Federal Regulators Issue Final Model Privacy Notice Form
Eight federal regulatory agencies today released a final model privacy notice form that will make it easier for consumers to understand how financial institutions collect and share information about consumers. Under the Gramm-Leach-Bliley Act (GLB Act), institutions must notify consumers of their information-sharing practices and inform consumers of their right to opt out of certain sharing practices. The model form issued today can be used by financial institutions to comply with these requirements.
The Financial Services Regulatory Relief Act of 2006 amended the GLB Act to require the agencies to propose a succinct and comprehensible model form that allows consumers to easily compare the privacy practices of different financial institutions, and has an easy-to-read font.
The agencies conducted extensive consumer research and testing in developing the model form issued today. Then they solicited public comments and considered those comments in developing a model form that is easier for consumers to understand and use. The final rule provides that a financial institution that chooses to use the model form obtains a "safe harbor" and will satisfy the disclosure requirements for notices. The rule also removes, after a transition period, the sample clauses now included in the appendices of the agencies' privacy rules.
The final model privacy form was developed jointly by the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission.
(Press Rel. 2009-248)
President Obama Establishes Interagency Financial Fraud Enforcement Task Force
Attorney General Eric Holder, Treasury Secretary Tim Geithner, Housing and Urban Development (HUD) Secretary Shaun Donovan, and Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro today announced that President Barack Obama has established by Executive Order an interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. The Department of Justice will lead the task force and the Department of Treasury, HUD and the SEC will serve on the steering committee. The task force's leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.
The task force, which replaces the Corporate Fraud Task Force established in 2002, will build upon efforts already underway to combat mortgage, securities and corporate fraud by increasing coordination and fully utilizing the resources and expertise of the government's law enforcement and regulatory apparatus. The attorney general will convene the first meeting of the Task Force in the next 30 days.
"This task force's mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening," Attorney General Eric Holder said. "We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives."
"Through the Financial Fraud Task Force, we are making clear that the Obama Administration is going to act aggressively and proactively in a coordinated effort to combat financial fraud," said Treasury Secretary Geithner. "It's not enough to prosecute fraud only after it's become widespread. We can't to wait for problems to peak before we respond. We're seeking comprehensive financial reform to create a more stable, safer financial system and stepping up our enforcement strategy. Doing so will help to stop emerging trends in financial fraud before they're able to cause extensive, system-wide damage to our economy."
"To give American families the protection and peace-of-mind they need, it's clear the federal response must be as interconnected and multi-dimensional as the challenges we face," said HUD Secretary Shaun Donovan. "No one agency is going to be able to stop financial fraud. This Task force will build upon many of the inter-agency collaborations already underway to protect consumers and restore confidence."
"Many financial frauds are complicated puzzles that require painstaking efforts to piece together. By formally coordinating our efforts, we will be better able to identify the pieces, assemble the puzzle and put an end to the fraud," said SEC Chairman Mary Schapiro.
The task force is composed of senior-level officials from the following departments, agencies and offices:
In addition, the attorney general will invite representatives of the National Association of Attorneys General, the National District Attorneys Association and other state, local, tribal and territorial representatives to participate in the task force through its Enforcement Committee. (Press Rel. 2009-249)
Securities and Exchange Commission Suspends Trading in the Securities of Ten Issuers for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EST on Nov. 17, 2009, and terminating at 11:59 p.m. EST on Dec.1, 2009.
The Commission temporarily suspended trading in the securities of these ten issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject companies unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of these companies that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-61013)
Commission Revokes Registration of Securities of Diversified Senior Services, Inc. for Failure to Make Required Periodic Filings
On November 17, the Commission revoked the registration of each class of registered securities of Diversified Senior Services, Inc. (DISS) 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, DISS 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 Diversified Senior Services, 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 DISS's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against DISS in In the Matter of Altiva Financial Corp., et al., Administrative Proceeding File No. 3-13651.
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 Altiva Financial Corp., et al., Administrative Proceeding File No. 3-13651, Exchange Act Release No. 60830 (Oct.15, 2009). (Rel. 34-61015; File No. 3-13651)
Commission Orders Hearings on Registration Suspension or Revocation Against Eleven Companies for Failure to Make Required Periodic Filings
In conjunction with today's trading suspension, the Commission also instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of eleven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the eleven issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-61014; File No. 3-13688)
In the Matter of PKI Solutions, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in PKI Solutions, Inc., Administrative Proceeding No. 3-13665. The Order Instituting Proceedings alleged that Respondents repeatedly failed 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 PKI Solutions, Inc., Planetgood Technologies, Inc. (n/k/a All American Coffee & Beverage, Inc.), Platronics, Inc., Plus Solutions, Inc., Portacom Wireless, Inc., Portal Net, Ltd., Prime Holdings & Investments, Inc., Pro-After, Inc. (f/k/a PurchasePro.Com, Inc.), Project Group, Inc., ProLong International Corp., PSS, Inc., and Purus, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61018; File No. 3-13665)
In the Matter of Universal Food & Beverage Co.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) in Universal Food & Beverage Co., Administrative Proceeding No. 3-13629. The Order Instituting Proceedings alleged that Universal Food & Beverage Co. failed repeatedly to file required annual and quarterly reports while its securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true. It revokes the registration of each class of registered securities of Universal Food & Beverage Co., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61019; File No. 3-13629)
SEC Charges Bancinsurance Corporation and its Senior Executive with Securities Fraud
On Nov. 16, 2009, the Commission filed a settled civil injunctive action against Ohio insurance company Bancinsurance Corporation (Bancinsurance or the Company), and its chief executive officer, John S. Sokol (Sokol), charging them with securities fraud and other violations of the federal securities laws. The Commission's complaint alleges that Bancinsurance failed to account properly for more than $2 million of reinsurance claims, and that Sokol-Bancinsurance's president at the time-failed to ensure that the Company's principal financial officer or its external auditors were informed of the claims. As a result, the Company's financial condition in its Form 10-K for fiscal year 2003 and its Form 10-Q for the first quarter of fiscal year 2004 was materially misstated. Sokol agreed to pay a $60,000 civil penalty, and both Bancinsurance and Sokol agreed to be permanently enjoined from violating the antifraud and other provisions of the federal securities laws.
The complaint alleges: During the period 2001 through 2004, Bancinsurance participated in a bail and immigration bond program (the Program) as a reinsurer. On or before March 11, 2004, shortly before Bancinsurance filed its Form 10-K for the fiscal year 2003, Bancinsurance and Sokol were notified that the Company would receive more than $1 million in reinsurance claims under the Program. Sokol understood, or was reckless in not understanding, that these claims represented 2003 losses and therefore were required to be reflected in Bancinsurance's fiscal 2003 financial statements. Sokol failed to ensure that the Company's principal financial officer or its external auditors were informed of the claims. As a result, the claims were not properly recorded in the Company's books and records, which caused Bancinsurance's 2003 financial statements to materially understate the Company's expenses and loss reserves.
The complaint further alleges: On or about March 25, 2004, Bancinsurance received invoices for more than $1 million in additional claims. Sokol understood, or was reckless in not understanding, that these claims were required to be included in Bancinsurance's financial statements filed with its Form 10-Q for the quarter ended March 31, 2004. Sokol again failed to ensure that Bancinsurance's principal financial officers or its external auditors were informed of the claims. As a result, the claims were not properly recorded in Bancinsurance's books and records, which caused its financial statements for that quarter to materially understate the Company's expenses.
Without admitting or denying the complaint's allegations, Bancinsurance agreed to be enjoined from violating Sections 10(b),13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-13. Without admitting or denying the complaint's allegations, Sokol agreed to be enjoined from violating Exchange Act Sections 10(b) and 13(b)(5), and Exchange Act Rules 10b-5, 13b2-1, and 13b2-2; and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Exchange Act Rules 12b-20, 13a-1, and 13a-13. [SEC v. Bancinsurance Corporation and John S. Sokol, Civil Action No. 1:09-CV-02155 (D.D.C.)] (LR-21300; AAE Rel. 3069)
SEC Charges Former Executives at Silicon Valley Company for Inflating Financial Results
The Securities and Exchange Commission today charged two former Silicon Valley executives for improperly inflating the reported financial results at Santa Clara, Calif., semiconductor company Tvia, Inc.
The SEC alleges that Tvia's former Vice President of Worldwide Sales, Benjamin Silva III of Fremont, Calif., made side deals with customers and concealed the terms from Tvia's executives and auditors, which fraudulently caused the company to report millions of dollars in excess revenue. The SEC further alleges that Tvia's former Chief Financial Officer Diane Bjorkstrom of Palo Alto, Calif., also played a role in Tvia's improper accounting, allowing Tvia to recognize revenue on merchandise shipped to a customer weeks before the customer had agreed to accept it, and failing to act on red flags surrounding Silva's misconduct.
Bjorkstrom agreed to settle the SEC's charges against her by paying a $20,000 penalty.
The SEC's complaint, filed in federal district court in San Jose, alleges that Silva's side agreements illegally inflated Tvia's revenue by approximately $5 million from September 2005 through June 2006. This caused the company's quarterly revenue to be consistently overstated, including by as much as 165 percent in one quarter. The SEC further alleges that in order to divert auditors' attention from delinquent customer payments, Silva fraudulently applied payments from new customers to old receivables.
According to the SEC's complaint, Silva's misconduct allowed him to meet his revenue targets at the company. For his efforts in meeting those targets, Silva received an award of options to buy 70,000 shares of Tvia stock. Before the fraud was discovered in early 2007, Silva exercised and sold all of his available Tvia options for a profit of $300,000.
The SEC's complaint against Silva charges him with violating and aiding and abetting violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities and Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, and 13b2-2 thereunder and seeking a permanent injunction, disgorgement of Silva's ill-gotten gains plus prejudgment interest, and a financial penalty. The SEC also seeks a court order permanently barring Silva from acting as an officer or director of any public issuer.
The SEC's settled enforcement action against Bjorkstrom charges her with violating and aiding and abetting violations of Sections 17(a)(2) and (3) of the Securities Act and Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 13a-14, and 13b2-1 thereunder and seeking a permanent injunction and civil penalties. Bjorkstrom consented without admitting or denying the SEC's allegations to an order requiring her to pay the penalty and banning her from appearing or practicing before the SEC as an accountant for a period of two years. [SEC v. Benjamin Silva, III, Case No. 09-5395-PVT (N.D. Cal.); SEC v. Diane Bjorkstrom, Case No. 09-5394-PVT (N.D. Cal.)] (LR-21302; AAE Rel. 3070)
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