Fee Rate Advisory #7 for Fiscal Year 2008
Pursuant to Section 31(j) of the Securities Exchange Act of 1934, the Commission has determined it must reduce the Section 31 fee rate. Effective April 1, 2008, the Section 31 fee rate for fiscal 2008 will decrease almost 50 percent, from the current rate of $11.00 per million to a revised rate of $5.60 per million.
The Act requires the Commission to adjust the Section 31 fee rate if it estimates that the baseline estimate of dollar volume for fiscal 2008 that was used to calculate the current annual rate ($11.00 per million) is reasonably likely to be at least 10 percent greater or less than the actual dollar volume of securities transactions for fiscal 2008. To make its determination, the Commission used market projections based on the most recent information on dollar volume of securities transactions thus far in fiscal year 2008.
This rate change does not apply to the Section 31 assessment on security futures transactions, which will remain at the current rate of $0.0042 per round turn transaction.
The Commission consulted with the Congressional Budget Office and the Office of Management and Budget regarding the mid-year adjustment, as required by Section 31(j)(2) of the Act. A copy of the Commission's order and calculation methodology is available at http://www.sec.gov.
The Office of Interpretation and Guidance in the Commission's Division of Trading and Markets is available for questions on Section 31 fees at (202) 551-5777, or by e-mail at email@example.com.
The Commission will announce the fiscal year 2009 rates for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e), 14(g), and 31 of the Securities Exchange Act of 1934 no later than April 30, 2008. These rates will become effective on Oct. 1, 2008, or after the date on which the Commission receives its fiscal 2009 regular appropriation, whichever comes later. (Press Rel. 2008-25)
SEC Permanently Suspends Attorney from Practicing Before Commission
The Commission announced today that it has permanently suspended from practicing before the Commission an attorney who took a primary role in his client's fraud and filed false and misleading documents with the Commission.
Moneesh K. Bakshi was suspended based on an injunction entered against him by the U.S. District Court for the Southern District of New York. The court found that Bakshi misused his role as corporate counsel for Ramoil Management Ltd. to violate, and aid and abet Ramoil's violations of, the federal securities laws. In part as a result of Bakshi's fraud, Ramoil's stock price rose to an all-time high of $20 per share, before plunging to less than 10 cents per share and eventually being de-listed.
SEC Chairman Christopher Cox said, "This action demonstrates once again that the Commission will act vigilantly to ensure that lawyers for public companies who disregard their responsibilities will be prevented from using their license as a means to commit further frauds on the market."
On Oct. 25, 2007, the District Court entered a decision and order in the SEC's favor against Bakshi for his knowingly filing a Form 10-KSB that included an unsigned and falsified audit report; and for knowingly making false representations in registration statements on Forms S-8 and supporting opinion letters related to Ramoil issuing shares for consulting services that were never performed. The court ordered Bakshi to pay a $100,000 penalty.
The Commission's temporary suspension against Bakshi, imposed Dec. 28, 2007, became permanent when no petition to lift the suspension was received. The Commission determined that allowing Bakshi — who remains a licensed attorney — to continue appearing and practicing before the Commission would not be in the public interest because of Bakshi's willful violations of the federal securities laws. (Press Rel. 2008-26)
SEC Staff Announces CCOutreach Regional Seminars for Adviser and Fund Chief Compliance Officers
The Securities and Exchange Commission staff today announced the schedule and beginning of registration for 25 regional seminars to help mutual fund and investment adviser chief compliance officers improve their effectiveness for the benefit of investors throughout the country.
The CCOutreach regional seminars for investment adviser and mutual fund chief compliance officers (CCOs) will be held in April, May, and June in various cities. They will focus on compliance areas that SEC examiners frequently find to be deficient at firms during examinations of investment advisers and investment companies.
"By focusing the 2008 regional seminars on the particular compliance areas where improvement will do the most good for investors, we can help CCOs be proactive and ensure compliance in these areas," said Lori Richards, Director of the SEC's Office of Compliance Inspections and Examinations. "These seminars enable CCOs to better understand the tests examiners use to identify deficiencies and how other firms address weaknesses. CCOs can then use similar tests and compliance controls at their own firms to safeguard investors."
SEC examiners will discuss deficiencies, how the SEC identifies them, and corrective actions funds and advisers have taken to address them. Additionally, some seminars will feature supplemental sessions designed to address the compliance concerns of smaller and newly-registered investment advisers.
The CCOutreach program was formed to promote open communications and coordination on mutual fund, investment adviser, and broker-dealer compliance issues.
Seating at the seminars is limited, with mutual fund and investment adviser CCOs given priority on a first-come, first-served basis. Information regarding the regional seminars, including dates and locations and registration instructions, is available on the SEC's Web site at http://www.sec.gov/info/iaicccoutreach.htm. For additional information, please e-mail CCOutreach@sec.gov. (Press Rel. 2008-27)
RULES AND RELATED MATTERS
SEC Proposes to Amend Rules and Forms to Enhance Reporting by Foreign Private Issuers
The Commission issued a release proposing amendments to various Commission rules and forms to enhance reporting by foreign private issuers. The amendments, if adopted, would allow foreign private issuer status to be tested once a year; change the deadline for annual reports filed by foreign private issuers; revise the annual report and registration statement forms used by foreign private issuers to improve disclosure; and amend the rule regarding going private transactions to reflect recent regulatory changes. The deadline for comments on the proposals is 60 days following publication of the proposals in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Senior Special Counsel, Office of International Corporate Finance, (202) 551-3450; or Katrina A. Kimpel, Professional Accounting Fellow, Office of the Chief Accountant, (202) 551-5300. (Rels. 33-8900; 34-57409; International Series Rel. 1308; File No. S7-05-08)
In the Matter of Vincent A. Lenarcic, Jr.
On Feb. 29, 2008, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act), Making Findings, and Imposing Remedial Sanctions against Vincent A. Lenarcic, Jr. (Lenarcic), (Order). The Order finds that on Feb. 20, 2008, an order of permanent injunction was entered against Lenarcic, permanently enjoining him from future violations of Section 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 Advisers Act. The civil action is entitled Securities and Exchange Commission v. Vincent A. Lenarcic, Jr. et al., Civil Action Number 3:05-CV-487, in the United States District Court for the Western District of North Carolina, Charlotte Division. The Order also finds that on June 8, 2006, Lenarcic pled guilty to one felony count, involving prohibited transactions by an investment adviser, in violation of Title 15 United States Code, Sections 80b-6 and 80b-17 before the U.S. District Court for the Western District of North Carolina, Charlotte Division, in United States v. Vincent A. Lenarcic, Jr., Case No. 3:06CR155-01. The Order further finds that on July 26, 2007, a judgment in the criminal case was entered against Lenarcic. He was sentenced to a prison term of 37 months and ordered to make restitution in the amount of $1,090,000.
Based upon the above, the Order bars Lenarcic from association with any investment adviser. Lenarcic consented to the issuance of the Order without admitting or denying any of the findings, except as to the entry of the permanent injunction and as to his criminal conviction. (Rel. IA-2709; File No. 3-12973)
Default Order as to Michael Cimilluca, Jr.
An Administrative Law Judge has issued an Order Making Findings and Imposing Remedial Sanctions by Default as to Michael Cimilluca, Jr. (Default Order), in K.W. Brown & Company, Administrative Proceeding No. 3-12923. The Order Instituting Proceedings (OIP) alleges that on Dec. 19, 2007, the U.S. District Court for the Southern District of Florida permanently enjoined Michael Cimilluca, Jr. (Cimilluca), from future violations of Section 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), 206(2), 207, and 204 of the Investment Advisers Act of 1940 and Rules 204-1(a)(2) and 204-2(a)(8) thereunder, and ordered them to jointly and severally disgorge $4,796,147 in ill-gotten gains plus prejudgment interest, and further ordered Cimilluca to pay a third tier civil penalty of $250,000.
The Default Order finds these allegations in the OIP to be true as to Cimilluca and concludes that, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, it is in the public interest to bar Cimilluca from associating with any broker or dealer and any investment adviser.
The proceeding is still pending as to respondents K.W. Brown & Company, 21st Century Advisors, Inc., K.W. Brown Investments, Inc., Kenneth Brown, and Wendy Brown. (Rels. 34-57403; IA-2710; File No. 3-12923)
Jason Malkin Dismissed from SEC v. Mohn
The Commission announced that on Feb. 22, 2005, the Commission and Jason Malkin entered a stipulation in the U.S. District Court for the Eastern District of Michigan dismissing Malkin from the above-referenced case, with prejudice. The Commission's complaint alleged that other entities and individuals fraudulently offered and sold investments in Agave, Ltd. and Genesis Trading Associates, L.L.C. In addition, the Commission named Malkin, NCB Investments, Inc., and PCM, L.L.C., two broker-dealers formerly registered with the Commission, as relief defendants, seeking disgorgement and other relief from them in the complaint. The Commission alleged that Malkin was the owner of NCB and PCM. The Commission did not allege that Malkin, NCB and PCM had violated the federal securities laws. By court order, NCB and PCM were placed under the control of the court-appointed receiver. After Malkin was dismissed from the case, the court entered an order against NCB and PCM, by consent, ordering them to pay to the court-appointed receiver approximately $10.5 million on Aug. 2, 2005. For further information, see SEC v. Keith Mohn, et al., Case No. 02-74634 (E.D. Mich.); LR-17856 and LR-19036. [SEC v. Keith Mohn, Mohn Asset Management, L.L.C., Mohn Financial Group, L.L.C., J. Patrick Kisor, PDK International, Inc., Agave, Ltd., Genesis Trading Associates, L.L.C., NCB Investments, Inc., PCM, L.L.C., Jason Malkin, and Gilbert Howard, Civil Action No. 02-74634 (E.D. Mich.)] (LR-20472)
Jury Finds Former Applix, Inc. CFO Violated Securities Laws and Finds Former CEO Not Liable; Consent Judgment Entered Against Third Former Executive
On Feb. 15, 2008, a jury found Walter T. Hilger, former Chief Financial Officer of Applix, Inc, a Westborough, Massachusetts Internet software company, liable for fraudulent conduct, including the falsification of books and records, in a civil injunctive action involving improper revenue recognition by Applix. The jury found former Applix CEO Alan C. Goldsworthy not liable for any securities law violations. The verdict followed a four week trial in Boston, Massachusetts before the Honorable Judith Dein, United States Magistrate for the United States District Court for the District of Massachusetts.
The Commission's complaint, filed on Jan. 4, 2006, alleged that Goldsworthy, Hilger and former Applix Director of World-Wide Operations Mark E. Sullivan participated in two fraudulent revenue recognition schemes, causing Applix to report inflated revenue and understated net loss figures for the year ended December 31, 2001 and for the quarter ended June 30, 2002.
The jury found that Hilger violated section 17(a)(3) of the Securities Act of 1933 (Securities Act); that he falsified Applix's books and records in violation of Rule 13b2-1 promulgated under the Securities Exchange Act of 1934 (Exchange Act); and that he knowingly aided and abetted Applix's filing of a false form 8-K in violation of Section 13(a) of the Exchange Act. The jury found that defendant Hilger did not violate Sections 17(a)(1) and (2) of the Securities Act, and Sections 10(b), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, and 13b2-2. The Court will determine the appropriate remedies against Hilger at a later date.
The Court had previously entered a final judgment by consent against former Applix Director of World-Wide Operations Mark E. Sullivan on Jan. 9, 2008. The final judgment enjoins Sullivan from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and 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, and orders Sullivan to pay a $25,000 civil money penalty. The Commission also issued an order instituting a settled administrative proceeding against Sullivan pursuant to Rule 102(e) of the Commission's Rules of Practice, based on the entry of the injunction against him. Sullivan, a resident of Bridgewater, Massachusetts, consented to the judgment without admitting or denying the allegations in the Commission's complaint. [SEC v. Alan C. Goldsworthy, Walter T. Hilger, and Mark E. Sullivan, Civil Action No. 06-CV-10012-JGD (D. Mass.)] (LR-20473; AAE Rel. 2793)
INVESTMENT COMPANY ACT RELEASES
Notices of Deregistration under the Investment Company Act
For the month of February, 2008, a notice has been issued giving interested persons until March 25, 2008, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act declaring that the applicant has ceased to be an investment company:
Proposed Rule Change
The Commission issued notice of filing of a proposed rule change (SR-NYSEArca-2008-25), filed by the NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., pursuant to Rule 19b-4 of the Securities Exchange Act of 1934 relating to rules permitting the listing and trading of Managed Fund Shares, trading hours and halts, fees applicable to such shares, and the listing and trading of shares of the PowerShares Active AlphaQ Fund, the PowerShares Active Alpha Multi-Cap Fund, the PowerShares Active Mega-Cap Portfolio and the PowerShares Active Low Duration Portfolio. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57395)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the International Securities Exchange relating to fee changes (SR-ISE-2008-13) 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 March 3. (Rel. 34-57397)
A proposed rule change filed by the International Securities Exchange relating to the extension of a pilot program to list and trade options on the iShares Emerging Markets Index Fund (SR-ISE-2008-10) 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 March 3. (Rel. 34-57399)
A proposed rule change (SR-Amex-2008-12), as modified by Amendment No. 2 thereto, filed by the American Stock Exchange relating to the Exchange's Options Fee Cap Pilot Program for Dividend Strategies, Merger Spreads, and Short Stock Interest Spreads 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 March 3. (Rel. 34-57401)
Approval of Proposed Rule Changes
The Commission granted approval to a proposed rule change, as modified by Amendment No.1 thereto (SR-ISE-2007-112), submitted by the International Securities Exchange relating to obvious errors. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57398)
The Commission granted approval to a proposed rule change, as modified by Amendment No. 1 thereto (SR-Amex-2007-109), submitted by the American Stock Exchange relating to the trading of exchange traded notes (ETNs). Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57400)
The Commission has approved a proposed rule change (SR-NSCC-2007-06) filed by the National Securities Clearing Corporation under Section 19(b)(1) of the Exchange Act to amend the hearing procedures afforded to members and applicants for membership and harmonize them with similar rules of its affiliates. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57404)
The Commission has approved a proposed rule change (SR-FICC-2007-06) filed by the Fixed Income Clearing Corporation under Section 19(b)(1) of the Exchange Act to amend the hearing procedures afforded to members and applicants for membership and harmonize them with similar rules of its affiliates. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57405)
The Commission has approved a proposed rule change (SR-DTC-2007-06) filed by the Depository Trust Company under Section 19(b)(1) of the Exchange Act to amend the hearing procedures afforded to an Interested Person and harmonize them with similar rules of its affiliates. Publication is expected in the Federal Register during the week of March 3. (Rel. 34-57406)
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