Fee Rate Advisory #5 for Fiscal Year 2010
Pursuant to Section 31 of the Securities Exchange Act of 1934, the Commission has determined that a mid-year adjustment to the Section 31 transaction fee rate is necessary. Effective on April 1, 2010, the Section 31 transaction fee rate will be set at $16.90 per million.
The Exchange Act requires the Commission to adjust the Section 31 fee rate if it estimates that the baseline estimate of dollar volume that was used to calculate the annual adjusted rate for fiscal year 2010 is reasonably likely to be 10 percent (or more) greater or less than the actual dollar volume of securities transactions for fiscal year 2010. The Commission determined the mid-year adjustment using a methodology developed in consultation with the Congressional Budget Office and the Office of Management and Budget, as required by Section 31(j)(2) of the Exchange Act. This methodology used market projections based on the most recent information on dollar volume of securities transactions thus far in fiscal year 2010. A copy of the Commission's order and calculation methodology is available at http://www.sec.gov/rules/other/2010/34-61605.pdf.
This rate change does not apply to the Section 31 assessment on security futures transactions, which will remain at the current rate of $0.0042 per round turn transaction.
The Office of Interpretation and Guidance in the Commission's Division of Trading and Markets is also available for questions on Section 31 at (202) 551-5777, or by e-mail at firstname.lastname@example.org. In addition, useful guidance on Section 31 can be found on the SEC's website at http://www.sec.gov/divisions/marketreg/sec31feesbasicinfo.htm and http://www.sec.gov/divisions/marketreg/sec31info.htm.
The Commission will announce the fiscal year 2010 rates for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e), 14(g), and 31 of the Exchange Act no later than April 30, 2010. Those rates will become effective on Oct. 1, 2010, or 30 days after the date on which the Commission receives its fiscal year 2011 regular appropriation, whichever date comes later. (Press Rel. 2010-29)
SEC and IRS Agree to Work More Closely Regarding Municipal Bond Enforcement
The Securities and Exchange Commission and the Internal Revenue Service today announced that the two agencies agreed to work more closely to monitor and regulate the municipal bond market and industry.
SEC Chairman Mary Schapiro and IRS Commissioner Doug Shulman today signed a Memorandum of Understanding (MOU) designed to improve compliance with SEC and IRS rules and regulations related to municipal securities. The muni bond market currently totals about $2.8 trillion in outstanding securities and continues to grow in complexity and size.
"Through cooperative relationships like this, we are better positioned to protect investors and ensure they are getting the information they need when investing in municipal securities," Schapiro said.
"This memorandum reflects the commitment both agencies have in using all means possible to ensure the municipal bond market operates in accordance with all the laws that govern it," Shulman said.
The SEC and IRS will work cooperatively to identify issues and trends related to tax-exempt bonds in the municipal securities industry and to develop strategies to enhance performance of their respective regulatory responsibilities. To support this effort, the two agencies will work through a standing Tax Exempt Bond/Municipal Securities Committee to discuss policy, procedures and compliance issues.
The SEC and IRS will also share information as appropriate regarding market risks, practices and events related to municipal securities, among other things. In addition, the two agencies will collaborate on educational and other types of outreach efforts. (Press Rel. 2010-30)
Initial Decision Barring Anthony Martin Declared Final
The Commission has declared final the initial decision of an administrative law judge barring Anthony Martin from association with any broker, dealer, or investment adviser based on his conviction of criminal violations of the federal securities laws for his participation in a pump-and dump scheme. The initial decision found that, on July 2, 2009, Martin was found guilty by a jury of conspiracy to commit securities fraud in violation of 18 U.S.C. § 371, and securities fraud in violation of 15 U.S.C. §§ 78j(b), 78ff, and 17 C.F.R. § 240.10b-5. On Dec. 10, 2009, a final judgment was imposed on Martin (the district court deferred the determination of restitution to be paid by Martin for ninety days), he was sentenced to fifty-seven months in prison and two years supervised release. United States v. Dennis Michael Nouri, Case No. 1:07-CR-1029-DC (S.D.N.Y. Dec. 17, 2009).
The initial decision found that over a period of five months, Martin received kickbacks from a company in return for making multiple recommendations of the company's stock to multiple buyers. The alleged purpose of Martin's recommendations was to create a false sense of market interest in the company's stock. As a result of his recommendations, he caused at least one buyer to suffer a significant financial loss. (Rels. 34-61610; IA-2989; File No. 3-13588)
In the Matter of Damir Lukovic
An Administrative Law Judge has issued an Order Making Findings and Imposing Sanction by Default in Damir Lukovic, Admin. Proc. No. 3-13686, that finds the allegations in the Order Instituting Proceedings to be true. In SEC v. Thompson Price Holding Inc., No. 07-cv-9525 (RMB/KNF) (S.D.N.Y. Nov. 3, 2009), Damir Lukovic (Lukovic) was permanently enjoined from violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rule 10b-5. Based on the injunction and public interest considerations, Lukovic was barred from association with any broker or dealer. Rel. 34-61621; File No. 3-13686)
In the Matter of Grant Ivan Grieve a/k/a Gad Grieve
On March 2, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against Grant Ivan Grieve, a/k/a Gad Grieve. The Division of Enforcement (Division) alleges that the United States District Court for the Southern District of New York entered a permanent injunction by default against Grieve on Jan. 27, 2010 in the civil action entitled Securities and Exchange Commission v. Grant Ivan Grieve, et al., Civil Action Number 09-Civ-1198. The injunction enjoined Grieve from violating 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 Section 206(4) of the Investment Advisers Act of 1940 (Advisers Act) and Rule 206(4)-8 thereunder.
According to the Division, the Commission's complaint in the civil action alleges that Grieve is the ultimate managing principal of New York-based investment advisers Finvest Asset Management, LLC (FAM) and Finvest Fund Management, LLC (FFM), which manage and advise, respectively, two hedge funds: Finvest Primer, L.P. (Primer Fund) and Finvest Yankee, L.P. (Yankee Fund). The complaint alleges that Grieve, through FAM, fabricated and disseminated false financial information for Primer Fund that was "certified" by a sham back-office administrator and phony auditing firm that Grieve himself created. The complaint also alleges that Grieve, through FAM and FFM, provided current and prospective investors in Primer Fund and Yankee Fund with false monthly account statements, newsletters, and fact sheets that materially overstated the funds' performance and assets. The complaint further alleges that, beginning in late 2008, Grieve engaged in similar misconduct overseas, including luring new investors and/or placating existing investors with counterfeit documents. According to related court filings by the Commission, Grieve, FAM, and FFM attracted more than $50 million in investments between Primer Fund and Yankee Fund.
The Order institutes administrative proceedings to determine what, if any, remedial sanctions against Grieve are appropriate pursuant to Section 203(f) of the Advisers Act. The Order directs an Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of the Order. (Rel. IA-2990; File No. 3-13799)
Commission Orders Hearings on Registration Revocation Against Ten Public Companies for Failure to Make Required Periodic Filings
The Commission today 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 ten companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the ten 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 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. 34-61622; File No. 3-13798)
In the Matter of Warrior Fund LLC
On March 2, 2010, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (Order). The Order finds that Warrior Fund LLC willfully violated Section 15(a)(1) by operating as an unregistered broker/dealer through its master/sub-account arrangement with day traders. Warrior earned improper transaction-based compensation for its services in two ways: (1) by passing along to the day traders marked up trading fees charged by Warrior's broker/dealer, and (2) by accepting rebates from Warrior's broker/dealer based on Warrior's total volume of trading.
Based on the above conduct, the Order finds that Warrior willfully violated Section 15(a)(1), orders Warrior to cease and desist from committing or causing any violations or future violations of Section 15(a)(1), censures Warrior Fund LLC, and orders Warrior to pay $124,901 in disgorgement, $21,483.21 in pre-judgment interest, and a $75,000 civil money penalty. Warrior Fund LLC consented to the issuance of the Order without admitting or denying any of the findings except for the Commission's jurisdiction over Warrior and the subject matter. (Rel. 34-61625; File No. 3-13800)
In the Matter of S4 Capital, LLC and Sharath Sury
On March 2, 2010, the Commission issued an Order Making Findings and Imposing a Cease-and-Desist Order and Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934, Sections 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940 against Sharath Sury (Sury), the former Chief Executive Officer of S4 Capital, LLC, and an Order Making Findings and Imposing a Cease-and-Desist Order and Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933, Section 21C of the Securities Exchange Act of 1934, Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940 against S4 Capital, LLC (S4 Capital), an investment adviser registered with the Commission.
The Orders against Sury and S4 Capital find that from December 2005 to February 2006, Sury caused an unregistered hedge fund managed by S4 Capital to engage in undisclosed, unhedged, high-risk trading, primarily in Google stock options, which resulted in substantial losses to the fund. The Orders further find that during this period, Sury failed to disclose to investors in the hedge fund with whom S4 Capital had investment advisory agreements, that Sury was engaging in risky, unhedged trading that was contrary to the investment strategy described in the hedge fund's private placement memorandum and their personal investment objectives and that the fund was suffering mounting losses. The Orders further find that Sury also sent certain investors emails that lulled them into believing that their investments were profitable and failed to disclose the risky trading and related losses. The Orders further find that Sury's undisclosed high-risk trading caused the hedged fund to lose all of its assets, totaling approximately $12 million, in about two months time.
The Orders find that as a result of this conduct, S4 Capital and Sury willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The Orders further finds that S4 Capital willfully violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and that Sury willfully aided and abetted and caused S4 Capital's violations of Sections 206(1) and 206(2) of the Advisers Act.
Based on the above, the Order against Sury: (1) orders Sury to cease and desist from committing or causing any violations and any future violations 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; (2) bars Sury from association with any broker, dealer, or investment adviser and is prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser, or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, with the right to reapply for association after two years to the appropriate self-regulatory organization, or if there is none, to the Commission; and (3) orders Sury to pay a civil penalty in the amount of $130,000 to the United States Treasury. The Order against S4 Capital: (1) orders S4 Capital to cease and desist from committing or causing any violations and any 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.; (2) censures S4 Capital; and (3) orders S4 Capital to undertake to wind down its operations and to file a Form ADV-W within six months from the date of the entry of the Order Against S4 Capital and to ensure that Sury will have no association with S4 Capital or any entities controlled by it during the period that Sury is barred; and (4) does not impose a civil penalty based on S4 Capital's sworn representations in its statement of financial condition. Sury and S4 Capital consented to the issuance of the orders against them without admitting or denying any of the findings in the Orders, except as to the Commission's jurisdiction over them and the subject matter of the proceedings, which they admitted. (Rels. 33-9110; 33-9111; 34-61623; 34-61624; IA-2991; IA-2992; IC-29165; IC-29166; File No. 3-13683)
SEC Charges Orange County Investment Adviser and Its Owner for Stealing Client Funds
The Securities and Exchange Commission yesterday charged Newport Beach-based former registered investment adviser Envision Direct L.L.C., and its owner, Gary R. Headding, for defrauding clients, including a young college student who invested her mother's life insurance policy proceeds with Headding. Envision Direct, a firm that managed almost $40 million in funds in 2007, de-registered in 2009 immediately after the Commission's investment advisory examination staff alerted Headding about a regulatory examination of the firm.
The Commission's complaint, filed in the federal court for the Central District of California, alleges that between April 2007 and May 2008, Headding stole at least $274,000 from two clients and used the monies for his personal purposes, including funding his own individual retirement account. The SEC alleges that although clients gave Headding discretionary authority to trade in their accounts, they did not authorize him to squander their money for his benefit. Headding used tactics such as obtaining clients' on-line passwords to effectuate his fraud. The Commission's complaint further alleges that Envision Direct and Headding withdrew inflated advisory fees of nearly $50,000 from three clients. Despite its agreement to charge advisory fees of no more than 2.0% of the asset value, Envision Direct extracted as much as 12.9% in unauthorized fees from some clients.
The Commission alleges that Envision and Headding violated Sections 206(1) and 206(2) of the Investment Advisers Act. The Commission further alleges that Envision violated Section 204 of the Advisers Act and Rule 204-2 thereunder for failure to maintain books and records and that Headding aided and abetted those violations. The Commission seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties. [SEC v. Envision Direct L.L.C. and Gary R. Headding, United States District Court for the Central District of California, Civil Action No. SACV 10-241 JVS (MLGx)] (LR-21427)
INVESTMENT COMPANY ACT RELEASES
First Trust/Aberdeen Global Opportunity Income Fund, et al.
A notice has been issued giving interested persons until March 23, 2010 to request a hearing on an application filed by First Trust/Aberdeen Global Opportunity Income Fund, et al. under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act, and Rule 19b-1 under the Act. The order would permit certain registered closed-end management investment companies to make periodic distributions of long-term capital gains (i) with respect to their common stock as part of a managed distribution plan as frequently as twelve times each year, and (ii) with respect to their preferred stock as frequently as required by the terms of such preferred stock. (Rel. IC-29163 - February 26)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-OCC-2009-20) submitted under Rule 19b-4 by The Options Clearing Corporation to clarify that the term "fund share" includes any option or any futures contract on ETFS Physical Swiss Gold Shares and ETFS Physical Silver Shares. Publication is expected in the Federal Register during the week of March 1. (Rel. 34-61591)
Proposed Rule Change
BATS Exchange filed a proposed rule change (SR-BATS-2010-001) to offer certain BATS Exchange data products pursuant to Rule 19b-4 under the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 1. (Rel. 34-61592)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change (SR-NYSE-2010-13) filed by the New York Stock Exchange to extend the pilot program in relation to certain of its continued listing standards 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 March 1. (Rel. 34-61609)
SECURITIES ACT REGISTRATIONS
RECENT 8K FILINGS