Closed Meeting - Wednesday, December 9, 2009 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Wednesday, December 9, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; adjudicatory matters; a collection matter; post argument discussion; and other matters relating to enforcement 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 Obtains Asset Freeze Against Co-Founder of Canopy Financial in $75 Million Offering Fraud
On Dec. 2, 2009, the Securities and Exchange Commission announced that it has filed fraud charges against a Chicago-based health care financial services company and has frozen the assets of its co-founder who allegedly provided investors with forged financial statements to lure them into a $75 million investment scheme.
The SEC alleges that Canopy Financial Inc. and its former president and chief operating officer Jeremy J. Blackburn solicited investors for a private placement offering for preferred shares of Canopy. They provided investors with a falsified audit report purportedly from accounting firm KPMG as well as bank and financial statements with false and misleading information exaggerating Canopy's financial condition. Blackburn misappropriated at least $1.7 million from the offering into his personal bank accounts.
"Blackburn personally profited by falsifying audited financial statements and bank account records to obtain financing for a purportedly up-and-coming company involved in health care technology," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "Our enforcement action seeks the return of fraudulently obtained funds to investors."
The Honorable Blanche M. Manning in the U.S. District Court for the Northern District of Illinois granted the SEC's request for a temporary restraining order and asset freeze against Blackburn. The SEC's case was unsealed today by the court.
The SEC's complaint alleges that Canopy and Blackburn solicited investors from at least October 2008 through August 2009, providing them with documents devised to show that Canopy had a much healthier cash balance and larger client base than it actually did. Blackburn also falsified at least one bank statement to show an account balance of approximately $8.9 million, when in fact it was a custodial account of a Canopy client that held approximately $86,952. The SEC further alleges that Canopy raised approximately $75 million from investors and paid approximately $40 million in redemptions to existing investors, including Blackburn who redeemed 250,000 shares in exchange for approximately $1.625 million.
According to the SEC's complaint, the fraud came to light when KPMG discovered that Canopy had been claiming that its financial statements for 2007 and 2008 were audited by KPMG. In fact, KPMG had never been retained by Canopy to audit its financial statements and had never opined on the financial condition of the company. KPMG issued a cease-and-desist letter to Canopy demanding that it stop the unauthorized use of KPMG's name and the audit report purportedly issued by KPMG.
The SEC's complaint, filed under seal on November 30, seeks among other things permanent injunctions against Blackburn and Canopy. In addition to seeking permanent injunctions against Blackburn and Canopy for violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)] and the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder], the SEC's complaint seeks the disgorgement of ill-gotten gains plus prejudgment interest and financial penalties.
The SEC's investigation is continuing.
The Commission acknowledges the assistance and cooperation of the U.S. Attorney for the Northern District of Illinois and the Federal Bureau of Investigation in this matter. (Press Rel. 2009-257)
In the Matter of Bruce B. Blatman
On Dec. 2, 2009, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against Bruce B. Blatman. The Order finds that on Nov. 13, 2009, a judgment was entered by consent against Blatman, permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; aiding and abetting future violations of Section 15(c)(3) of the Exchange Act and Rule 15c3-3 thereunder; and aiding and abetting future violations of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder, in the civil action entitled SEC v. North American Clearing, Inc., et al., Civil Action Number 6:08-cv-829-ORL-35KRS, in the United States District Court for the Middle District of Florida.
Based on the above, the Order bars Blatman from association with any broker or dealer. Blatman consented to the issuance of the Order without admitting or denying any of the findings except that he admitted to the entry of the judgment. (Rel. 34-61096; File No. 3-13702)
INVESTMENT COMPANY ACT RELEASES
FaithShares Trust, et al.
An order has been issued on an application filed by FaithShares Trust, et al. The order permits (a) series of an open-end management investment company to issue shares (Fund Shares) that can be redeemed only in large aggregations (Creation Unit Aggregations); (b) secondary market transactions in Fund Shares to occur at negotiated prices; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days after the tender of Fund Shares for redemption; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Unit Aggregations; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Fund Shares. (Rel. IC-29065 - December 1)
Proposed Rule Changes
The Commission issued notice of a proposed rule change submitted by Financial Industry Regulatory Authority (SR-FINRA-2009-084) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to adopt FINRA Rule 5330 (Adjustment of Orders) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of December 7. (Rel. 34-61083)
International Securities Exchange filed a proposed rule change under Rule 19b-4 (SR-ISE-2009-103) relating to market data fees. Publication is expected in the Federal Register during the week of December 7. (Rel. 34-61086)
The Commission issued a notice of a proposed rule change as modified by Amendment No. 2 (SR-FINRA-2009-040), filed by the Financial Industry Regulatory Authority to adopt FINRA Rule 2380 to limit the leverage ratio offered by broker-dealers for certain forex transactions. Publication is expected in the Federal Register during the week of December 7. (Rel. 34-61090)
New York Stock Exchange filed a proposed rule change (SR-NYSE-2009-117) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to amend its listing fees for structured products. Publication is expected in the Federal Register during the week of December 7. (Rel. 34-61091)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the Chicago Board Options Exchange to amend its Fees Schedule in connection with the New Linkage Plan (SR-CBOE-2009-088) 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 December 7. (Rel. 34-61084)
A proposed rule change (SR-NASDAQ-2009-101) filed by The NASDAQ Stock Market to correct certain citations to renumbered rules in the Nasdaq Rule 4000 and 5000 Series 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 December 7. (Rel. 34-61085)
The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2009-09) under Section 19(b)(1) of the Exchange Act, which proposed rule change became effective upon filing, to move the Canadian Depository for Securities Clearing and Depository Services Inc. to risk-based margining. Publication is expected in the Federal Register during the week of December 7. (Rel. 34-61089)
A proposed rule change filed by The NASDAQ Stock Market (SR-NASDAQ-2009-103) to modify fees for members using the NASDAQ Options Market 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 December 7. (Rel. 34-61093)
A proposed rule change (SR-CBOE-2009-090) filed by the Chicago Board Options Exchange relating to temporary membership status and interim trading permit access fees 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 December 7. (Rel. 34-61094)
A proposed rule change filed by New York Stock Exchange (SR-NYSE-2009-115) to amend its warrant initial listing standard to exempt from the minimum holders requirement any series of warrants that is listed in connection with the initial firm commitment underwritten public offering of such warrants 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 December 7. (Rel. 34-61099)
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