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, July 15, 2009 - 10:00 a.m.
The subject matter of the Open Meeting will be:
The Commission will consider a recommendation regarding amendments to Rule 15c2-12 (Rule) under the Securities Exchange Act of 1934 (Act), concerning the responsibilities of a broker, dealer, or municipal securities dealer acting as an underwriter in a primary offering of municipal securities and interpretive guidance intended to assist municipal securities issuers, brokers, dealers and municipal securities dealers in meeting their obligations under the antifraud provisions of the Act.
Closed Meeting - Thursday, July 16, 2009 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, July 16, 2009, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; other matters relating to enforcement proceedings; and opinions.
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.
Commission Declares Initial Decision as to Gordon Brent Pierce Final
The Commission has declared final the initial decision of an administrative law judge ordering Gordon Brent Pierce to cease and desist from committing or causing any violations or future violations of Section 5(a) and 5(c) of the Securities Act of 1933 and of Section 13(d) and 16(a) of the Securities Exchange Act of 1934 and Rules 13d 1, 13d 2, and 16a 3 thereunder. The law judge further ordered that, pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Gordon Brent Pierce disgorge $2,043,362.33 plus prejudgment interest.
Pierce is the beneficial owner of, and works as president and director for Newport Capital Corporation, an entity based in Switzerland. Pierce is also the beneficial owner of Jenirob Company Ltd.
The law judge found that Pierce violated Sections 5(a) and 5 (c) of the Securities Act of 1933 by reselling shares of stock without a valid registration statement or exemption from registration, and obtaining at least $2.7 million in proceeds from such sales in June 2004. The law judge further found that Pierce violated Sections 13(d) and 16(a) of the Securities Exchange Act of 1934, and Rules 13(d) 1, 13d 2, and 16a 3 thereunder, by failing to make timely required filings disclosing his beneficial ownership of stock during the period from November 2003 to May 2004. (Rels. 33-9050; 34-60263; File No. 3-13109)
In the Matter of Robert John Hipple
On July 9, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 21C of the Securities Exchange Act of 1934, Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Rule 102(e)(1) of the Commission's Rules of Practice (the Order) against Robert John Hipple, a Florida attorney and resident, and former CEO and CFO of iWorld Projects & Systems, Inc., a now-defunct Nevada business development company (BDC).
In the Order, the Division of Enforcement (the Division) alleges that Hipple willfully violated Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder, and Sections 34(b) and 57(a)(1) of the Investment Company Act, by fraudulently reporting the value of iWorld's portfolio companies, failing to conduct the requisite asset valuation for BDCs, failing to make and keep requisite books and records, failing to maintain a system of sufficient internal accounting controls, and misleading the iWorld's auditors. The Division also alleges that, as a result of the foregoing, Hipple willfully aided and abetted and caused iWorld's violations of Sections 13(a), 13(b)(2)(A) 13(b)(2)(B) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder, and Section 31(a) of the Investment Company Act and Rule 31a-1 thereunder.
A hearing will be scheduled before an administrative law judge to determine whether Hipple should be ordered to cease and desist from committing or causing any violations and any future violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, 13b2-2 thereunder, and Sections 34(b) and 57(a) of the Investment Company Act, and from causing any violations and any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 13a-11 and 13a-13 and 12b-20 thereunder, and Section 31(a) of the Investment Company Act and Rule 31a-1 thereunder, and to determine whether: i) Hipple should be ordered to pay a penalty; ii) Hipple should be prohibited from acting as an officer or director of any issuer that has a class of securities registered, or that is required to file reports, pursuant to the Exchange Act; iii) any remedial action against Hipple is appropriate under Section 9(b) of the Investment Company Act; and iv) Hipple should be censured, or denied, temporarily or permanently, the privilege of appearing or practicing before the Commission, pursuant to Rule 102(e)(1) of the Commission's Rules of Practice.
The Order requires the Administrative Law Judge to issue an initial decision no later than 300 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rels. 34-60269; IC-28816; File No. 3-13543)
Federal Court Grants Summary Judgment and Orders Principals of Offering Fraud to Pay Disgorgement and Civil Penalties of Over $30 Million
The Commission announced that on July 6, 2009, the Honorable Virginia A. Phillips, United States District Judge, Central District of California, granted the Commission's motion for (i) summary judgment against defendants James B. Duncan (Duncan) and Hendrix M. Montecastro (Montecastro); (ii) remedies against defendant Maurice E. McLeod (McLeod); and (iii) default judgment against defendants Pacific Wealth Management, LLC (PWM); Stonewood Consulting, Inc. (Stonewood); and Total Return Fund, LLC (TRF). Duncan, Montecastro, and McLeod used PWM, Stonewood, and TRF to raise more than $29 million from investors in several affinity groups, including the Southern California Filipino community, fellow church members, and military personnel. The Court permanently enjoined Duncan, Montecastro, PWM, Stonewood, and TRF from future violations of the registration and antifraud provisions of the federal securities laws, as it had previously done with McLeod on Aug. 28, 2008. The Court also ordered Duncan to pay disgorgement of $29,498,679 plus prejudgment interest, imposed joint and several liability on Montecastro for $27,515,421 of this amount, ordered McLeod to pay $469,223 in disgorgement plus prejudgment interest, and imposed civil penalties of $130,000 against each of Duncan, Montecastro, and McLeod.
In its Complaint, filed Feb. 27, 2008, the Commission alleged that Duncan, Montecastro, and McLeod, operating through Murrieta, California-based PWM and Stonewood, promised investors "financial freedom" within three years in exchange for control over their finances. The defendants offered investors securities in the form of investment contracts to purchase and maintain investment homes on behalf of investors. The Complaint further alleged that Duncan conducted a separate offering of preferred membership units in Total Return Fund, LLC, and that the proceeds raised in both offerings were commingled and used to run a Ponzi-like scheme that fell apart in late 2006.
Following a hearing on July 6, 2009, Judge Phillips granted the Commission's motion as to all of its claims against each defendant. In her 43-page order granting summary judgment, Judge Phillips found that the defendants "represented that they were a 'Christian organization.' In fact, Duncan and Montecastro were using investor funds for regular sprees to Las Vegas. An investor would consider it important to know that the principals were misrepresenting their beliefs and not using investor funds as represented, but rather to fund a lavish lifestyle which meant there was little likelihood that investors would receive a reasonable return, or any return, on their investments." Judge Phillips also found that Duncan used a "complex web of transactions" to obscure his involvement, which was "clear evidence of his intent to deceive."
For additional information, please see Litigation Release No. 20469 (Feb. 27, 2008). [SEC v. James B. Duncan, et al., United States District Court for the Central District of California, Case No. CV 08-01323 VAP (OPx)] (LR-21121)
SEC Sues Russian Based Pointer Worldwide and Tatiana Badmaeva in Online Intrusion Scheme Involving NYSE and Nasdaq Traded Stocks
The Securities and Exchange Commission today filed a complaint in the United States District Court for the Southern District of New York charging Russian entity Pointer Worldwide Ltd and its officer, Tatiana Badmaeva, with participating in a fraudulent scheme to manipulate the prices of four New York Stock Exchange and Nasdaq traded securities through the unauthorized use of innocent victims' online brokerage accounts.
The complaint alleges that between June 18, 2008 and June 20, 2008, Badmaeva, or others acting in concert, commandeered the online trading accounts of unwitting investors at various broker-dealers, liquidated existing equity positions and, using the resulting proceeds, purchased shares in four publicly traded companies. The unauthorized purchases created the appearance of legitimate trading activity, thereby inducing others to trade the securities and driving up the price and volume of these stocks. The complaint further alleges that in each of these instances, Badmaeva's trading pattern was similar. In some instances, Badmaeva first accumulated in her own account a position in one of the issuers. Next, a series of unauthorized electronic intrusions involving that issuer occurred at one or more broker-dealers whereby the intruders liquidated existing positions in the accounts and used the resulting proceeds to buy thousands of shares of the same stocks previously purchased by Badmaeva in her own account. Then, at the height of the pump, Badmaeva sold her shares at the inflated prices for a profit. In other instances, Badmaeva engaged in short sales, timing her covers by taking advantage of the lower prices following the intrusions.
The complaint further alleges that the Pointer Worldwide account, which is beneficially owned by Badmaeva, was the only account that traded in all four of these securities on the dates of the intrusions. Moreover, the account, which was opened just one week before the intrusions began and closed shortly thereafter, traded in only these four securities. In just three days of trading involving a combination of buys, sales and short sales, Pointer Worldwide and Badmaeva generated a net profit of $33,113.75 trading in the four securities.
The Commission's action charges Pointer Worldwide and Badmaeva with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctive relief, disgorgement and civil money penalties.
The SEC's Office of Investor Education and Assistance has previously issued an investor alert, available on the SEC's website, which provides tips for avoiding becoming a victim of an online intrusion. See http://www.sec.gov/investor/pubs/onlinebrokerage.htm.
The Commission would like to thank the Financial Industry Regulatory Authority (FINRA) for its assistance in this matter. [SEC v. Pointer Worldwide, Ltd et al., Civil Action No. 09-CV-6162 (S.D.N.Y.)] (LR-21122)
INVESTMENT COMPANY ACT RELEASES
PowerShares Exchange-Traded Fund Trust, et al.
An order has been issued on an application filed by PowerShares Exchange-Traded Fund Trust, 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-28813 - July 7)
Nationwide Life Insurance Company, et al.
An order has been issued approving an application filed by Nationwide Life Insurance Company, Nationwide Variable Account-II, Nationwide Variable Account-7, Nationwide Variable Account-9, Nationwide Variable Account-14, Nationwide Multi-Flex Variable Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-4, Nationwide VLI Separate Account-7, Nationwide Life and Annuity Insurance Company, Nationwide VL Separate Account-G, Nationwide Life Insurance Company of America, Nationwide Provident VLI Separate Account 1, Nationwide Life and Annuity Company of America, Nationwide Provident VA Separate Account A, and Nationwide Provident VLI Separate Account A (collectively, Section 26 Applicants), and Nationwide Variable Insurance Trust (collectively with Section 26 Applicants, Section 17 Applicants). Section 26 Applicants have been authorized under Section 26(c) of the Investment Company Act to substitute securities issued by certain registered investment companies for shares of certain other registered investment companies. In addition, Section 17 Applicants have been granted an exemption from Section 17(a) of the Act in order to engage in certain in-kind transactions in connection with the substitution. (Rel. IC-28815 - July 8)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the International Securities Exchange (SR-ISE-2009-34) regarding Customer Cross 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 July 6. (Rel. 34-60253)
A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2009-042) relating to temporary membership status and interim trading permit access fees 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 July 6. (Rel. 34-60254)
A proposed rule change filed by the NYSE Arca (SR-NYSEArca-2009-56) to add two new order types to NYSE Arca Equities Rule 7.31 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 July 6. (Rel. 34-60256)
A proposed rule change filed by NASDAQ OMX BX to further extend the temporary cap on certain fees for members (SR-BX-2009-036) 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 July 6. (Rel. 34-60257)
A proposed rule change filed by the Chicago Stock Exchange relating to participant fees and credits (SR-CHX-2009-07) 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 July 6. (Rel. 34-60258)
A proposed rule change filed by the Chicago Stock Exchange relating to the reallocation of credits paid to Institutional Brokers (SR-CHX-2009-08) 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 July 6. (Rel. 34-60259)
Accelerated Approval of Proposed Rule Changes
The Commission granted accelerated approval to a proposed rule change (SR-NYSE-2009-55) submitted by New York Stock Exchange amending Rule 70.25 to permit all available contra-side liquidity to trigger the execution of a d-Quote. Publication is expected in the Federal Register during the week of July 6. (Rel. 34-60251)
The Commission granted accelerated approval to a proposed rule change (SR-NYSEAmex-2009-24) submitted by NYSE Amex amending Rule 70.25 to permit all available contra-side liquidity to trigger the execution of a d-Quote. Publication is expected in the Federal Register during the week of July 6. (Rel. 34-60252)
The Commission noticed and granted accelerated approval to a proposed rule change (SR-NYSE-2009-58) submitted by the New York Stock Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to amend the scope of the Exchange's prior approval to receive inbound routes from Archipelago Securities LLC (ArcaSec), an affiliated member. Publication is expected in the Federal Register during the week of July 6. (Rel. 34-60255)