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COMMISSION ANNOUNCEMENTSSEC Proposes Large Trader Reporting SystemThe Securities and Exchange Commission today voted to propose the creation of a large trader reporting system that would enhance its ability to identify large market participants, collect information on their trades, and analyze their trading activity. The SEC is proposing that large traders be required to identify themselves to the Commission, which would then assign each trader a unique identification number. Large traders would provide this number to their broker-dealers, who would be required to maintain transaction records for each large trader and report that information to the SEC upon request. The SEC's proposal is the latest in an ongoing effort to promote fairness and efficiency in the markets. Other rules proposed recently to increase fairness and efficiency include a proposed ban on marketable flash orders, a proposal to bring greater transparency to dark pools of liquidity, and a proposal to prohibit unfiltered access to markets. "This rule is designed to strengthen our oversight of the markets and protect investors in the process," said SEC Chairman Mary L. Schapiro. "It would give us prompt access to trading information from large traders so we can better analyze the data and investigate potentially illegal trading activity." Under the SEC's proposal, traders who engage in substantial levels of trading activity would be required to identify themselves to the SEC through a filing with the Commission. A "large trader" would be generally defined as a firm or individual whose transactions in exchange-listed securities equal or exceed two million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month. Public comments on the proposal should be received by the Commission within 60 days after its publication in the Federal Register. FACT SHEET Background Rapid technological advances have continued to produce fundamental changes in the securities markets. In fact, the SEC frequently sees new types of market participants, new trading strategies, and new products. Today, trades are transacted in milliseconds and dispersed among many trading centers. These changes have allowed large market participants to employ sophisticated trading methods to trade electronically in huge volumes at very fast speeds. In light of these changes, the Commission believes it is now appropriate to consider exercising its authority under Section 13(h) of the Securities Exchange Act of 1934 to establish a large trader reporting system. Goal of the Proposal The proposed large trader reporting system is intended to:
The need for the Commission to consider monitoring these entities is heightened by the fact that large traders, including high-frequency traders, appear to be playing an increasingly prominent role in the securities markets. Requirements under the Proposal The proposed rule provides that: Filing a Form: Traders who engage in substantial levels of trading activity would be required to identify themselves to the SEC by filing a form with the Commission. A "large trader" would generally be defined as a person, including a firm or individual, whose transactions in exchange-listed securities equal or exceed (i) two million shares or $20 million during any calendar day, or (ii) 20 million shares or $200 million during any calendar month. Getting an Identification Number: The SEC then would assign each large trader a unique large trader identification number (LTID), which would allow the agency to efficiently identify and analyze trading activity by the large trader. A large trader would be required to disclose to its broker-dealers its LTID and highlight all of the accounts held by that broker-dealer through which the large trader trades. Recordkeeping and Reporting: The proposed rule would require broker-dealers to maintain and report data that is largely similar to the information covered by the Commission's Electronic Blue Sheets ("EBS") system -- the system the SEC currently uses to collect transaction data from broker-dealers. The only additional items that broker-dealers would be required to maintain and report are the LTID and the time a transaction occurs. The proposed rule contemplates that broker-dealers would use the same technology that they use under the EBS system. Ready Access to Data: The proposed rule would require transaction data to be available to the SEC upon request the morning after the day on which the transactions were effected. Such next day SEC access could be used to promptly reconstruct market activity and perform other trading analyses, as well as to assist in investigations of potential manipulative, abusive, or otherwise-illegal trading activity. In addition, the proposed rule would require broker-dealers to monitor whether their customers meet the threshold that define a "large trader" (based on transactions completed at the broker-dealer) in order to facilitate compliance by their customers with the requirement to identify themselves as large traders to the Commission. Recent SEC Actions on Market Structure Today's actions are part of a larger effort by the Commission to ensure that the markets are fair, transparent and efficient. Among other things, the Commission already has proposed rules that would:
The Commission also has sought public comment about a concept release on a wide range of topics concerning the equity markets to help facilitate the SEC's ongoing review of market structure issues. What's Next? The Commission will seek public comment and data on a broad range of issues relating to the large trader reporting system, including the costs and benefits associated with the proposal. After careful review of comments, the Commission will consider any further action to take on the proposal. (Press Rel. 2010-55) SEC Proposes New Measures to Protect Investors in Options MarketsThe Securities and Exchange Commission today proposed to put in place two investor protection measures in options markets that currently exist in stock markets. The SEC's proposal would prohibit an options exchange from unfairly impeding access to displayed quotations, and would limit the fees that an options exchange can charge investors and others wishing to access a quote on an exchange. "This rule is designed to increase transparency in the markets and promote greater fairness and efficiency," said SEC Chairman Mary L. Schapiro. "It is important that investors have the ability to access the best prices available regardless of the exchange that is posting the quotation. And, those investors should have a better understanding of the true cost of executing a transaction." The SEC's proposal is designed to address these issues by extending the same measures to listed options that currently apply only to transactions involving exchange-listed stocks. By expanding the protections that are available in the options markets, the SEC's proposal would help provide investors with the ability to achieve best execution for their orders, and remove barriers that an exchange might erect to keep non-members from accessing a quotation on the exchange. Public comments on the proposal should be received by the Commission within 60 days after its publication in the Federal Register. FACT SHEET Background An option is an agreement in which an investor pays for the right, but not an obligation, to buy or sell a stock - or other asset - at a particular price, up to a particular date. If the investor decides not to go through with the sale or purchase, the investor only loses the amount of money he or she paid to buy the option. When investors seek to buy an option that is listed on an exchange, they need to be able to readily determine the total cost of executing a particular transaction. In practice, the displayed quotation on an options exchange, however, may not reflect the actual amount a person will pay to buy or sell the option. Instead, the person often incurs additional costs to conduct the transaction, including the cost of accessing the exchange's quotation. Currently, there are many different fees across options exchanges, across different categories of options participants, and across different product types. As such, it is difficult for anyone to estimate the total cost of executing against a quotation for a particular transaction. In recent years, several of the options exchanges have introduced a "Make or Take" fee model for certain classes of options. Under this model, a market participant who displays a quotation on an exchange is entitled to receive a rebate from the exchange if another market participant executes against that quotation - that is, if someone chooses to buy or sell at the quoted price. At the same time, under this model, the exchange can charge a "Take" fee to the individual who executes against such displayed quotations. This fee, which is a type of access fee, is not a part of the displayed quotation so investors are not able to determine the actual cost of conducting the transaction. In July 2008 the Commission received a Petition for Rulemaking to Address Excessive Access Fees in the Options Markets from Citadel Investment Group, L.L.C. In the petition, the Commission was asked to create a rule that would limit the "Take" fees that options exchanges may charge non-members to obtain access to quotations. In response to this petition, the Commission received comment on the issue of access fees, as well as other proposals concerning access fees from a self-regulatory organization. In addition, the Commission received several related comment letters in response to a proposal to amend Rule 602 of Regulation NMS to effectively ban marketable "flash orders" in NMS securities. Those letters discussed the issue of access fees in listed options in the context of flash orders. The Commission has considered these comments in developing its options access proposal. Extending Standards for Indirect Access In an effort to promote fair and efficient access to quotations, the SEC previously adopted Rule 610(a) to prohibit exchanges from imposing unfairly discriminatory terms. This anti-discrimination rule is designed to remove barriers that an exchange might erect to keep non-members from accessing a quotation on the exchange. However, this rule does not apply to quotations in listed options. As such, the proposed changes would extend the application of Rule 610(a) to listed options, to further the objective of fair and efficient access to an option exchange's quotations. Limits on Access Fees In addition to extending the non-discriminatory standard to listed options, the Commission also is considering a proposal that would set limits on the fees that can be charged for accessing an exchange's best bid or offer in a listed option. In particular, the proposed access fee limit seeks to:
The proposed access fee limit for options is consistent with the maximum access fee limit currently in place for exchange-listed stocks under Rule 610. Under the proposed rule, the Commission would prohibit a national securities exchange from imposing, or permitting to be imposed, any access fees that exceeds $0.30 per contract for the execution of an order. The proposed rule would apply to any fee based on the execution of an incoming order against an exchange's best bid or offer. Conversely, fees not triggered by the execution of orders against such quotations would not be included. Recent SEC Actions on Market Structure Today's actions are part of a larger effort by the Commission to ensure that the markets are fair, transparent and efficient. Among other things, the Commission already has proposed rules that would:
The Commission also has sought public comment about a concept release on a wide range of topics concerning the equity markets to help facilitate the SEC's ongoing review of market structure issues. What's Next? The proposal seeks public comment and data on a broad range of issues relating to access to quotations in listed options and the proposed fee cap, including the costs and benefits associated with the proposal. After careful review of comments, the Commission will consider any further action to take on the proposal. (Press Rel. 2010-56) SEC Issues Notice of Proposed Plan of Distribution and Opportunity for Comment in Haidar Capital Management Market Timing CaseThe Commission announced today that it has given notice, pursuant to Rule 1103 of the Securities and Exchange Commission's Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. S 201.1103, that the Division of Enforcement has filed a proposed plan (Distribution Plan) for the distribution of the Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 in the matter of Haidar Capital Management, LLC, et al. (Haidar), Admin. Proc. File No. 3-12678. The Fair Fund is comprised of $4.58 million paid by Haidar, plus accumulated interest, less any federal, state, or local taxes on the interest. The Distribution Plan provides for distribution of the Fair Fund to affected mutual funds that were harmed by deceptive market timing from 2001 through 2003. The Commission's Administrative Order alleges that Respondents Haidar Capital Management and Haidar Capital Advisors used multiple trading entities and accounts to hide their identities in connection with their market timing trading. Interested parties may print a copy of the Distribution Plan from the Commission's public website, http://www.sec.gov. Interested parties may also obtain a written copy of the Distribution Plan by submitting a written request to Stephen Webster, Assistant Regional Director, United States Securities and Exchange Commission, 801 Cherry Street, 19th Floor, Fort Worth, Texas 76102. All persons who desire to comment on the Distribution Plan may submit their comments, in writing, within 30 days of the date of the notice: by sending a letter to the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-1090; by using the Commission's Internet comment form (http://www.sec.gov/litigation.admin.shtml); or by sending an e-mail to rule-comments@sec.gov. Comments submitted by email or via the Commission's website should include "Administrative Proceeding File Number 3-12678" in the subject line. Comments received will be available to the public. Persons should only submit information that they wish to make publicly available. For more information, see Securities Act of 1933 Release No. 8820 and News Digest No. 2007-129 (July 6, 2007). (Rel. 34-61897; File No. 3-12678) ENFORCEMENT PROCEEDINGSIn the Matter of Ronald BowskyOn April 13, 2010, 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 Ronald Bowsky. The Order finds that Bowsky was a sales agent for 3001 AD, LLC, a North Carolina company based in Delray Beach, Florida, from 2000 through 2005, and that during that time he solicited investors in 3001 AD and received commissions based on his sales of the securities of 3001 AD and its affiliates. The Order also finds that on Dec. 4, 2009 Bowsky pled guilty to one count of conspiracy to commit mail and wire fraud committed during his time with 3001 AD, for which the United States District Court for the Southern District of Florida sentenced him to 58 months in prison and three years of supervised release, and ordered him to pay $1,751,709.81 in restitution on Feb. 17, 2010. Based on the above, the Order bars Bowsky from association with any broker or dealer. Bowsky consented to the issuance of the Order without admitting or denying any of the findings in the Order except for his conviction and sentencing, which he admitted. (Rel. 34-61893; File No. 3-13858) Commission Denies in Part Motion of John Gardner Black and Devon Capital Management to Vacate Bar from Association and Revocation of RegistrationThe Commission has denied the motion of John Gardner Black and Devon Capital Management, which Black controlled, to vacate a Commission order imposed in 1998 with Black's consent. The order barred Black from associating with any broker, dealer, municipal securities dealer, investment adviser or investment company and revoked Devon's registration as an investment adviser. Black and Devon argued that certain changes in accounting practices removed the factual grounds for the imposition of sanctions. The Commission rejected the Petitioners' motion by noting that the administrative proceeding against them was based on a district court injunction that had been entered by consent, and that they remained bound by the allegations in the injunctive complaint unless and until the district court modifies the injunction. The Commission noted further that it has a "strong interest" in the finality of its settlement orders. Although the Commission denied Black's motion to vacate his bar from associating with an investment adviser or an investment company, it vacated a portion of the order barring Black from associating with a broker, dealer, or municipal securities dealer. The Commission did so "in light of precedent issued subsequent to the Settled Order questioning the validity of so-called 'collateral bars' such as those involved here." (Rel. IA-3015; File No. 3-9599) Commission Revokes Registration of Securities of Ultimate Security Systems Corp. for Failure to Make Required Periodic FilingsOn April 14, 2010, the Commission revoked the registration of each class of registered securities of Ultimate Security Systems Corp. (Ultimate Security) 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, Ultimate Security 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 Ultimate Security Systems Corp. 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 Ultimate Security's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Ultimate Security in In the Matter of Ultimate Security Systems Corp., Administrative Proceeding File No. 3-13829. 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 Ultimate Security Systems Corp., Administrative Proceeding File No. 3-13829, Exchange Act Release No. 61765 (March 23, 2010). (Rel. 34-61898; File No. 3-13829) In the Matter of Aspen Group Resources Corp.On April 14, 2010, an Administrative Law Judge issued an Order Making Findings and Revoking the Registrations of Securities by Default as to Aspen Group Resources Corp., Desert Health Products, Inc., Equalnet Communications Corp., and Geneva Steel Holdings Corp. in Aspen Group Resources Corp., Admin. Proc. 3-13824. The Commission had issued Orders Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act) as to Respondents Orderpro Logistics, Inc. (n/k/a Securus Renewable Energy, Inc.), Commercial Concepts, Inc., and Sepragen Corp. on March 30, and April 6, 2010. A final Respondent, Trinity Energy Resources, Inc., has submitted a signed Offer of Settlement. The Default Order finds that each of the four non-settling Respondents failed to comply with Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 13a-13 or 13a-16 because they failed to make required periodic filings with the Commission for a number of years. Based on these findings, the Default Order revoked the registration of each class of registered securities of each non-settling Respondent. (Rel. 34-61899; File No. 3-13824) Commission Revokes Registration of Securities of Trinity Energy Resources, Inc. for Failure to Make Required Periodic FilingsOn April 14, 2010, the Commission revoked the registration of each class of registered securities of Trinity Energy Resources, Inc. (TRGC) 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, TRGC 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 Trinity Energy Resources, Inc. 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 TRGC's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against TRGC in In the Matter of Aspen Group Resources Corp., et al., Administrative Proceeding File No. 3-13824. 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 Aspen Group Resources Corp., et al., Administrative Proceeding File No. 3-13824, Exchange Act Release No. 61740 (March 19, 2010). (Rel. 34-61900; File No. 3-13824) In the Matter of Donald CunninghamAn Administrative Law Judge has issued an Order Making Findings and Imposing Sanction by Default (Default Order) in Administrative Proceeding No. 3-13785, Donald Cunningham. The Order Instituting Proceedings (OIP) alleged that, on Jan. 14, 2010, the U.S. District Court for the Southern District of New York issued a permanent injunction against Cunningham. According to the OIP, the injunction bars Cunningham from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Default Order finds the allegations to be true. It concludes that, pursuant to Section 15(b) of the Securities Exchange Act of 1934, it is in the public interest to bar Cunningham from association with any broker or dealer. (Rel. 34-61901; File No. 3-13785) SEC v. Trevor G. Cook, Patrick J. Kiley, et al.The Securities and Exchange Commission announced that on April 13, 2010, the Honorable James M. Rosenbaum of the United States District Court for the District of Minnesota accepted a guilty plea by Minneapolis-area resident Trevor G. Cook to one count of mail fraud and one count of tax evasion for his role in a $190 million foreign currency trading scheme involving at least 1,000 investors. For his crimes, Cook faces a potential maximum penalty of 20 years in federal prison on the mail fraud charge and five years on the tax evasion charge. His sentence will be determined at a future date. The U.S. Attorney's Office for the District of Minneapolis filed criminal charges against Cook on March 30, 2010. Cook is one of the defendants in a pending civil injunctive action filed by the SEC on Nov. 23, 2009 in the United States District Court for the District of Minnesota. The SEC's action against Cook arises out of the same facts that are the subject of the criminal case. The SEC's complaint alleges that from at least July 2006 through at least July 2009, Cook and co-defendant Patrick J. Kiley of Minneapolis, Minnesota, raised at least $190 million from at least 1,000 investors through the sale of unregistered investments in a purported foreign currency trading venture. According to the SEC's complaint, Cook and Kiley pooled investors' funds in bank and trading accounts in the names of entities they controlled. The SEC's complaint alleges that the foreign currency trading they did conduct resulted in millions of dollars in losses, and they misused approximately one half of the investor funds raised to make Ponzi-like payments to earlier investors and pay for, among other things, Cook's gambling losses and the purchase of the historic Van Dusen Mansion in Minneapolis. The SEC's complaint charges Cook and Kiley with violating Sections 5 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. The Commodity Futures Trading Commission also filed an action on Nov. 23, 2009, against Cook, Kiley and others for their roles in the scheme. On Nov. 23, 2009, the Court entered a preliminary injunction order against Cook and froze all of his assets. On Jan. 25, 2010, the Court found Cook in civil contempt of the asset freeze order for failing to surrender more than $35 million in assets and ordered Cook jailed until he is in compliance with the Court's orders. Cook has not complied with those orders and remains incarcerated. [SEC v. Trevor G. Cook, Patrick J. Kiley, et al., Case No. 09 SC 3333 (D. Minn.)] (LR-21484) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangeA proposed rule change filed by BATS Exchange related to fees for use of BATS Exchange (SR-BATS-2010-007) 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 April 19. (Rel. 34-61883) Proposed Rule ChangeNYSE Amex filed a proposed rule change, and Amendment No. 1 thereto (SR-NYSEAmex-2010-31), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to adopt, as a pilot program, a New NYSE Amex Equities rule series for the trading of securities listed on the Nasdaq Stock Market pursuant to a grant of unlisted trading privileges, and amending existing NYSE Amex Equities Rules as needed to accommodate the trading of Nasdaq-listed securities on the Exchange. Publication is expected in the Federal Register during the week of April 19. (Rel. 34-61890) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig041410.htm
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