravata with violating Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On July 27, 2009, the Honorable David M. Lawson issued a temporary restraining order against John Bravata, which included the previously noted asset freeze. [SEC v. John J. Bravata, et al., Case No. 09-CV-12950 (E.D. Mich.)] (LR-21237) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangesA proposed rule change filed by the BATS Exchange to amend BATS Rule 11.17, entitled "Clearly Erroneous Executions" (SR-BATS-2009-030) 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 October 5. (Rel. 34-60759) A proposed rule change filed by the Chicago Board Options Exchange regarding the Chicago Board Stock Exchange's Obvious Error Rule (SR-CBOE-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 October 5. (Rel. 34-60760) A proposed rule change filed by the International Securities Exchange relating to clearly erroneous executions, as amended, (SR-ISE-2009-73) 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 October 5. (Rel. 34-60761) A proposed rule change filed by the National Stock Exchange amending NSX Rule 11.19 governing Clearly Erroneous Executions (SR-NSX-2009-05) 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 October 5. (Rel. 34-60762) A proposed rule change (SR-NYSE-2009-94) filed by the New York Stock Exchange to modify its requirements with respect to quarterly earnings releases 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 October 5. (Rel. 34-60763) The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2009-08) under Section 19(b)(1) of the Exchange Act, which became effective upon filing, to revise fees for certain retirement and insurance processing services. Publication is expected in the Federal Register during the week of October 5. (Rel. 34-60765) The Commission issued notice of filing and immediate effectiveness of a proposed rule change (SR-NYSEArca-2009-86) filed by NYSE Arca pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to activity assessment fees. Publication is expected in the Federal Register during the week of October 5. (Rel. 34-60766) A proposed rule change (SR-ISE-2009-67) filed by the International Securities Exchange relating to fee changes 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 October 5. (Rel. 34-60767) A proposed rule change filed by New York Stock Exchange (SR-NYSE-2009-98) to discontinue rebates paid to Floor Brokers for orders swept into the close 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 October 5. (Rel. 34-60768) A proposed rule change filed by the International Securities Exchange (SR-ISE-2009-68) relating to amending the Direct Edge ECN Fee Schedule 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 October 5. (Rel. 34-60769) A proposed rule change filed by NASDAQ OMX PHLX relating to the discontinuation of the specialist fee credit pilot program (SR-Phlx-2009-85) 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 October 5. (Rel. 34-60771) A proposed rule change filed by Financial Industry Regulatory Authority (SR-FINRA-2009-062) to update certain cross-references within certain FINRA Rules 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 October 5. (Rel. 34-60774) A proposed rule change (SR-ISE-2009-72) filed by the International Securities Exchange to modify the customer fees for certain complex orders 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 October 5. (Rel. 34-60778) A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2009-73) to amend on CBSX the Taker Fees and Maker Rebates 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 October 5. (Rel. 34-60779) A proposed rule change (SR-ISE-2009-71), filed by the International Securities Exchange relating to PrecISE Fees 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 October 5. (Rel. 34-60780) A proposed rule change filed by the Municipal Securities Rulemaking Board relating to amendments to Rule A-13, on underwriting assessments and Rule G-32, on disclosures in connection with primary offerings (SR-MSRB-2009-15) 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 October 5. (Rel. 34-60783) A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2009-69) to prohibit options specialists commission charges 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 October 5. (Rel. 34-60784) A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2009-86) relating to specialist and registered options traders allocation and assignment rules 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 October 5. (Rel. 34-60785) Proposed Rule ChangesThe Commission has published notice of a proposed rule change (FINRA-2009-059) filed by the Financial Industry Regulatory Authority to adopt NASD Rule 2360 (Approval Procedures for Day-Trading Accounts) as FINRA Rule 2130 and to adopt NASD Rule 2361 (Day-Trading Risk Disclosure Statement) as FINRA Rule 2270 in the consolidated FINRA rulebook, with minor changes. Publication is expected in the Federal Register during the week of October 5. (Rel. 34-60754) NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, has filed a proposed rule change (SR-NYSEArca-2009-83) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to List and Trade Shares of the Grail American Beacon International Equity ETF. Publication is expected in the Federal Register during the week of October 5. (Rel. 34-60773) Accelerated Approval of Proposed Rule ChangeThe Commission granted accelerated approval to a proposed rule change (SR-ISE-2009-69) submitted by the International Securities Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the amounts that Direct Edge ECN, in its capacity as an introducing broker for non-ISE Members, passes through to such non-ISE Members. Publication is expected in the Federal Register during the week of October 5. (Rel. 34-60770) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2009/dig100609.htm
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