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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2009-49
March 16, 2009


SEC Approves Exemptions Allowing Chicago Mercantile Exchange to Operate as Central Counterparty for Credit Default Swaps

On March 13, the Securities and Exchange Commission took further action to help increase the transparency of credit default swaps by approving conditional exemptions that will allow the Chicago Mercantile Exchange Inc. (CME) to operate as a central counterparty for clearing them.

These conditional exemptions, based on a request by the CME and Citadel Investment Group LLC, provide the SEC with regulatory oversight of the central counterparty, and should enhance the quality of the credit default swap market and the Commission's ability to protect investors.

"The SEC is committed to increasing investor protection and reducing systemic risk by facilitating the development and oversight of central counterparties to clear credit default swaps," said SEC Chairman Mary L. Schapiro. "Today's actions will further enhance opportunities to manage the risk related to credit default swaps and improve the transparency and integrity of the market for these products."

On Dec. 24, 2008, the SEC approved temporary exemptions allowing LCH.Clearnet Ltd. to operate as a central counterparty for credit default swaps. On March 6, 2009, the SEC approved similar temporary exemptions for ICE US Trust LLC. The Commission has worked in close consultation with the Board of Governors of the Federal Reserve System and the Commodity Futures Trading Commission, executing a Memorandum of Understanding in November 2008 to lay out a framework related to central counterparties for credit default swaps.

The SEC is soliciting public comment on all aspects of these exemptions to assist in its consideration of any further action that may be needed in this area. (Press Rel. 2009-58)

SEC Names Julie Zelman Davis as Deputy Director of Legislative Affairs

Securities and Exchange Commission Chairman Mary L. Schapiro announced today that Julie Zelman Davis has been named Deputy Director of the agency's Office of Legislative and Intergovernmental Affairs, where she will serve as a key liaison between the Commission and Congress.

Ms. Davis comes to the SEC from the staff of U.S. Senator Carl Levin of Michigan, where for the past several years she has advised the Senator on financial legislative matters including securities. Ms. Davis began working at the SEC today, replacing Peter Kiernan who recently retired from the Deputy Director position.

"Julie will play a key role in our efforts with Congress to establish the SEC's priorities, needs, and initiatives as we work together to restore investor confidence and reform the financial regulatory system," said Chairman Schapiro. "Julie has an ideal combination of government and legal experience, and the Commission will benefit a great deal from her extensive knowledge of both the legislative process and the securities laws."

Ms. Davis said, "I have a long-held respect for the work of the SEC, and I am honored for the opportunity to work with Chairman Schapiro, the Commission, and its staff in advancing the goals of investor protection and restoring market confidence as the Administration and Congress examine the challenges facing the financial regulatory system."

The SEC's Office of Legislative and Intergovernmental Affairs carefully monitors ongoing legislative activities and initiatives on Capitol Hill that affect the Commission and its mission, and works with Members of Congress and their staffs to achieve legislative policy goals.

Ms. Davis has worked for Senator Levin since 2003, serving as a Legislative Counsel for financial services and other issues and working closely with the Senate Permanent Subcommittee on Investigations that is chaired by the Senator. The subcommittee is part of the Senate Committee on Homeland Security and Governmental Affairs.

Ms. Davis previously was Legislative Counsel for U.S. Congressman Lloyd Doggett of Texas. From 1999 to 2002, she was an Associate in the Business Practices Group of Testa, Hurwitz & Thibeault LLP in Boston, where among other things she handled SEC filings for public companies, represented underwriters in initial public offerings, and negotiated stock purchase agreements.

Ms. Davis earned her B.A. in Government from the University of Texas at Austin in 1995, and earned her J.D. from the University of Texas School of Law in 1999. (Press Rel. 2009-59)

Commission Meetings

Following is a schedule of Commission meetings, which will be conducted under provisions of the Government in the Sunshine Act. Meetings will be scheduled according to the requirements of agenda items under consideration.

Open meetings will be held in the Auditorium, Room L-002 at the Commission's headquarters building, 100 F Street, N.E., Washington, D.C. Visitors are welcome at all open meetings, insofar as space is available. Persons wishing to photograph or videotape Commission meetings must obtain permission in advance from the Secretary of the Commission. Persons wishing to tape record a Commission meeting should notify the Secretary's office 48 hours in advance of the meeting.

Any member of the public who requires auxiliary aids such as a sign language interpreter or material on tape to attend a public meeting should contact SECInterpreter@SEC.gov at least three business days in advance. For any other reasonable accommodation related disability contact DisabilityProgramOfficer or call 202-551-4158.

Open Meeting - Wednesday, April 8, 2009 - 10:00 a.m.

The subject matter of the open meeting will be:

The Commission will consider whether to propose short sale price test rules.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.


Court Enters Final Judgment Setting Disgorgement, Prejudgment Interest and Civil Penalty Against Glenn E. Glasshagel

The Securities and Exchange Commission announced that on March 6, 2009, the Honorable Marcia G. Cooke, United States District Judge for the Southern District of Florida, entered a final judgment ordering Glenn E. Glasshagel to pay $35,000 in disgorgement, plus prejudgment interest of $8,310 and a $110,000 civil penalty for his scheme to manipulate Roadhouse Grill, Inc.'s earnings between 1999 and 2000.

Previously, on Nov. 1, 2006, the Court entered a judgment of permanent injunction and other relief against Glasshagel by consent, enjoining him from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. In addition, the November 1 judgment barred Glasshagel from acting as an officer or director of any public company.

For more information on earlier actions in this case, see LR-19309, AAE Rel. 2280 (July 25, 2005) and LR-19911 (Nov. 15, 2006). [SEC v. Glenn E. Glasshagel, Case No. 05-61159-CIV-Cooke/Bandstra (S.D. Fla.)] (LR-20954)

Attorney Charged in Stock Manipulation Scheme

The Department of Justice announced today that it filed criminal charges against Texas securities lawyer Phillip W. Offill, Jr. in the United States District Court for the Eastern District of Virginia. The Department of Justice charged Offill with one count of conspiracy to evade securities registration and to commit securities and wire fraud, and nine counts of wire fraud. According to the criminal indictment, Offill evaded the securities registration requirements and participated in a "pump-and-dump" scheme to issue shares to the public illegally and to manipulate the trading price and volume by making materially false and misleading statements in press releases and in spam e-mail messages.

The Securities and Exchange Commission earlier named Offill in two civil injunctive actions currently pending in federal district courts in Michigan and Texas. In the actions, described below, the Commission alleged that Offill violated the registration provisions of the securities laws:

  • On June 14, 2007, the Commission filed a complaint in the United States District Court for the Eastern District of Michigan alleging that Offill and Arizona securities attorney David B. Stocker assisted Michigan-based AVL Global, Inc., in a scheme to dump millions of shares of AVL Global stock into the marketplace without any public disclosure of the company's failing operations.

  • On Sept. 26, 2007, the Commission filed a complaint in the United States District Court for the Northern District of Texas alleging that Offill, Stocker, four other individuals, and five entities engaged in a scheme to evade the registration requirements of the federal securities laws in connection with their sales of shares of six public companies.

The Commission seeks to enjoin Offill from future violations of the securities laws, disgorgement of Offill's ill-gotten gains with pre-judgment interest, civil penalties, and to bar Offill from participating in future offerings of penny stock. [SEC v. Peter W. Fisher, et al., Civil Action No. 07-cv-12552 GER PJK (E.D. Mich.); SEC v. Phillip W. Offill, Jr., et al., Civil Action No. 07-cv-1643-D (N.D. Tex.)] (LR-20955)

Court Establishes Fair Fund and Appoints a Distribution Agent in K.W. Brown and Company, et al.

The Securities and Exchange Commission announced that on Jan. 29, 2009, the Honorable Linnea R. Johnson, United States Magistrate Judge for the Southern District of Florida, entered an order granting the Commission's motion to establish a Fair Fund distribution fund (Fair Fund) in accordance with Section 308(a) of the Sarbanes-Oxley Act. The Commission has collected in the aggregate approximately $6.4 million from Defendants K.W. Brown & Company, 21st Century Advisors, Inc., K.W. Brown Investments, Kenneth Brown and Wendy Brown and all of these funds have been deposited into the Fair Fund.

The Judge also granted the Commission's motion to appoint Kevin Love, Esq. of the firm of Criden & Love, P.A., 7301 S.W. 57th Court, Suite 515, South Miami, FL 33143, (305) 357-9010, www.cridenlove.com, as Distribution Agent for the Fair Fund. Mr. Love has been appointed by the Court to distribute the Fair Fund in a fair and equitable fashion. [SEC v. K.W. Brown and Company, et al., Civil Action No. 05-CV-80367-JOHNSON (S.D. Fla.)] (LR-20956)


Automated Trading Desk Specialists, LLC, et al.

The Commission has issued a temporary order to Automated Trading Desk Specialists, LLC, et al. (ATDS) under Section 9(c) of the Investment Company Act with respect to an injunction issued by the U.S. District Court for the Southern District of New York on March 11, 2009. The temporary order exempts applicants and companies of which ATDS is or becomes an affiliated person from the provisions of Section 9(a) of the Act until the Commission takes final action on an application for a permanent order. The Commission also has issued a notice giving interested persons until April 6, 2009, to request a hearing on the application filed by applicants for a permanent order under Section 9(c) of the Act. (Rel. IC-28647 - March 12)


Proposed Rule Changes

NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., filed with the Securities and Exchange Commission a proposed rule change (SR-NYSEArca-2009-20) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the listing and trading of the Safety First Trust Certificates Linked to the S&P 500(R) Index. Publication is expected in the Federal Register during the week of March 16. (Rel. 34-59562)

The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-009) to adopt FINRA Rule 1122 (Filing of Misleading Information as to Membership or Registration) in the Consolidated FINRA Rulebook pursuant to Rule 19b-4 under the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 16. (Rel. 34-59563)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the NASDAQ OMX PHLX (SR-PHLX-2009-18) relating to fee caps on equity option transaction charges on dividend, merger and short stock interest strategies 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 March 16. (Rel. 34-59566)

A proposed rule change filed by New York Stock Exchange (SR-NYSE-2009-28) amending NYSE Rules 13, 902, 903, 904, 905 and Rule 906 to eliminate certain order types from the off-hours trading facility 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 March 16. (Rel. 34-59570)





Modified: 03/16/2009