Commission Imposes Sanctions Against James G. Marquez, Former Co-Principal of Bayou Hedge Fund
On June 5, the Commission instituted settled administrative proceedings against James G. Marquez, who, from 1996 through October 2001, was a portfolio manager and principal of Bayou Management, LLC (Bayou Management), the investment adviser to the failed Connecticut-based hedge fund Bayou Fund, LLC (Bayou Fund). During that time, Marquez also was associated with and acted as a control person of Bayou Securities, LLC, a registered broker-dealer affiliated with Bayou Fund and Bayou Management.
On May 28, 2008, a judgment was entered by consent against Marquez, in the United States District Court for the Southern District of New York, permanently restraining and enjoining him from future violations of the general antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Commission's complaint alleged that Marquez and his partners attracted millions of dollars in investments by issuing to Bayou Fund's investors fictitious account statements, periodic newsletters, and falsified "independent" yearly audits certified by a sham accounting firm that Marquez and his partners had created.
The Commission's order, which is based on the entry of the injunctions, permanently bars Marquez from association with any broker, dealer, or investment adviser pursuant to Section 15(b)(6) of the Exchange Act and Section 203(f) of the Investment Advisers Act of 1940. Marquez has consented to the issuance of the order without admitting or denying any of the Commission's findings except as to the entry of the final judgment.
The Commission's investigation in this matter continues. For more information see [SEC v. James G. Marquez, Civil Action No. 08-CIV-4773 (S.D.N.Y. May 22, 2008)] (LR-20595). (Rels. 34-57931; IA-2741; File No. 3-13058)
SEC Sanctions Faro Technologies, Inc. for Improper Payments to Chinese Government Employees
On June 5, the Commission instituted settled enforcement proceedings charging Faro Technologies, Inc. (Faro), which is headquartered in Lake Mary, Florida, with violations of the Foreign Corrupt Practices Act (FCPA) in connection with certain improper payments that Faro's Chinese subsidiary made to employees of Chinese state-owned companies in order to obtain or retain business. Faro develops, manufactures, markets, and supports software-based three-dimensional measurement devices.
The Commission issued an administrative order finding that Faro violated the anti-bribery, books-and-records, and internal controls provisions of the FCPA. In the administrative order, the Commission ordered Faro to cease and desist from such violations, and to disgorge $1,411,306 in illegal profits, together with $439,637.72 in prejudgment interest. The Commission also required Faro to retain an independent consultant for a two year term to review and make recommendations concerning the company's FCPA compliance policies and procedures.
In the administrative order, the Commission found that, from 2004 through early 2006, Faro's Chinese subsidiary made a total of $444,492 in improper payments to employees of Chinese state-owned companies in order to obtain or retain sales contracts, from which Faro realized net profits of $1,411,306. The Commission found that a high level Faro executive, Faro's Director of Asia-Pacific Sales (the Sales Director), authorized employees of Faro's Chinese subsidiary to make the improper payments, including payments made through third-party intermediaries in order to avoid detection. The Commission also found that the Sales Director directed employees of Faro's Chinese subsidiary to alter account entries to conceal the true nature of the payments. In connection with the improper payments, Faro failed to make and keep accurate books and records, and failed to devise and maintain effective internal accounting controls.
As a result of the conduct described above, the Commission found that Faro violated Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Faro consented to the ordered relief without admitting or denying the findings contained in the Commission's administrative order. In addition, in a separate non-prosecution agreement with the United States Department of Justice also announced today, Faro will pay a $1.1 million criminal penalty and agree to the same terms concerning the independent consultant.
The Commission considered the fact that Faro self-reported and promptly undertook remedial actions, as well as the cooperation it afforded the Commission staff in its investigation. The Commission acknowledges the assistance of the Department of Justice, Fraud Section. The Commission's investigation is ongoing. (Rel. 34-57933; AAE Rel. 2836; File No. 3-13059)
In the Matter of EKN Financial Services, Inc. f/k/a Ehrenkrantz King Nussbaum, Inc., and Anthony Ottimo
On June 6, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, and Sections 15(b) and 21C of the Securities Exchange Act of 1934, as to EKN Financial Services, Inc. f/k/a Ehrenkrantz King Nussbaum, Inc., and Anthony Ottimo. The Order finds that EKN Financial Services, Inc. (Ehrenkrantz) is a registered broker-dealer headquartered in Garden City, New York. The Order further finds that Ottimo, 68 years old and a resident of Plainview, New York, is the chief executive officer of Ehrenkrantz and also a registered representative of the firm. The Order finds that between January and November 2003, Ehrenkrantz, through another person associated with the firm, defrauded mutual funds and their shareholders by engaging in deceptive practices designed to mislead the funds and conceal from the funds that four Ehrenkrantz customers each controlled numerous accounts, which they used to exceed limits on exchanges imposed by the funds. The Order finds that Ottimo failed reasonably to supervise the other associated person with a view to preventing the violations. Ehrenkrantz and Ottimo consented to the issuance of the Order without admitting or denying any of the findings.
Based on the above, the Order censures EKN and orders it to pay disgorgement of $31,000 and prejudgment interest of $10,024, as well as a civil money penalty of $25,000. The Order also orders Ehrenkrantz to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Sections 10(b), 15(c)(1) and 15(b)(7) of the Exchange Act and Rules 10b-5 and 15b7-1 thereunder. The Order also requires Ottimo to pay disgorgement of $31,000 and prejudgment interest of $10,024, along with a civil penalty of $25,000. Further, the Order bars Ottimo from association in a supervisory capacity with any broker or dealer. The Order also orders Ottimo to cease and desist from causing any violations and any future violations of Section 15(b)(7) of the Exchange Act and Rule 15b7-1 thereunder. (Rels. 33-8928; 34-57934; File No. 3-13060)
Proposed Rule Changes
The Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2008-31) to permit CBOE to list and trade CBOE S&P 500 three-month realized variance options and CBOE S&P 500 three-month realized volatility options. Publication is expected in the Federal Register during the week of June 9. (Rel. 34-57913)
The American Stock Exchange filed a proposed rule change (SR-Amex-2008-36) relating to the listing and trading of shares of the MacroShares $100 Oil Up Trust and the MacroShares $100 Oil Down Trust. Publication is expected in the Federal Register during the week of June 9. (Rel. 34-57925)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-Amex-2008-14), as modified by Amendment No. 1 thereto, submitted by the American Stock Exchange to permit the listing and trading of additional index options series that do not meet current requirements of Rule 903C. Publication is expected in the Federal Register during the week of June 9. (Rel. 34-57916)
Accelerated Approval of Proposed Rule Changes
The Commission granted accelerated approval to a proposed rule change (SR-Amex-2008-42) submitted by the American Stock Exchange relating to Equity Linked Term Notes. Publication is expected in the Federal Register during the week of June 9. (Rel. 34-57918)
The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2008-46) submitted by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to the listing and trading of shares of the NETS ISEQ 20 Index Fund (Ireland). Publication is expected in the Federal Register during the week of June 9. (Rel. 34-57921)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change filed by NYSE Arca relating to the extension of the pilot program for initial and continued financial listing standards for common stock of operating companies until Nov. 30, 2008, (SR-NYSEArca-2008-55) 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 June 9. (Rel. 34-57922)
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