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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-40
February 28, 2008


Commission Meetings

Following is a schedule of Commission meetings, which will be conducted under provisions of the Government in the Sunshine Act. Meetings will be scheduled according to the requirements of agenda items under consideration.

Open meetings will be held in the Auditorium, Room L-002 at the Commission's headquarters building, 100 F Street, N.E., Washington, D.C. Visitors are welcome at all open meetings, insofar as space is available. Persons wishing to photograph or videotape Commission meetings must obtain permission in advance from the Secretary of the Commission. Persons wishing to tape record a Commission meeting should notify the Secretary's office 48 hours in advance of the meeting.

Any member of the public who requires auxiliary aids such as a sign language interpreter or material on tape to attend a public meeting should contact SECInterpreter@SEC.gov at least three business days in advance. For any other reasonable accommodation related disability contact DisabilityProgramOfficer or call 202-551-4158.

Open Meeting - Tuesday, March 4, 2008 - 10:00 a.m.

The subject matter of the open meeting scheduled for March 4, 2008, will be:

  1. The Commission will consider whether to propose two new rules under the Investment Company Act concerning exchange-traded funds (ETFs). Proposed Rule 6c-11 would provide exemptions from restrictions of the Act, to permit ETFs to operate without the need to obtain individual exemptive orders from the Commission. The Commission also will consider related disclosure amendments, and rule revisions concerning fund of funds restrictions of that Act.
  2. The Commission will consider whether to propose a rule directed at misrepresentations in connection with a seller's ability or intent to deliver securities by settlement date.
  3. The Commission will consider a recommendation to propose amendments to Regulation S-P, which governs the privacy of consumer financial information. The amendments would address the Rule's provisions related to the safeguarding and disposal of financial information, and would specify information that may be transferred when employees of broker-dealers or investment advisers change firms.

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.

Jonathan Sokobin Named Director of SEC's Office of Risk Assessment

SEC Veteran to Lead Expansion of Agency's Efforts

The Securities and Exchange Commission announced today that Jonathan S. Sokobin has been named Director of the agency's Office of Risk Assessment (ORA), which is responsible for helping SEC Divisions and Offices develop new ways to anticipate emerging issues and address potential problems in the securities markets.

"Jonathan is being tapped to lead a major initiative that will knit together the agency's resources for the identification of market risks and dangerous illegal practices before they metastasize into truly lethal consequences for investors," said SEC Chairman Christopher Cox.

"This year, under Jonathan's leadership, the Office of Risk Assessment will see a doubling of its professional staff to provide resources and analytical support to the Divisions of Enforcement, Trading and Markets, Investment Management, and Corporation Finance, as well as the Office of the Chief Accountant and the Office of Compliance Inspections and Examinations. Jonathan's experience, knowledge, and professional training have well equipped him for this vital function of looking around the corners and over the horizon, so that the SEC's efforts will not always be focused on the money that got away, and the lessons of the last major scandal," Chairman Cox added.

"I am excited to face this new challenge and appreciative of the opportunity," said Mr. Sokobin. "The Office of Risk Assessment can serve as a focal point for collecting financial market intelligence in order to help the Commission meet the challenges of regulating in a rapidly evolving world to ensure U.S. markets remain effective, efficient, fair and competitive. I look forward to working closely with the Commission, the staff and market leaders in order to meet ORA's crucial objectives."

The Office of Risk Assessment was created in 2004. Mr. Sokobin will lead the expansion of the Office announced by Chairman Cox earlier this month. The expansion will include the hiring of additional staff this year, and providing additional resources and analytical support to SEC divisions and offices responsible for examining market risks and identifying dangerous illegal practices before they spread into wide-scale problems to the detriment of investors.

Mr. Sokobin joined the SEC in 1998 and has served as Deputy Chief Economist since 2002. Mr. Sokobin replaces the inaugural director of the Office of Risk Assessment, Charles Fishkin, who left the Commission last year.

The Office of Risk Assessment was established to help the SEC's senior managers develop new ways to process and analyze information in order to properly assess market risks associated in an increasingly complex market environment. The Office has introduced various innovative approaches including new technology, statistical and quantitative methods, and enhanced collaboration strategies to help SEC staff make better informed decisions about how best to adjust oversight methods to address emerging challenges. The Office has assisted in many aspects of the SEC's responsibilities, including investment adviser issues, disclosure issues, hedge fund regulation, international regulatory dialogue, and emergency preparedness.

As Deputy Chief Economist, Mr. Sokobin has helped bolster efforts in all areas of the SEC's Office of Economic Analysis, including market structure, market intermediaries, corporate governance and disclosure, mutual funds, technical assistance to foreign regulators, examinations, and enforcement. Mr. Sokobin previously served as Senior Research Fellow from 1998 to 2000 and as Financial Economist from 2000 to 2002.

Prior to joining the SEC staff, Mr. Sokobin was an Assistant Professor of Finance at Southern Methodist University in Dallas, and he previously worked at the Center for Research in Security Prices at the University of Chicago. He earned a B.A. in Economics from Ohio State University in 1984, and his MBA and Ph.D. from the University of Chicago in 1988 and 1993 respectively. Mr. Sokobin has twice earned an SEC Chairman's Award for Excellence, in 2000 and 2004. (Press Rel. 2008-24)


Bally Total Fitness Settles Financial Fraud Charges with SEC

The Commission today filed financial fraud charges against Bally Total Fitness Holding Corporation, a nationwide commercial operator of fitness centers that has recently emerged from bankruptcy proceedings under new, private ownership. The Commission alleges that from at least 1997 through 2003, Bally's financial statements were affected by more than two dozen accounting improprieties, which caused Bally to overstate its originally reported year-end 2001 stockholders' equity by nearly $1.8 billion, or more than 340%. The Commission's complaint further alleges that Bally understated its originally reported 2002 net loss by $92.4 million, or 9341%, and understated its originally reported 2003 net loss by $90.8 million, or 845%. As a result, the Commission alleges that Bally violated the antifraud, reporting, books and records, and internal control provisions of the federal securities laws.

According to the Commission's complaint, Bally fraudulently accounted for three types of revenue it received from its members: initiation fees, prepaid dues, and reactivation fees; additionally, Bally fraudulently accounted for its membership acquisition costs. These frauds account for $1.2 billion of the $1.8 billion overstatement of Bally's originally reported year-end 2001 stockholders' equity. In addition, Bally's accounting for more than 20 other revenue or expense items failed to conform to Generally Accepted Accounting Principles. These failures account for the remaining $600 million of the $1.8 billion overstatement of Bally's originally reported year-end 2001 stockholders' equity.

The Commission's complaint, which was filed in the United States District Court for the District of Columbia, charges Bally with violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13. Without admitting or denying the Commission's allegations, Bally has consented to the entry of a court order enjoining it from violating these provisions. In determining to accept Bally's settlement offer, the Commission considered Bally's cooperation with the Commission staff in the investigation leading to this action and prompt commencement of remedial action. The Commission's investigation is continuing. [SEC v. Bally Total Fitness Holding Corporation, Civ. 08-00348 (HHK) (Judge Kennedy) (D.D.C.)] (LR-20470)


PowerShares Capital Management LLC, et al.

An order has been issued on an application filed by PowerShares Capital Management LLC, et al. The order permits (a) series of certain open-end management investment companies to issue shares (Shares) redeemable in large aggregations only (Creation Units); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (d) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares. (Rel. IC-28171 - February 27)

Bear Stearns Asset Management, Inc., et al.

An order has been issued on an application filed by Bear Stearns Asset Management, Inc., et al. The order permits (a) series of certain open-end management investment companies to issue shares (ETS) redeemable in large aggregations only and (b) secondary market transactions in ETS to occur at negotiated market prices. (Rel. IC-28172 - February 27)

Advisors Series Trust and FundQuest Incorporated

A notice has been issued giving interested persons until March 24, 2008, to request a hearing on an application filed by Advisors Series Trust and FundQuest Incorporated for an order exempting them from Section 15(a) of the Investment Company Act and Rule 18f-2 under the Act. The order would permit the applicants to enter into and materially amend subadvisory agreements without shareholder approval and grant relief from certain disclosure requirements. (Rel. IC-28175 - February 27)


Approval of Proposed Rule Changes

The Commission granted approval to a proposed rule change submitted by the American Stock Exchange (SR-Amex-2007-95) under Section 19(b)(1) of the Securities Exchange Act of 1934 relating to the execution of NDX and RUT combination orders. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57384)

The Commission approved a proposed rule change (SR-Phlx-2008-02) submitted under Rule 19b-4 by the Philadelphia Stock Exchange to amend By-Law Article XIV, Section 14-5 and Phlx Rule 50. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57386)





Modified: 02/28/2008