Commission Reopens Comment Period on Proposal for Model Privacy Form Under Gramm-Leach-Bliley Act
The Securities and Exchange Commission announced today that it has reopened the public comment period on a proposal for a model privacy form that financial institutions could use to provide disclosures required by the Gramm-Leach-Bliley Act (GLBA). The Commission is reopening the comment period in order to solicit public comment on the results of recent quantitative consumer testing conducted to evaluate the form.
In March 2007, pursuant to the Financial Services Regulatory Relief Act of 2006, the Commission, together with seven other federal regulators, proposed a model privacy form designed to allow consumers easily to compare privacy practices of financial institutions. The jointly developed model form uses easily readable type font and is designed to be succinct and comprehensible. Under the proposal, financial institutions that chose to use the model privacy form would satisfy GLBA disclosure requirements and could take advantage of a legal "safe harbor."
The Commission has reopened the comment period on the proposal to provide all persons who are interested in this matter an opportunity to comment on the results of the recent testing of the model privacy form. The proposal and results of the recent quantitative consumer testing are available on the Commission's Web site. Comments on the results of the testing are due thirty days after the date of publication in the Federal Register. (Press Rel. 2009-84)
2009 PCAOB Accounting Support Fee
The Commission voted to approve an increase to the 2009 accounting support fee of the Public Company Accounting Oversight Board under Section 109 of the Sarbanes-Oxley Act of 2002. (Rels. 33-9025; 34-59759)
RULES AND RELATED MATTERS
Interagency Proposal for Model Privacy Form Under the Gramm-Leach-Bliley Act
On April 15, the Commission announced that it reopened the public comment period on a proposal for a model privacy form that financial institutions could use to provide disclosures required by the Gramm-Leach-Bliley Act. The Commission is reopening the comment period in order to solicit public comment on the results of quantitative consumer testing conducted to evaluate the form.
The full text of the release is available on the Commission's Web site. Comments on the results of the testing are due 30 days after date of publication in the Federal Register. [Rels. 34-59769; IA-2866; IC- 28697; File No. S7-09-07)
SEC Obtains a $51 Million Final Judgment Against Tri Energy, Inc. and Defendants Arthur Simburg and Robert Jennings for Their Role in a Massive Affinity Fraud and Ponzi Scheme
The Securities and Exchange Commission announced today that the Honorable Andrew Guilford, U.S. District Judge for the Central District of California, entered a Final Judgment on April 13, 2009, against defendants Tri Energy, Inc., H & J Energy Company, Inc., Robert Jennings, Arthur Simburg, and La Vie D'Argent (collectively, Tri Energy Defendants). In this settled action, the Court ordered the Tri Energy Defendants to pay $35 million in disgorgement and $2,048,466 in prejudgment interest, and ordered Simburg and Jennings to each pay a civil penalty of $7 million. $28,058,310 of the disgorgement is deemed satisfied by the criminal restitution ordered in a parallel criminal proceeding. In the criminal case, Simburg was sentenced on Nov. 17, 2008, to nine years imprisonment after entering into a plea agreement. Jennings was convicted after a jury trial on July 11, 2008, and sentenced to twelve years imprisonment on Nov. 17, 2008. Defendant Henry Jones was extradited from Hong Kong and convicted after a jury trial on July 11, 2008, and was sentenced to twenty years imprisonment on April 3, 2009. This $50 million Ponzi scheme and affinity fraud has a long history, numerous defendants, and has resulted in several court actions both civil and criminal.
The Commission's Amended Complaint, filed on Aug. 10, 2006, alleged that the aforementioned defendants, and others, perpetrated a massive affinity fraud and Ponzi scheme involving a purported coal mine venture and a so-called international "gold deal." The Complaint alleged that defendants had been telling investors that these extraordinary profits were to be generated in part by helping an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates. In reality, according to the Complaint, although some money had been paid out to investors, those funds appeared to have come from new investor money, and substantial amounts of investor funds had been transferred to bank accounts controlled by some of the defendants and relief defendants. Defendants recruited potential victims through claims that their investments were aimed, at least in part, at raising money for humanitarian and religious efforts. The defendants promised their victims outlandish returns on their investments of 100-1000% in as little as 60 days. Over 500 investors lost more than $50 million in the scheme.
The Court previously on Aug. 13, 2007, enjoined the Tri Energy Defendants from violations of the reporting and antifraud provisions of the securities laws (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 10-b-5 thereunder), and specifically enjoined them from soliciting investments of the type at issue in the Commission's lawsuit. The Commission obtained a default judgment against Jones and his companies Marina Investors Group, Inc. and Global Village Records on March 20, 2008, enjoining them from future violations of the same provisions identified above, as well ordering $22,291,725 in disgorgement, $2,073,922 in prejudgment interest, and a $7 million civil penalty. The Commission also obtained final judgments against relief defendant Thomas Avery and his company T.M.A. Investment Enterprises and relief defendant R.P.J. Investment Group, Inc. on April 9, 2008, ordering $70,000 in disgorgement plus $4,342.42 in prejudgment interest jointly and severally between Avery and his company, and ordering $7,364 in disgorgement against R.P.J.
For further information see also LR-20239 (Aug. 13, 2007) announcing settlements with the Tri Energy Defendants, Defendant Daniel J. Merriman and his companies DJM, LLC, Financial MD, Inc., and Financial MD and Associates, Defendant Mildred Stultz, and Relief Defendant Nga Wing Lau a/k/a Adrienne Lau; LR-19907 (Nov. 14, 2006) announcing Contempt Order Against Defendant Henry Jones; and LR-19214 (May 3, 2005) announcing Temporary Restraining Order and Asset Freeze against the Tri Energy Defendants. [SEC v. Tri Energy, Inc., H & J Energy Company, Inc., Marina Investors Group, Inc., Lowell Decker, Robert Jennings, Henry Jones, Arthur Simburg, Mildred Stultz, DJM, LLC, Financial MD, Inc., Financial MD and Associates, Inc., Daniel J. Merriman, Global Village Records, and La Vie D'Argent, as defendants, and R.P.J. Investment Group, Inc., T.M.A. Investment Enterprises, Thomas Avery, and Wing NGA Lau, a/k/a Adrienne Lau, as relief defendants, Case No. ED CV 05-00351 AG(MANx) (C.D. California)] (LR-21000)
SEC Charges Former State Political Party Leader and Hedge Fund Manager in Kickback Scheme Involving New York Pension Fund
The Securities and Exchange Commission today charged a former New York state political party leader and a former hedge fund manager in connection with a multi-million dollar kickback scheme involving New York's largest pension fund.
In an amended complaint filed today in federal district court in Manhattan, the SEC alleges that Raymond Harding, who is a former leader of the New York Liberal Party, and Barrett Wissman, a former hedge fund manager, participated in a scheme that extracted kickbacks from investment management firms seeking to manage the assets of the New York State Common Retirement Fund. The SEC previously charged Henry "Hank" Morris and David Loglisci for orchestrating the fraudulent scheme to enrich Morris and others with close ties to them. Specifically, the SEC alleges that Wissman arranged some of the payments made to Morris, and Wissman was rewarded with at least $12 million in sham "finder" or "placement agent" fees. Harding received approximately $800,000 in sham fees that were arranged by Morris and Loglisci.
The SEC's amended complaint alleges that the payments to Morris, Wissman, Harding and certain others were kickbacks that resulted from quid pro quo arrangements or that were otherwise fraudulently induced by the defendants. Loglisci ensured that investment managers that made the requisite payments - to Morris, Wissman, Harding, and certain other recipients designated by Morris and Loglisci - were rewarded with lucrative investment management contracts, while investment managers who declined to make such payments were denied fund business. Morris, Wissman, Harding and the others who received the payments at issue did not perform bona fide placement or finder services for the investment management firms that made the payments.
The SEC's amended complaint additionally charges three entities through which Wissman perpetrated the fraud - Flandana Holdings Ltd., Tuscany Enterprises LLC, and W Investment Strategies LLC - as well as two investment management firms with which he was affiliated at the time, HFV Management L.P. and HFV Asset Management L.P. According to the SEC's amended complaint, Wissman was a longtime family friend of Loglisci and a key participant in the kickback scheme. Wissman worked with Loglisci and Morris to extract sham finder fee payments for Morris and for himself from investment managers. Wissman received millions of dollars in sham fees and other illicit payments, and arranged millions of dollars in additional payments for Morris. In addition, Wissman caused HFV Management L.P. and HFV Asset Management L.P. to pay sham finder fees to Morris in one New York State Common Retirement Fund transaction.
According to the SEC's amended complaint, Harding was a political ally who was allegedly inserted by Morris and Loglisci into at least two fund transactions for the sole purpose of compensating Harding, and Harding received a total of approximately $800,000 in sham "finder" fees. In one of those transactions, the investment management firm already had a finder and Morris arranged for that finder to secretly split his fee with Harding. In another transaction, Morris and Loglisci simply inserted Harding as a finder on an investment solely for the purpose of directing money to Harding.
In a partial settlement of the SEC's charges, Wissman and Flandana Holdings Ltd. have consented, without admitting or denying the SEC's allegations, to the entry of a partial final judgment that imposes all of the permanent injunctive relief sought in the amended complaint and defers the determination of disgorgement and financial penalties until a later date.
In addition, HFV Management and HFV Asset Management have consented, without admitting or denying the SEC's allegations, to the entry of a final judgment that permanently enjoins them from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 206(2) of the Investment Advisers Act of 1940, and that orders them to pay a penalty in the aggregate amount of $150,000.
The SEC's charges against Harding remain pending. The amended complaint alleges that Harding aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 committed by Morris and Loglisci. The SEC is seeking a permanent antifraud injunction, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.
The SEC's investigation is continuing. The Commission acknowledges the assistance and cooperation of the New York Attorney General's Office. [SEC v. Henry Morris, David J. Loglisci, Barrett N. Wissman, Raymond B. Harding, Nosemote LLC, Pantigo Emerging LLC, Purpose LLC, Flandana Holdings Ltd., Tuscany Enterprises LLC, W Investment Strategies, HFV Management LP and HFV Asset Management LP, 09 cv 2518 (S.D.N.Y.) (CM)] (LR-21001)
INVESTMENT COMPANY ACT RELEASES
Triangle Capital Corporation
A notice has been issued giving interested persons until May 4, 2009, to request a hearing on an application filed by Triangle Capital Corporation (Company) for an order under Section 23(c)(3) of the Investment Company Act for an exemption from Section 23(c) of the Act. The order would amend a prior order that permits the Company to issue restricted shares of its common stock under the terms of its employee and director compensation plan (Plan). The amended order would permit the Company, pursuant to the Plan, to engage in certain transactions that may constitute purchases by the Company of its own securities within the meaning of Section 23(c) of the Act. (Rel. IC-28692 - April 13)
ING Investments, LLC, et al.
An order has been issued on an application filed by ING Investments, LLC, et al., under Section 6(c) of the Investment Company Act for an exemption from Rule 12d1-2(a) under the Act. The order permits funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-28693 - April 14)
Massachusetts Financial Services Company, et al.
An order has been issued on an application filed by Massachusetts Financial Services Company, et al. under Section 12(d)(1)(J) of the Investment Company Act for an exemption from Sections 12(d)(1)(A) and (B) of the Act, under Sections 6(c) and 17(b) of the Act for an exemption from Section 17(a) of the Act, and under Section 6(c) of the Act for an exemption from Rule 12d1-2(a) under the Act. The order (a) permits certain management investment companies registered under the Act to acquire shares of certain open-end management investment companies registered under the Act that are outside the same group of investment companies as the acquiring investment companies, and (b) permits funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-28694 - April 14)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by NYSE Arca (SR-NYSEArca-2009-27) amending Rule 6.62 to offer WAIT modifier, PNP Plus orders and allow the use of attributable orders 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 April 13. (Rel. 34-59737)
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2009-06) under Section 19(b)(1) of the Exchange Act, which proposed rule change became effective upon filing, to accommodate the clearance and settlement of Metals Futures and Options on Metals Futures traded on NYSE Liffe. Publication is expected in the Federal Register during the week of April 13. (Rel. 34-59763)
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2009-07) under Section 19(b)(1) of the Exchange Act, which became effective upon filing, to revise OCC's fee schedule for OneChicago, LLC (ONE). Publication is expected in the Federal Register during the week of April 13. (Rel. 34-59764)
Accelerated Approval of Proposed Rule Change
The Commission granted accelerated approval of a proposed rule change (SR-NYSEArca-2009-20) submitted by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., 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 April 13. (Rel. 34-59747)
Proposed Rule Change
A proposed rule change (SR-FINRA-2008-018) has been filed by the Financial Industry Regulatory Authority to adopt National Association of Securities Dealers Interpretive Material 2830-1 ("Breakpoint" Sales) as a FINRA rule. Publication is expected in the Federal Register during the week of April 13. (Rel. 34-59754)
Approval of Proposed Rule Changes
The Commission approved proposed rule changes submitted by the New York Stock Exchange (SR-NYSE-2009-18) and NYSE Alternext US (n/k/a NYSE Amex LLC) (SR-NYSEAltr-2009-15) under Rule 19b-4 of the Securities Exchange Act of 1934 amending Rule 123C to provide the Exchanges with the ability to temporarily suspend certain requirements relating to the closing of securities on the Exchanges. Publication is expected in the Federal Register during the week of April 13. (Rel. 34-59755)
The Commission has issued an order approving a proposed rule change filed by International Securities Exchange (SR-ISE-2009-08) relating to changes to the Third Amended and Restated Limited Liability Company Operating Agreement of Direct Edge Holdings LLC. Publication is expected in the Federal Register during the week of April 13. (Rel. 34-59756)
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