Securities and Exchange Commission Suspends Trading in the Securities of Nine 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 Jan. 29, 2010, and terminating at 11:59 p.m. EST on Feb. 11, 2010.
The Commission temporarily suspended trading in the securities of these nine 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. 34-61441)
Reserve Primary Fund Distributes Assets to Investors
The Reserve Primary Fund today completed distribution of $3.4 billion in assets to investors who held shares of the fund when its net asset value fell below $1 per share in September 2008. This distribution represents the bulk of the fund's remaining assets.
U.S. District Court Judge Paul Gardephe in Manhattan ordered the pro rata distribution last November at the request of the Securities and Exchange Commission.
"Today's distribution is the product of significant efforts by the SEC to get money back to investors as quickly and fairly as possible," said SEC Chairman Mary Schapiro.
With today's distribution, investors will have recovered more than 98 cents on the dollar.
"The SEC will continue to seek the return of even more assets for investors in the coming months," added Schapiro.
On Sept. 15, 2008, the Reserve Primary Fund, which held $785 million in Lehman-issued securities, became illiquid when the fund was unable to meet investor requests for redemptions. The following day, the Reserve Fund declared it had "broken the buck" because its net asset value had fallen below $1 per share.
On May 5, 2009, the SEC filed fraud charges against several entities and individuals who operate the Reserve Fund for failing to provide key material facts to, and affirmatively misleading, investors and trustees about the impact on the fund of the bankruptcy of Lehman Brothers Holdings, Inc. More significantly, in bringing the enforcement action, the SEC sought to expedite the distribution of the fund's remaining assets to investors by proposing a plan of liquidation. The SEC is continuing to pursue those claims and will designate any further financial recovery for distribution.
In its complaint, the agency asked the court to enter an order compelling a pro rata distribution of remaining fund assets, $3.5 billion of which the fund had withheld from investors pending the outcome of approximately 30 lawsuits against the Reserve Fund, the trustees and other officers and directors of the Reserve entities.
In November, the court adopted the SEC's proposed distribution plan.
Investors can find additional information relating to the Commission's action and the Court's orders on the Commission's website at: http://www.sec.gov/spotlight/reserve_primary_fund_investors.htm.
Investors also can find additional information on the Reserve's website at http://ther.com. (Press Rel. 2010-16)
Commission Revokes Registration of Securities of Petromin Resources, Ltd. for Failure to Make Required Periodic Filings
On Jan. 29, 2010, the Commission revoked the registration of each class of registered securities of Petromin Resources, Ltd. (Petromin Resources) 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, Petromin Resources 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 Petromin Resources 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-16 thereunder and revoking the registration of each class of Petromin Resources' securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Petromin Resources in In the Matter of Pacific Acquisition Corp., et al., Administrative Proceeding File No. 3-13700.
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 Pacific Acquisition Corp., et al., Administrative Proceeding File No. 3-13700, Exchange Act Release No. 61077, Nov. 30, 2009. (Rel. 34-61440; File No. 3-13700)
Commission Orders Hearings on Registration Suspension or Revocation Against Nine 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 nine companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the nine 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. 34-61442; File No. 3-13768)
In the Matter of Ethan Kass
On Jan. 29, 2010, 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, Making Findings, and Imposing Remedial Sanctions (Order). The Order finds that on Jan. 4, 2010, a final judgment was entered by consent against Ethan Kass (Kass) permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and from aiding and abetting violations of Sections 206(2) and 204 of the Investment Advisers Act of 1940 and Rule 204-2 thereunder, in the civil action entitled SEC v. Ethan Kass, Civil Action Number 09-CIV-8764 (WHP), in the United States District Court for the Southern District of New York. The Order finds that the Commission's complaint alleges that Kass, 28 and a resident of New York, New York, executed and concealed at least 24 unauthorized trades between February and May 2005 resulting in at least approximately $8,474,325 in losses to investors in Tobias Bros. Inc. (Tobias Bros.), a New York-based registered investment adviser, and until Feb. 2, 2008, also a registered broker-dealer. The Order also finds that the Commission's complaint alleges that Kass did not have any authority or discretion to independently make any trades on behalf of Tobias Bros. or any funds or accounts it advised. Rather, the Order finds that the Commission's complaint alleges that Kass was responsible for providing back office support, including order entry, internal and external trade reporting, and trade reconciliation, under the general supervision of portfolio managers who were associated with Tobias Bros. The Order further finds that the complaint alleges that on at least 24 occasions, Kass traded without any authorization or direction from his supervisors. Finally, the Order finds that the complaint alleges that Kass routinely concealed his unauthorized trading by intentionally omitting such trades from Tobias Bros.'s internal records, including its handwritten trade blotter, and by deleting, altering or manipulating information in Tobias Bros.'s portfolio management system so that his unauthorized trades would not appear on that system's daily profit and loss statements.
Based on the above, the Order bars Kass from association with any investment adviser or broker dealer. Kass consented to the issuance of the Order without admitting or denying any of the findings. (Rel. 34-61444; IA-2979; File No. 3-13769)
In the Matter of Mark Evan Bloom (CPA)
On Jan. 29, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Remedial Sanctions (Order) against Mark Evan Bloom. The Order finds that Bloom, age 58, is and has been the principal and 100% owner of North Hills Management, LLC (North Hills), an unregistered investment adviser that served as Manager and General Partner of North Hills, L.P. (Fund) and is also a certified public account licensed to practice in the State of New York. Bloom marketed the Fund as a "fund of funds" whose strategy was to invest in a diverse group of hedge funds to generate a relatively moderate, market-neutral return and reduce investment risk through diverse and uncorrelated investments. Instead, Bloom misappropriated more than $13.2 million of investor funds to furnish a lavish lifestyle that included the purchase of luxury homes, cars and boats for himself and his wife. The remaining funds were invested in a single fund which itself turned out to be fraudulent. The Order further finds that, on Oct. 22, 2009, a final judgment by consent was entered against Bloom, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206-4(8) thereunder by the United States District Court for the Southern District of New York in SEC v. Bloom, et al., Civil Action Number 1:09-CV-1746 (JGK). The Commission's complaint alleged, among other things, that from on or before July 2001 to February 2009, in connection with the offer, sale and purchase of limited partnership interests in the Fund, Bloom misused and misappropriated investor funds, falsely stated to investors that their funds were invested as represented in the offering materials, sent out false account statements indicating that investor funds were fully invested and earning returns, and otherwise engaged in a variety of conduct which operated as a fraud and deceit on investors. On June 30, 2009, Bloom pled guilty in a parallel criminal proceeding before the United States District Court for the Southern District of New York, in United States v. Mark Evan Bloom (Criminal Information No. S1:09-CR-367). The counts of the criminal information to which Bloom pled guilty alleged, inter alia, that Bloom defrauded investors and obtained money and property by means of materially false and misleading statements, that he used the United States mails to send false account statements, that he caused commercial interstate carriers to deliver investors' checks to him via wire, transferred investor funds to unlawfully renovate his home and purchase artwork and jewelry and obstructed the internal revenue laws by, among other things, promoting tax shelters.
Based on the above, the Order bars Bloom from association with any investment adviser and suspends Bloom from appearing or practicing before the Commission as an accountant. Bloom consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the entry of the permanent injunction against him and his guilty plea, which he admitted. (Rels. 34-61445; IA-2980; AAE Rel. 3112; File No. 3-13770)
SEC v. Galleon Management, LP, et al.
The SEC announced that The Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, has authorized the SEC to file a Second Amended Complaint (SAC), containing new allegations of insider trading in the securities of two additional companies by two defendants in this action, Raj Rajaratnam (Rajaratnam) and Anil Kumar (Kumar). The insider trading now alleged in the Commission's enforcement action cumulatively generated more than $52 million in illicit trading profits or losses avoided. The SAC also recounts details of an illicit payment scheme between Rajaratnam and Kumar, in which Rajaratnam paid Kumar for material non-public information that Rajaratnam then used to trade on behalf of his hedge fund, Galleon Management, LP (Galleon), generating almost $20 million in illicit profits. From 2003 to October 2009, Rajaratnam paid Kumar $1.75 to $2 million for inside information, and Kumar reinvested some of those funds in a nominee account at Galleon, earning, together with the profits on such reinvestments, a combined total of roughly $2.6 million for his participation in the scheme. The SAC adds a claim relating to these allegations against Kumar for violation of Section 17(a) of the Securities Act of 1933 (Securities Act). The Commission also announced that the Court has approved settlements against defendants Choo-Beng Lee (Lee) and Ali T. Far (Far), who were managing members of Far & Lee LLC (Far & Lee), a Delaware limited liability company. Lee was president and Far was managing member of Spherix Capital LLC (Spherix), an unregistered hedge fund investment adviser based in San Jose, California. Lee and Far consented to the entry of a final judgment.
The final judgment to be entered against Lee and Far permanently enjoins them from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act of 1934 (Exchange Act), Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act. It also orders them, jointly and severally, to disgorge $1,335,618.17, representing profits gained and/or losses avoided as a result of the conduct alleged, together with prejudgment interest thereon in the amount of $96,385.52. In addition to disgorgement of profits, the judgment orders a civil penalty on defendants Lee and Far, jointly and severally, representing fifty percent of the trading profits/losses avoided, a discount from a one-time penalty, in recognition of their cooperation.
Separately, on Dec. 16, 2009, Far & Lee and Spherix, now defunct or nearly so, were dismissed from the case in exchange for their agreement to cooperate and to cease doing business. [SEC v. Galleon Management, LP, et al., Civil Action No. 09-CV-8811 (SDNY) (JSR)] (LR-21397)
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