SEC, MSRB: New Measures to Provide More Transparency Than Ever Before for Municipal Bond Investors
The Securities and Exchange Commission today announced that it has unanimously approved measures that will shine more light than ever before on the municipal securities market by tapping the power of the Internet. For the first time, investors will have a free, one-stop way to find municipal bond information online to help them make investment decisions.
The SEC has worked with the Municipal Securities Rulemaking Board (MSRB) to correct a glaring deficiency in the $2.6 trillion municipal market, in which two-thirds of the securities are owned by individual investors. Unlike investors in corporate securities who have direct access to free company information through the SEC's EDGAR system, average investors in municipal securities currently have no free and convenient way to get important information about the municipal bonds in which they invest.
Currently, municipal securities investors who want ongoing disclosure information about a municipal bond - such as annual financial data or a material event like a downgrade or default - first must locate it on their own at one of the four Nationally Recognized Municipal Securities Information Repositories (NRMSIRs). Then once they find a source, investors come to find out that they must pay significant fees to get the information they want, and then may experience considerable delays while waiting for the documents to be delivered to them by mail or fax.
"For the first time, millions of individual investors in municipal bonds will have free and instant access to information about their investments, similar to the way they can obtain information about public companies," said SEC Chairman Christopher Cox. "With liquidity problems of municipal auction rate securities and rating downgrades of municipal bond insurers contributing to the current credit crisis, the disclosure and transparency of the municipal markets have never been more critical. Municipal securities investors need to know what they own. Now they will no longer have to go to such extensive and expensive lengths to find out."
The rule amendments approved by the SEC designate the MSRB as the central repository for ongoing disclosures by municipal issuers. Under a separate MSRB rule change, its Electronic Municipal Market Access (EMMA) system would make these disclosures available to investors in the same manner that the SEC's EDGAR system does for corporate disclosures.
Ronald A. Stack, Chair of the MSRB, said, "This historic action by the SEC will improve the flow of information in the municipal market and enable more informed investors. The MSRB is gratified by the SEC's support for the transparency and accessibility that our EMMA system can provide."
EMMA will operate as a consolidated, online portal where investors can instantly access, for free, all of the key information produced by municipal bond issuers about their bonds. Offering documents, real-time trade prices, and education resources already are available on EMMA at www.emma.msrb.org.
In order to provide adequate transition time, the SEC's rule amendments and the MSRB's rule change will be effective on July 1, 2009.
For more information, contact: SEC: Kevin Callahan - 202-551-4120 or MSRB: Jennifer A. Galloway - 703-797-6600.
SEC Issues Notice of Proposed Distribution Plan and Opportunity for Comment in Bear Stearns Market Timing Case
The Commission announced today that it has given notice, pursuant to Rule 1103 of the Securities and Exchange Commission's Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. § 201.1103, that the Division of Enforcement has filed a proposed plan (Distribution Plan) for the distribution of the Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 in the matter of Bear, Stearns & Co., Inc., and Bear, Stearns Securities Corp., Administrative Proceeding File No. 3-12238. The Fair Fund is comprised of $250 million in disgorgement and civil penalties paid by Bear, Stearns & Co., Inc., and Bear, Stearns Securities Corp., plus accumulated interest, less any federal, state or local taxes on that interest. Under the Distribution Plan, eligible mutual funds or their investors would receive proportionate shares of the Fair Fund to compensate them for the harm from certain market timing and late trading activities during the period from January 4, 1999, through October 29, 2003. Interested parties may print a copy of the Distribution Plan from the Commission's public website, http://www.sec.gov or from the website www.BearStearnsFairFundSettlement.com. Interested parties may also obtain a written copy of the Distribution Plan by submitting a written request to Alison Conn, Assistant Regional Director, United States Securities and Exchange Commission, Room 400, 3 World Financial Center, New York, NY 10281-1022. All persons who desire to comment on the Distribution Plan may submit their comments, in writing, no later than January 7, 2008: (1) by sending a letter to the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-1090; (2) by using the Commission's Internet comment form (http://www.sec.gov/litigation/admin.shtml); or (3) by sending an e-mail to email@example.com. Comments submitted by email or via the Commission's website should include "Administrative Proceeding File Number 3-12238" in the subject line. Comments received will be available to the public. Commenters should only submit information that they wish to make publicly available.
For more information, see Securities Act of 1933 Release No. 8668; Securities Exchange Act of 1934 Release No. 53490; Investment Company Act of 1940 Release No. 27262; and Press Release No. 2006-38 (Mar. 16, 2006). (Rel. 34-59065; File No. 3-12238)
Administrative and Cease-and-Desist Proceedings Instituted Against OOO CentreInvest Securities, CentreInvest, Inc., Dan Rapoport, Svyatoslav Yenin, Vladimir Chekholko, and William Herlyn, Alleging Broker-Dealer Registration and Reporting Violations
The United States Securities and Exchange Commission announced that it instituted public administrative and cease-and-desist proceedings against a foreign broker-dealer, its registered U.S. affiliate, and four associated individuals for violations of the broker-dealer registration and reporting provisions of the Securities Exchange Act. Named as respondents in the proceedings are:
OOO CentreInvest Securities (CI-Moscow), a Moscow-based unregistered broker-dealer;
CentreInvest, Inc. (CI-New York) a registered broker-dealer and CI-Moscow's New York-based affiliate;
Dan Rapoport (Rapoport), CI-Moscow's executive director;
Svyatoslav Yenin (Yenin), CI-New York's managing director, FINOP and CFO;
Vladimir Chekholko (Chekholko), CI-New York's head of sales; and
William Herlyn, CI-New York's chief compliance officer.
The Division of Enforcement alleges in the Order Instituting Proceedings that from about 2003 through November 2007, CI-Moscow and Rapoport - directly and through CI-New York, Yenin, Chekholko, and Herlyn, - solicited institutional investors in the United States to purchase and sell thinly-traded stocks of Russian companies, without registering as a broker-dealer as required by Section 15(a) of the Exchange Act or meeting the requirements for the exemption from registration for foreign broker-dealers under Exchange Act Rule 15a-6(a). The Order Instituting Proceedings also alleges that Yenin and Herlyn were responsible for CI-New York's filing of amendments to CI-New York's Forms BD that failed to disclose CI-Moscow and Rapoport's control of CI-New York, or that the license of the CI-New York's parent company had been revoked by the Cyprus SEC. The Order Instituting Proceedings further alleges that CI-New York either failed to maintain business-related emails as required by Exchange Act Rule 17a-4(b)(4), or failed to produce them at the request of the Commission's staff as required by Exchange Act Rule 17a-4(j), and that Yenin was responsible for CI-New York's failure to maintain these business-related emails.
The Order Instituting Proceedings alleges that as a result of the foregoing conduct:
CI-Moscow and Rapoport willfully violated Section 15(a) of the Exchange Act, CI-New York, Yenin and Chekholko willfully aided and abetted and caused CI-Moscow's violations of Section 15(a) of the Exchange Act, and Herlyn caused CI-Moscow's violations of Section 15(a) of the Exchange Act;
CI-New York willfully violated Section 17(a) of the Exchange Act and Rule 15b3-1 thereunder, and Yenin and Herlyn willfully aided and abetted and caused CI-New York's violation of Section 17(a) of the Exchange Act and Rule 15b3-1 thereunder; and
CI-New York willfully violated Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) or, in the alternative, Rule 17a-4(j) thereunder, and Yenin willfully aided and abetted and caused CI-New York's violation of Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder.
A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations against CI-Moscow, CI-New York, Rapoport, Yenin, Chekholko and Herlyn are true, to afford the respondents an opportunity to establish defenses to the allegations, to determine whether remedial action is necessary and appropriate, and to determine whether respondents should be ordered to cease and desist from committing or causing violations of and any future violations of the securities laws. The Administrative Law Judge is directed to issue a decision no later than 300 days from the date of service of the Order Instituting Proceedings, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-59067; File No. 3-13304)
SEC Charges Marc S. Dreier, New York Attorney, With Multimillion Dollar Fraud; Seeks Emergency Relief
On December 8, the Commission filed a civil injunctive action in United States District Court for the Southern District of New York alleging that New York attorney Marc S. Dreier engaged in an elaborate scheme, that violated the antifraud provisions of the federal securities laws and raised at least $113 million from the sale of bogus promissory notes. According to the Commission's complaint, Dreier is the founder and managing partner of Dreier LLP, a 250-attorney law firm headquartered in Manhattan. Along with its complaint seeking a permanent injunction, disgorgement of Dreier's ill-gotten gains, and civil monetary penalties, the Commission filed an application for an emergency court order to freeze Drier's assets and appoint a temporary receiver.
The Commission's complaint, filed in federal court in Manhattan, alleges that since at least October 2008, Dreier has been marketing fake promissory notes, including bogus notes of a New York-based real estate development company, to hedge funds and other private investment funds, and has closed at least three sales. According to the complaint, Dreier created an elaborate charade designed to convince purchasers that the notes were genuine. He allegedly distributed phony financial statements and audit opinion letters of a reputable accounting firm, and recruited confederates to play the parts of representatives of legitimate companies involved in the transactions, even creating dummy email addresses and telephone numbers.
According to the complaint, Dreier directed that two purchasers of the bogus notes wire payment to what appeared to be his law firm's escrow account. At least one note purchaser discovered the fraud and demanded, and received, the return of its investment. Approximately $100 million in known proceeds from the sale of the bogus notes remains unaccounted for.
The SEC's complaint alleges that, among other fake securities, Dreier has been offering fictitious promissory notes of a New York-based real estate development company (the "developer"), a former client of Dreier and his firm. Since at least October of this year, Dreier has approached at least three different investment funds with an offer to sell them, at a deep discount, various short-term, unsecured promissory notes supposedly issued by the developer. Two of the investment funds agreed to purchase the notes (one fund purchased notes in two separate transactions) and forwarded approximately $113 million to an account in the name of "Dreier LLP Attorney Trust Account" in payment. A third fund was offered the notes, but declined to participate.
As alleged in the complaint, all of the offers were accompanied by documents that Dreier subsequently admitted he knew were fabricated. Dreier offered the notes for sale even though he knew that the developer had never issued the notes, had not authorized Dreier to market them and indeed knew nothing of their existence or Dreier's offers or sales.
The complaint further alleges that in marketing the notes, Dreier provided the hedge funds with fabricated documents including a "form" note and related agreements, "audited financial statements," and purported audit letters, which bore the forged signature of the developer's auditor, but which were printed on purported stationary of the developer's auditing firm. Dreier did not tell representatives from the hedge funds that the notes were bogus, that the "audited financial statements" and audit opinion letters were fabricated, or that the developer had never issued the notes or authorized Dreier to market them, despite Dreier's knowledge of these matters.
As alleged in the complaint, Dreier has admitted that:
The Commission seeks emergency and preliminary relief, including the asset freeze, appointment of a receiver and temporary restraining order and preliminary injunction, as well as a final judgment permanently enjoining Dreier from committing future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest, and provide an accounting.
According to the complaint, Dreier is 58 years old and resides in Manhattan, and is a former partner at two prestigious law firms and a graduate of Harvard Law School and Yale College. In addition to its offices in Manhattan, the complaint alleges that Dreier LLP has offices in Manhattan, Los Angeles, California, Stamford, Connecticut, and Pittsburgh, Pennsylvania, among other places. [SEC v. Marc S. Dreier, United States District Court for the Southern District of New York, Civil Action No. 08 Civ. 10617(MGC)] (LR-20823)
INVESTMENT COMPANY ACT RELEASES
RiverSource Life Insurance Company, et al.
A notice has been issued giving interested persons until December 29 to request a hearing on an application filed by RiverSource Life Insurance Company et al. seeking an order pursuant to Section 26(c) of the Investment Company Act approving certain substitutions of securities and an order of exemption pursuant to Section 17(b) of the Act from Section 17(a) of the Act. (Rel. IC-28527 - December 4)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-OCC-2007-16) submitted under Rule 19b-4 by the Options Clearing Corporation that amends OCC's rules relating to the submission of late items and the fees associated with filing exercise notices after the start of critical processing. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59046)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change (SR-CBOE-2008-119) filed by Chicago Board Options Exchange amending CBOE rules relating to appointment costs for the OEX and XEO option classes traded on the Hybrid Trading System 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 December 8. (Rel. 34-59052)
Accelerated Approval of Proposed Rule Changes
The Commission issued notice of filing and granted accelerated approval to substantively identical proposed rule changes (SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58) submitted by the American Stock Exchange (now renamed NYSE Alternext US), the Boston Stock Exchange, the Chicago Board Options Exchange, the International Securities Exchange, NYSE Arca, and the Philadelphia Stock Exchange, pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 amending certain of their respective rules to enable the listing and trading of iShares Trust Options on their markets. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59055)
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