Michael Lauer Indicted On Conspiracy and Wire Fraud Charges
The Commission announced that on Feb. 19, 2008, the United States Attorney's Office for the Southern District of Florida unsealed an Indictment charging Michael Lauer and four other individuals with one count of conspiracy to commit mail, wire and securities fraud and six counts of wire fraud. If convicted, Lauer faces a maximum sentence of 20 years and a $250,000 fine for each count of wire fraud and five years and a $250,000 fine for the conspiracy count. The Indictment also seeks forfeiture of properties obtained, directly or indirectly as a result of the alleged criminal violations.
The Indictment alleges that from at least October 1999 through July 2003, Lauer, as founder and primary manager, formed and directed several hedge funds, collectively known as the Lancer Group hedge funds, to manipulate the month-end closing prices of shares of thinly-traded shell companies' securities, to falsely overstate the value of the Lancer Group's holdings. According to the Indictment, Lauer purchased large quantities of restricted stock at pennies per share in private transactions and then purchased small amounts of the same securities for the Lancer Group to drive up the price by the end of the trading day. Lauer then falsely valued the securities held by the Lancer Group, including the restricted shares, at the much higher closing price, to pump-up the performance fees paid to the management companies, attract new investors to buy into the hedge funds, and induce current investors in the hedge funds.
The Indictment's allegations are based on the same conduct underlying the Commission's July 8, 2003 Complaint against Lauer in the United States District Court for the Southern District of Florida. The Commission charged Lauer with 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 (2) of the Investment Advisers Act of 1940, and as "control person" for Lancer Group under Section 20(a) of the Exchange Act. On Jan. 18, 2007, the Commission filed a motion for summary judgment against Lauer, which is pending before the Court. [SEC v. Michael Lauer, et al., Case No. 03-80612-CIV-MARRA/VITUNAC (S.D. Fla.)] (LR-20505)
Proposed Rule Changes
A proposed rule change (SR-FINRA-2008-005) has been filed by the Financial Industry Regulatory Authority regarding a proposal to adopt Rule 12905 of the NASD Code of Arbitration Procedure for Customer Disputes and Rule 13905 of the NASD Code of Arbitration Procedure for Industry Disputes to permit submissions to arbitrators after a case has closed only under the following circumstances: (1) as ordered by a court; (2) at the request of any party within 30 days of service of an award or notice that a matter has been closed, for ministerial matters; or (3) if all parties agree and submit documents within 30 days of service of an award or notice that a matter has been closed. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57525)
A proposed rule change (SR-Amex-2007-129) has been filed by the American Stock Exchange regarding a proposal to require member organizations to integrate the responsibility for supervision of their public customer options business into their overall supervisory and compliance programs. In addition, the proposal would require member organizations to strengthen their supervisory procedures and internal controls as related to their public customer options business. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57527)
A proposed rule change (SR-FINRA-2008-009) has been filed by the Financial Industry Regulatory Authority regarding a proposal to amend the chairperson eligibility requirements in the Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57529)
Accelerated Approval of Proposed Rule Change
A proposed rule change (SR-Phlx-2008-18) filed by the Philadelphia Stock Exchange relating to the imposition of fines for Minor Rule Plan Violations has been approved on an accelerated basis pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57528)
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