Recommendations Ready for Commission Action to Facilitate U.S. Investors' Exercise of Rights in Overseas Mergers and Acquisitions
Staff Completes Review of Cross-Border Tender, Exchange Offer and Business Combination Rules
The Securities and Exchange Commission's Division of Corporation Finance said today that it has completed its review of the Commission's cross-border tender, exchange offer and business combination rules, and has prepared recommendations for consideration by the Commission.
The cross-border tender offer rules apply to offers for the securities of foreign companies that have U.S. security holders. They do not apply to offers for U.S. companies.
The goal of the review of the current rules, which were adopted by the Commission in 1999, was to determine whether changes could be made that would further facilitate the ability of U.S. investors to exercise their rights in connection with cross-border mergers and acquisitions. This review included looking at areas of conflict and inconsistency with foreign regulations and practice that are frequently encountered in cross-border business combinations and that result in U.S. investors being excluded from these transactions.
"As I have noted publicly on a number of occasions earlier this year, preparing recommendations for the Commission to consider regarding ways to improve the cross-border business combination rules was a high priority for the Division. I am pleased to deliver our recommendations to the Commission and look forward to the public discourse that will follow the Commission's issuance of any proposed changes," said John White, Director of the Division of Corporation Finance.
The Division recommends Commission consideration as soon as possible. Issuance of a rule proposal by the Commission based on the Division's recommendations requires a vote of the Commissioners, followed by a public comment period.
An excerpt from Mr. White's Jan. 23, 2008 speech at the 35th Annual Securities Regulation Institute in San Diego outlines the Division's priorities:
"The cross-border tender offer rules are another area in which the staff may recommend revisions in the near future. In fact, revisions to these rules are currently the number one rulemaking priority in our Office of Mergers and Acquisitions. With eight years of experience using the current rules, I believe that most will agree that the rules have worked well in balancing the need to promote the inclusion of U.S. security holders in cross-border transactions against the need to provide the protections of the federal securities laws to those holders. Despite the success of these rules however, the staff is considering revisions to address areas that may not be working as well as expected and areas where relief could be expanded. For example, it may be appropriate to make revisions with respect to the way U.S. ownership of a subject company's securities is calculated."
Read the entire speech at: http://www.sec.gov/news/speech/2008/spch012308jww.htm
An earlier speech by Mr. White describing this and other Division of Corporation Finance (2008) priorities is available at: http://www.sec.gov/news/speech/2008/spch011408jww.htm. (Press Rel. 2008-66)
In the Matter of Joseph A. Ferona, Jr.
On April 28, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 against Joseph A. Ferona, Jr. (Ferona), formerly of Castle Rock, Colorado.
The Order finds that Ferona entered a guilty plea to one count of mail fraud and that he was permanently enjoined by default from future violations of the securities laws. The order further finds that Ferona was an associated person of an unregistered investment adviser, Castle Rock Trading Company, and that he acted as a broker or dealer when he sold securities in the Global Prosperity Fund.
Based on the above, the Order bars Ferona from association with any broker, dealer, or investment adviser. Ferona consented to the issuance of the Order without admitting or denying the findings therein, except as to the entry of the injunction and judgment of criminal conviction, which he admitted. (Rel. 34-57729; IA-2729; File No. 3-12935)
In the Matter of Diversified Financial Corporation
On April 29, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(e) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against Diversified Financial Corporation (Diversified). In the Order, the Division of Enforcement (Division) alleges that a final judgment ordering a permanent injunction was entered against Diversified.
The Division further alleges that, on March 28, 2008, the Southern District Court of New York entered a permanent injunction by default against Diversified from violating 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 Investment Advisers Act of 1940. The court also held Diversified and Dominique S. Alvieri, its principal, jointly and severally liable for disgorgement of $555,800, the profits gained as a result of the fraudulent acts, together with prejudgment interest in the amount of $252,682.84, for a total of $909,482.82. The court imposed a civil penalty against Diversified in the amount of $555,000 or the gross amount of its pecuniary gain as a result of the violation. SEC v. Dominique S. Alvieri and Diversified Financial Corporation, 02 Civ. 7893 (DAB) (Mar. 28, 2008 Final Judgment)
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Diversified an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions against Diversified are appropriate and in the public interest pursuant to the Advisers Act. The Commission directed that an administrative law judge issue an initial decision in this matter within 210 days from the date of service of the Order Instituting Proceedings. (Rel. IA-2730; File No. 3-13026)
SEC Orders Hearing on Registration Revocation Against Three 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 three companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the three 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 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. 34-57731; File No. 3-13027)
In the Matter of Michael J. Nolan
On April 29, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) in the matter of Michael J. Nolan. The Order finds that on December 12, 2007, the Commission filed a complaint against Nolan in the United States District Court for the District of Connecticut (SEC v. Michael J. Nolan, Civil Action No. 03:07-cv-01833-AHN). On April 8, 2007, the court entered an order permanently enjoining Nolan, by consent, from future violations of Section 17(a) of the Securities Act of 1933, 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 future 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.
Based on the above, the Order suspends Nolan from appearing or practicing before the Commission as an accountant. Nolan consented to the issuance of the Order without admitting or denying the findings in the Order, except as to the Commission's jurisdiction and the entry of the permanent injunction against him by the District Court in the civil injunctive action. (Rel. 34-57733; AAE Rel. 2816; File No. 3-13028)
SEC Files Settled Insider Trading Action Against Edward O. Boshell and Donald J. Pochopien
On April 28, the Commission filed an insider trading action in the United States District Court for the Northern District of Illinois against Edward O. Boshell and Donald J. Pochopien. At the time of the alleged misconduct, Boshell was an outside disinterested director of a Dallas-based business development company (BDC) and Pochopien was a shareholder of a Chicago-based law firm. The Commission alleges that Boshell and Pochopien engaged in unlawful insider trading in the securities of Laserscope in advance of a public announcement on June 5, 2006, that Laserscope would be acquired by American Medical Systems Holding, Inc. (American Medical).
In its complaint, the Commission alleges that, in May 2006, Boshell and Pochopien purchased Laserscope securities based on material, non-public information regarding the acquisition of Laserscope by American Medical. The Commission alleges that Boshell was made aware of the acquisition during a routine board meeting of the Dallas-based BDC approximately a month before the public announcement. The Commission alleges that Pochopien was made aware of the acquisition approximately a month before the public announcement when his law firm was hired by American Medical to conduct a due diligence review of the Laserscope acquisition. On the day of the announcement, Laserscope's common stock closing price of $30.65 was 43% higher than the proceeding day closing price of $21.41. By selling their Laserscope stock, Boshell profited $85,750 and Pochopien profited $134,970.
Without admitting or denying the allegations in the complaint, Boshell and Pochopien have agreed to settle the Commission's charges by consenting to the entry of final judgments that would: (i) permanently enjoin them from further violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; (ii) order them to pay $85,750 and $134,970, respectively, in disgorgement; (iii) order them to pay $11,381 and $17,914, respectively, in prejudgment interest; and (iv) order them to pay civil penalties of $85,750 and $134,970, respectively. [SEC v. Edward O. Boshell and Donald J. Pochopien, Civil Action No. 08-CV-2392, USDC, NDIll. (Chicago Division)] (LR-20541)
SEC Charges Former Director of Community Bancorp and His Son With Insider Trading
The Commission today filed an insider trading action against Charles R. Norton, a former director of Community Bancorp, and his son, Chad R. Norton, who traded in Valley Bancorp stock shortly before the June 28, 2006 announcement of Valley Bancorp's acquisition by Community Bancorp.
The SEC's complaint, filed in federal district court in Las Vegas, Nevada, alleges that Charles and Chad Norton, both of Las Vegas, traded on the basis of confidential information about Community Bancorp's imminent acquisition of Valley Bancorp. Charles Norton sat on the board of directors of Community Bancorp and had access to sensitive information about the acquisition through his attendance at Community Bancorp board meetings. The complaint alleges that Charles Norton tipped Chad Norton, who traded ahead of the announcement. Charles and Chad Norton realized illegal profits of $35,064.71 from the trades.
According to the SEC's complaint, Charles Norton learned confidential information about Community Bancorp's acquisition of Valley Bancorp at a May 2006 Community Bancorp board of directors meeting and later informed his son about the acquisition. Chad Norton traded based on that inside information, buying 7,000 Valley Bancorp shares between May 16, 2006, and the June 28 announcement. On the first trading day after the announcement, Valley Bancorp's stock price increased more than 13 percent, and its trading volume increased 2,885 percent. In July 2006, Chad Norton sold the Valley Bancorp shares for a profit of $35,064.71.
To settle the SEC's charges, Charles and Chad Norton have consented, without admitting or denying the allegations in the complaint, to a final judgment permanently enjoining them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, to pay $38,433.72, representing the disgorgement of their illegal trading profits and prejudgment interest, and each to pay a civil penalty of $35,064.71. In addition, Charles Norton will be barred from serving as an officer or director of a public company for five years. The settlement is subject to approval by the court.
The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA). [SEC v. Charles R. Norton and Chad R. Norton, Civil Action No2:08-CV-541(D. Nev.)] (LR-20542)
Final Judgments Entered Against Elfindepan S.A., Strategic Asset Funds S.A., and Southern Financial Group for Fraudulent High-Yield Investment Scam
The Commission announced that the U.S. District Court for the Middle District of North Carolina entered final judgments on April 15, 2008, against defendants Elfindepan, S.A., Strategic Asset Funds, S.A. (SAF), and Southern Financial Group (SFG) for their roles in a high-yield investment scheme. Elfindepan, a defunct Costa Rican company, SAF, a defunct Panamanian company, and SFG, a de facto trust, were controlled by defendant Tracy Dunlap. Without admitting or denying the allegations in the Commission's complaint, Elfindepan, SAF, and SFG each consented to the entry of final judgments permanently enjoining them from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered Elfindepan, SAF, and SFG to pay disgorgement of $5,577,855.05, $618,332.07, and $220,935.47 respectively. The disgorgement obligations of both Elfindepan and SFG are deemed satisfied by the corresponding amounts that the receiver recovered from each pursuant to the Court's March 23, 2001 order. SAF's disgorgement obligation is deemed satisfied by the corresponding amount that the receiver recovered from SAF pursuant to the Court's July 24, 2001 order.
On Aug. 10, 2000, the Commission filed a complaint, which was amended on Aug. 30, 2002, alleging that Elfindepan, SFG, SAF, and others defrauded investors nationwide of approximately $30 million in connection with a high-yield investment scheme involving the unregistered offer and sale of Securities of Elfindepan, a purported Costa Rican financial company. The complaint alleges that Elfindepan made numerous materially false and misleading statements including promising investors that their investments were secure and would yield returns of as much as 40% to 50% per month. Investors were not told that proceeds from later investors were being used to pay earlier investors and distributors in classic ponzi-scheme fashion. According to the complaint, SAF perpetrated a variation of the Elfindepan scheme through the internet. In 2001, the Court appointed a receiver for Elfindepan, SFG, and SAF. The receiver has distributed proceeds derived from the Commission's suit along with other funds collected during the litigation to defrauded investors. [SEC v. Elfindepan, S.A., et al., United States District Court for the Middle District of North Carolina, Civil Action No. 1:00CV00742] (LR-20543)
INVESTMENT COMPANY ACT RELEASES
ING USA Annuity and Life Insurance Company, et al.
A notice has been issued giving interested persons until May 22, 2008, to request a hearing on an application filed by ING USA Annuity and Life Insurance Company, Separate Account B of ING USA Annuity and Life Insurance Company, Reliastar Life Insurance Company of New York, Reliastar Life Insurance Company of New York Separate Account NY-B and ING Variable Portfolios, Inc. (Applicants). Applicants seek an order pursuant to Section 26(c) of the Investment Company Act to permit the substitution of shares of the ING Russell Small Cap Index Portfolio for shares of the ProFund VP Small-Cap. (Rel. IC-28256 - April 28)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change (SR-BSE-2008-28) filed by the Boston Stock Exchange regarding transfer of BOX Units from the Montréal Exchange Inc. to MX US 2, Inc. 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 April 28. (Rel. 34-57713)
Accelerated Approval of Proposed Rule Change
A proposed rule change (SR-CBOE-2007-39), as modified by Amendment No. 2 thereto, filed by the Chicago Board Options Exchange has been approved on an accelerated basis pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934 regarding penny price improvement. Publication is expected in the Federal Register during the week of April 28. (Rel. 34-57716)
Proposed Rule Change
A proposed rule change (SR-FINRA-2008-013) has been filed by the Financial Industry Regulatory Authority regarding a proposal to amend NASD Rule 2220 (Options Communications with the Public). Publication is expected in the Federal Register during the week of April 28. (Rel. 34-57720)
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