SEC Chairman Cox Statement on Meeting of IOSCO Technical Committee
On November 24, the International Organization of Securities Commissions (IOSCO) Technical Committee launched three task forces to support G-20 aims following a meeting by teleconference. The meeting was convened by SEC Chairman Christopher Cox to craft a detailed work program to address the continuing market turmoil, focused on strengthening financial markets and investor protections. Chairman Cox, who is Chairman of IOSCO's Technical Committee, said:
"IOSCO's Technical Committee is taking urgent action to coordinate global regulatory measures aimed at abusive short selling, including reporting requirements for short positions and trading activity.
"Being representative of over one hundred securities regulators worldwide, IOSCO is central to developing coordinated regulatory solutions to deal with the current financial crisis. To be effective, the regulation of trading abuses must be coordinated across major markets. This is equally true not only of short selling, but also of derivatives trading and activity by currently unregulated entities such as hedge funds. The three task forces the Technical Committee is forming on each of these topics will help ensure that global capital markets address the current turmoil on a sound basis and in a well-coordinated way."
The Technical Committee Task Forces will consider the following issues:
The Task Forces will present their reports at the next Technical Committee meeting in February 2009 and to the next G-20 summit in spring 2009. (Press Rel. 2008-279)
Alexander F. Cohen, Deputy Chief of Staff, Leaving SEC
On November 24, the Securities and Exchange Commission announced that Alexander F. Cohen, Deputy Chief of Staff and former Deputy General Counsel, will leave the agency on December 18, with plans to return to the private sector.
Since joining the Chairman's office in May 2008, Mr. Cohen, 48, has assisted SEC Chairman Christopher Cox as senior legal counsel in the development and execution of the Commission's program across the entire agency to promote investor protection, healthy markets, and capital formation. He also served as a liaison to Commissioners and senior agency staff on rulemaking, policy, and enforcement matters.
In that role, he was centrally involved in key initiatives by the Commission, including:
Other major initiatives during his time at the SEC included rules to allow foreign private issuers to file financial statements with the Commission in IFRS without reconciliation to U.S. GAAP, and rules to implement the Credit Rating Agency Reform Act of 2006.
Mr. Cohen joined the SEC staff in 2006 as Deputy General Counsel for Legal Policy and Administrative Practice. He was responsible in the Office of General Counsel for review of all aspects of the Commission's regulatory program.
"Alex has done outstanding work for the benefit of investors," said Chairman Cox. "His service to all of the Commissioners, and the close working relationships he developed with Commission staff in each of the Divisions and Offices, were exemplary. The SEC and the nation are fortunate to have had a leader of his caliber in these critical times."
Mr. Cohen said, "It has been an honor and a privilege to work with Chairman Cox, the Commissioners, and the SEC's superb staff. Recent market events have brought out the very best in the agency, and I am deeply grateful to the SEC's dedicated men and women for their unceasing efforts - under extraordinary pressure and at all hours - on behalf of America's investors."
Prior to joining the SEC staff in 2006, Mr. Cohen was a partner in the international law firm of Latham & Watkins LLP, and co-chair of the firm's Corporate Finance Practice Group. Mr. Cohen earned his J.D. from Yale University in 1988, and served as law clerk to Hon. Wilfred Feinberg of the U.S. Court of Appeals for the Second Circuit from 1989 to 1990. He received his M.A. in international relations from Yale University in 1985, and his B.A. cum laude in political science from Yale in 1982. (Press Rel. 2008-280)
SEC Chief Accountant Conrad Hewitt to Leave SEC
The Securities and Exchange Commission announced today that Chief Accountant Conrad W. Hewitt will leave the agency in January 2009 following two-and-a-half years of public service devoted to increasing the accuracy and usefulness of financial reporting.
Mr. Hewitt has been integral to the Commission's efforts to increase transparency and reduce the complexity of financial disclosure. For example, he led the Commission's issuance of management guidance under Section 404 of the Sarbanes-Oxley Act of 2002 to help companies focus their internal controls reviews on the matters most important to investors. He also worked to improve the auditor requirements under Sarbanes-Oxley, culminating in the Commission's approval of a new risk-based audit standard to increase reliability while reducing unnecessary costs.
Most recently, Mr. Hewitt has helped lead the SEC's efforts to increase investor confidence and promote market integrity in response to the current turmoil in the credit markets. He also has championed the potential for increasing the accuracy and comparability of financial reports through the use of interactive data and high-quality international financial reporting standards.
"As Chief Accountant, Conrad Hewitt has dedicated his broad experience as a leader in the accounting profession, a banking regulator, and an outside director of several public companies to solving the problems that challenge today's markets," said SEC Chairman Christopher Cox. "His outstanding contributions to the Commission and, more importantly, to the nation's investors have served our nation well. On behalf of the Commissioners and the agency's professional staff, I can say that he has been much admired and will be sorely missed."
Mr. Hewitt added, "It has been a privilege to work with the highly motivated and extremely talented staff in the SEC's Office of the Chief Accountant that has exceeded my every expectation, and it also has been an honor to serve under Chairman Cox. I'm proud of our office's accomplishments and the steps we have taken to improve financial reporting transparency in these difficult economic times. I'm also pleased with the close collaboration our office has had with the FASB and the PCAOB, and I will miss the relationships we have forged while working together to solve a number of difficult problems."
Mr. Hewitt joined the SEC in August 2006 with more than 30 years of experience as a distinguished leader in the accounting profession and as the former chief financial regulator in California. As the SEC's Chief Accountant, he has been responsible for overseeing accounting interpretations, international accounting matters, and professional practice issues.
He has been a strong proponent of efforts to improve the transparency of off-balance sheet arrangements, and led development of the staff's January 2008 guidance on accounting for loan modifications, and critical guidance on other-than-temporary impairments during the peak of the credit crisis. Most recently, Mr. Hewitt has led the SEC's efforts to improve guidance for preparers and auditors valuing securities in illiquid markets.
Among Mr. Hewitt's other notable achievements and contributions during his service at the SEC:
While at the Commission, Mr. Hewitt has been a member of the SEC's Financial Management Oversight Committee, and he chaired the Diversity Communications Committee.
Prior to his work at the SEC, Mr. Hewitt served as a captain in the U.S. Air Force, Strategic Air Command Headquarters. Following his military service, Mr. Hewitt was the Managing Partner of Ernst & Young, and its predecessor firm, Ernst & Ernst, in the Northern California, Northwest, and Hawaii-Pacific regions. During his public accounting career, he specialized in financial institutions and technology companies.
Upon retiring from public accounting, Mr. Hewitt became the Superintendent of Banking for the state of California and later California's first Commissioner of the Department of Financial Institutions. Mr. Hewitt also was a member of the Napa County, Calif., Twenty-Year General Plan Committee.
After public service in California, Mr. Hewitt served on 10 corporate boards of directors of both private and public companies. He was the chairman of 10 audit committees and two compensation committees, in addition to serving on various nominating committees. Also, Mr. Hewitt served as a trustee of two pension plans and as a trustee of a San Francisco charitable foundation.
Mr. Hewitt earned a B.S. in finance from the University of Illinois and performed post-graduate work at the University of Southern California. He also attended the Stanford University Executive Program, the Kellogg School of Business Executive Program, and the Aspen Institute. (Press Rel. 2008-281)
Commission Revokes Registration of Securities of Ebiz Enterprises, Inc. for Failure to Make Required Periodic Filings
On November 25, the Commission revoked the registration of each class of registered securities of Ebiz Enterprises, Inc. (Ebiz) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings in the order, except as to jurisdiction, which it admitted, Ebiz consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Ebiz Enterprises, Inc. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-16 thereunder and revoking the registration of each class of Ebiz's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Ebiz in In the Matter of EA Industries, Inc., et al., Administrative Proceeding File No. 3-13203.
Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:
No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .
For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of EA Industries, Inc., et al., Administrative Proceeding File No. 3-13203 (Sept. 17, 2008). (Rel. 34-59013; File No. 3-13203)
In the Matter of Dennis K. McNell
On November 25, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Dennis K. McNell. The Order finds that McNell was a principal of Redwood Trading, LLC, a now defunct broker-dealer, and also served as the Chief Executive Officer, Chief Operations Officer, and a registered representative at the firm. The Order further finds that on Nov. 21, 2008, a judgment was entered by consent against McNell, permanently enjoining him from violations of Sections 9(a)(2) and 10(b) of the Exchange Act and Exchange Act Rule 10b-5, and provisions relating to short sales of securities, Section 10(a)(1) of the Exchange Act, and aiding and abetting violations of Sections 15(c)(3) and 17(a) of the Exchange Act and Exchange Act Rules 15c3-1, 17a-3, and 17a-4(j) in the civil action entitled Securities and Exchange Commission v. McNell, Civil Action Number 08-Civ.-10053-BSJ, in the United States District Court for the Southern District of New York.
The Order finds that the Commission's complaint alleged that (i) during the period of October 2003 through September 2004, McNell aided and abetted his customer's fraudulent trading scheme involving the execution of thousands of mis-marked short sales of securities listed on the New York Stock Exchange with the intent to artificially depress the price of those shares, and (ii) during July and August 2004, McNell engaged in a scheme to conceal from Redwood substantial trading losses that he had incurred in a Redwood proprietary trading account. As alleged in the Complaint, McNell also aided and abetted Redwood's violations of the federal securities laws by (a) causing the firm's books and records to be inaccurate, (b) causing the firm to engage in securities business while it was not in compliance with the net capital rule, and (c) failing to produce Redwood's records when requested by the Commission's staff.
Based on the above, the Order bars McNell from association with any broker or dealer, with the right to reapply in a non-supervisory capacity after five years. McNell consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the Commission's jurisdiction over him and the entry of the permanent injunction against him. [SEC v. Dennis K. McNell, Civil Action No. 08-cv-10053 (BSJ), SDNY] (See also LR-20814). (Rel. 34-59016; File No. 3-13298)
In the Matter of Cort L. Poyner
On November 25, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order), against Cort L. Poyner (Poyner).
In the Order, the Division of Enforcement alleges that on Nov. 3, 2008, a final judgment was entered against Poyner, permanently enjoining him from future violations of Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and of Sections 5 and 17(a) of the Securities Act of 1933, in the civil action entitled Securities and Exchange Commission v. The Children's Internet, Inc., et al., Civil Action Number C 06 6003 (CW) in the United States District Court for the Northern District of California. The Division of Enforcement further alleges that Poyner solicited investors for The Children's Internet while failing to disclose his commission arrangement and failing to be registered with the Commission as a broker. The Division of Enforcement also alleges that Respondent sold unregistered securities and otherwise engaged in a variety of conduct which operated as a fraud and deceit on investors.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the Respondent an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.
The Order requires the Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-59017; File No. 3-13299)
In the Matter of Stephen L. Hochberg, CPA
On November 25, the Commission issued an Order of Forthwith Suspension Pursuant to Rule 102(e)(2) of the Commission's Rules of Practice (Order) against Stephen L. Hochberg, CPA. The Order finds that from June 1985 to June 1999, Hochberg was a certified public accountant in Massachusetts. The Order also finds that on Oct. 21, 2008 Hochberg was convicted of eight counts of wire fraud and nine counts of fraud in connection with the purchase or sale of a security before the United States District Court for the District of Massachusetts in United States v. Stephen L. Hochberg, No. 08-10126-NMG. In addition, the Order finds that Hochberg was sentenced to serve 63 months imprisonment, followed by three years of supervised release, and to pay restitution in the amount of $1,791,500.
Based on the above, the Commission forthwith suspended Hochberg from appearing or practicing before the Commission. (Rel. 34-59018; File No. 3-13300)
INVESTMENT COMPANY ACT RELEASES
Notices of Deregistration under the Investment Company Act
For the month of November, 2008, a notice has been issued giving interested persons until Dec. 17, 2008, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act declaring that the applicant has ceased to be an investment company:
Smith Barney Money Funds, Inc. [File No. 811-2490]
(Rel. IC-28520 - November 21)
Proposed Rule Changes
NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., filed a proposed rule change (SR-NYSEArca-2008-125) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the listing of units of the United States Short Oil Fund. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58994)
A proposed rule change filed by the NASDAQ OMX PHLX (SR-Phlx-2008-74) relating to automated openings in index options has become immediately 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 November 24. (Rel. 34-58995)
A proposed rule change filed by the Boston Stock Exchange (SR-BSE-2008-55) to temporarily increase the number of additional quarterly options series has become immediately 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 November 24. (Rel. 34-58996)
A proposed rule change filed by the International Securities Exchange (SR-ISE-2008-88) to list options on the Mini-Nasdaq-100 Index at $1 strike price intervals has become immediately 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 November 24. (Rel. 34-58997)
A proposed rule change (SR-CBOE-2008-114) filed by the Chicago Board Options Exchange relating to Web CRD fingerprinting fees 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 November 24. (Rel. 34-59008)
Approval of Proposed Rule Change
The Commission granted approval to a proposed rule change (SR-NYSEArca-2008-108) submitted by NYSE Arca revising NYSE Arca Rule 5.3 to enable the listing and trading of options on managed fund shares. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-59004)
Accelerated Approval of Proposed Rule Changes
The Commission granted accelerated approval to a proposed rule change (SR-CBOE-2008-113) submitted by the Chicago Board Options Exchange amending CBOE Rule 5.3 to enable the listing and trading of options on managed fund shares. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-59005)
The Commission granted accelerated approval to a proposed rule change (SR-NYSEALTR-2008-08) submitted by NYSE Alternext US, relating to the listing and trading of managed fund share options. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-59006)
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