SEC Proposes Regulations to Implement Sudan Accountability and Divestment Act of 2007
The Securities and Exchange Commission has proposed requiring registered investment companies to disclose when they divest, in accordance with the Sudan Accountability and Divestment Act of 2007, from securities of issuers that the investment company determines conduct or have direct investments in certain business operations in Sudan. The Sudan Accountability and Divestment Act requires the Commission to prescribe regulations requiring this disclosure by April 29, 2008.
On Dec. 31, 2007, the President signed the Sudan Accountability and Divestment Act into law. Among other things, the Act provides that no person may bring any civil, criminal, or administrative action against any registered investment company, or any employee, officer, director, or investment adviser of the investment company, based solely upon the investment company divesting from securities issued by persons that the investment company determines, using credible information that is available to the public, conduct or have direct investments in certain business operations in Sudan. This limitation on actions does not apply unless the investment company makes disclosures in accordance with regulations prescribed by the Commission.
To implement the Act, the Commission on Feb. 11, 2008, proposed to require each registered investment company that divests securities in accordance with the Act to disclose the divestment on the next Form N-CSR or Form N-SAR (forms that registered investment companies currently use to file periodic reports) that it files following the divestment. Management investment companies would provide the disclosure on Form N CSR, and unit investment trusts would provide it on Form N-SAR. The proposed amendments would require disclosure of the issuer's name; exchange ticker symbol; CUSIP number; total number of shares or, for debt securities, principal amount divested; and dates that the securities were divested.
Public comment on these proposed form amendments should be received by the Commission no later than 30 days after their publication in the Federal Register.
The full text of the detailed release concerning these proposed form changes have been posted to the SEC Web site at http://www.sec.gov/rules/proposed/2008/34-57306.pdf. (Press Rel. 2008-17; Rels. 34-57306; IC-28148; File No. S7-02-08)
Order Approving Association of Timothy J. Miller with Certain Investment Advisers and Investment Companies
On February 12, the Commission issued an Order approving the application of Timothy J. Miller for consent to associate with Waddell & Reed Investment Management Company (WRIMCO), Ivy Investment Management Company (IICO), and registered investment companies managed by WRIMCO and IICO. The Order is necessary because Mr. Miller is subject to a 2004 order of the Commission barring him from association with any investment adviser or investment company, with the proviso that he may apply to become so associated after one year from the date of that order. (Rel. IA-2702)
In the Matter of Justin M. Paperny
On February 11, 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 of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Justin M. Paperny. The Order finds that on Jan. 23, 2008, a final judgment was entered by consent against Paperny, permanently enjoining him 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, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, in a civil action entitled Securities and Exchange Commission v. Justin M. Paperny, Civil Action Number CV-08-00213 CAS (VBKx), in the United States District Court for the Central District of California.
The Order further finds that the Commission's complaint alleged that, in connection with the sale of limited partnership interests in a purported hedge fund, Paperny falsely stated indirectly to prospective investors that the hedge fund would receive shares in an initial public offering, had achieved high average yearly returns, and used a particular investment strategy. The complaint also alleged that Paperny aided and abetted the investment adviser's securities fraud by processing investments in the hedge fund by Paperny's customers and executing trades for the hedge fund despite knowing that the adviser was defrauding the hedge fund and its investors by misappropriating funds. The complaint further alleged that Paperny sold unregistered securities.
Based on the above, the Order bars Paperny from association with any broker, dealer, or investment adviser. Paperny consented to the issuance of the Order without admitting or denying any of the findings in the Order.
For further information, please see Litigation Release No. 20428 (Jan. 14, 2008). (Rel. 34-57307; IA- 2703; File No. 3-12954)
Commission Revokes Registration of Securities of AdPads, Inc. for Failure to Make Required Periodic Filings
On February 12, the Commission revoked the registration of each class of registered securities of AdPads, Inc. (AdPads) 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, AdPads 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 AdPads, 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 AdPads's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against AdPads in the Matter of Accent Color Sciences, Inc., et al., Administrative Proceeding File No. 3-12922.
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 Accent Color Sciences, Inc., et al., Administrative Proceeding File No. 3-12922, Exchange Act Release No. 57098 (Jan. 4, 2008). (Rel. 34-57309; File No. 3-12922)
Bartholomew F. Palmisano, Jr., Former CFO of OCA, Inc., Consents to a Permanent Injunction, $100,000 Civil Penalty, and 10 Year Officer and Director Bar
The Commission announced that on February 7, it filed a complaint in the U.S. District Court for the Eastern District of Louisiana against Bartholomew F. Palmisano, Jr., a resident of Metairie, Louisiana, and former Chief Financial Officer of OCA, Inc. (OCA).
The Commission's complaint alleges that during twelve different quarters during 1998 through 2001, Palmisano recorded eighteen fraudulent journal entries on OCA's general ledger that had the cumulative effect of creating approximately $71 million of fictitious revenue. The complaint also alleges that OCA's false financial information, resulting from Palmisano's conduct, was included in reports on Forms 10-Q, 10-K, and other forms, which were filed with the Commission for the years ended Dec. 31, 1998 through 2001. Further, the complaint alleges that Palmisano tried to cover-up his fraud and provided false information and documents in response to an inquiry by OCA's independent auditors concerning a fixed asset balance related to one of the fraudulent journal entries.
Palmisano, without admitting or denying the allegations of the Commission's complaint, consented to the entry of a Final Judgment, which will permanently enjoin him from future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The proposed final judgment will also order Palmisano to pay a civil penalty in the amount of $100,000 plus post-judgment interest, and will bar him from acting as an officer or director of a public company for ten years. The settlement is subject to the Court's approval. [SEC v. Bartholomew F. Palmisano, Jr., Civil Action File No. 08-905-B1 (E.D. La.)] (LR-20454)
Accelerated Approval of Proposed Rule Change
The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2007-78) submitted by NYSE Arca to trade units of the United States Heating Oil Fund, LP and the United States Gasoline Fund, LP pursuant to unlisted trading privileges. Publication is expected in the Federal Register during the week of February 11. (Rel. 34-57294)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change (SR-DTC-2007-13) filed by The Depository Trust Company under Section 19(b)(1) of the Securities Exchange Act of 1934. The rule change provides that DTC's Foreign Currency Payment Option may be used (1) in relation to securities denominated in U.S. dollars and (2) regardless of whether the terms of the issue originally contemplated the option of payment in one or more currencies. Publication is expected in the Federal Register during the week of February 11. (Rel. 34-57298)
The Commission approved a proposed rule change (SR-NYSE-2007-119) submitted by the New York Stock Exchange relating to the adoption of NYSE Rule 309 (Failure to Pay Fees). Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57305)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by Financial Industry Regulatory Authority to establish a fee for the submission of non-media reports to the NASD/NSX Trade Reporting Facility (SR-FINRA-2008-004) 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 February 11. (Rel. 34-57299)
A proposed rule change filed by the Boston Stock Exchange (SR-BSE-2008-08) to expand, and make permanent, the $1 Strike Program has become immediately 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 February 18. (Rel. 34-57302)
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