SEC, CFTC to Hold Joint Meetings on Regulation Harmonization
On August 20, the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) announced that the two regulatory agencies will hold joint meetings to seek input from the public on harmonization of market regulation. President Barack Obama in June called on the two regulators to recommend changes to statutes and regulations that would eliminate differences with respect to similar types of financial instruments.
The first meeting, on Sept. 2, 2009, will be held at the CFTC. The second meeting, on Sept. 3, 2009, will be held at the SEC.
"These joint meetings will build on the progress the CFTC and SEC have made on designing a framework to regulate OTC derivatives. It will move us further down the road of harmonizing our regulations to increase transparency, reduce regulatory arbitrage and rebuild confidence in our markets," said SEC Chairman Mary Schapiro.
"I look forward to working with Chairman Schapiro and hearing from market experts and participants on how to most effectively harmonize our regulatory systems," said CFTC Chairman Gary Gensler. "Harmonizing our regulatory policies will improve market integrity by applying consistent standards to market participants. There are three areas where this review will most benefit the American public: to address gaps between the two agencies' financial regulatory authorities, to assess the effects of regulatory overlap and to bring appropriate consistency to the two agencies' regulation over similar products, practices and markets."
On June 17, 2009, the White House released a White Paper on Financial Regulatory Reform calling on the SEC and CFTC to "make recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities."
Specifically, the White House recommended "that the CFTC and the SEC complete a report to Congress by Sept. 30, 2009, that identifies all existing conflicts in statutes and regulations with respect to similar types of financial instruments and either explains why those differences are essential to achieve underlying policy objectives with respect to investor protection, market integrity, and price transparency or makes recommendations for changes to statutes and regulations that would eliminate the differences." (Press Rel. 2009-186; Rel. 34-60539; File No. 4-588)
In the Matter of National Tire Services, Inc., TheNETdigest.com, Inc., New Media, Inc. (n/k/a New Media Group, Inc.), New Tel, Ltd., New York Film Works, Inc., and Newstar Resources, Inc.
Today, the Securities and Exchange Commission instituted public administrative proceedings against six companies to determine whether the registration of each class of their securities should be revoked or suspended for a period not exceeding twelve months for failure to file required periodic reports (ticker symbols provided where available):
In this Order, the Division of Enforcement alleges that the six issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, instituted pursuant to Securities Exchange Act of 1934 Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute a failure to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-60541; File No. 3-13590)
In the Matter of Deborah Duffy
On August 19, the Securities and Exchange Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions against Deborah Duffy age 54, and a resident of Mahwah, N.J. The Order finds that, from 1991 to February 2009, Duffy was the Chief Compliance Officer and a registered representative associated with WG Trading Company Limited Partnership, a broker-dealer registered with the Commission. The Order further finds that on July 21, 2009, Duffy pled guilty to one count of conspiracy to commit securities fraud and wire fraud in violation of Title 18 United States Code, Section 371, one count of securities fraud in violation of Title 15 United States Code, Sections 78j(b) and 78ff, Title 17 Code of Federal Regulations, Section 240.10b-5 and Title 18 United States Code, Section 2, and one count of money laundering in violation of Title 18 United States Code, Sections 1957 and 2 before the United States District Court for the Southern District of New York, in United States v. Deborah Duffy, Crim. Information No. 09-Cr.-709. The conspiracy and securities fraud counts of the criminal indictment to which Duffy pled guilty alleged, inter alia, that from at least or about 1996 through February 2009, Duffy, together with others, did knowingly and intentionally conspire to execute a scheme and artifice to defraud investors by soliciting funds under false pretenses, failing to invest investor funds as promised and misappropriating and converting investor funds to her personal benefit.
Based on the above, the Order bars Duffy from association with any broker or dealer. Duffy consented to the issuance of the Order without admitting or denying any of the Commission's findings, except she admits to the Commission's jurisdiction over her and the subject matter of the proceedings and her guilty plea on July 16, 2009. (Rel. 34-60543; File No. 3-13591)
In the Matter of Michael A. Atkins
On August 19, the Securities and Exchange 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 against Michael A. Atkins. The Order finds that Atkins was associated with LandOak Securities, LLC, an investment adviser registered with the Commission, from April 2000 until October 2006. The Order also finds that LandOak is a broker-dealer registered with the Commission, and that from April 1996 until July 2007, Atkins was a registered representative associated with LandOak. Additionally, the Order finds that on Aug. 10, 2009, a final judgment was entered by consent against Atkins, permanently enjoining him from future violations of Sections 206(1) and 206(2) of the Advisers Act, in the civil action entitled Securities and Exchange Commission v. LandOak Securities, LLC, Patrick L. Martin, and Michael A. Atkins, Civil Action Number 3:08-cv-0209, in the United States District Court for the Eastern District of Tennessee. The Order finds that the complaint in the civil action alleged that in July 2002, Atkins and another person took $1,545,000 from a Tennessee limited liability company, and diverted or loaned it to Tice Technologies, Inc., without disclosing to the limited liability company’s investors, several of whom were LandOak advisory clients, that Atkins had a conflict of interest because he was a director of Tice and owned a substantial stake in that company.
Based on the above, the Order bars Michael A. Atkins from association with any broker, dealer, or investment adviser, with the right to reapply for association after three years to the appropriate self-regulatory organization, or if there is none, to the Commission. Michael A. Atkins consented to the issuance of the Order without admitting or denying any of the findings. (Rels. 34-60544, IA-2919; File No. 3-13592)
SEC Halts Phony Investment Pool By San Diego Promoter
On August 20, the Securities and Exchange Commission obtained an asset freeze and court order halting an ongoing securities fraud orchestrated by a San Diego, Calif. promoter.
The Commission alleges that Mohit A. Khanna, who was barred in 2004 by the Financial Industry Regulatory Authority (FINRA), claimed to have raised as much as $70 million from 300 investors though his company, MAK 1 Enterprises Group, LLC.
The Commission's complaint alleges that the defendants solicited investors in Southern California and several other states, as well as a charitable foundation, through word-of-mouth referrals and MAK 1's website. The Commission further alleges that the defendants claimed to pool investor funds to invest in commercial paper, foreign currency trading products, and other guaranteed investments. The complaint alleges that the investment products Khanna claimed to have invested in were non-existent. Instead, the complaint alleges, Khanna misused investor funds to pay for several luxury cars and residential properties, including those now owned by his wife, Sharanjit Khanna of San Diego, Calif., who was also named as a relief defendant.
The Commission's complaint, which was filed in federal court in San Diego, alleges that the defendants falsely claimed that investor accounts would be FDIC and SIPC insured and were "insured" by insurance policies purchased by the defendants. The complaint alleges Khanna fabricated and gave to an accountant a "screen shot" of MAK 1's online banking activity purporting to show a balance of over $50 million in its bank account. The defendants obtained a letter verifying the account balance from the accountant which was sent to investors. The complaint alleges that, in reality, the average daily balance in that account never exceeded $197,000. The complaint also alleges the defendants concealed Khanna's FINRA-bar which resulted from unrelated, alleged fraudulent conduct.
The Honorable Roger T. Benitez, United States District Judge, on Aug. 18, 2009, granted the Commission's application for a temporary restraining order against the defendants and issued orders freezing defendants' assets, prohibiting the destruction of documents, requiring accountings, granting expedited discovery, repatriating funds, and requiring Khanna to surrender his passport. The Judge also appointed LaBella & McNamara LLP as the temporary receiver over the assets of MAK 1 and its affiliates. On Aug. 31, 2009, the Court will hold a hearing on the Commission's motion for a preliminary injunction and appointment of a permanent receiver.
The Commission's complaint charges defendants with violating the antifraud provisions (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) and securities registration provisions (Sections 5(a) and 5(c) of the Securities Act) of the federal securities laws, and names as relief defendants Khanna's wife and another company Khanna controls, First Opportunities Management Group, Inc. The Commission alleges that the relief defendants received ill-gotten gains from Khanna's fraud. In addition to the emergency relief, the Commission seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against Khanna and MAK 1.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of California, U.S. Postal Inspection Service, Federal Bureau of Investigation, National Futures Association, and the Better Business Bureau - San Diego.
In a related case also filed on August 17 in federal court, the U.S. Commodity Futures Trading Commission and the California Corporations Commissioner jointly filed an emergency action against the defendants. [Securities and Exchange Commission v. Mohit A. Khanna and MAK 1 Enterprises Group, LLC, et al., Case No. 09cv1784 BEN, CAB, S.D. Cal. Aug. 17, 2009](LR-21181)
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