In the Matter of Damir Lukovic
On November 16, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Notice of Hearing (Order) against Damir Lukovic.
The Division of Enforcement (Division) alleges in the Order that on Nov. 4, 2009, the District Court entered a judgment enjoining Lukovic from future violations of Section 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 promulgated thereunder in a civil action entitled SEC v. Thompson Price Holding Inc. et al., 07 Civ. 9525 (RMB) (S.D.N.Y.). Lukovic, age 33, was the president of Thompson Price. The Commission's complaint alleged that Lukovic and Thompson Price defrauded unsuspecting investors in the United States by inducing investors to send checks purportedly for the purchase of shares in the initial public offerings of several Australian companies. Lukovic, using the alias "Greg Thompson," made false and misleading statements to prospective investors, including that: (i) Thompson Price had received an "allocation" of shares in the IPOs; and (ii) Thompson Price would use investors' funds to purchase IPO stock. Thompson Price was not an underwriter or a broker-dealer. It had no affiliation with any of the Australian companies or their underwriters. It never received any allocation of stock from those IPOs.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Lukovic an opportunity to dispute the allegations, and to determine what, if any, remedial action is appropriate and in the public interest. The Order requires the Administrative Law Judge to issue an initial decision not later than 210 days from the date of service of the Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-61011; File No. 3-13686)
Remaining Defendant in Restoration Hardware Insider Trading Scheme Permanently Enjoined From Future Violations and Ordered to Pay $1,190,102 in Disgorgement and Penalty
The Securities and Exchange Commission today announced that the Honorable Charles R. Breyer, United States District Judge for the Northern District of California, entered Final Judgment as to Defendant Francis Axiaq, of Millbrae, California on Nov. 17, 2009. Axiaq is the final defendant in the above-listed insider trading litigation.
Pursuant to the judgment, Axiaq was permanently enjoined from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court ordered disgorgement of $881,102 against Axiaq, with prejudgment interest of $59,000. In addition, the Court imposed a civil penalty of $250,000, for a total payment of $1,190,102. Axiaq consented to the entry of the judgment without admitting or denying the allegations of the Commission's Complaint.
The Commission's Complaint, filed on Oct. 7, 2008, alleged fraud in connection with insider trading in the securities of Corte Madera, Calif.-based Restoration Hardware, Inc. According to the SEC's complaint, Restoration Hardware's Vice President of Treasury, Ciriaco "Eric" Rivor of Millbrae, Calif., learned in mid-2007 that the company was about to be acquired by a private equity firm at a substantial premium. Rivor allegedly passed the confidential, non-public information to his friend Emmanuel Axiaq of San Carlos, Calif., and told Emmanuel Axiaq to pass the information to his father, Francis Axiaq. Rivor instructed the Axiaqs to limit the size of their Restoration Hardware stock purchases to prevent detection.
Francis Axiaq allegedly ignored Rivor's instruction to limit the size of his stock purchases and spent the following weeks amassing nearly 250,000 shares of Restoration Hardware stock. When Restoration Hardware publicly announced the acquisition on Nov. 8, 2007, its stock price soared more than 140 percent and gave Francis Axiaq illicit potential profits of $881,102. Francis Axiaq later sold all of his Restoration Hardware shares for realized profits of approximately $406,000.
Final judgments have previously been entered against all other defendants. [SEC v. Francis Elias Axiaq, Case No. C-08-CV-4637 (CRB) (N.D. Cal.] (LR-21303)
SEC Obtains Asset Freeze Over Limited Partnership Managed By Culver City Adviser
The Securities and Exchange Commission today announced that it has obtained an asset freeze and other emergency relief to halt the continuing false disclosures being made by a Culver City, Calif. investment adviser.
The Commission's complaint alleges that that Heath M. Biddlecome (Biddlecome), through his firm California Wealth Management Group, doing business as IFC Advisory (IFC), operated a limited partnership investment fund, raising $9.8 million from investors, many of whom were IFC clients.
The Commission's complaint alleges that Biddlecome established Homestead Properties, L.P. (Homestead) to invest in mobile home park communities. The complaint further alleges that Biddlecome, without ever informing investors, changed the partnership's investment strategy to securities day trading. According to the complaint, Biddlecome transferred $4.5 million of the partnership's moneys and began to trade options, trade on margin, and engage in short sales. The complaint alleges that this risky day trading strategy has resulted in erratic performance, alternating between six figure trading losses to profits in various months; in September and October 2009 alone, the account value declined $1.9 million.
The Commission's complaint, which was filed in federal court in Los Angeles, alleges that the defendants falsely claimed that a brokerage firm would sell the partnership interests and an accounting firm would audit the partnership's books yearly. The complaint alleges that, in reality, Biddlecome ever enlisted these third parties to perform such services. In addition, although investors were told distributions would be made quarterly out of net profits and certain investors received distributions, Homestead suffered losses for two years. The complaint also alleges Biddlecome misappropriated partnership moneys to pay for his personal credit card bills.
On Nov. 16, 2009, the Honorable Cormac J. Carney, United States District Judge, granted the Commission's application for a temporary restraining order against the defendants and issued orders freezing Homestead's assets and prohibiting the destruction of documents. The Judge also appointed Robb Evans & Associates LLC as the temporary receiver over Homestead. On Nov. 25, 2009, the Court will hold a hearing on the Commission's motion for a preliminary injunction and appointment of a permanent receiver.
The Commission's complaint charges defendants with violating the antifraud, securities registration and broker-dealer registration provisions of the federal securities laws, and names as relief defendants two entities controlled by Biddlecome, Homestead Northland MHC, LLC and Jackson MHC, L.L.C. The Commission alleges that the relief defendants received ill-gotten gains as a result of Biddlecome's conduct. In addition to the emergency relief, the Commission seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties. [SEC v. Homestead Properties, L.P.; Homestead Limited, L.L.C.; California Wealth Management Group, d.b.a. IFC Advisory; Heath M. Biddlecome; William C. Tak, Defendants; and Homestead Northland MHC, LLC and Jackson MHC, L.L.C., Relief Defendants, United States District Court for the Central District of California, Case No. SACV 09-01331 CJC] (LR-21304)
STANDARDS SETTING BOARDS
Notice to Solicit Comments on PCAOB Rule Change
The Commission is publishing for public comment a proposed Public Company Accounting Oversight Board rule change (PCAOB-2008-03), changing the effective date of its rules and forms related to annual and special reporting by registered firms and succession to the registration status of a predecessor firm. The comment period will end 21 days after the proposed rule is published in the Federal Register. (Rel. 34-60996)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by The NASDAQ Stock Market to modify fees for members using the NASDAQ Options Market (SR-NASDAQ-2009-098) 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 November 16. (Rel. 34-60980)
A proposed rule change (SR-CBOE-2009-084) filed by the Chicago Board Options Exchange to Codify Certain Provisions of the Options Listing Procedures Plan into CBOE's 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 November 16. (Rel. 34-60995)
A proposed rule change (SR-NASDAQ-2009-094) filed by The NASDAQ Stock Market to require that companies provide Nasdaq with at least ten minutes prior notification when releasing material information and eliminate a potential inconsistency with Commission guidance on the use of company websites to satisfy public disclosure requirements 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 November 23. (Rel. 34-61008)
A proposed rule change (SR-ISE-2009-97) filed by the International Securities Exchange regarding the closing settlement value for the Brazilian real 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 November 23. (Rel. 34-61009)
Proposed Rule Change
The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-077) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to the restructuring of quotation collection and dissemination for OTC equity securities. Publication is expected in the Federal Register during the week of November 16. (Rel. 34-60999)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change (SR-FINRA-2009-050) submitted by the Financial Industry Regulatory Authority relating to retention and availability of information pursuant to FINRA Rule 8312 (FINRA BrokerCheck Disclosure). Publication is expected in the Federal Register during the week of November 16. (Rel. 34-61002)
The Commission approved a proposed rule change (SR-OCC-2009-15) filed by The Options Clearing Corporation under Section 19(b)(1) of the Exchange Act to revise the minimum eligibility criteria applicable to common stock loaned through OCC's Stock Loan Programs and deposited as margin collateral. Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61006)
Accelerated Approval of Proposed Rule Change
The Commission issued a notice of filing of Amendment Nos. 1, 2, 3, and 4 and order granting accelerated approval to proposed rule change, as modified by Amendment Nos. 1, 2, 3, and 4 thereto, submitted by the Financial Industry Regulatory Authority under Rule 19b-4 of the Securities Exchange Act of 1934 (SR-FINRA-2007-006) relating to Historic TRACE Data. Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61012)
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