SEC to Hold Securities Lending and Short Sale Roundtable
The Securities and Exchange Commission will hold a roundtable about securities lending and short sale issues on September 29 and September 30.
The roundtable will feature an in-depth review of securities lending practices and also analyze possible short sale pre borrowing requirements and additional short sale disclosures. Panelists are expected to include investors, corporate issuers, financial services firms, beneficial owner lenders, lending agents, borrowers of securities, self-regulatory organizations, international regulators, and the academic community.
The roundtable agenda is available on the SEC Web site. The list of panelists will be announced at a later date.
The roundtable discussion will be held in the auditorium at SEC headquarters at 100 F Street NE in Washington, D.C. On September 29, the roundtable will focus on securities lending issues and take place from 9:30 a.m. to approximately 4 p.m. On September 30, the roundtable will focus on short sale pre-borrowing and additional short sale disclosures and take place from 9:30 a.m. to approximately 12:30 p.m.
The public is invited to observe the roundtable discussion. Seating will be available on a first-come, first-served basis. The roundtable discussion also will be available via webcast on the SEC Web site.
Delinquent Filers' Stock Registrations Revoked
The registrations of the registered securities of Pacific International Enterprises, Inc., Paradise Holdings, Inc., PC-EPhone, Inc., Phoenix Laser Systems, Inc., Phoenix Resources Technologies, Inc., and Pilot Network Services, Inc., have been revoked. Each had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, each violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocations were ordered in an administrative proceeding before an administrative law judge. (Rel. 34-60652; File No. 3-13598)
In the Matter of Magnum Resources, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Five Respondents (Default Order) in Magnum Resources, Inc., Administrative Proceeding No. 3-13582. The Order Instituting Proceedings (OIP) alleged that six Respondents repeatedly failed to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission (Commission). The Default Order finds these allegations to be true as to Magnum Resources, Inc., Manakoa Services Corp. (n/k/a Teslavision Corp.), Maxus Technology Corp., Med/Waste, Inc., and Medsearch Technologies, Inc., and revokes the registrations of each class of registered securities of these five Respondents, pursuant to Section 12(j) of the Securities Exchange Act of 1934.
The proceeding has been stayed as to Meisenheimer Capital, Inc., the other Respondent named in the OIP, while the Commission considers its Offer of Settlement. (Rel. 34-60655; File No. 3-13582)
SEC Files Fraud Charges Against Former Stockbroker for Conducting Scalping Scheme
The Securities and Exchange Commission yesterday filed a civil action in United States District Court, District of Nevada, against Daryl O. Anderson, a resident of Henderson, Nevada and former registered securities sales representative, for conducting a stock scalping scheme generating over $930,000 in illicit profits.
Scalping is the illegal practice of recommending that others purchase a security, while secretly selling the same security, contrary to the recommendation.
The Commission's complaint alleges that between June 2007 and January 2008, Anderson, who was no longer associated with a registered broker-dealer, recommended Pink Sheets-quoted Cloudtech stock to his former brokerage customers, friends, and relatives (collectively, investors). Anderson pitched Cloudtech to investors as an up-and-coming company where they could double or triple their money quickly.
According to the complaint, Anderson's investors trusted and followed his advice, purchasing over one million Cloudtech shares at a cost in excess of $3 million. Those purchases accounted for 33% of the total trading volume in the stock, and triggered a 358% increase in the stock price (from $0.95 per share to a high of $4.35 per share).
The complaint further alleges that while Anderson was recommending Cloudtech stock to investors, contrary to his buy recommendations, he was secretly selling his personal Cloudtech shares, thereby realizing $930,852 in illicit profits from his stock scalping scheme.
Anderson has consented to a permanent injunction against 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, without admitting or denying the Commission's allegations. Anderson also agreed to pay disgorgement of his ill-gotten gains, prejudgment interest, and a civil penalty, in amounts to be determined by the court. [SEC v. Daryl O. Anderson, Civ. Action No. 2:09-CV-1799 (United States District Court for the District of Nevada)] (LR-21204)
SEC Settles With Former Tenet Healthcare Corporation Senior Executive
On September 10, the Commission accepted a settlement offer from Thomas B. Mackey, the former co-president and chief operating officer of Tenet Healthcare Corporation and the sole remaining defendant in an action brought by the Commission on April 2, 2007. Mackey consented to the relief described below without admitting or denying the allegations in the Commission's Complaint. Mackey's consent has been submitted to the Court for its approval.
The Complaint alleges that Mackey, of Keswick, Virginia, was the principal architect of Tenet's scheme to inflate its earnings by exploiting Medicare's outlier reimbursement regulations, which provided for additional reimbursement to hospitals to cover the additional costs for treating extraordinarily sick patients. Mackey realized that additional outlier reimbursement could be triggered simply by increasing Tenet's gross charges, regardless of the actual cost incurred by Tenet to treat its Medicare patients. In 1999, and under Mackey's direction, Tenet management calculated the precise increase to Tenet's gross charges needed to boost its revenue from Medicare outlier payments to a level that would allow Tenet to reach its earnings targets. For the next three years, Mackey continued to oversee aggressive gross charge increases by Tenet. Tenet's outlier revenue more than tripled by 2002 and accounted for over 40% of Tenet's earnings per share in fiscal year 2002, as Tenet's earnings goals were surpassed year after year. Once Tenet finally revealed its scheme to the investing public and admitted that its strategy was not sustainable, the market value of Tenet's stock plunged by over $11 billion.
During the relevant time, Tenet was based in Santa Barbara, California, and was the second largest publicly traded healthcare company in the United States.
To settle the charges, Mackey consented to entry of a permanent injunction prohibiting him from future violations of the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aiding and abetting violations of the issuer reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. He also agreed to disgorge $1,780,000 in ill-gotten gains resulting from his exercise of Tenet stock options during the period when its revenues were artificially inflated together with $251,541 in prejudgment interest thereon, and to pay a $500,000 civil penalty, which the Commission will seek to have placed into a Fair Fund for distribution to harmed investors pursuant to the Sarbanes-Oxley Act, together with disgorgement and penalties previously paid by other settling defendants in the case. Finally, Mackey agreed to be permanently barred from serving as an officer or director of a public company.
On March 30, 2006, the Commission charged three of Tenet's outside auditors with improperly changing audit work papers in connection with the audit completed during the period of the defendants' scheme. See http://sec.gov/news/press/2006-45.htm
For further information see LR-20067; Exchange Act Release No. 60170 and AAER No. 3000 (June 25, 2009). [SEC v. Tenet Healthcare Corporation, et al., United States District Court for the Central District of California, Civil Action No. CV 07-2144 RSWL (RZx)] (LR-21205; AAE Rel. 3047)
INVESTMENT COMPANY ACT RELEASES
Old Mutual Global Shares Trust, et al.
An order has been issued on an application filed by Old Mutual Global Shares Trust, et al. The order permits (a) certain open-end management investment companies and their series to issue shares (Shares) that can be redeemed only in large aggregations (Creation Units); (b) secondary market transactions in Shares to occur at negotiated prices; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days after the tender of Shares for redemption; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares. (Rel. IC-28898 - September 9)
GE Asset Management Incorporated and GE Investment Distributors, Inc.
The Commission has issued an order to GE Asset Management Incorporated and GE Investment Distributors, Inc. under Section 9(c) of the Investment Company Act exempting applicants and any other company of which General Electric Company is or becomes an affiliated person from Section 9(a) of the Act with respect to an injunction entered by the U.S. District Court for the District of Connecticut on Aug. 11, 2009. (Rel. IC-28899 - September 9)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the NASDAQ OMX BX regarding audit trail information (SR-BX-2009-052) 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 September 14. (Rel. 34-60633)
A proposed rule change (SR-FINRA-2009-056) filed by the Financial Industry Regulatory Authority relating to the establishment of a fee for the investment banking representative examination 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 September 14. (Rel. 34-60640)
A proposed rule change filed by the International Securities Exchange regarding exposure of reserve orders (SR-ISE-2009-61) 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 September 14. (Rel. 34-60642)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-FINRA-2007-024) submitted by Financial Industry Regulatory Authority amending Rule 2320 regarding best execution and interpositioning. Publication is expected in the Federal Register during the week of September 14. (Rel. 34-60635)
Proposed Rule Change
The Securities and Exchange Commission has issued notice of a proposed rule change submitted by NASDAQ OMX PHLX (SR-Phlx-2009-77) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 Regarding Listing Certain Options at $1 Strike Price Intervals Below $200 and Listing Certain Options at $2.50 Strike Price Intervals below $200. Publication is expected in the Federal Register during the week of September 14. (Rel. 34-60637)
JOINT INDUSTRY PLAN RELEASES
Order Approving the Eleventh Charges Amendment to the Second Restatement of the Consolidated Tape Association Plan
The Commission granted approval to an amendment to the CTA Plan (SR-CTA-2008-01) to waive the automatic annual increase in the enterprise cap for 2008. Publication is expected in the Federal Register during the week of September 14. (Rel. 34-60639)
SECURITIES ACT REGISTRATIONS
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