Securities and Exchange Commission Suspends Trading in the Securities of Fifteen 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. EDT on June 17, 2010, and terminating at 11:59 p.m. EDT on June 30, 2010.
The Commission temporarily suspended trading in the securities of these fifteen 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. 34-62307)
SEC to Publish For Public Comment Proposed Rules for Clearly Erroneous Trades
The Securities and Exchange Commission today announced that the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) are filing proposed rules to clarify the process for breaking erroneous trades. The rules would make it clearer when, and at what prices, trades would be broken.
The proposed rules come in response to the market disruption of May 6 and complement last week's SEC approval of a uniform set of stock-by-stock circuit breakers. Those circuit breakers are now being implemented for S&P 500 stocks at every exchange and by FINRA.
The exchanges and FINRA are proposing a series of thresholds for breaking trades when prices diverge from the "reference price," typically the last sale before pricing was disrupted. On May 6, the exchanges only broke trades that were more than 60 percent away from the reference price in a process that was not transparent to market participants.
"Establishing clear and transparent standards for breaking trades helps provide certainty in advance as to which trades will be broken, and allows market participants to better manage their risks," said SEC Chairman Mary L. Schapiro.
Under current rules, there is not a clearly defined standard used for breaking erroneous trades. Exchanges may choose the specific percentage threshold away from the reference price where trades are broken. Today's rule proposals set forth clearer standards for breaking trades and curtail the exchanges' discretion to select a different percentage threshold at which they would break trades.
Under the proposed rules for stocks that are subject to single stock circuit breakers, trades would be broken at specified levels.
Where circuit breakers are not yet applicable, the exchanges and FINRA propose to break trades at specified levels for events involving multiple stocks depending on how many stocks are involved.
As with the circuit breakers, these proposed rules stem from a meeting between the SEC, exchanges and FINRA shortly after the May 6 market disruption.
Last week, the SEC approved rules that require the exchanges and FINRA to pause trading in certain individual stocks if the price moves 10 percent or more in a five-minute period. Under the rules, trading in a stock will pause across U.S. equity markets for a five-minute period in the event that the stock experiences a 10 percent change in price over the preceding five minutes. The pause, which applies to stocks in the S&P 500® Index, will give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion. These new rules are in effect on a pilot basis through Dec. 10, 2010.
Today's proposed rules, which also are proposed to be in effect on a pilot basis through Dec. 10, 2010, will be available on the SEC's website as well as the websites of each of the exchanges and FINRA. The Commission intends to promptly publish the proposed rules in the Federal Register for a 21-day public comment period.
At Chairman Schapiro's request, the SEC staff also is:
The SEC staff is working with the markets and the Commodity Futures Trading Commission with regard to calibrating market-wide circuit breakers currently on the books - none of which were triggered on May 6. These circuit breakers apply across all equity trading venues and the futures markets. (Press Rel. 2010-104)
Change in the Meeting: Cancellation of Open Meeting
The Open Meeting scheduled for Friday, June 18, 2010, at 10:00 a.m. has been cancelled.
For further information please contact the Office of the Secretary at (202) 551-5400.
Closed Meeting - Thursday, June 24, 2010 - 2:00 p.m.The subject matter of the Closed Meeting scheduled for Thursday, June 24, 2010, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; adjudicatory matters; and other matters relating to enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.
In the Matter of China Technology Global Corp.
On June 17, 2010, an Administrative Law Judge issued an Order Making Findings and Revoking Registration by Default (Default Order) as to China Technology Global Corp. (China Technology) in China Technology Global Corp., Admin. Proc. 3-13901. The Default Order finds that China Technology failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 13a-1 and 13a-16 because it failed to make periodic filings with the Commission for a number of years. Based on these findings, the Default Order revoked the registration of each class of China Technology Global Corp.'s registered securities, pursuant to Section 12(j) of the Exchange Act. (Rel. 34-62305; File No. 3-13901)
SEC Sues Former CFO of Advanced Materials Group, Inc. for Fraudulently Inflating Sales and for Misappropriating Hundreds of Thousands of Dollars for Personal Expenses
On June 9, 2010, the Commission sued William G. Mortensen, the former CFO of Advanced Materials Group, Inc. (AMG), in U.S. District Court in Dallas for fraudulently inflating AMG's publicly reported sales, earnings and accounts receivable over multiple quarters in 2008 and 2009. The Commission charged that Mortensen committed securities fraud, lied to accountants, falsified records and circumvented internal controls, and aided and abetted reporting, record-keeping and internal control violations. The Commission also alleged that Mortensen misappropriated hundreds of thousands of dollars from AMG to pay personal expenses. The Commission seeks civil penalties, disgorgement of ill-gotten gains, a permanent officer and director bar and permanent injunctive relief against Mortensen.
The Commission also charged Mortensen's subordinate, Feng Zheng, with participating in the scheme. The Commission alleges that Zheng lied to accountants, falsified records, circumvented internal controls, and aided and abetted securities fraud and reporting, record-keeping and internal controls violations. Zheng has agreed to settle these charges, without admitting or denying the Commission's allegations, by paying a $25,000 civil penalty and accepting a permanent injunction against future violations of the antifraud, lying-to-accountants, reporting, record-keeping and internal controls provisions of the federal securities laws.
In related administrative proceedings instituted pursuant to Section 12(j) of the Exchange Act, AMG has consented to the revocation of its securities registration. The Commission is also instituting settled administrative proceedings pursuant to Rule 102(e) of the Commission's Rules of Practice against AMG's former auditor, Fei-Fei Catherine Fang, in which she has consented to a permanent bar from appearing or practicing before the Commission as an accountant. [SEC v. William G. Mortensen and Feng Zheng, Action No. 3:10-CV-1142-B (United States District Court for the Northern District of Texas, Dallas Division)] (LR-21550). (Rel. 34-62306; File No. 3-13941)
Commission Orders Hearings on Registration Suspension or Revocation Against Sixteen Companies for Failure to Make Required Periodic Filings
In conjunction with today's trading suspension, the Commission also instituted two separate 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 sixteen companies for failure to make required periodic filings with the Commission:
In the Matter of Applied Nanoscience, Inc., et al., Administrative Proceeding File No. 3-13943
In the Matter of Aphton Corp., et al., Administrative Proceeding File No. 3-13952
In each Order, the Division of Enforcement (Division) alleges that the respective Respondents are delinquent in their required periodic filings with the Commission.
In each of these proceedings, 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 or 13a-16 thereunder, are true. The judge in the proceedings 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 each proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rels. 34-62308; File No. 3-13942 and 34-62309; File No. 3-13943)
Commission Revokes Registration of Securities of British American Holdings, Ltd. for Failure to Make Required Periodic Filings
On June 17, 2010, the Commission revoked the registration of each class of registered securities of British American Holdings, Ltd. (British American Holdings) 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, British American Holdings 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 British American Holdings, Ltd. 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 British American Holdings' securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against British American Holdings in In the Matter of BCI Telecom Holding, Inc., et al., Administrative Proceeding File No. 3-13888.
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 BCI Telecom Holding, Inc., et al., Administrative Proceeding File No. 3-13888, Exchange Act Release No. 62077 (May 11, 2010). (Rel. 34-62310; File No. 3-13888)
Initial Decision Ordering J.P. Turner & Company, LLC, to Cease and Desist Declared Final
The Commission has declared final the initial decision of an administrative law judge ordering J.P. Turner & Company, LLC, to cease and desist from committing or causing any violations or future violations of Rule 30(a) of Regulation S P (the Safeguard Rule), 17 C.F.R. § 248.30(a); and to pay a civil money penalty of $65,000.
The initial decision found that from July 2005 through September 2006, J.P. Turner willfully violated the Safeguard Rule by its failure to adopt written policies and procedures that addressed administrative, technical, and physical safeguards for the protection of customer records and information and that were reasonably designed to provide the security and protection of those records as required by the Safeguard Rule. Although J.P. Turner had minimal written documentation that referred to safeguarding customer records and information, it was deemed insufficient to meet the standard set by the Safeguard Rule that policies and procedures be reasonably designed for the security and protection of customer information. Furthermore, J.P. Turner continued to publish its Written Supervisory System & Procedures manuals that contained incomplete and deficient safeguarding policies and procedures, which further demonstrated its willful violation of the Safeguard Rule. (Rel. 34-62313; File No. 3 13550)
SEC Settles Insider Trading Case With Qualcomm's Former Director of Strategic Marketing
On June 16, 2010, the United States District Court for the Southern District of California entered a final judgment against Andres Leyva, a former Director of Strategic Marketing Analysis at San Diego-based Qualcomm Incorporated. As alleged in the SEC's first amended complaint filed on July 21, 2009, Leyva realized more than $34,000 in illegal profits by trading on the basis of confidential information about Qualcomm's new licensing agreement with Nokia Corporation and the settlement of all litigation between the companies.
According to the SEC's first amended complaint, Qualcomm and Nokia were set to begin trial on July 23, 2008 in a key Delaware case to determine whether Nokia owed Qualcomm substantial royalty revenues when the companies' licensing agreement expired in April 2007. The first amended complaint alleges that on July 22, 2008, the senior Qualcomm executive leading negotiations with Nokia representatives in Delaware informed Leyva that Nokia had surprised Qualcomm with a significant settlement offer and conveyed the key terms of that offer to Leyva. Approximately two hours later, the first amended complaint alleges, Leyva purchased 80 Qualcomm call option contracts priced at $.39 each with a strike price of $50.
After the market closed on July 23, 2008, Qualcomm and Nokia announced their new licensing agreement and a global settlement of all litigation between them. On July 24, 2008, Qualcomm's stock price increased 17 percent to $52.43, and its trading volume increased 394 percent. That same day, the first amended complaint alleges, Leyva sold the 80 Qualcomm call option contracts for a profit of $34,739.98.
To settle the SEC's charges, Leyva has consented, without admitting or denying the allegations in the first amended complaint, to the final judgment permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, to pay $36,109.71, representing the disgorgement of his illegal trading profits and prejudgment interest, and to pay a civil penalty of $34,739.98. [SEC v. Andres Leyva, United States District Court for the Southern District of California, Civil Action No. 09 CV 1565 JLS WVG] (LR-21559)
SEC v. Martin T. Wegener, et al.
The Securities and Exchange Commission announced that on June 14, 2010, it filed a civil injunctive action against Martin T. Wegener (Wegener), a resident of Grand Rapids, Michigan, and two companies formed, owned, and controlled by Wegener, Wealth Resources, Inc. and Wealth Resources, LLC (collectively, Wealth Resources), for fraudulently offering and selling at least $6.5 million in securities.
In the complaint, filed in the United States District Court for the Western District of Michigan, the Commission alleges that, from at least 2007 to March 2010, Wegener, who, along with Wealth Resources, acted as an unregistered broker and investment adviser, raised at least $6.5 million from at least twenty investors by falsely representing that he would invest their funds in securities through Wealth Resources. The complaint further alleges that after he received the customers' funds, Wegener gave them purported "brokerage account" statements from Wealth Resources that falsely represented that he invested the money in a variety of investments, including publicly traded securities, publicly traded mutual funds, two private companies in which Wegener had an ownership interest, other private companies, and other "funds." According to the complaint, in reality, Wegener did not use the customers' money to purchase the investments as represented. Instead, Wegener used the customers' money (1) for personal expenses, (2) to pay business expenses for and make investments on his own behalf in entities in which he held an ownership interest, including WU Ventures, LLC, Secura Technology, LLC, and Trailblazer Learning, Inc., as well as Wealth Resources itself; and (3) to make Ponzi-like payments to other customers who requested a return of all or part of their investment. The complaint names WU Ventures, LLC, Secura Technology, LLC, and Trailblazer Learning, Inc. as relief defendants, along with Kristin A. Wegener, Wegener's former wife, to whom he also transferred investor funds.
Without admitting or denying the allegations in the SEC's complaint, Wegener and Wealth Resources consented to the entry of orders of permanent injunction enjoining them from violations of Section 17(a) of the Securities Act of 1933; Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder; Section 15(a) of the Exchange Act; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The proposed orders further provide that the Court shall order disgorgement of ill-gotten gains and prejudgment interest thereon, and that the amounts of the disgorgement as well as a civil penalty against Wegener, shall be determined by the Court upon motion of the Commission. The orders are subject to the approval of the Court. The Complaint also seeks disgorgement of ill-gotten gains from the relief defendants. [SEC v. Martin T. Wegener et al., Case No. 1:10-CV-566 (W.D. Mich.)] (LR-21560)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2010-84) to establish a Short Term Option Program 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 June 21. (Rel. 34-62296)
A proposed rule change filed by The NASDAQ Stock Market (SR-NASDAQ-2010-073) to establish a Short Term Option Program 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 June 21. (Rel. 34-62297)
A proposed rule change filed by the NASDAQ Stock Market (SR-NASDAQ-2010-070) to list options on Trust Issued Receipts in $1 strike intervals 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 June 21. (Rel. 34-62295)
Proposed Rule Change
The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2010-029) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder that proposes to adopt FINRA Rule 5141 (Sale of Securities in a Fixed Price Offering) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of June 21. (Rel. 34-62299)
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