RULES AND RELATED MATTERS
SEC Proposes Revisions to Rules Governing Offerings of Asset-Backed Securities
On April 7, 2010, the Securities and Exchange Commission voted to propose revisions to Regulation AB and other rules regarding the offering process, disclosure and reporting for asset-backed securities. The proposed amendments would revise the shelf offering process and eligibility criteria for asset-backed securities and require asset-backed issuers to provide enhanced disclosures. Public comments on this proposal must be received by the Commission within 90 days after its publication in the Federal Register. Rels. 33-9117; 34-61858; File No. S7-08-10)
Commission Revokes Registrations of Securities of Advanced Mineral Technologies, Inc. for Failure to Make Required Periodic Filings
On April 9, 2010, the Commission instituted a settled proceeding pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act) revoking the registration of each class of registered securities of Advanced Mineral Technologies, Inc. (AMTO) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings of the order, except as to jurisdiction, which it admitted, AMTO consented to the entry of an Order Instituting Proceedings, Making Findings, and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 finding that it had failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of AMTO's securities pursuant to Section 12(j) of the Exchange Act.
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 . . . .
(Rel. 34-61880; File No. 3-13854)
SEC Charges New Hampshire-Based Operators of Private Lending Program With Investment Fraud
The Securities and Exchange Commission today charged two individuals and the two entities that they operated out of Meredith, New Hampshire in connection with a fraudulent Ponzi scheme involving a purported private lending program. The Commission's complaint alleges that Scott D. Farah of Meredith, New Hampshire, and Donald E. Dodge of Belmont, New Hampshire, acting through their businesses, Financial Resources Mortgage, Inc. and C L and M, Inc., defrauded at least $20 million from at least 150 investors beginning as early as 2005.
The Commission's complaint, filed in the United States District Court for the District of New Hampshire, alleges that the scheme involved raising investor money to fund purported loans to specific real estate construction projects and other businesses. According to the Commission's complaint, Scott Farah and his mortgage brokerage company, Financial Resources Mortgage, Inc. offered investors annual returns of 12% to 20% and falsely represented to investors that invested monies would be segregated and invested in the specific project that the investors had agreed to fund. The complaint alleged that Donald Dodge and his unlicensed loan servicing company, C L and M, Inc., serviced all loans brokered through Scott Farah and Financial Resources Mortgage, Inc. In reality, according to the Commission's complaint, the Defendants did not segregate investor money and used it for a variety of purposes not authorized by the offering documents, including paying returns to earlier investors, paying personal expenses, paying operating expenses of Financial Resources Mortgage, Inc. and C L and M, Inc., and donating money to the Center Harbor Christian Church, a church founded and owned by Scott Farah's father, and of which Scott Farah was treasurer. The complaint names the church as a relief defendant, and seeks the return of investor funds diverted to it.
The Commission's complaint alleges that defendants Scott D. Farah and Financial Resources Mortgage, Inc. violated 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, and that Defendants Dodge and C L and M, Inc. violated Section 17(a) of the Securities Act of 1933 and violated, or in the alternative, aided and abetted Farah's and/or Financial Resources Mortgage, Inc.'s violations of, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission seeks, among other relief, the entry of permanent injunctions, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against the defendants. The Commission also charged as a relief defendant the Center Harbor Christian Church and seeks from it disgorgement plus prejudgment interest of investor funds that were diverted to it.
The Commission acknowledges the assistance of the United States Attorney's Office for the District of New Hampshire and New Hampshire Bureau of Securities Regulation. [SEC v. Scott D. Farah, Donald E. Dodge, Financial Resources Mortgage, Inc., and C L and M, Inc., as Defendants, and Center Harbor Christian Church, as Relief Defendant, 1:10-CV-00135 (District of New Hampshire] (LR-21482)
Approval of Proposed Rule ChangeThe Commission has issued an order approving a proposed rule change filed by The NASDAQ Stock Market, as modified by Amendment No. 1 (SR-NASDAQ-2010-025) to amend the By-laws of The NASDAQ OMX Group, Inc. Publication of this notice is expected in the Federal Register during the week of April 12. (Rel. 34-61876)
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