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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-58
March 25, 2008


SEC Announces Next Steps for Implementation of Mutual Recognition Concept

On March 24, the Commission announced a series of actions it intends to take to further the implementation of the concept of mutual recognition for high-quality regulatory regimes in other countries.

The Commission contemplates taking the following actions:

  • Exploring initial agreements with one or more foreign regulatory counterparts, which would be based upon a comparability assessment by the SEC and by the foreign authority of one another's regulatory regimes.
  • Considering adoption of a formal process for engaging other national regulators on the subject of mutual recognition. This process could be accomplished through rulemaking or other appropriate mechanisms, possibly informed by one or more initial agreements with other regulators.
  • Developing a framework for mutual recognition discussions with jurisdictions comprising multiple securities regulators tied together by a common legal framework, including Canada (which has no national securities regulator, but rather provincial regulators) and the European Union (whose national securities regulators are subject to supranational legislation and directives).
  • Proposing reforms to Rule 15a-6 in order to improve the process by which U.S. investors have access to foreign broker-dealers.

The steps we are announcing today are designed to better coordinate SEC regulation of the U.S. capital markets with our counterparts' regulation in the larger global marketplace," said SEC Chairman Christopher Cox. "Innovations in technology have eliminated many barriers to cross-border access between U.S. and foreign markets, and that in turn has increased U.S. investor demand for foreign investment opportunities. By beginning to build a sturdy basis for cooperation among securities regulators who share the same concerns, we can greatly improve investor protection and market efficiency worldwide.

The Commission's engagement of other regulators in an effort of coordination and cooperation has spanned more than 20 years. These efforts have included the reaching of memoranda of understanding regarding enforcement cooperation, technical assistance, and investigatory collaboration with more than 30 foreign jurisdictions. In the past decade, as global markets have become more interconnected, the SEC has been approached by market participants and foreign regulators regarding the possibility of reducing regulatory barriers between high-quality markets. Recently, the Commission has engaged in an extensive exploration of the issues, including the holding of a Mutual Recognition roundtable on June 12, 2007. The Commission also has had the benefit of the extensive public discourse, including the publication of formal studies and recommendations by various private groups.

The steps that the Commission is announcing today proceed from the following premises:

  • Globalized markets and increased cross-border access offer many potential benefits for U.S. investors, including broader investment choices, lower transaction costs resulting from increased competition and technology, increased efficiency of transactions, improved integration of cross-border trading and technology, greater opportunity for diversification, and more access to information about foreign investment opportunities. At the same time, taking advantage of these developments requires greater international cooperation to ensure consistent and strengthened investor protection.
  • Today, regulatory overlap from different national securities regulatory regimes can pose impediments to cross-border trading. This overlap can result in additional costs for U.S. investors and regulatory compliance burdens on market participants without consideration of whether such costs afford any additional meaningful investor protections.
  • Even as exchanges consolidate and trading occurs without regard to borders, securities regulation remains primarily a national function, and likely will remain the province of domestic regulators for the foreseeable future.
  • While presiding over their own national regulatory regimes, securities regulators worldwide continue to work together to promote efforts to reach consensus on, and where possible convergence of, shared principles of high-quality securities regulation designed to promote the protection of investors globally. This does not mean that regulators will adopt one identical approach to securities regulation, but differing approaches may achieve the same desired outcomes.

The Commission also is taking this opportunity to express again its interest in discussing market access with foreign counterparts, investors, and other interested parties, as well as other issues affecting international regulatory cooperation. (Press Rel. 2008-49)

Commission Meetings

Closed Meeting - Monday, March 31, 2008 - 10:00 a.m.

The subject matter of the closed meeting scheduled for Monday, March 31, will be: formal orders of investigation; institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; and adjudicatory matters.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. 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.


Final Consent Judgment Entered Against Former CEO and President of Issuer in Offering Fraud Litigation

The Commission announced that on Feb. 27, 2008, a final consent judgment was entered in the United States District Court for the Eastern District of New York as to defendant Peter Riccardo (Riccardo), the former President and CEO of America In Line Corporation (AIL) and America In Line of Mount Sinai Corp. (AILMS). Without admitting or denying the allegations in the Commission's complaint, Riccardo consented to the entry of a final judgment which provides: (1) that Riccardo is enjoined from violating 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; (2) that he is barred from acting as an officer or director of a public company and from participating in a penny stock offering; and (3) that he pay a civil monetary penalty of $50,000.

According to the Commission's complaint filed on Aug. 6, 2002, AIL, AILMS and Riccardo conducted a series of unregistered offerings between 1996 and 2000 in order to raise funds to construct an in-line roller hockey rink in Long Island, New York, and the offering memoranda provided to investors either failed to make any disclosures concerning the commission payments or disclosed that only 8% of the investor proceeds would be used to pay sales commissions.

On Sept. 28, 2007, the Commission obtained default judgments against AIL and AILMS which permanently enjoined them 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. [SEC v. America In Line Corporation, et. al., 02-CIV-4362 (LDW) (EDNY)] (LR-20507)

SEC Settles With Former Officers of Riverstone Networks, Inc.

The Commission announced today that the Honorable Charles R. Breyer of the United States District Court for the Northern District of California has entered, by consent, orders of permanent injunction and other relief (Orders) in a civil action the Commission brought against five former officers and one former employee of Riverstone Networks, Inc. (Riverstone), a California-based company that formerly manufacture and market communications routers. In the lawsuit, the Commission alleged that from June 2001 through June 2002, these defendants participated in a scheme to inflate Riverstone's publicly-reported net revenues through improper revenue recognition on contingent sales (LR-19869). The defendants, in consenting to the Orders, neither admitted nor denied the allegations of the Commission's complaint.

Pursuant to the Orders, former Riverstone officers Romulus S. Pereira, chief executive officer, Robert B. Stanton, chief financial officer, L. John Kern, executive vice president of sales, Andrew D. Feldman, vice president of marketing, and William F. McFarland, vice president of finance, have been enjoined from violating 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) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. Defendants Pereira, Stanton, and McFarland were further enjoined from aiding and abetting violations of Section 13(b)(2)(B)(ii) of the Exchange Act. Former Riverstone employee Lori H. Cornmesser, director of sales operations, was enjoined from violating Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, and from aiding and abetting violations of Section 13(b)(2)(A) of the Exchange Act and Rule 13b2-2 thereunder. The Orders also require defendants Pereira, Stanton, Kern, Feldman, and Cornmesser to pay disgorgement in the amount of $375,000, $175,000, $347,066, $289,507, and $17,054, respectively. Defendants Pereira, Stanton, and McFarland were further ordered to pay civil penalties in the amount of $75,000, $75,000, and $40,000, respectively. Finally, defendants Pereira, Stanton, and Kern have been barred for a period of five years from acting as an officer or director of a public company.

In related criminal cases, defendants Kern and Feldman pled guilty to one felony count each of violating the internal accounting controls of a public company under the provisions of Sections 13(b)(5) and 32 of the Exchange Act. In December 2007, they were each sentence to three years of probation and fined $5,000. U.S. v. Kern, Case No. 3:0-cr-00733 and U.S. v. Feldman, Case No. 3:07-cr-00731, N.D. Cal.] (LR-20508)


A summary previously published in the March 20th issue of the Digest, entitled "SEC Files Settled Books and Records and Internal Controls Charges Against AB Volvo for Improper Payments to Iraq Under the U.N. Oil for Food Program - - Company Agrees to Pay Over $12.6 Million in Civil Penalties, Disgorgement of Profits, and Interest", was inadvertently included again in yesterday's Digest.


Immediate Effectiveness of Proposed Rule Changes

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-03) under Section 19(b)(3)(A) of the Securities Exchange Act of 1934 relating to the types of cleared contracts that may be carried in a cross-margining account at OCC. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57543)

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-05) under Section 19(b)(3)(A) of the Securities Exchange Act to modify the description of OCC's pro rata assignment procedure with respect to flexibly structured foreign currency options. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57547)





Modified: 03/25/2008