SEC Staff Extends Sarbanes-Oxley Survey to January 31
The Securities and Exchange Commission's Office of Economic Analysis has extended the deadline to January 31 for public companies' participation in a Web-based survey about the costs and benefits of Section 404 of the Sarbanes-Oxley Act of 2002.
The survey, which is available at https://404survey.sec.gov, will help inform the SEC's ongoing cost-benefit study of Section 404 implementation with a focus on the consequences for smaller companies.
"We encourage all companies with Section 404 experience to participate," said James Overdahl, the SEC's Chief Economist. "The survey provides companies with an opportunity to share their experiences and provide a comprehensive set of facts on the effectiveness and efficiency of compliance with the rules established pursuant to Section 404."
More than 2,000 companies already have completed the voluntary survey, which is open to any company with Section 404 compliance experience in the U.S. and globally. "This large number of responses is encouraging," said Cindy Alexander, Assistant Chief Economist at the SEC. "A further increase in the number of responding companies can improve the information and insight to be gained from the study."
The survey's deadline is being extended from January 16 and is being conducted among all registered corporations, with special attention on smaller companies that are scheduled to begin complying with Section 404(b) requirements at the end of this year. Section 404(b) requires that companies have an independent audit of their internal controls over financial reporting (ICFR) in addition to the internal management assessment of ICFR that is required under Section 404(a).
The SEC's cost-benefit study will help the Commission assess the effects of measures taken by both the SEC and the Public Company Accounting Oversight Board (PCAOB) in previous years, including whether the measures have helped companies reduce their costs of compliance and whether the Commission should consider additional measures. These measures include new guidance for management's Section 404 assessment, which was issued last year, and the PCAOB's effort to make the Section 404(b) auditor attestation process more efficient.
The SEC and other organizations have sent announcements of the survey to the executives of the more than 8,000 companies with prior experience with the rules established pursuant to Section 404. More information about the 404 survey project can be found at http://www.sec.gov/spotlight/404survey.htm. For answers to specific questions, e-mail email@example.com or call 877-737-5782. (Press Rel. 2009-7)
In the Matter of Michael K. Brugman
On January 14, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Section 203(f) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act. The Order finds that from mid-2001 through December 2002, Michael K. Brugman (Brugman), who was at the time a wholesaler for Invesco Funds Group, Inc. (IFG), accepted personal payments totaling over $3 million from various entities in exchange for procuring market timing capacity with the Invesco funds. Brugman never disclosed these payments to IFG.
Based on the above, the Order bars Brugman from association with any broker, dealer, or investment adviser, and is prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter. Additionally, the Order states that Brugman shall cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and shall pay disgorgement of $700,000.00. Brugman consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 34-59249; IA-2831; IC-28601; File No. 3-13063)
SEC Charges Las Vegas Man with Making a Market in Deregistered Securities
The Commission announced today that it filed a civil injunctive action in the United States District Court of Nevada against Marco Glisson, a resident of Las Vegas, Nev., alleging that he illegally sold deregistered securities of CMKM Diamonds, Inc. On Oct. 28, 2005, CMKM's registration with the Commission was revoked. From Dec. 2005 through April 2007, Glisson allegedly acted as an unregistered broker-dealer by purchasing and selling deregistered CMKM securities. Through this unlawful conduct, Glisson realized gross proceeds of at least $2 million.
According to the complaint, Glisson, a former auto worker and restaurant employee, identified potential buyers and sellers by frequenting CMKM related internet chat rooms and through referrals from past buyers and sellers. Glisson then negotiated the terms of the transaction and consummated it by exchanging money for the pertinent CMKM stock certificate. Through these practices, Glisson made a market in deregistered CMKM securities at a time when legitimate broker-dealers refused to execute such purchases or sales because of the Commission's deregistration of CMKM.
The Commission's complaint alleges that Glisson violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Securities & Exchange Act. The Commission seeks a permanent injunction against Glisson prohibiting him from future violations of the relevant federal securities laws, disgorgement with prejudgment interest, civil penalties and an order prohibiting Glisson from participating in the offering of any penny stock. [SEC v. Marco Glisson., Case No. 2:09-cv-00104 (Nevada) (LR-20855)
SEC Settles Fraud Charges Against Two Former Executives of Platforms Wireless International Corporation
On Dec. 19, 2008, the Honorable Jeffrey Miller of the United States District Court for the Southern District of California issued final judgments against defendants Francois M. Draper and Robert D. Perry, both former officers of Platforms Wireless International Corp. (Platforms). Draper served as Executive Vice President, Chief Operating Officer, and Chief Technical Officer of Platforms from June 2000 through July 2001. Perry formerly served as a President of Platforms.
The final judgments against Draper and Perry permanently enjoin them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The final judgment entered against Draper prohibits him for four years from acting as an officer or director of any issuer of securities registered with the Commission and bars him for four years from participating in an offering of penny stock. The Court earlier found Draper liable for disgorgement of $402,920, plus prejudgment interest, representing monies gained as a result illegal sales of stock in violation of Section 5 of the Securities Act of 1933 and also ordered Draper to pay a $20,000 civil penalty for violating Section 5. The final judgment requires Draper to pay the $20,000 civil penalty and $14,000 in disgorgement but waives payment of the remainder of disgorgement and prejudgment interest based on Draper's sworn financial statement and other information submitted to the Commission. The final judgment entered against Perry waives payment of disgorgement and prejudgment interest based on his sworn financial statement and other information submitted to the Commission.
The Court previously granted partial summary judgment against defendants Platforms and William C. Martin and sustained its findings against Platforms and Martin after a request for reconsideration by the defendants. A final judgment issued by the Court on Nov. 3, 2008 permanently enjoins Platforms and Martin from violating Section 5 of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, prohibits Martin for eight years from acting as an officer or director of any issuer of securities registered with the Commission and bars him for eight years from participating in an offering of penny stock, and orders that Platforms and Martin pay penalties and disgorgement plus prejudgment interest. [SEC v. Platforms Wireless International Corp., William C. Martin, Charles B. Nelson, Robert D. Perry, Francois M. Draper, and Victor L. Ziller, Civil Action No. 04 CV 2105 JM (AJB)(S.D.CA)] (LR-20856)
INVESTMENT COMPANY ACT RELEASES
Orders of Deregistration Under the Investment Company Act
Orders have been issued under Section 8(f) of the Investment Company Act declaring that each of the following has ceased to be an investment company:
Variable Investment Trust
An order has been issued under Section 8(f) of the Investment Company Act declaring that Variable Investment Trust has ceased to be an investment company. (Rel. IC-28602 - January 14)
Calamos Convertible Opportunities and Income Fund, et al.
A notice has been issued giving interested persons until Feb. 9, 2009, to request a hearing on an application filed by Calamos Convertible Opportunities and Income Fund, et al. (Funds) for an order under sections 6(c) of the Investment Company Act granting an exemption from sections 18(a)(1)(A) and (B) of the Act for a period from the date of the order until Oct. 31, 2010. The order would permit each Fund to issue or incur debt subject to asset coverage of 200% that would be used to refinance all of the Fund's auction rate preferred shares issued prior to Feb. 1, 2008, that are outstanding at the time of the order. The order also would permit each Fund to declare dividends or any other distributions on, or purchase, capital stock during the term of the order, provided that any such debt has asset coverage of at least 200% after deducting the amount of such transaction. (Rel. IC-28603 - January 14)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by NYSE Arca amending the Adding Liquidity Only Order (SR-NYSEArca-2008-140) 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 19. (Rel. 34-59234)
A proposed rule change filed by NASDAQ OMX PHLX to amend the Phlx fee schedule (SR-Phlx-2008-86) 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 19. (Rel. 34-59243)
A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2008-87) amending the Phlx fee schedule 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 19. (Rel. 34-59247)
The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2008-10), which became effective upon filing, under Section 19(b)(1) of the Exchange Act relating to an enhancement to its Insurance and Retirement Services to allow for the electronic exchange of attachments to messages. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59252)
Proposed Rule Changes
The Commission noticed a proposed rule change and Amendment No. 2 thereto (SR-NASDAQ-2008-102) submitted by The NASDAQ Stock Market pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to establish a pilot program for NASDAQ Basic data feeds. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59244)
The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2008-052) under Section 19(b) of the Exchange Act relating to the adoption of FINRA Rule 2140 (Interfering With the Transfer of Customer Accounts in the Context of Employment Disputes) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59253)
Approval of Proposed Rule Changes
A proposed rule change (SR-ISE-2008-90) filed by the International Securities Exchange relating to Alternative Primary Market Makers, has been approved pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59250)
The Commission approved a proposed rule change (SR-FINRA-2008-054) submitted pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder by the Financial Industry Regulatory Authority to adopt FINRA Rule 5280 (Trading Ahead of Research Reports) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of January 19. (Rel. 34-59254)
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