SEC News Digest

ENFORCEMENT PROCEEDINGS

SEC Charges Joseph S. Forte for Conducting $50 Million Ponzi Scheme

The Commission announced that on January 7, 2009, it filed an emergency action to halt an estimated $50 million Ponzi scheme conducted by Joseph S. Forte (Forte) and Joseph Forte, L.P. (Forte LP), of Broomall, Pennsylvania. According to the Commission's complaint, from at least February 1995 to the present, Forte has been operating a Ponzi scheme in which he fraudulently obtained approximately $50 million from as many as 80 investors through the sale of securities in the form of limited partnership interests in Forte L.P. Forte was the general partner of Forte L.P. The Honorable Paul S. Diamond, U.S. District Judge for the Eastern District of Pennsylvania, has issued an order granting a preliminary injunction, freezing assets, compelling an accounting, and imposing other emergency relief. Without admitting or denying the allegations in the Commission's complaint, Forte and Forte LP consented to the entry of the order.

The Commission's complaint alleges that in late December 2008, Forte admitted to federal authorities that from at least 1995 through December 2008, he had been conducting a Ponzi scheme. Forte, who has never been registered with the Commission in any capacity, told investors that he would invest the limited partnership funds in a securities futures trading account in the name of Forte LP that would trade in futures contracts, including S&P 500 stock index futures (trading program). The complaint also alleges that despite the impressive and consistent returns the defendants falsely reported to investors, Forte consistently lost money in the limited trading that he did. Forte has admitted that he misrepresented and falsified Forte LP's trading performance from the very first quarter. From 1995 through September 30, 2008, the defendants reported to investors annual returns ranging from 18.52% to as high as 37.96%. However, from January 1998 through October 2008, the Forte LP trading account had net trading losses of approximately $3.3 million.

The complaint further alleges that in addition to misrepresenting to investors that the trading was highly successful and making huge profits, defendants Forte and Forte LP misrepresented the use of investor funds. Although Forte claimed that he raised approximately $50 million from investors for the purpose of participating in the trading program, between January 1998 and October 2008 Forte deposited only $25.8 million in the trading account and during that same period withdrew $23.1 million. Forte admitted that he took at least $10 to $12 million in so-called fees for his personal use based on the falsely inflated value of Forte LP, but Forte LP statements provided to investors reflect fees charged of $28.7 million between March 1995 and September 2008. He also claimed that he used approximately $15 to $20 million of investor funds to repay other investors - the hallmark of a Ponzi scheme. The complaint alleges that the defendants also lied to investors about the value of the partnership portfolio. For example, in September 2008, the defendants reported to investors that the Forte LP portfolio had a value of over $150 million. In fact, Forte LP's trading account at that time had a balance of only $146,814.

In addition to the emergency relief obtained, the Commission's complaint seeks disgorgement of the defendants' ill-gotten gains plus prejudgment interest, civil penalties, and permanent injunctions barring future violations of the antifraud provisions of the federal securities laws.

The Commission's investigation is continuing.

The Commission acknowledges the assistance of the Commodity Futures Trading Commission. The CFTC has filed a related action against Forte. (SEC v. Joseph S. Forte, et al., Civil Action No. 09-0063 (PD)(E.D. Pa.) (LR-20847; Press Rel. 2009-5)

SEC v. Gen-See Capital Corp. and Richard S. Piccoli

Today, the Commission filed a civil injunctive action in the United Stated District Court for the Western District of New York and a motion for a temporary restraining order and asset freeze against defendants Gen-See Capital Corporation a/k/a Gen Unlimited ("Gen-See") and its owner and president, Richard S. Piccoli. The Commission is also seeking an Order directing the defendants to provide verified accountings and prohibiting the destruction, concealment or alteration of documents.

The SEC's complaint alleges that Gen-See and Piccoli have orchestrated a Ponzi scheme and affinity fraud targeting clergy, Catholic parishioners, and senior citizens. The complaint further alleges that the defendants have raised millions of dollars from investors by promising steady, "guaranteed" returns, ranging from 7.1% to 8.3% per annum, and no fees or commissions. In November 2008 alone, the defendants raised over $500,000. The complaint further alleges that the defendants relied heavily on advertisements in newsletters published by churches and dioceses, and told investors that their money was invested in "high quality" residential mortgages that the defendants were able to purchase at a discount. In addition, the complaint alleges that the defendants did not invest the funds as promised, but instead used new investor funds to make payments to earlier investors. In addition, the complaint alleges that Gen-See's offering of securities to the public was not registered with the Commission.

The SEC's complaint alleges that the defendants violated 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.

In addition to the emergency relief sought, the Commission also seeks preliminary and permanent injunctive relief and civil money penalties against the defendants, as well as disgorgement by the defendants of their ill-gotten gains plus prejudgment interest. [SEC v. Gen-See Capital Corp. and Richard S. Piccoli, Civil Action No. 09 CV 0014 S (W.D. N.Y.)] (LR-20848)

INVESTMENT COMPANY ACT RELEASES

SunAmerica Focused Alpha Growth Fund, Inc., et al.

A notice has been issued giving interested persons until February 2, 2009 to request a hearing on an application filed by SunAmerica Focused Alpha Growth Fund, et al., under Section 6(c) of the Investment Company Act of 1940 (Act) for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order would permit certain registered closed-end investment companies to make periodic distributions of long-term capital gains (i) with respect to their common stock as part of a managed distribution plan as frequently as twelve times each year, and (ii) with respect to their preferred stock as frequently as required by the terms of such preferred stock. (Rel. IC-28578 - January 6)

Macquarie Global Infrastructure Total Return Fund Inc., et al.

A notice has been issued giving interested persons until February 2, 2009 to request a hearing on an application filed by Macquarie Global Infrastructure Total Return Fund Inc., et al., under Section 6(c) of the Investment Company Act of 1940 ("Act") for an exemption from Section 19 (b) of the Act and Rule 19b-1 under the Act. The order would permit certain registered closed-end management investment companies to make periodic distributions of long-term capital gains: (i) with respect to their common stock as part of a managed distribution plan as frequently as twelve times each year, and (ii) with respect to their preferred stock as frequently as required by the terms of such preferred stock. (Rel. IC-28579 - January 6)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

The Depository Trust Company filed a proposed rule change (File No. SR-DTC-2008-14) under Section 19(b)(1) of the Exchange Act, which became effective upon filing, to modify DTC's existing Operational Arrangements necessary for a securities issue to become and remain eligible for the services of DTC. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59199)

A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2008-125) related to affiliations with broker-dealers 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 January 12. (Rel. 34-59200)

A proposed rule change filed by the International Securities Exchange relating to amending the fee schedule (SR-ISE-2008-101) 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 January 12. (Rel. 34-59201)

A proposed rule change filed by the New York Stock Exchange amending Exchange Rule 1500 ("MatchPoint") to clarify the functionality of the Intra-Day Matching Sessions in relation to order entry, correction and cancellation capabilities, and when the MatchPoint system cancels unexecuted orders back to the user and disseminates Intra-Day and After Hours Trade Reports (SR-NYSE-2008-134), has become immediately 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 January 12. (Rel. 34-59207)

A proposed rule change filed by the Chicago Board Options Exchange relating to fees on the CBOE Stock Exchange (SR-CBOE-2008-132) 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 January 12. (Rel. 34-59209)

Proposed Rule Changes

The New York Stock Exchange filed with the Securities and Exchange Commission a proposed rule change under Rule 19b-4 (SR-NYSE-2008-131) to introduce a NYSE OpenBook® nonprofessional subscriber fee and to revise the unit of count that determines the device fees payable by data recipients. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59198)

The New York Stock Exchange filed with the Securities and Exchange Commission a proposed rule change under Rule 19b-4 (SR-NYSE-2008-132) to introduce a NYSE Order Imbalance Information fee. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59202)

The Commission approved a proposed rule change (SR-NASDAQ-2008-084) submitted pursuant to Section 19(b)(1) and Rule 19b-4 under the Securities Exchange Act of 1934 by the NASDAQ Stock Market to require limited partnerships to obtain shareholder approval for the use of equity compensation and make other clarifying changes to the listing requirements for limited partnerships. Publication in the Federal Register is expected during the week of January 12. (Rel. 34-59203)

A proposed rule change (SR- FINRA 2008-045) and Amendment No. 1 thereto have been filed by the Financial Industry Regulatory Authority pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder regarding a proposal to amend the FINRA Rule 9520 series regarding eligibility procedures for persons subject to certain disqualifications. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59208)

The Commission has published notice of a proposed rule change (SR-BSE-2008-56), filed by the Boston Stock Exchange, relating to BOX rules governing a BOX member's doing business with the public. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59211)

Approval of Proposed Rule Changes

The Commission granted approval to a proposed rule change (SR-CBOE-2008-118), submitted by the Chicago Board Options Exchange related to obvious error rules. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59210)

The Commission granted approval to a proposed rule change, as modified by Amendment No. 1, filed by the Municipal Securities Rulemaking Board (SR-MSRB-2008-07) under Section 19(b)(2) of the Securities Exchange Act of 1934, Relating to MSRB Rule G-34, CUSIP Numbers and New Issue Requirements, to Establish a Transparency System for Municipal Auction Rate Securities and Municipal Variable Rate Demand Obligations. Publication is expected in the Federal Register during the week of January 12. (Rel. 34-59212)

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