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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2009-98
May 22, 2009

COMMISSION ANNOUNCEMENTS

SEC, DOL Accepting Requests to Participate in Joint Hearing Examining Target Date Funds

The Securities and Exchange Commission and the Department of Labor announced today that they are accepting requests to participate in a joint hearing on June 18 examining target date funds. Target date funds and other similar investment options are investment products that allocate their investments among various asset classes and automatically shift that allocation to more conservative investments as a "target" date approaches. This shift in asset allocation, often referred to as a fund's "glide path," may differ significantly among funds with the same target date.

Discussion topics at the joint hearing will include issues related to how target date fund managers determine asset allocations and changes to asset allocations (including glide paths) over the course of a fund's operation; how they select and monitor underlying investments; how the foregoing and related risks are disclosed to investors; and the approaches or factors for comparing and evaluating target date funds.

"Target date funds are an increasingly popular investment for Americans focused on retirement planning," said SEC Chairman Mary Schapiro. "If there's any confusion or misunderstanding caused by these funds, then we need to clear that up. I look forward to furthering our productive collaboration with the Department of Labor on this important issue."

The Commission requests persons interested in presenting testimony and answering questions at this public hearing to submit a written request to participate along with an outline of topics to be discussed. The information that is submitted will become part of the public record of the joint hearing. Submissions to the Commission may be provided by any of the following methods:

Electronic submissions:

  • Use the Commission's Internet submission form.
  • Send an e-mail to rule-comments@sec.gov.

Paper submissions:

  • Send paper submissions in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, D.C. 20549-1090.

All submissions should refer to File Number 4-582. This file number should be included on the subject line if e-mail is used. To help process and review submissions more efficiently, please use only one method. The Commission will post all submissions on its Web site.

Please note that all submissions received will be posted without change. The SEC does not edit personal identifying information from submissions. Only information desired to be shared publicly should be submitted.

The joint hearing will begin at 9 a.m. ET and will be held in the auditorium at the DOL's headquarters at 200 Constitution Avenue NW, Washington, D.C. The hearing will be open to the public with seating on a first-come, first-served basis. Visitors will be subject to security checks. Any individuals with disabilities who may need special accommodations should notify Fred Wong, Employee Benefits Security Administration, U.S. Department of Labor, at (202) 693-8500. The hearing will be transcribed and also will be available via webcast on the SEC Web site. Captioning of the webcasts will be available.

Link to Federal Register Notice: http://www.sec.gov/rules/other/2009/ic-28725.pdf

(Press Rel. 2009-120)


Commission Meetings

Closed Meeting - Wednesday, May 27, 2009 - 1:00 p.m.

The subject matter of the Closed Meeting scheduled for Wednesday, May 27, will be: institution and settlement of injunctive actions; and other matters related to enforcement proceedings.

Closed Meeting - Thursday, May 28, 2009 - 2:00 p.m.

The subject matter of the Closed Meeting scheduled for Thursday, May 28, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; an opinion; and other matters related to enforcement proceedings.

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.


ENFORCEMENT PROCEEDINGS

In the Matter of David G. Ghysels, Kenneth E. Mahaffy, Jr., and Linus N. Nwaigwe

On May 21, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities and Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 And Notice of Hearing (Order) against David G. Ghysels (Ghysels), Kenneth E. Mahaffy, Jr. (Mahaffy), and Linus N. Nwaigwe (Nwaigwe) (collectively, Respondents). The Order alleges that:

Ghysels was employed from approximately March 27, 2001 through March 28, 2003, by Lehman Brothers, Inc. (Lehman) as a registered representative in its Palm Beach, Florida office. From approximately April 10, 2003 through May 1, 2005, Citigroup employed Ghysels as a registered representative in its Boca Raton, Florida office. Ghysels was subsequently employed at Geoffrey Richards Securities Corp. in Delray Beach, Florida. Ghysels has had a Series 7 license since November 1983.

Mahaffy was employed from approximately Dec. 8, 1997 through Feb. 19, 2003, at Merrill Lynch, Pierce, Fenner, & Smith, Inc. (Merrill) as a registered representative in its Garden City, New York office. From Feb. 19, 2003 through 2005, Mahaffy was a registered representative at Citigroup Global Markets, Inc. (Citigroup) in its Farmingdale, New York office. Mahaffy has had a Series 7 license since March 1997. Mahaffy was a foreign exchange broker from January 1989 through January 1997.

Nwaigwe was director of compliance at A.B. Watley, Inc. (Watley), a day trading firm registered with the Commission as a broker-dealer from approximately October 2001 through 2004. Nwaigwe has a Series 7 license.

For a portion of the time in which Respondents engaged in the conduct underlying the information described below, Respondents were associated with a broker-dealer registered with the Commission, and Ghysels and Mahaffy were also associated with an investment adviser registered with the Commission.

The Order further alleges that on April 22, 2009, Respondents were found guilty of one count of conspiracy to commit securities fraud, a felony, in the United States District Court in the Eastern District of New York. U.S. v. Mahaffy, No. 05-CR-613 (JG) (E.D.N.Y. April 22, 2009). The conspiracy count of the criminal information of which Respondents were found guilty alleges, inter alia, that, while associated with a broker-dealer, Respondents participated in a scheme to provide access to "squawk boxes" to Watley to broadcast confidential information so its day traders could improperly trade ahead of the broker-dealers' institutional orders.

Based on the above, the Order states that the Commission deems it necessary and appropriate in the public interest that public administrative proceedings be instituted to determine whether the allegations set forth in the Order are true and, in connection therewith, to afford Respondents an opportunity to establish any defenses to such allegations, and to determine what, if any, remedial action is appropriate in the public interest against Respondents pursuant to Section 15(b) of the Exchange Act and Section 203(f) of the Advisers Act.

A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Ghysels, Mahaffy and Nwaigwe an opportunity to respond to these allegations, and to determine what sanctions, if any, are appropriate and in the public interest. As directed by the Commission, an administrative law judge shall issue an initial decision in this matter no later than 210 days from the date of service of the Order Instituting Proceedings. (Rels. 34-59957; IA-2877; File No. 3-13481)


In the Matter of Daryl L. Batts

On May 21, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Daryl L. Batts. The Order finds that from at least October 2000 through June 27, 2008, Batts was a registered representative associated with three registered broker dealers, one of which was also a registered investment adviser.

On July 16, 2008, Batts pleaded guilty to one count of securities fraud in violation of Title 15, United States Code, Section 78b(j), and one count of mail fraud in violation of Title 18, United States Code, Section 1341 before the United States District Court for the District of South Carolina, in United States of America v. Daryl Batts, Case No. 8:08-00716 (D. SC). On Dec. 10, 2008, the United States District Court for the District of South Carolina entered a judgment of conviction against Batts and sentenced him to serve 10 years in federal prison, followed by five years of supervised release, and to pay full restitution in an amount to be determined and a $200 special assessment. The Court also appointed a receiver over all of Batts' assets.

The criminal information to which Batts pleaded guilty alleged, inter alia, that from November 2002 to July 2008, Batts defrauded numerous of his brokerage customers of at least $5 million by making various misrepresentations regarding securities he purportedly purchased on their behalf. In fact, he misappropriated his customers' money and concealed his wrongdoing by preparing false monthly statements for each customer that set forth the securities the customer purportedly owned, and indicated that the customer was earning substantial returns.

Based on the above, the Order bars Batts from association with any broker, dealer, or investment adviser. (Rels. 34-59958; IA-2878; File No. 3-13478)


In the Matter of TMT Capital Corporation

On May 21, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (Order) as to TMT Capital Corporation (TMT). The Order finds that TMT, a Florida corporation based in Winter Park, Florida that owns two subsidiaries and whose stock is quoted on the Pink Sheets operated by Pink OTC Markets Inc., failed to comply with Items 307, 308T, and 601(b)(31) of Regulation S-B in its Form 10-KSB/A reports filed on June 18, 2008 and Nov. 13, 2008, respectively, for the fiscal year ended Dec. 31, 2007. The Order further finds that as a result of the foregoing, TMT violated Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1, 13a-14 and 13a-15 thereunder.

Based on the above, the Order orders TMT to cease and desist from committing or causing any violations and any future violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-14 and 13a-15 thereunder. TMT consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the Commission's jurisdiction over the company and the subject matter of the proceedings, which are admitted. (Rels. 34-59959; AAE Rel. 2973; File No. 3-13479)


Commission Revokes Registration of Securities of Warning Management Services, Inc. for Failure to Make Required Periodic Filings

On May 22, the Commission revoked the registration of each class of registered securities of Warning Management Services, Inc. (Warning Management) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, Warning Management consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Warning Management Services, Inc. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Warning Management's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Warning Management in In the Matter of Wade Cook Financial Corp., et al., Administrative Proceeding File No. 3-13461.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Wade Cook Financial Corp., et al., Administrative Proceeding File No. 3-13461, Exchange Act Release No. 59868 (May 6, 2009). (Rel. 34-59968; File No. 3-13461)


In the Matter of ACT Mfg., Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Five Respondents (Default Order) in ACT Mfg., Inc., Administrative Proceeding No. 3-13452. The Order Instituting Proceedings alleged that ACT Manufacturing, Inc., Aerovox, Inc. (n/k/a New Bedford Capacitor, Inc.), Agility Capital, Inc., Air Water International Corp. (f/k/a Universal Communication Systems, Inc.), Allegiant Physician Services, Inc., and Alpha Microsystems (n/k/a NQL Inc.) each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.

The proceeding has ended as to Respondent Allegiant Physician Services, Inc. ACT Mfg., Inc., Exchange Act Release No. 59954 (May 21, 2009).

The Default Order finds the allegations to be true as to the remaining five Respondents. It revokes the registrations of each class of registered securities of ACT Manufacturing, Inc., Aerovox, Inc. (n/k/a New Bedford Capacitor, Inc.), Agility Capital, Inc., Air Water International Corp. (f/k/a Universal Communication Systems, Inc.), and Alpha Microsystems (n/k/a NQL Inc.), pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-59969; File No. 3-13452)


In the Matter of Phillip J. Milligan

On May 22, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Phillip J. Milligan (Milligan or Respondent).

The Division of Enforcement alleges in that Order that on April 29, 2009, the United States District Court for the Eastern District of New York entered a final judgment against Milligan, permanently enjoining him from 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, in a civil action captioned Securities and Exchange Commission v. Grant Curtis, et al., 99 Civ. 7357 (NG) (VVP) (E.D.N.Y.). The final judgment also ordered Milligan to pay disgorgement and prejudgment interest totaling $238,030.49 and a $100,000 civil penalty.

The Division of Enforcement further alleges in the Order that the Commission's complaint in the civil action alleged, among other things, that during 1995 and 1996: (1) Milligan was a registered principal and president of J.P. Milligan, a broker-dealer registered with the Commission and located in New York City; (2) Pilot Transport, Inc. (Pilot) was a publicly-traded corporation; (3) a Milligan co-defendant agreed to pay kickbacks to Milligan in exchange for Milligan's causing Pilot stock to be recommended to J.P. Milligan customers; (4) between Nov. 17, 1995 and February 2, 1996, Milligan caused shares of Pilot stock to be sold to customers of J.P. Milligan & Co; (5) J.P. Milligan did not disclose the kickback arrangement to its customers; and (6) following those sales, Milligan received $93,600 in proceeds of Pilot stock sales, representing his kickback, to a bank account he controlled in the name of Stone International Trading Corp.

A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Milligan an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.

The Order directed that an Administrative Law Judge issue an initial decision no later than 210 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-59970; File No. 3-13482)


In the Matter of Barrett N. Wissman

On May 22, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Barrett N. Wissman.

The Order finds that on April 16, 2009, the United States District Court for the Southern District of New York entered a partial final consent judgment against Wissman in the civil action entitled Securities and Exchange Commission v. Henry Morris, et al., Civil Action No. 09-cv-2518 (CM). The court's judgment, to which Wissman consented, permanently enjoins Wissman from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act.

The Commission's amended complaint in the above-referenced civil action alleges that Wissman - an indirect owner and control person of a registered broker-dealer and a managing director of a registered investment adviser - knowingly engaged in a fraudulent scheme involving undisclosed kickback payments made by investment management firms and others in connection with the sale of securities to the New York Common Retirement Fund and the investment of the retirement fund's assets in the purchase and sale of securities.

Based on the above, the Order bars Wissman from association with any broker, dealer or investment adviser. Wissman consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 34-59971; IA-2879; File No. 3-13483)


INVESTMENT COMPANY ACT RELEASES

Main Street Capital Corporation, et al.

A notice has been issued giving interested persons until June 15, 2009, to request a hearing on an application filed by Main Street Capital Corporation (Company), Main Street Mezzanine Fund, LP, Main Street Capital Partners, LLC and Main Street Mezzanine Management, LLC, 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-28726 - May 19)


William Blair & Company, L.L.C. and Wilblairco II, L.L.C.

An order has been issued on an application filed by filed by William Blair & Company, L.L.C. (Blair) and Wilblairco II, L.L.C. The order exempts certain limited partnerships and other investment vehicles formed for the benefit of eligible employees of Blair and its affiliates from certain provisions of the Investment Company Act. Each limited partnership or other investment vehicle will be an "employees' securities company" within the meaning of Section 2(a)(13) of the Act. (Rel. IC-28727 - May 20)


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:

  • BBH U.S. Money Market Portfolio [File No. 811-8842]

  • [Rel. No. IC-28728]
  • BBH Prime Institutional Money Market Fund, Inc. [File No. 811-10073]

  • [Rel. No. IC-28729]
  • NETS Trust [File No. 811-22140]

  • [Rel. No. IC-28730]
  • HealthShares TM , Inc. [File No. 811-21855]

  • [Rel. No. IC-28731]
  • Goldman Sachs Hedge Fund Partners Registered Fund, LLC [File No. 811-21376]

  • [Rel. No. IC-28732]
  • Goldman Sachs Hedge Fund Partners Registered Master Fund,
  • LLC [File No. 811-21721]
    [Rel. No. IC-28733]
  • Capital One Funds [File No. 811-5536]

  • [Rel. No. IC-28734]
  • Domini Social Trust [File No. 811-5824]

  • [Rel. No. IC-28735]
  • Dreyfus California Intermediate Municipal Bond Fund [File No. 811-6610]

  • Rel. No. IC-28736]
  • Aetos Capital Market Neutral Strategies Fund, LLC [File No. 811-21060]

  • [Rel. No. IC-28737]
  • New River Funds [File No. 811-21384]

  • [Rel. No. IC-28738]
  • Evergreen Investment Trust [File No. 811-4154]

  • [Rel. No. IC-28739]
  • Mellon Institutional Funds Master Portfolio [File No. 811- 7603]

  • [Rel. No. IC-28740]
  • U.S. Global Accolade Funds [File No. 811-7662]

  • [Rel. No. IC-28741]
  • AllianceBernstein Global Health Care Fund, Inc. [File No. 811-9329]

  • [Rel. No. IC-28742]
  • Heritage Income Trust [File No. 811-5853]

  • [Rel. No. IC-28743]
  • BBH Fund, Inc. [File No. 811-6139]

  • [Rel. No. IC-28744]
  • BBH Trust [File No. 811-3779]

  • [Rel. No. IC-28745]

SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Changes

The Commission approved a proposed rule change (SR NYSEArca-2009-24) submitted under Rule 19b-4 by NYSE Arca to adopt a policy with respect to the treatment of aberrant trades. Publication is expected in the Federal Register during the week of May 25. (Rel. 34-59937)

The Commission approved a proposed rule change (SR- FINRA-2009-017) filed by the Financial Industry Regulatory Authority pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934. The rule change adopts NYSE Rule 406 (Designation of Accounts) as a FINRA Rule in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of May 25. (Rel. 34-59947)

The Commission approved a proposed rule change (SR-ISE-2007-97), as modified by Amendment No. 1, submitted by the International Securities Exchange under Rule 19b-4 relating to market data fees. Publication is expected in the Federal Register during the week of May 25. (Rel. 34-59949)


Accelerated Approval of Proposed Rule Change

The Commission approved, on an accelerated basis, a proposed rule change (SR-FINRA-2009-012) filed by the Financial Industry Regulatory Authority (f/k/a National Association of Securities Dealers, Inc. (NASD)), as modified by Amendment No. 1, to implement an interim pilot program with respect to margin requirements for certain transactions in credit default swaps. Publication is expected in the Federal Register during the week of May 25. (Rel. 34-59955)


Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-ISE-2009-28) filed by the International Securities Exchange relating to the extension of a pilot program for directed orders has become effective under Section 19(b)(3)(A) under the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 25. (Rel. 34-59943)

A proposed rule change filed by Financial Industry Regulatory Authority relating to amendments to FINRA Rule 2360 (Options) regarding position limits for options on exchange-traded funds and registration qualifications with respect to options discretionary accounts (SR-FINRA-2009-032) 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 May 25. (Rel. 34-59946)


Proposed Rule Change

NYSE Arca has filed a proposed rule change (SR-NYSEArca-2009-44) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to amend NYSE Arca Rule 6.72 and expand the Penny Pilot Program. Publication is expected in the Federal Register during the week of May 25. (Rel. 34-59944)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2009/dig052209.htm


Modified: 05/22/2009