SEC Publishes 2010-2015 Draft Strategic Plan for Public Comment
The Securities and Exchange Commission today published for public comment its Draft Strategic Plan that outlines the Commission's strategic goals for fiscal years 2010 through 2015.
The draft plan surveys the forces shaping the SEC's environment and outlines over 70 initiatives designed to support its primary strategic goals.
The draft plan was prepared pursuant to the Government Performance and Results Act of 1993.
The draft strategic plan is available at: http://www.sec.gov/about/secstratplan1015.htm.
To comment on the 2010-2015 Draft Strategic Plan, send an email to firstname.lastname@example.org by Nov. 16, 2009. (Press Rel. 2009-216)
Chief Accountant is Seeking Candidates for Seven Professional Accounting Fellow Positions
The Securities and Exchange Commission's Office of the Chief Accountant is now accepting applications for Professional Accounting Fellow (PAF) positions. The PAF program, which began in 1972, is designed to provide participating fellows with outstanding opportunities for public service to investors, personal development, and career advancement. During their fellowship, the successful candidates will be involved in the study and development of rule proposals under the federal securities laws, liaison with accounting, auditing and other professional standard-setting bodies, and consultation with registrants on reporting matters. The Office of the Chief Accountant plans to select up to seven candidates for the following positions:
Interested applicants should submit:
Standard Form 171, Form OF-612, and "Applying for a Federal Job," which highlights the information to be included in the resume or other written submission, can be obtained from the Office of Administrative and Personnel Management, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C., 20549. Form OF-612 is also available on the Internet at http://www.opm.gov.
Applicants are required to submit an eight to twelve page essay that they have prepared on their own on a subject directly related to a current accounting or auditing topic. While no restriction is placed on the essay topic, applicants should consider focusing their essay on a particular technical topic and supplementing their technical discussion with a consideration of one or more interrelated policy-level issues. Applicants are encouraged to consider selecting any accounting or auditing topic on which they possess expertise. Suggested accounting and auditing topics include, but are not limited to, the following:
Suggested policy-level considerations to be discussed in connection with the technical topic include, but are not limited to, the following:
The application and essay should be submitted on or before Jan. 13, 2010, to the Chief Accountant of the Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C., 20549. In addition to the hard copy, applicants should also submit a CD that includes their essay and resume in electronic form. Inquiries about the program may be addressed to the attention of Sagar Teotia or John Offenbacher in the Office of the Chief Accountant at (202) 551-5308 and (202) 551-5329, respectively.
The Commission's policy of affording equal employment opportunity to all interested candidates will be followed.
Closed Meeting - Thursday, October 15, 2009 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, October 15, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; other matters relating to enforcement proceedings; an adjudicatory matter; and a post argument discussion.
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.
Former Document Sciences Project Manager to Pay More than $120,000 to Settle Insider Trading Charge
On October 7, the Securities and Exchange Commission filed a settled civil injunctive action in the United States District Court for the Southern District of California, alleging that Feng "Frank" Xie engaged in insider trading in the common stock of Document Sciences Corp. (DOCX), prior to the announcement on Dec. 27, 2007, that EMC Corp. (EMC) would acquire DOCX in an all-cash transaction valued at $85 million, or $14.75 per share.
The Commission's Complaint alleges the following:
DOCX executives asked Xie in late November 2007 to participate in a meeting with EMC representatives concerning a plan to further extend the pre-existing partnership between EMC and DOCX. DOCX executives asked Xie to compile information about DOCX's source code and other documents in anticipation of the meeting with EMC. Xie also worked on the project with a due diligence firm hired by EMC.
On Dec. 7, 2007 at a meeting between EMC and DOCX employees in Oakland, Xie made a presentation and answered related questions. After the meeting, Xie asked his DOCX supervisor what would happen if someone were to buy DOCX shares in a time period when they thought something was going to happen to that company. Xie's supervisor told Xie that would be a bad thing to do, that it could be traced, and that it was prohibited and illegal. As late as Dec. 19, 2007, Xie continued to work with EMC and EMC's due diligence firm.
Xie began acquiring shares of DOCX common stock prior to the December 7th meeting, while preparing due diligence materials for EMC. These initial purchases of 6,892 shares were made at prices ranging from $8.39 to $8.68. Despite the warning from his supervisor on December 7th, Xie continued to acquire DOCX common stock up to the day before the merger announcement, purchasing an additional 3,607 shares. In total, between Dec. 3, 2007 and Dec. 26, 2007, Xie purchased 10,499 DOCX common shares for prices ranging from $8.10 to $8.81.
Under terms of the proposed settlement, Xie has consented, without admitting or denying the allegations of the Commission's Complaint, to the entry of a final judgment permanently enjoining him from violating the antifraud provisions of the Securities Exchange Act of 1934, specifically Section 10(b) and Rule 10b-5 thereunder. As part of the proposed settlement, Xie also has agreed to pay disgorgement of $62,050.25, prejudgment interest of $5,297.25, and a civil penalty of $62,050.25. The settlement remains subject to the approval of the U.S. District Court for the Southern District of California.
The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA).
The Commission's investigation is ongoing. [SEC v. Feng "Frank" Xie, United States District Court for the Southern District of California, Civil Action No. 3:09-CV-02210-JM-RBB (S.D. Cal.)] (LR-21240)
SEC Obtains Emergency Relief Against Randy W. Cho For Misappropriation of Investors' Funds and Ponzi Scheme
On October 7, the Securities and Exchange Commission filed an emergency civil action in the U.S. District Court of the Northern District of Illinois charging Randy W. Cho, a resident of Newton, Massachusetts, with fraudulent conduct.
The Commission's complaint alleges that, since at least 2001, Cho engaged in a fraudulent scheme to misappropriate investors' funds for his personal use and to repay other investors, raising at least $3.7 million from at least 45 investors in four states. The complaint alleges that Cho falsely represented to investors that he would pool their funds to invest in shares of specific well-known companies in anticipation of expected initial public offerings of those companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc. and Rosetta Stone, Inc. The complaint alleges that, instead of purchasing these shares for investors, Cho used investor funds for personal trading, the personal expenses of himself and his family, and also operated a Ponzi scheme, using new investor funds to repay existing investors. The complaint alleges that throughout the scheme, Cho falsely told investors that he had worked at Goldman Sachs, still had an account there and made his investments through the firm, and/or that Goldman Sachs still considered him a preferred client. The complaint further alleges that Cho told some investors that additional funds would be needed to satisfy a U.S. tax liability in connection with their supposed purchase of Google and Rosetta Stone shares, when there was no tax liability and when the shares had not even been purchased for the investors.
In an order dated Oct. 7, 2009, the Honorable Judge James F. Holderman entered a temporary restraining order enjoining Cho from violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)], the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder], and the Investment Advisers Act of 1940 [Sections 206(1) and 206(2)]. Among other things, the Court also entered orders freezing the assets of Cho until further order of the court. [SEC v. Randy W. Cho, Case No. 09-CV-6261, USDC, N.D.Ill.] (LR-21241)
Operator of Mx Factors Sentenced to 100 Years for Orchestrating Multi-Million Dollar Ponzi Scheme
The Securities & Exchange Commission announced today that on Sept. 28, 2009, United States District Judge Virginia A. Phillips sentenced Richard M. Harkless, 65, of Riverside, California to 100 years in federal prison. Harkless was convicted in July of three counts of mail fraud, three counts of wire fraud, and one count of money laundering. According to the United States Attorney's Office, Harkless's sentence is believed to be the longest ever imposed in a white collar crime in the Central District of California.
Harkless was charged by the United States Attorney's Office for the Central District of California with orchestrating a multi-million dollar Ponzi scheme between 2000 and late 2003. Harkless and his sales agents fraudulently induced investors nationwide to invest in Mx Factors' notes, which purportedly paid a "guaranteed" return of up to 14% every two to three months. Mx Factors claimed that it would use the investor funds to provide its clients - construction contractors, wholesalers, and manufacturers - with accounts receivable financing. Instead, Harkless operated a Ponzi scheme and skimmed investor funds to finance a Mexican crab fishing business, pay personal expenses, and fund overseas bank accounts. In February 2004, the Commission obtained a restraining order against Harkless, Mx Factors, and the sales agents, and federal criminal authorities executed search warrants. Harkless fled to Mexico shortly thereafter. Harkless was arrested by special agents with IRS-Criminal Investigation two years ago when he traveled to Phoenix.
In a related proceeding, the Commission obtained a final judgment against Harkless on Feb. 6, 2006. That judgment permanently enjoins Harkless from future securities law violations and orders him to pay over $42 million in disgorgement, prejudgment interest, and civil penalties. The Commission also obtained a judgment by default against Mx Factors and its sales agents BBH Resources and JTL Financial. Mx Factors, BBH Resources, and JTL Financial have been under the control of a court-appointed receiver since the Commission's action was filed on Feb. 26, 2004 in federal district court in Riverside, California. And, on June 2, 2006, the Commission obtained a final judgment against Harkless's three sales agents, Daniel Berardi, Jr., Thomas Hawkesworth, and Randall W. Harding ordering disgorgement, prejudgment interest, and civil penalties. The judgment orders Berardi and Hawkesworth, managing members of BBH Resources, LLC, to pay over $11 million in disgorgement, prejudgment interest, and civil penalties. The judgment orders Harding, managing member of JTL Financial Group, LLC, to pay over $17 million in disgorgement, prejudgment interest, and civil penalties. Berardi, Hawkesworth, and Harding received sentences of up to six years as part of the criminal proceeding.
This case is the product of an investigation by the United States Securities and Exchange Commission, the United States Attorney's Office for the Central District of California, the United States Postal Inspection Service, the IRS-Criminal Investigation, and the Federal Bureau of Investigation. For more information see Lit. Release Nos. 18599, 18619, 18779, and 19726. [SEC v. Mx Factors LLC, BBH Resources LLC, JTL Financial Group LLC, Richard M. Harkless, Daniel J. Berardi, Jr., Thomas Hawkesworth, and Randall W. Harding, Civil Action No. EDCV-04-223-VAP (SGLx) (C.D. Cal.)] (LR-21242)
SEC Charges Five With Dozens of Fraudulent Corporate Hijackings and Unregistered Offerings of Securities and Names Two Relief Defendants
On Sept. 29, 2009, the United States Securities and Exchange Commission filed a civil injunctive action against Irwin Boock, Stanton B. J. DeFreitas, and Jason C. Wong, all of Ontario, Canada, and two Houston-based attorneys, Roger L. Shoss and Nicolette D. Loisel, charging them with having violated the antifraud and registration provisions of the federal securities laws by effecting dozens of corporate hijackings and making unregistered offerings and sales of shares. The complaint also names as relief defendants Boock's wife, Birte Boock, and a company of which she allegedly was the sole officer and director during the relevant period, 1621566 Ontario, Inc.
The Commission's complaint alleges that the hijackings were effected by identifying inactive or defunct publicly-traded corporations which were no longer operating and either illicitly revivifying the corporations by falsely representing that the defendants were duly authorized officers, directors, or agents of the corporations or by incorporating new corporations using the names of the void corporation. Once an inactive corporation was revivified or a new corporation formed, the complaint alleges that the defendants immediately effected a name change in the corporation and requested from third parties responsible for assigning unique identifiers to each class of securities issued by a publicly-traded corporation a new identifying number known as a CUSIP number and ticker symbol. According to the complaint, these identifiers were obtained by falsely representing that the companies seeking new CUSIPs and ticker symbols were the same companies to which CUSIP numbers and ticker symbols had previously been issued and that the name changes triggering the need for new identifiers were duly authorized corporate actions.
The complaint alleges that from November 2003 through March 2006, Boock, Shoss, and Loisel effected at least 22 corporate hijackings. From November 2003 through June 2007, Boock, Wong, and DeFreitas allegedly effected at least another 21 corporate hijackings.
With respect to at least 19 of those corporations hijacked with Shoss and Loisel's involvement, the complaint alleges that Shoss and Loisel were tasked to provide 28 opinion letters falsely representing that offerings of approximately 223 million shares were exempt from the registration requirements of the federal securities laws. With respect to the 21 hijacking corporations involving Wong and DeFreitas, the complaint alleges that Boock, DeFreitas and Wong effected the unregistered offerings of up to seven billion shares. The complaint further alleges that Boock, DeFreitas and Wong effected unregistered sales into the secondary market of securities in various of the issuers.
Based on the foregoing, the Commission's complaint alleges that the five defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further alleges that Boock violated a penny stock bar instituted against him in 2002 in a settled administrative proceeding (see In the Matter of Birte Boock and Irwin Boock, Admin. Proc. File No. 3-10960 (Ex. Act Rel. No. 46952)), thereby violating Exchange Act Section 15(b)(6)(B)(i). With respect to each of the five defendants, the Commission is seeking a permanent injunction, a judicial penny stock bar, disgorgement with prejudgment interest, and civil penalties. The Commission is also seeking officer and director bars against Boock and Wong.
On Sept. 23, 2009, the Commission issued an order suspending trading in the securities of 17 of the above-mentioned issuers pursuant to Exchange Act Section 12(k). See Ex. Act Rel. No. 60707. The Commission previously instituted a trading suspension on March 13, 2008 with respect 26 issuers, 11 of which are identified in the Commission's complaint as having been newly incorporated by Boock, Shoss and Loisel and used in the scheme. See Release No. 57486 (March 13, 2008). [SEC v. Irwin Boock, Stanton B. J. DeFreitas, Nicolette D. Loisel, Roger L. Shoss, and Jason C. Wong, Birte Boock, and 1621566 Ontario, Inc., Civil Action No. 09 CV 8261 (S.D.N.Y) (DLC)] (LR-21243)
INVESTMENT COMPANY ACT RELEASES
Morgan Stanley Investment Management Inc., et al.
A notice has been issued giving interested persons until Oct. 28, 2009, to request a hearing on an application filed by Morgan Stanley Investment Management Inc., et al., for an order pursuant to Sections 6(c) and 17(b) of the Investment Company Act for an exemption from Sections 17(a) of the Act; and pursuant to Section 17(d) of the Act and Rule 17d-1 under the Act permitting certain joint arrangements. The order would permit (1) registered investment companies for which certain affiliates of Morgan Stanley act as an adviser to engage in certain securities transactions with certain affiliates of Citigroup Inc. (Citigroup) and (2) registered investment companies for which certain affiliates of Citigroup act as an adviser to engage in certain securities transactions with certain affiliates of Morgan Stanley. (Rel. IC-28941 - October 6)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change (SR-BX-2009-059) filed by NASDAQ OMX BX to modify potential payment amounts available under Rule 4626 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. 34-60793)
A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2009-072) 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 October 5. (Rel. 34-60796)
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