Securities and Exchange Commission Orders Hearing on Registration Revocation Against Four Public Companies for Failure to Make Required Periodic Filings
Today the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the four issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, 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 thereunder, are true. The judge in the proceeding 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 this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-57453; File No. 3-12985)
Commission Revokes Registration of Securities of Advanced Products Group, Inc. (N/K/A Cloudtech Sensors, Inc.) For Failure to Make Required Periodic Filings
Today, the Commission revoked the registration of each class of securities of Advanced Products Group, Inc. (Advanced Products Group) 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, Advanced Products Group 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 Advanced Products Group, Inc. (n/k/a Cloudtech Sensors, 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 Advanced Product Group's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Advanced Products Group in 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 . . . .
(Rel. 34-57457; File No. 3-12922)
Defendant in SEC Enforcement Action Sentenced in Related Criminal Case
Today, the Commission announced that on February 20, 2008, the Honorable John W. Darrah, U.S. District Court Judge for the Northern District of Illinois, sentenced Brad A. Weaver to twelve years and seven months in prison for his role in a fraudulent investment scheme that raised $22.6 million from 87 investors and ordered him to pay restitution of $22.6 million. Weaver pled guilty to one count of violating the federal wire fraud statute.
In a related civil case, on December 23, 2004, the Commission filed a complaint against Weaver and his company, Beta Asset Management, Inc., alleging they violated 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 by, among other things, telling investors that they could profitably trade in the "error accounts" of a broker-dealer at no risk. The error account trading strategy did not exist. The Complaint also alleged that the Defendants repeatedly delayed making requested payouts to existing investors until they raised money from new investors, as in a ponzi scheme. On February 3, 2006, the Court permanently enjoined Weaver and Beta Asset from violating the antifraud provisions of the federal securities laws. On April 10, 2006, the Commission barred Weaver from association with any broker, dealer or investment adviser. Weaver consented to the entry of both orders. [LR-20484]
In the Matter of Richard D. Nye, CPA
The United States Securities and Exchange Commission (Commission) announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Richard D. Nye. The Order finds that Nye, who has held a CPA license and served as Cornerstone Propane Partners, L.P.'s vice president of finance and administration and acting chief financial officer, consented to a Final Judgment in a civil action (SEC v. Baxter, et al., Case No.: C-05-03843-RMW, No. D. Cal.) which was entered on February 22, 2008 permanently restraining him from securities violations, ordering him to pay a civil money penalty and barring him from acting as an officer or director of a public company for three years.
Based on the above, the Order suspends Nye from appearing or practicing before the Commission as an accountant, with a right to apply for reinstatement after three years from the date of the order. Richard D. Nye consented to the issuance of the Order without admitting or denying any of the findings in the Order. [LR-20483]
SEC v. Enterprise Trust Company, et al
On March 3, 2008, the Honorable Matthew Kennelly of the United States District Court for the Northern District of Illinois, Eastern Division issued a Temporary Restraining Order (TRO) against Oak Brook, Illinois-based Enterprise Trust Company (Enterprise), its President, John H. Lohmeier (Lohmeier), and its Vice President, Rebecca Townsend (Townsend), and an Asset Freeze Order against Enterprise and Lohmeier. The TRO, among other things, temporarily enjoined Enterprise, Lohmeier and Townsend from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Asset Freeze Order froze the assets of Enterprise and Lohmeier. The Defendants consented to the issuance of both Orders. In addition, on March 5, 2008, Judge James B. Zagel entered an order appointing a receiver over Enterprise.
The Commission's complaint, filed on March 3, 2008, alleges, among other things, that Defendants Enterprise, Lohmeier and Townsend fraudulently induced hundreds of customers of Advisory Financial Consultants ("AFC"), a registered broker-dealer, to transfer custody of approximately $49 million in mutual funds to Enterprise. The complaint further alleges that unbeknownst to and without the authorization of the customers, Defendants Enterprise, Lohmeier and Townsend placed the AFC customers' mutual funds into margin and other accounts where the AFC customers' securities served as collateral for leveraged margin trading, including options trading and short selling, that was intended to benefit Enterprise's principals, Lohmeier and Townsend, and other Enterprise customers. This margin trading was not intended to and did not benefit the AFC customers. The complaint further alleges that on February 13, 2008, more that $8 million of the AFC customers' mutual funds were sold without the AFC customers' knowledge or approval to cover Enterprise's margin debt. The Commission alleges that Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Lohmeier aided and abetted, and, as a control person of Enterprise, is also jointly and severally liable for, Enterprise's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In addition to the emergency relief already obtained, the complaint seeks, among other things, preliminary and permanent injunctions, disgorgement of ill-gotten gains, and the imposition of civil penalties against Enterprise, Lohmeier and Townsend and the appointment of a receiver for Enterprise.
[SEC v. Enterprise Trust Company, et al, Civil Action 08 cv 1260, United States District Court for the Northern District of Illinois, filed March 3, 2008] [LR-20482]
Approval of Proposed Rule Changes
The Commission approved a proposed rule change (SR-NASDAQ-2008-004) filed by the NASDAQ Stock Market related to supplemental market participant identifiers. Publication is expected in the Federal Register during the week of March 10. (Rel. 34-57452)
The Commission approved a proposed rule change (SR-NASDAQ-2007-096) submitted under Rule 19b-4 of the Securities Exchange Act of 1934 by the NASDAQ Stock Market to modify the allocation of the maximum time an adjudicatory body may grant a company to regain compliance with the listing requirements without modifying the maximum time available under Nasdaq Rule 4802. Publication is expected in the Federal Register during the week of March 10. (Rel. 34-57447)
Notice of Proposed Rule Change
The American Stock Exchange filed a proposed rule change (SR-Amex-2007-131) and Amendment No. 1 thereto under Rule 19b-4 of the Securities and Exchange Act of 1934 relating to Generic Listing Standards For Index Multiple Fund Shares and Index Inverse Fund Shares. Publication is expected in the Federal Register during the week of March 10. (Rel. 34-57451)
Accelerated Approval of Proposed Rule Change
The Commission issued an order granting accelerated approval of a proposed rule change, as modified by Amendment No. 1 thereto, submitted by NYSE Arca (SR-NYSEArca-2007-91) relating to the listing and trading of six iShares® S&P GSCI™ Commodity-Indexed Trusts. Publication is expected in the Federal Register during the week of March 10. (Rel. 34-57456)
The Commission published notice and granted accelerated approval of a proposed rule change filed by the National Stock Exchange, (SR-NSX-2008-05), as modified by Amendment No. 1 thereto, consolidating into a single rule certain requirements for products traded on the exchange pursuant to unlisted trading privileges. Publication is expected in the Federal Register during the week of March 10. (Rel. 34-57448)
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