SEC Announces Proposed Plan to Enhance Insider Trading Surveillance and Detection
The Securities and Exchange Commission today announced that it has published for public comment an agreement among the securities self-regulatory organizations (SROs) that is designed to improve detection of insider trading across the equities markets by centralizing surveillance, investigation, and enforcement under NYSE Regulation, Inc. (NYSE Regulation) and the Financial Industry Regulatory Authority, Inc. (FINRA). Currently, each equity exchange is responsible for surveillance of trading on its market and any investigations and enforcement actions involving its members.
This proposed new approach by the SROs to detect and enforce prohibitions against insider trading arose from yearlong discussions among the SEC, NYSE Regulation, FINRA and the exchanges to improve market integrity and better protect investors. The proposed plan would focus expertise and eliminate gaps and duplication in surveillance for insider trading among the equities markets.
SEC Chairman Christopher Cox said, "We have immediately published this proposal for public comment because of its potential to increase the likelihood that those who engage in insider trading will be caught and punished. This should send a strong warning to those who would undermine market integrity and undercut investor confidence for their own personal gain."
To complement the regulatory allocation agreement published for comment today, the securities exchanges and FINRA also entered into regulatory services agreements. Together, these agreements would provide NYSE Regulation with responsibility for surveillance, investigation, and enforcement of insider trading in securities listed on the New York Stock Exchange and NYSE Arca; FINRA would have such responsibility with respect to NASDAQ-listed and Amex-listed securities, and securities listed solely on the Chicago Stock Exchange.
FINRA and the following equity exchanges are parties to these agreements:
The insider trading initiative for the equities markets follows a similar consolidation of responsibility for surveillance for insider trading involving securities options, which the SEC approved in June 2006. The Order approving the Options Regulatory Surveillance Authority Plan can be found on the SEC Web site.
Public comments should be received by the Commission no later than 21 days after publication of the proposed plan in the Federal Register. (Press Rel. 2008-174)
In the Matter of Scott Hirth
On August 13, 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 against Scott Hirth (Order). The Order finds that, on July 28, 2008, the United States District Court for the Eastern District of Michigan entered a final judgment against Hirth permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5, 13b2-1, 13b2-2 thereunder, and from aiding and abetting 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. Hirth was also ordered to pay $233,676.00 in disgorgement of ill-gotten gains, $54,474.25 in prejudgment interest, a $130,000 civil money penalty, and was permanently barred from serving as an officer or director of a public company. Based on the final judgment of permanent injunction, the Order suspends Respondent Hirth from appearing or practicing before the Commission as an accountant. Hirth consented to the issuance of the Order without admitting or denying the findings in the Order.
According to the Order, the Commission's complaint alleged that Scott Hirth, of Carleton, Michigan, engaged in accounting fraud at ProQuest Company from at least 2001 through 2005. The complaint further alleged that Hirth made fraudulent manual journal entries in order to favorably alter ProQuest's financial results and that these manual journal entries were designed to increase revenue and decrease expenses at ProQuest. (Rel. 34-58355; AAE Rel. 2863; File No. 3-13129)
INVESTMENT COMPANY ACT RELEASES
Pimco Funds, et al.
An order has been issued on an application filed by PIMCO Funds, et al., under Section 6(c) of the Investment Company Act for an exemption from Rule 12d1-2(a) under the Act. The order permits funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-28356 - August 12)
The Mexico Fund, et al.
An order has been issued on an application filed by The Mexico Fund, et al. under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order permits The Mexico Fund, a registered closed-end management investment company, to make periodic distributions of long-term capital gains with respect to its common stock as part of a managed distribution plan as frequently as twelve times each year. (Rel. IC-28357 - August 12)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change, as modified by Amendment Nos. 1 and 2 thereto, filed by the Philadelphia Stock Exchange (SR-Phlx-2007-33) relating to margining. Publication is expected in the Federal Register during the week August 18. (Rel. 34-58340)
The Commission approved a proposed rule change (SR-NYSE-2008-45) and Amendment No. 1 thereto submitted by the New York Stock Exchange pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, amending NYSE Rule 98 and related rules to redefine specialist operations at the NYSE. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58328)
Proposed Rule Changes
The American Stock Exchange filed a proposed rule change (SR-Amex-2008-60) related to margin requirements for fixed return options. Publication is expected in the Federal Register during the week August 18. (Rel. 34-58341)
The Depository Trust Company filed a proposed rule change (SR-DTC-2008-06) under Section 19(b)(1) of the Exchange Act that would allow DTC to modify its end of day settlement procedures relating to settlement acknowledgement cut-off time frames for settling banks. Publication is expected in the Federal Register during the week of August 18. (Rel. 34-58343)
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