SEC Names Senior Officials to Investor Education and Advocacy Efforts
The Securities and Exchange Commission today announced the appointments of three senior officials to its Office of Investor Education and Advocacy (OIEA) to help continue its increased focus on individual investors. OIEA serves the Commission as the "investors' office" and provides educational resources to help individual investors make informed financial decisions.
Mary S. Head, who recently served as Acting Director of OIEA, has been named Deputy Director of the office. Kathleen M. Floyd has been appointed Deputy Director of Investor Education, and Richard C. Ferlauto will become Deputy Director of Policy.
"We are working to further expand OIEA's ability to understand investors' concerns, provide effective educational programs, and advocate for investors' interests. Investors need our assistance now more than ever, and I am confident that our new team has the experience and the drive to make a difference," said Lori J. Schock, Director of OIEA. Ms. Schock was named OIEA Director in October.
Ms. Head has worked at the SEC since 2000, most recently as Assistant Director for Policy in OIEA. Ms. Head began her legal career in the Office of General Counsel at the National Association of Securities Dealers (now FINRA). She practiced securities law with Kelley Drye & Warren and later with Dechert LLP prior to joining the SEC staff. Ms. Head is a graduate of Yale College and Catholic University Law School.
Ms. Floyd comes to the SEC from the Securities Industry and Financial Markets Association (SIFMA) Foundation, where she was the Executive Director of the Stock Market Game. She previously served as Director of Baltimore Academies for Baltimore City Public Schools. In 2002, Ms. Floyd was named as one of Maryland's Top 100 Women. She is a graduate of Drew and George Washington Universities.
Richard C. Ferlauto joins the SEC from the American Federation of State County and Municipal Employees, where he has been Director, Corporate Governance and Public Pension Programs since 2002. Previously, he was Managing Director, Proxy Voter Services for Institutional Shareholder Services and Director of Policy for the Center for Policy Alternatives. Currently, Mr. Ferlauto is a member of the PCAOB Investor Advisory Committee and The Conference Board Taskforce on Executive Compensation. He has been named to the Directorship 100 as one of the most influential leaders in corporate governance for the past three years. Mr. Ferlauto is a graduate of Georgetown University.
OIEA has direct contact with tens of thousands of individual investors each year, hearing their needs, answering their questions and helping to solve their problems. Last month, OIEA launched the Commission's first-ever Web site (www.investor.gov) devoted exclusively to investor education, providing investors of all ages with in-depth information and "top tips" on how to invest wisely, plan for the future, and avoid being scammed. The Office also works closely with the Commission's newly-formed Investor Advisory Committee to give investors a greater voice in the Commission's work. (Press Rel. 2009-251)
Closed Meeting - Monday, November 23, 2009 - 9:00 a.m.
The subject matter of the Closed Meeting scheduled for Monday, November 23, will be: institution and settlement of injunctive actions; and institution and settlement of administrative proceedings.
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.
SEC Imposes Investment Adviser Bar Against William H. Eichengreen
On November 19, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against William H. Eichengreen. The Order bars Eichengreen from associating with any investment adviser pursuant to Section 203(f) of the Advisers Act. The Commission brought the administrative proceeding against Eichengreen based on an injunction entered against him by the U.S. District Court for the Northern District of Illinois in SEC v. Eichengreen and Myatt, 08-cv-5564. Eichengreen consented to entry of the Order without admitting or denying the findings contained in the Order except as to jurisdiction and the fact that the District Court had entered a permanent injunction against him.
The Order finds that Eichengreen was the Chief Compliance and Marketing Officer for Directors Performance Fund, LLC (the Fund), a now-defunct hedge fund operated by Eichengreen and Sharon Vaughn through Vaughn's wholly-owned registered investment adviser, Directors Financial Group, Ltd. (DFG). On Sept. 29, 2008, the Commission sued Eichengreen, alleging that - in the course of DFG's investment in a purported FOREX trading program and its subsequent investment of $25 million of the Fund's assets in a fraudulent "Prime Bank" scheme - Eichengreen and DFG defrauded the Fund, and DFG's individual investor adviser clients who invested in the Fund, by (a) falsifying the Fund's financial statements, thereby allowing DFG to take profit-based fees to which it was not entitled, and (b) misrepresenting the Fund's trading strategy, investments, and performance. The Complaint also alleged that Eichengreen substantially assisted DFG in altering documents in anticipation of a Commission examination of DFG. On Oct. 29, 2009, the Court entered an order that, among other things, permanently enjoined Eichengreen from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from aiding and abetting violations of Sections 204, 206(1), and 206(2) of the Advisers Act and Rule 204-2 thereunder. Eichengreen consented to entry of the injunction without admitting or denying any of the allegations in the Complaint. (Rel. IA-2952; File No. 3-13690)
In the Matter of David L. McMillan
On November 19, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against David L. McMillan (McMillan).
In the Order Instituting Proceedings, the Division of Enforcement alleges that a final judgment was entered on Oct. 20, 2009, against McMillan, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act, in the civil action entitled SEC v. David L. McMillan, Case No. 06-CV-0951 (District of Arizona). The Complaint in the civil action alleged, among other things, that from at least February 1999 through October 2005, McMillan, an investment adviser and stock broker working in Bullhead City, Arizona defrauded investors in Arizona, Nevada, California, and Colorado by offering and selling them investments in either annuity or loan programs that did not exist. A hearing will be convened to determine whether the allegations in the Order Instituting Proceedings are true, to provide McMillan an opportunity to dispute the allegations, and to determine whether any remedial sanction is appropriate and in the public interest.
The Order directs the Administrative Law Judge to issue an initial decision in this matter no later than 210 days from the date of service of the Order. (Rel. 34-61029; IA-2951; File No. 3-13589)
SEC Charges Investor Relations Firm and its Executives with Fraud, Registration Violations, and Acting as an Unregistered Broker-Dealer
On November 18, the Securities and Exchange Commission filed a civil action in the U.S. District Court for the Middle District of Florida, alleging that investor relations firm Big Apple Consulting USA, Inc. (Big Apple), its wholly-owned subsidiary MJMM Investments, LLC (MJMM), and four of its executives-CEO Marc Jablon, vice president Matthew Maguire, MJMM president Mark Kaley, and Keith Jablon, vice president of another Big Apple subsidiary-made public misrepresentations and material omissions about the financial state of CyberKey Solutions, Inc., (CyberKey) while the two entities sold hundreds of millions of CyberKey shares. These CyberKey shares were sold under no registration statement and no legitimate exemption from registration. The SEC also charged Big Apple and MJMM with acting as unregistered broker-dealers, and Marc Jablon, Maguire, and Kaley with aiding and abetting the two entities' violations in that respect.
According to the SEC's complaint, the Big Apple executives learned by Aug. 8, 2006, that CyberKey's only significant source of revenue, a supposed $25 million purchase order from the U.S. Department of Homeland Security (DHS), could not be located by DHS itself and almost certainly did not exist. Despite this knowledge, the Big Apple team continued to promote CyberKey and its business relationship with DHS and sold hundreds of millions of CyberKey shares into the public market. In addition to planning and editing press releases, Big Apple used a telephone calling room of 14 to 50 callers to promote CyberKey stock, including the company's relationship with DHS, to registered brokers. In doing so, Big Apple and MJMM acted as dealers in connection with the distribution of CyberKey stock and as brokers by participating in securities transactions at key points in the chain of distribution of CyberKey shares.
The SEC's complaint charges each of the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, as well as with violations of Section 17(a) of the Securities Act of 1933 (Securities Act). The SEC's complaint also charges Big Apple, MJMM, Maguire and Marc Jablon with violating Sections 5(a) and 5(c) of the Securities Act. Finally, the complaint charges Big Apple and MJMM with violations of Section 15(a) of the Exchange Act and Marc Jablon, Maguire and Kaley with aiding and abetting the entities' violations of Section 15(a).
The SEC's complaint requests permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties against all of the defendants. The complaint also seeks penny stock bars against Big Apple, MJMM, Maguire, and Marc Jablon. [SEC v. Big Apple Consulting USA, Inc., MJMM Investments, LLC, Marc Jablon, Matthew Maguire, Mark C. Kaley, and Keith Jablon, Civ. Action No. 09-cv-1963 (M.D. Fla.) (JA)] (LR-21305)
SEC Obtains Permanent Injunctions in a Phony Investment Pool Scheme; Promoter Permanently Barred
The Securities and Exchange Commission announced that it obtained permanent injunctions against Mohit A. Khanna, age 32, and his former company, MAK 1 Enterprises Group LLC, both of San Diego, Calif., which operated a phony investment pool scheme. Mohit Khanna and MAK 1, through its Court-appointed receiver, agreed to the entry of the permanent injunctions, which were entered on October 6 and Nov. 3, 2009, respectively. The injunctions permanently enjoin Mohit Khanna and MAK 1 from violating the antifraud and securities registration provisions of the federal securities laws.
The Commission's initial complaint, filed August 17, in federal court in San Diego, alleged that Mohit Khanna and MAK 1 claimed to pool investor funds to invest in foreign currency trading products and other guaranteed investments, which the complaint alleged were non-existent. The complaint alleged the defendants engaged in a variety of fraudulent conduct designed to solicit new investors and lull existing investors into believing their money was safe and secure, and that Mohit Khanna and MAK 1 misused investor funds to pay for several luxury cars and residential properties, including those owned by his wife, Sharanjit K. Khanna. The complaint charged Mohit Khanna and MAK 1 with violating the antifraud and securities registration provisions of the federal securities laws and named as a relief defendant another company Mohit Khanna controlled, First Opportunities Management Group, Inc. The Commission filed an amended complaint on September 18, which named Sharanjit Khanna as a defendant and charged her with violations of the antifraud provisions and securities registration provisions.
On August 26, the Court issued an order to show cause why Mohit Khanna should not be held in civil contempt for violating the Court's Temporary Restraining Order granted on August 18 based on evidence filed by the Commission and the receiver. The Court ordered Mohit Khanna to show cause why an order of civil contempt should not be issued and why he should not be sanctioned pending his compliance with the TRO. The Court held multiple hearings on the contempt application.
On September 3, the Court granted additional relief that the Commission sought, with the consent of Mohit Khanna, including orders freezing the assets of Mohit Khanna and MAK 1, appointing Charles LaBella of LaBella & McNamara, LLP, as permanent receiver over MAK 1, and requiring Mohit Khanna and MAK 1 to repatriate assets from abroad. On October 6, the Court entered an order, with the consent of Sharanjit Khanna, freezing her assets.
On October 27, the Commission instituted administrative proceedings against Mohit Khanna barring him from association with a broker or dealer based on the entry of the judgment of permanent injunction against him. Mohit Khanna consented to the entry of the order without admitting or denying the Commission's findings.
In addition to the relief already obtained, the Commission seeks a permanent injunction, disgorgement, and civil penalties against Sharanjit Khanna, and disgorgement and civil penalties against Mohit Khanna and MAK 1. [SEC v. Mohit A. Khanna, MAK 1 Enterprises Group, LLC, et al., United States District Court for the Southern District of California, Case No. 09cv1784 BEN (POR)] (LR-21306)
SEC Settles Insider Trading Action against Abu Dhabi National
The Commission today announced the settlement of its claims against Khaled Al Hashemi, a citizen and resident of Abu Dhabi, United Arab Emirates, for unlawful insider trading in the securities of Nova Chemicals Corporation (Nova) before a Feb. 23, 2009 merger announcement with International Petroleum Investment Company (IPIC). Hashemi, without admitting or denying the Commission's claims, consented to the entry of a final judgment enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and directing him to pay a total of $875,000, comprised of disgorgement in the amount of $458,760, $9,620 in prejudgment interest, and a penalty of $406,620.
According to the Commission's Complaint, filed in the United States District Court for the Southern District of New York, Hashemi purchased 120,000 shares of Nova common stock through his online brokerage account in the two weeks leading up to the merger announcement, purchasing more than half of the shares on the last trading day before the announcement. Hashemi funded these purchases, in part, by liquidating nearly 80 percent of the value of his stock portfolio at a significant loss. 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. [SEC v. Khaled Mohammed Sharif Al Sayed Al Hashemi a.k.a Khaled Al Hashemi, Civil Action No. 09-CV-6650 (S.D.N.Y.) (HB)] (LR-21307)
Immediate Effectiveness of Proposed Rule Changes
Boston Stock Exchange Clearing Corporation filed a proposed rule change (SR-BSECC-2009-005) under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, which proposed rule change became effective upon filing, to amend the restated certificate of incorporation of the NASDAQ OMX Group, Inc. Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61000)
Stock Clearing Corporation of Philadelphia filed a proposed rule change (SR-SCCP-2009-04) under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, which proposed rule change became effective upon filing, to amend the restated certificate of incorporation of the NASDAQ OMX Group, Inc. Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61001)
A proposed rule change filed by the International Securities Exchange to extend the pilot program to expose All-Or-None orders until Dec. 31, 2009 (SR-ISE-2009-96) 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 23. (Rel. 34-61016)
A proposed rule change filed by NASDAQ OMX BX amending the Fee Schedule of the Boston Options Exchange Facility (SR-BX-2009-072) 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. 34-61017)
A proposed rule change filed by the Municipal Securities Rulemaking Board relating to new Rule A-16, on examination fees (SR-MSRB-2009-16) 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. 34-61023)
Proposed Rule Changes
International Securities Exchange filed a proposed rule change (SR-ISE-2009-87) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder relating to Foreign Currency Options. Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61010)
NYSE Arca filed a proposed rule change (SR-NYSEArca-2009-103) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 regarding listing and trading of RP Short Duration ETF. Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61021)
NYSE Arca filed a proposed rule change (SR-NYSEArca-2009-101) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 amending Equities Rule 5.2(j)(3). Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61022)
The Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2009-025) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 related to the Simple Auction Liaison (SAL). Publication is expected in the Federal Register during the week of November 23. (Rel. 34-61024)
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