SEC News Digest

ENFORCEMENT PROCEEDINGS

Commission Revokes Registration of Securities of Presidio Oil Company for Failure to Make Required Periodic Filings

On March 22, 2010, the Commission revoked the registration of each class of registered securities of Presidio Oil Company (Presidio Oil) 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, Presidio Oil 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 Presidio Oil Company 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-13 thereunder and revoking the registration of each class of Presidio Oil's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Presidio Oil in In the Matter of Planet Earth Recycling, Inc., et al., Administrative Proceeding File No. 3-13803.

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 Planet Earth Recycling, Inc., et al., Administrative Proceeding File No. 3-13803, Exchange Act Release No. 61636, March 3, 2010. (Rel. 34-61749; File No. 3-13803)

In the Matter of BioKey ID, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in BioKey ID, Inc., Administrative Proceeding No. 3-13798. The Order Instituting Proceedings alleged that BioKey ID, Inc., Bionet Technologies, Inc., Biscayne Apparel, Inc., BizCom U.S.A., Inc., Blackstocks Development Corp. (n/k/a Sunburst Holding Corp.), Bluestone Holding Corp., Brandt Technologies, Inc., Brendle's, Inc., BTR Realty, Inc., and Buckeye Communications, Inc., each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.

The Default Order finds the allegations to be true and revokes the registrations of each class of registered securities of BioKey ID, Inc., Bionet Technologies, Inc., Biscayne Apparel, Inc., BizCom U.S.A., Inc., Blackstocks Development Corp. (n/k/a Sunburst Holding Corp.), Bluestone Holding Corp., Brandt Technologies, Inc., Brendle's, Inc., BTR Realty, Inc., and Buckeye Communications, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61750; File No. 3-13798)

SEC v. Bear, Stearns & Co. Inc., et al.

The Securities and Exchange Commission today announced that the Honorable William H. Pauley III issued an Order on March 15, 2010 approving modifications to the final judgments entered against the twelve firms covered by the Global Research Analyst Settlement.

The final judgments first entered in October 2003 contained an extensive Addendum with provisions mandating structural and other reforms that addressed potential conflicts of interest between equity research analysts and investment banking.

The Global Settlement provided that with respect to any provision that had not been expressly superseded by subsequent rulemaking within five years, it was the expectation of the parties that, "the SEC would agree to an amendment or modification of such term, subject to Court approval, unless the SEC believes such amendment or modification would not be in the public interest."

As set forth in an Aug. 3, 2009 letter to the Court made public in connection with the Court's decision, the Settling Firms "strongly believe[d]" that all existing operative provisions of the Addendum should be eliminated, but the Commission believed that it was in the public interest to retain a number of provisions in their current form or with certain modifications. The Settling Firms consequently did not seek elimination of all of the Addendum's operative provisions, but instead requested specific modifications. The SEC did not oppose the resulting request by the Settling Firms.

In particular, there was no request for modification of the following provisions and firewalls, all of which remain in place under the modified Addendum approved by Judge Pauley:

• Investment banking input into the research budget is prohibited;
• The physical separation of research analysts and investment banking is required;
• Investment banking is prohibited from having input into company-specific coverage decisions;
• Research oversight committees are required to ensure the integrity and independence of equity research;
• Communications between investment banking personnel and research analysts regarding the merits of a proposed transaction or a potential candidate for a transaction are prohibited unless a chaperone from the firm's legal and compliance department is present;
• Research analysts and investment bankers are prohibited from having any communications for the purpose of having research personnel identify specific potential investment banking transactions; and
• Research analysts must be able to express their views to a commitment committee about a proposed transaction outside the presence of investment bankers working on the deal.

The SEC supported the continued retention of these provisions in the Addendum.

The Court approved removing a number of provisions from the Addendum because rules issued by the National Association of Securities Dealers Inc. and New York Stock Exchange addressed the same concerns and provided comparable protections. As a result, the Addendum no longer includes prohibitions against investment banking input into research analyst compensation and the bar against research analysts participating in efforts to solicit investment banking business, among other things.

As noted above, the modified Addendum as ordered by Judge Pauley and supported by the SEC maintained the requirement that a chaperone from legal or compliance be present when investment banking seeks the views of research analysts concerning a proposed transaction or a potential candidate for a transaction. One proposed modification would have allowed investment banking to seek the views of research analysts regarding market or industry trends, conditions, or developments without the requirement of a chaperone, subject to certain limitations including the implementation of controls and training as described in the November 30, 2009 letter to the Court from the Settling Firms. In his March 15, 2010 Order, Judge Pauley did not approve this proposed modification.

As a result of the Court's Order, the Settling Firms remain subject to a number of important restrictions that apply only to Global Settlement firms. Together with the rest of the industry, they also remain subject to all of the provisions of NASD Rule 2711, NYSE Rule 472, and the SEC's Regulation AC that address research analyst conflicts of interest. SEC v. Bear, Stearns & Co. Inc., No. 03 Civ. 2937 (WHP) (S.D.N.Y.); SEC v. J.P. Morgan Securities Inc., No. 03 Civ. 2939 (WHP) (S.D.N.Y.); SEC v. Lehman Brothers, Inc., No. 03 Civ. 2940 (WHP) (S.D.N.Y.); SEC v. Merrill Lynch, Pierce, Fenner & Smith Incorporated, No. 03 Civ. 2941 (WHP) (S.D.N.Y.); SEC v. U.S. Bancorp Piper Jaffray, Inc., No. 03 Civ. 2942 (WHP) (S.D.N.Y.); SEC v. UBS Securities LLC, f/k/a UBS Warburg LLC, No. 03 Civ. 2943 (WHP) (S.D.N.Y.); SEC v. Goldman, Sachs & Co., No. 03 Civ. 2944 (WHP) (S.D.N.Y.); SEC v. Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc., No. 03 Civ. 2945 (WHP) (S.D.N.Y.); SEC v. Credit Suisse First Boston LLC, f/k/a Credit Suisse First Boston Corporation, No. 03 Civ. 2946 (WHP) (S.D.N.Y.); SEC v. Morgan Stanley & Co. Incorporated, No. 03 Civ. 2948 (WHP) (S.D.N.Y.); SEC v. Deutsche Bank Securities, Inc., No. 04 Civ. 6909 (WHP) (S.D.N.Y.); SEC v. Thomas Weisel Partners LLC, No. 04 Civ. 6910 (WHP) (S.D.N.Y.)] (LR-21457)

Commission Obtains Asset Freeze and Appointment of a Receiver in Alleged $3.5 Million Life Settlement Fraud

On March 19, 2010, the Securities and Exchange Commission filed civil securities fraud charges in U.S. District Court in Houston, Texas, against Charles C. Jordan. (Jordan), Kelly T. Gipson (Gipson) and American Settlement Associates, LLC (ASA). The charges stem from an alleged offering fraud involving investments in a life settlement. On the same day, the U.S. District Court for the Southern District of Texas granted the SEC's request and issued an order temporarily freezing assets of the Defendants and appointing a receiver to take control of the assets and operations of American Settlement Associates, LLC.

According to its complaint, the Commission alleges that Charles C. Jordan, Kelly T. Gipson, and ASA sold fractional ownership interests in a particular life settlement policy to a specific group of investors (Policy), and then failed, without warning or disclosure, to use investors' money to cover the future premium payments on the Policy. Instead of reserving investor funds to pay future Policy premiums, Defendants commingled the funds and used them to pay Defendants' business and personal expenses and to support lavish lifestyles, including payments for jewelry, casinos and other travel and entertainment. The complaint alleges that Defendants enriched themselves with approximately $2.3 million of investor funds. As a result, the Policy lapsed on March 9, 2010. The Commission further alleges that Jordan and Gipson misled investors by falsely claiming that the investments were protected by a bonding company, but failed to disclose to investors significant risks associated with the purported bonding company, including the fact that it is located offshore and is not licensed to provide insurance in the U.S.

The complaint alleges that Jordan, Gipson and ASA violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks preliminary and permanent injunctions, disgorgement together with prejudgment interest, and civil penalties. The Commission's complaint also seeks an asset freeze against the Defendants, and the appointment of a receiver to recover and conserve assets for the benefit of defrauded investors.

The Commission acknowledges the cooperation and assistance of the Houston Office of the Internal Revenue Service and the Alberta Securities Commission. [SEC v. American Settlement Associates, LLC, Charles C. Jordan and Kelly T. Gipson, Case No. 4:10-cv-00912 (S.D. Tex., Houston Division)] (LR-21458)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the International Securities Exchange (SR-ISE-2010-20) relating to fee changes 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 22. (Rel. 34-61720)

A proposed rule change filed by the NYSE Arca (SR-NYSEArca-2010-13) to accommodate cabinet trades that take place below $1 per option contract until July 1, 2010 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 March 22. (Rel. 34-61727)

A proposed rule change filed by the International Securities Exchange to adopt a fee credit (SR-ISE-2010-18) 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 March 22. (Rel. 34-61731)

A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2010-027) to amend CBOE Rule 31.85 to, among other things, prohibit broker discretionary voting on the elections of directors 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 March 22. (Rel. 34-61732)

A proposed rule change filed by the Chicago Stock Exchange (SR-CHX-2010-06) to amend CHX Article 8 Rule 14 to, among other things, prohibit broker discretionary voting on the elections of directors 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 March 22. (Rel. 34-61733)

Proposed Rule Change

NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-14) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the listing of United States Brent Oil Fund, LP pursuant to NYSE Arca Equities Rule 8.300. Publication is expected in the Federal Register during the week of March 22. (Rel. 34-61721)

Approval of Proposed Rule Change

The Commission approved a proposed rule change, as modified by Amendment No. 1, (SR-NASDAQ-2010-007) submitted pursuant to Section 19(b)(1) and Rule 19b-4 under the Securities Exchange Act of 1934 by The NASDAQ Stock Market relating to the elimination of a Market Maker requirement for each option series. Publication is expected in the Federal Register during the week of March 22. (Rel. 34-61735)

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