Securities and Exchange Commission Suspends Trading in the Securities of Five 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. 25, 2009, and terminating at 11:59 p.m. EST on Dec. 9, 2009.
The Commission temporarily suspended trading in the securities of these five 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. 34-61062)
SEC Surpasses $2 Billion in Fair Fund Distributions in 2009
The Securities and Exchange Commission today announced that, for the first time, more than $2 billion has been distributed in a calendar year to injured investors as a result of SEC enforcement actions and proceedings.
The SEC reached the milestone with the November 20 distribution of more than $40 million related to an illegal late trading scheme involving Ritchie Capital Management. The money resulted from penalties and disgorgement paid by Ritchie and others involved in the scheme that was the subject of an SEC enforcement proceeding.
"There is no substitute for returning money to defrauded investors," said Robert Khuzami, Director of the SEC's Division of Enforcement.
In 2002, the Sarbanes-Oxley Act (SOX) authorized the SEC to create funds, called Fair Funds, comprised of both civil penalties and ill-gotten gains that could be returned to injured investors. Prior to SOX, the SEC could return to investors only ill-gotten gains that had been disgorged by defendants. SOX enabled the SEC to include civil penalties in the distribution funds. The SEC has distributed approximately $6.6 billion in Fair Funds to investors since gaining this authority.
"Our sharp focus is on improving the effectiveness of our Fair Fund Program in order to accelerate the return of money to harmed investors," added Mr. Khuzami.
In 2009, distributions to injured investors have been made in 31 cases brought by the Commission, involving illegal conduct ranging from accounting fraud to pump-and-dump schemes to mutual fund market timing. Among the distributions this year were more than $840 million to approximately 257,000 injured AIG investors, more than $320 million to approximately two million injured investors in Alliance Capital mutual funds, and more than $240 million to approximately 700,000 injured Bear Stearns investors. (Press Rel. 2009-254)
Commission Orders Hearings on Registration Suspension or Revocation Against Six 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 six companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the six 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 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. 34-61063; File No. 3-13698)
Commission Revokes Registration of Securities of Polar Molecular Holding Corporation for Failure to Make Required Filings
On Nov. 25, 2009, the Commission revoked the registration of each class of registered securities of Polar Molecular Holding Corporation (Polar) for failure to make required filings with the Commission.
Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, Polar 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 Polar finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1, 13a-11, and 13a-13 thereunder and revoking the registration of each class of Polar's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Polar in In the Matter of Polar Molecular Holding Corporation, Administrative Proceeding File No. 3-13620.
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 Polar Molecular Holding Corporation, Administrative Proceeding File No. 3-13620, Exchange Act Release No. 60702, Sept. 21, 2009. (Rel. 34-61064; File No. 3-13620)
In the Matter of Thomas Lester Irby II and Titan Wealth Management, LLC
On Nov. 24, 2009, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Sections 203(e) and 203(f) of the Investment Advisers Act of 1940 (Order) against Thomas Lester Irby II (Irby) and Titan Wealth Management, LLC (Titan).
The Division of Enforcement alleges that the United States District Court for the Eastern District of Texas entered a judgment on Sept. 10, 2009, against Irby and Titan, permanently enjoining them 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. Securities and Exchange Commission v. Titan Wealth Management, LLC, et al., Civil Action Number 4:09-cv-418 (E.D. Tex.).
A hearing before an administrative law judge will be scheduled to determine whether the allegations in the order are true, to provide the Respondents an opportunity to dispute these allegations, and to determine what remedial action, if any, is appropriate in the public interest. The Order directed the Administrative Law Judge to issue an initial decision within 210 days from the date of service of the Order. (Rel. IA-2956; File No. 3-13697)
SEC v. Trevor G. Cook, Patrick J. Kiley, et al.
On Nov. 23, 2009, the Honorable Michael J. Davis of the U.S. District Court for the District of Minnesota issued an Asset Freeze Order against all assets of Trevor G. Cook (Cook), Patrick J. Kiley (Kiley), both Minnesota residents, and UBS Diversified Growth LLC, Universal Brokerage FX Management LLC, Oxford Global Advisors LLC, and Oxford Global Partners LLC (the Defendant Companies), four shell companies owned or controlled by them. The court also issued an asset freeze order against several Relief Defendant Companies: Basel Group LLC, Crown Forex LLC, Market Shot LLC, PFG Coin and Bullion, Oxford FX Growth L.P., Oxford Global FX LLC, Oxford Global Managed Futures Fund L.P, UBS Diversified FX Advisors LLC, UBS Diversified FX Growth L.P., and UBS Diversified FX Management LLC. The court also entered a freeze order against certain assets of relief defendants Clifford and Ellen Berg, who received investor funds from Cook. In addition, Judge Davis issued an order appointing a receiver over all of these assets. The court issued the freeze and receivership orders under seal while the assets were being secured, and the seal has now been lifted.
The SEC alleges that from at least July 2006 through at least July 2009, Cook and Kiley, through the Defendant Companies, raised at least $190 million from at least 1,000 investors through the sale of unregistered investments in a purported foreign currency trading venture by misrepresenting that they would deposit each investor's funds into a separate account in the investor's name to trade in foreign currencies and generate annual returns of 10 percent to 12 percent. They also misrepresented that their foreign currency trading program involved little or no risk and that investors' principal would be safe and could be withdrawn at any time. The SEC alleges that Cook and Kiley did not place each investor's money into a segregated account in the name of the investor. Instead, they pooled the investors' funds in bank and trading accounts in the names of entities that they controlled, including the Defendant and Relief Defendant companies. The SEC alleges that Cook and Kiley misappropriated $42.8 million of investors' money, including $18 million that Cook used to buy ownership interests in two trading firms; $12.8 million that Cook and Kiley transferred to Panama to purportedly finance the construction of a casino; $2.8 million that Cook used to acquire the Van Dusen Mansion and $4.8 million that Cook lost through gambling. Cook and Kiley also misspent approximately $51 million to make Ponzi-like payments to earlier investors. The SEC further alleges that Cook and Kiley placed $108 million of investors' funds into banking and trading accounts in the names of their various shell companies and used some of this money to trade foreign currencies, resulting in losses of at least $48 million.
The SEC's complaint charges Cook, Kiley, and the Defendant Companies with violating Sections 5(a), 5(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. In addition to the emergency relief already obtained, the complaint seeks preliminary and permanent injunctions and disgorgement from all defendants as well as financial penalties from Cook and Kiley, and disgorgement of ill-gotten gains from the relief defendants. A hearing on the SEC's motion for preliminary injunction has been set for Dec. 4, 2009, at 9:30 a.m., at 300 South Fourth Street, 202 U.S. Courthouse, Minneapolis, MN.
None of the entities named in this action using the UBS name are affiliated with UBS, AG, the Switzerland-based global financial services firm.
The SEC acknowledges the assistance of the Commodity Futures Trading Commission, the Swiss Financial Market Supervisory Authority, the National Futures Association, and the Minnesota Attorney General in this investigation. [SEC v. Trevor G. Cook, Patrick J. Kiley, et al., Case No. 09 SC 3333 (D. Minn.)] (LR-21313)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by New York Stock Exchange to modify the sample broker letters set forth in Rule 451 (SR-NYSE-2009-114) 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. 34-61046)
A proposed rule change (SR-CHX-2009-15) filed by Chicago Stock Exchange to its Bylaws and those of its parent corporation, CHX Holdings, Inc., 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 30. (Rel. 34-61053)
Proposed Rule Changes
The New York Stock Exchange filed a proposed rule change (SR-NYSE-2009-112) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 regarding the Exchange's Gap Quote Policy. Publication is expected in the Federal Register during the week of November 30. (Rel. 34-61048)
NYSE Amex filed a proposed rule change (SR-NYSEAmex-2009-82) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 regarding the Exchange's Gap Quote Policy. Publication is expected in the Federal Register during the week of November 30. (Rel. 34-61049)
Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-075) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to amend Rules 12601(b) and 12902(a) of the Code of Arbitration Procedure for Customer Disputes and Rules 13601(b) and 13902(a) of the Code of Arbitration Procedure for Industry Disputes to clarify the applicability of the fee waiver provision of the postponement rule and to codify the hearing session fee for an unspecified damages claim heard by one arbitrator. Publication is expected in the Federal Register during the week of November 30. (Rel. 34-61057)
Approval of Proposed Rule Change
The Commission approved 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 November 30. (Rel. 34-61059)
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