SEC Releases Money Market Fund Portfolio and "Shadow NAV" Information to the Public
The Securities and Exchange Commission today announced that investors can for the first time access detailed information that money market funds file with the Commission — including information about a fund's investments and the market-based price of its portfolio known as its "shadow NAV" (net asset value) or mark-to-market valuation.
The information is available on the SEC's website and will be updated monthly.
As part of its overhaul of money market fund regulation, the Commission last year adopted a rule requiring money market funds to file information about their holdings and portfolio valuations.
"While the Commission uses this information in its real-time oversight of money market funds, we also believe that public disclosure can provide investors and market analysts with useful insight for their evaluation of these funds," said SEC Chairman Mary L. Schapiro.
Funds began filing the information on the SEC's new Form N-MFP in December. Under the rule, the SEC will release the information with a 60-day delay. The rule also requires money market funds to post more current but less detailed portfolio information on their own websites within five business days after the end of the month.
The information on the SEC website is available through the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The information can be retrieved in several ways, including by typing in the fund's name or ticker symbol or by reviewing recent Form N-MFP filings. (Press Rel. 2011-32)
In the Matter of Apex Capital Group, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) as to Atlas Consolidated Mining and Development Corp. (Atlas) in Apex Capital Group, Inc., Admin. Proc. No. 3-14151. The Order Instituting Proceedings (OIP) alleged that five Respondents repeatedly failed to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true as to Atlas and revokes the registration of each class of its registered securities, pursuant to Section 12(j) of the Securities Exchange Act of 1934. The proceeding has ended as to the other four Respondents named in the OIP. See Apex Capital Group, Inc., Exchange Act Release Nos. 63713 (Jan. 13, 2011), 63739 (Jan. 20, 2011). (Rel. 34-63797; File No. 3-14151)
In the Matter of Gregory J. Buchholz
On Jan. 21, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act, Making Findings and Imposing Remedial Sanctions (Order) against Gregory J. Buchholz. On November 12, 2010, Mr. Buchholz pled guilty to wire fraud in violation of Title 18 of the United States Code, Section 1343, before the United States District Court for the District of Connecticut, in United States v. Gregory J. Buchholz, Criminal No. 10-229-J. The Stipulation of Offense to which Mr. Buchholz pled guilty found that between 2001 and 2010, Buchholz, a former registered representative formerly affiliated with Raymond James Financial, Inc., engaged in a scheme to defraud his investment clients of more than $1.3 million. He embezzled the money by, among other things, forging his clients' signatures, depositing client funds into personal accounts, misrepresenting that his clients' had authorized a redemption when he knew they had not, and misrepresenting to his clients that the funds would be placed into their investment accounts when those funds were actually placed into his personal accounts.
Based on the above, the Order finds that that pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act, Mr. Buchholz is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or nationally recognized statistical rating organization (NRSO), and from participating in any offering of penny stock. Mr. Buchholz consented to the issuance of the Order. (Rels. 34-63800; IA-3146; File No. 3-14212)
In the Matter of Richard Jonathan Blech
On Jan. 31, 2011, the Commission an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Order) against Richard Jonathan Blech. The Order finds that Blech is the Chief Executive Officer of Credit Bancorp, N.V. a Netherlands Antilles Corporation (Credit Bancorp). Blech was a registered representative with Credit Bancorp & Co., a Credit Bancorp affiliate, during the time it was registered as a broker-dealer with the Commission. The Order further finds that Blech pleaded guilty to three counts of securities fraud and fraud by wire, radio or television in violation of 15 U.S.C. §§ 78(j),1343 and 1346 before the United States District Court for the Southern District of New York, United States v. Blech, et al., 1:02-CR-122.
Based on the above, the Order bars Blech from association with any broker or dealer. Blech consented to the Order without admitting or denying the findings, except he admitted the entry of the criminal conviction. (Rel. 34-63801; File No. 3-14001)
SEC Charges New York Investment Firms and Senior Officers With Fraud
On Jan. 20, 2011, the Securities and Exchange Commission charged three affiliated New York-based investment firms and four former senior officers with fraud, misuse of client assets, and other securities laws violations involving their $66 million advisory business.
The SEC alleges that the operation's investment adviser William Landberg and president Kevin Kramer — through the firms West End Financial Advisors LLC (WEFA), West End Capital Management LLC (WECM), and Sentinel Investment Management Corporation — misled investors into believing that their money was in stable, safe investments designed to provide steady streams of income. However, in reality West End faced deepening financial problems stemming from Landberg's failed investment strategies. When starved for cash to meet obligations of the West End funds or for his personal needs, Landberg misused investor assets, fraudulently obtained more than $8.5 million from a bank, and used millions of dollars from an interest reserve account for unauthorized purposes.
The SEC also charged West End's chief financial officer Steven Gould and controller Janis Barsuk for their roles in the scheme.
According to the SEC's complaint filed in U.S. District Court for the Southern District of New York, the misconduct occurred from at least January 2008 to May 2009. The SEC alleges that Landberg used substantial amounts of fraudulently-obtained bank loans to make distributions to certain West End fund investors, thereby sustaining the illusion that West End's investments were performing well. During the same period, Landberg also misappropriated at least $1.5 million for himself and his family. Landberg's wife Louise Crandall and their family partnership are named as relief defendants in the SEC's complaint.
The SEC further alleges that Gould and Barsuk knew, or were reckless in not knowing, that Landberg was defrauding a bank that provided loans to a West End fund by misusing funds in a related interest reserve account. Both officers nevertheless participated in the fraud by facilitating Landberg's misappropriations from that account. The SEC alleges that Gould conceived and used improper accounting methods to conceal aspects of the fraud, and he issued account statements to investors showing false investment returns. Barsuk facilitated Landberg's uses of investor money to cover his personal obligations. Similarly, Kramer knew, or was reckless in not knowing, that West End faced severe financial problems and had difficulty obtaining sufficient financing to sustain its investment strategy. Nevertheless, Kramer failed to disclose those material facts to investors as he continued to market the funds to new and existing investors through April 2009.
The SEC charged Landberg, Kramer, Gould, WEFA, WECM, and Sentinel with violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition, Landberg, WEFA, WECM, and Sentinel are charged with violating the antifraud provisions of the Investment Advisers Act of 1940. Kramer, Gould, Barsuk, and Sentinel are charged with aiding and abetting violations of the Advisers Act. Barsuk is also charged with aiding and abetting violations of the antifraud provisions of the Exchange Act. The SEC's complaint seeks a final judgment enjoining each defendant from future violations of the securities laws as well as monetary relief, the imposition of an independent monitor, and certain other sanctions.
The SEC's case was investigated by Ken C. Joseph, Matthew J. Watkins, and Cynthia A. Matthews of the SEC's New York Regional Office, with assistance from Alistaire Bambach. The SEC's litigation effort will be led by Howard Fischer.
The SEC acknowledges the assistance of the U.S. Attorney for the Southern District of New York, the Federal Bureau of Investigation, and the U.S. Commodity Futures Trading Commission. [SEC v. William Landberg, Kevin Kramer, Steven Gould, Janis Barsuk, West End Financial Advisors LLC, West End Capital Management LLC, and Sentinel Investment Management Corporation, Defendants, and Louise Crandall and L/C Family Limited Partnership, Relief Defendants, Civ. No. 11-CV-0404 (S.D.N.Y.)] (LR-21829)
David J. Hernandez Sentenced to More Than 16 Years in Prision and Ordered to Pay More Than $6.4 Million in Restitution for Conducting Fraudulent Investment Scheme
The Securities and Exchange Commission announced that on Jan. 14, 2011, U.S. District Court Judge Robert Gettleman sentenced David J. Hernandez, of Downers Grove, Illinois, to serve 200 months in prison for conducting a fraudulent investment scheme that resulted in more than $6.4 million in losses to more than 250 investors. In addition, Judge Gettleman ordered Hernandez to pay more than $6.4 million in restitution to the victims of his fraud.
The criminal case was filed on June 17, 2009 when the U.S. Attorney's Office for the Northern District of Illinois filed a criminal complaint against Hernandez charging him with one count of mail fraud. On July 8, 2009, the U.S. Attorney's Office filed a grand jury indictment against Hernandez charging him with 4 counts of mail fraud. In January 2010, Hernandez pled guilty to one count of mail fraud.
On June 15, 2009, the Commission filed its own civil action against Hernandez for the same conduct. The Commission sought and obtained emergency relief, including an order restraining Hernandez from further violations of the antifraud and registration provisions of the federal securities laws and an order freezing Hernandez's assets and the assets of several relief defendants. The Commission's complaint alleged that between at least February 2008 and June 2009, Hernandez solicited investors to purchase "guaranteed investment contracts" by making false and misleading statements about his background, the existence of the company that issued the investments, the uses of investor proceeds and the safety of the investments. The complaint alleged that Hernandez, also doing business as "NextStep Financial Services, Inc.," sold the guaranteed investment contracts in person and through NextStep Financial's website. Hernandez also claimed that he had an extensive background in banking and business, including having business and law degrees, and that NextStep Financial was a successful company that invested in payday advance stores. The complaint further alleges that Hernandez told investors that their investments were safe because they were covered by insurance. According to the Commission's complaint however, Hernandez never received the claimed degrees, his "banking experience" included a prior federal conviction for wire fraud and NextStep Financial was a defunct corporation with no financial services operations other than running this scheme. In addition, the complaint alleged that Hernandez never invested in the payday advance stores or purchased the insurance that covered investors' funds and instead, Hernandez used the majority of the investors' funds to pay existing investors their promised returns and diverted the remaining funds for his own benefit, for the benefit of his wife, and into his other business ventures, including several companies charged as relief defendants in the Commission's action. The Commission previously obtained judgments against Hernandez's companies charged in the complaint. The SEC's civil action against Hernandez and relief defendant Gina Hernandez remains pending. [SEC v. David J. Hernandez et al., Case No. 1:09-cv-3587 (N.D. Ill.); USA v. David J. Hernandez, Case No. 0:09-cr-516 (N.D. Ill.).] (LR-21831)
Settlement of Enforcement Action by Former Broker Eugene C. Geiger Concludes Market Manipulation Cases
The Securities and Exchange Commission announced that a federal district court in Colorado has entered a final judgment, by consent, against Eugene C. Geiger of Parker, Colorado, in connection with two related stock manipulation schemes. The final judgment against Geiger, a former registered representative, was entered on Jan. 28, 2011. It permanently enjoins him from violating the antifraud provisions of the federal securities laws and orders him pay disgorgement of $261,110 plus prejudgment interest thereon in the amount of $221,466 and civil monetary penalty of $220,000. Separately, Geiger also consented to an administrative order barring him from participating in any offering of penny stock and barring him from association with regulated entities engaged in various parts of the securities industry. The litigation originally was filed in federal district court in New York, in 2001, as two separate enforcement actions. In 2010, the cases against Geiger were transferred to the court in Colorado and consolidated for trial.
In the Commission's consolidated case, the complaints allege that, between December 1999 and June 2000, Geiger knowingly participated in a scheme with others to manipulate the stock price and trading volume of Absolutefuture.com (AFTI) and Wamex Holdings, Inc. (WAMX). According to the complaints, AFTI and WAMX were penny stocks that traded over-the-counter. As a part of the scheme, Geiger, then a registered representative of a broker-dealer, purchased blocks of these stocks for a brokerage customer who, also, was a defendant in this litigation at then-prevailing market prices in exchange for a secret discount of 50% or higher through the privately-arranged transfer of additional shares from the seller at no cost. In addition, the complaints allege that Geiger further agreed to manipulate the trading volume of the stocks by interposing a straw market-maker into the market portion of the block transaction, which doubled the reported volume of the trades. The complaints also allege that, at the same time as he knowingly arranged these manipulative trades, Geiger sold his customer's holdings back into the public markets at ever-increasing, manipulated prices, reaping millions of dollars in gains for his customer and hundreds of thousands of dollars in commissions for his brokerage firm and himself.
The complaint in SEC v. Absolutefuture.com, et al. was filed in October 2001 and named 12 defendants and four relief defendants. The complaint in SEC v. Wamex Holdings, Inc., et al. also was filed in October 2001 and named 22 defendants and four relief defendants. The judgment against Geiger concludes the litigation. The cases against all other parties have been previously resolved.
Without admitting or denying the allegations in the Commission's complaints, Geiger consented to the entry of a final judgment against him. The final judgment against Geiger enjoins him from violating 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 and orders him to pay disgorgement of $261,110 plus prejudgment interest thereon in the amount of $221,466 and civil monetary penalty of $220,000.
Geiger also consented to the entry of an administrative order barring him from association with any investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. Geiger already was permanently barred from association with any broker or dealer in prior, unrelated administrative proceedings. [SEC v. AbsoluteFuture.com, et al., Civil Action No. 01 Civ. 9058 (SDNY); SEC v. Wamex Holdings, Inc., et al., Civil Action No. 01 Civ. 9056 (SDNY); SEC v. Eugene C. Geiger, Civil Action No. 10-CV-00128 (D. Nev.)(consolidated with Civil Action No. 10-CV-00129)] (LR-21831)
SEC Charges Maxwell Technologies Inc. for Bribery Scheme in China
The Securities and Exchange Commission filed a settled civil action against Maxwell Technologies Inc. (Maxwell) in the U.S. District Court for the District of Columbia, charging the company with violations of the Foreign Corrupt Practices Act (FCPA) for repeatedly paying bribes to government officials in China to obtain business from several Chinese state-owned entities.
The SEC alleges that a Maxwell subsidiary paid over $2.5 million in bribes from 2002 through May 2009 for contracts that generated more than $15 million in revenues for Maxwell, a Delaware corporation headquartered in San Diego that manufactures energy storage and power delivery products. Maxwell has agreed to pay more than $6.3 million to settle the SEC's charges.
The complaint alleges that from 2002 through May 2009, Maxwell, through its wholly-owned Swiss subsidiary, Maxwell Technologies SA (Maxwell SA), paid over $2.5 million in bribes to officials at several Chinese state-owned entities through a third-party sales agent. The bribes, which were classified in invoices as either "Extra Amount" or "Special Arrangement" fees, were made to improperly influence decisions by foreign officials to assist Maxwell in obtaining and retaining sales contracts for high voltage capacitors produced by Maxwell SA. According to the complaint, a Maxwell SA executive approved sales contracts with the Chinese state-owned entities knowing that the purchase orders were inflated by 20% with the intention that the 20% be paid as bribes.
According to the complaint, the illicit payments were made with the knowledge and tacit approval of certain former Maxwell officials. For example, the complaint alleges that former management at Maxwell knew of the bribery scheme in late 2002, when an employee indicated that a payment made in connection with a sale in China appeared to be "a kick-back, pay-off, bribe, whatever you want to call it, . . . . in violation of US trade laws." A U.S.-based Maxwell executive replied that "this is a well know[n] issue" and he warned '[n]o more emails please."
The SEC alleges that Maxwell failed to devise and maintain an effective system of internal controls and improperly recorded the bribes on its books. As a result of this bribery scheme, Maxwell SA was awarded contracts that generated over $15 million in revenues, and $5.6 million in profits for Maxwell. These sales and profits helped Maxwell offset losses that it incurred to develop new products now expected to become Maxwell's future source of revenue growth. Maxwell accounted for the bribe payments as sales commission expenses in its financials. Maxwell made corrections in its Form 10-Q filing for the quarter ended March 31, 2009 to reclassify the kickbacks as a reduction in revenue.
Without admitting or denying the allegations in the SEC's complaint, Maxwell consented to the entry of a final judgment that permanently enjoins the company from future violations of Sections 30A, 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, orders the company to pay $5,654,576 in disgorgement, and $696,314 in prejudgment interest to be paid in two installments over one year. The order also requires the company to comply with certain undertakings regarding its FCPA compliance program. Maxwell cooperated in the investigation. In a related criminal proceeding, Maxwell has reached a settlement with the United States Department of Justice in which Maxwell has agreed to pay an $8 million criminal penalty in three installments over approximately two years.
Tracy L. Price and James Valentino of the FCPA Unit conducted the SEC's investigation. The SEC acknowledges the assistance of the U.S. Department of Justice's Criminal Division-Fraud Section in its investigation, which is continuing. [SEC v. Maxwell Technologies Inc., Civil Action No. 1:11-CV-00258 (DDC) (BAH)] (LR-21832; AAE Rel. 3236)
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