Investor Advisory Committee Open Meeting - Monday, October 5, 2009 - 9:00 a.m.
The Securities and Exchange Commission Investor Advisory Committee will hold an Open Meeting on Monday, Oct. 5, 2009, in the Multipurpose Room, L-006. The meeting will begin at 9:00 a.m. and will be open to the public, with seating on a first-come, first-served basis. Doors will open at 8:30 a.m. Visitors will be subject to security checks.
The agenda for the meeting includes: (i) a presentation by SEC staff of potential Commission initiatives; (ii) description of the composition and purpose of the Committee's subcommittees; (iii) consideration of a Committee recusal policy; (iv) reports from the Committee's subcommittees; and (v) discussion of next steps for the Committee, including regarding SEC resources.
Closed Meeting - Thursday, September 24, 2009 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, September 24, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; a litigation matter; and other matters relating 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.
In the Matter of Regions Bank
On September 21, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 (Securities Act) and Section 21C of the Securities Exchange Act of 1934 (Exchange Act), Making Findings, and Imposing a Cease-and-Desist Order against Regions Bank (Regions). The Order finds that Regions, the primary banking subsidiary of Regions Financial Corporation, was a cause of U.S. Pension Trust Corp. and U.S. College Trust Corp. (collectively, USPT)'s violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 15(a)(1) of the Exchange Act.
Beginning in 1996, USPT defrauded approximately 14,000 investors by charging exorbitant, undisclosed commissions and fees in connection with the sale of mutual funds. Using a network of approximately 2,000 unregistered sales agents, USPT offers and sells to investors residing primarily in Latin America mutual funds available from well-known U.S. fund companies, through a trust created at a U.S. bank. USPT sells the funds through a series of retirement and college investment plans that provide investors with a choice of making either annual contributions for multiple years or a single, lump-sum contribution. Until March 2006, USPT did not disclose to new investors that it took up to 85% of investors' annual contributions, and as much as 18% of investors' lump-sum contributions. USPT used these contributions to gain profits for itself, and pay commissions to its sales agents and insurance premiums to an insurance company USPT's principals owned. As one aspect of the plans, individuals established trust accounts at Regions, which served to "hold" the assets in which individuals had invested. A primary selling point for USPT's plans is the assurance that investors' funds would be safe because investors would have a direct trust relationship with a major U.S. bank.
Regions (or a predecessor, Union Planters Bank) has served as trustee of the plans since October 2001 and, in that capacity, entered into individual trust agreements (Trust Agreement) with each investor and followed USPT's instructions to distribute a portion of the investors' contributions to USPT and use the remainder of the contributions to purchase mutual funds. In that regard, Regions has subtracted from each contribution the amounts of USPT's commissions and fees and deposited those amounts in USPT's operating account in accordance with USPT's instructions. Regions knew or should have known, however, that these exorbitant commissions and fees were not disclosed in USPT's marketing materials or in any other document USPT provided to investors. Further, the trust agreement was misleading because it stated, among other things, that fees "may be paid" to USPT - when they always were - and, although it discloses Regions' own, comparatively nominal trust fees, did not disclose the nature and amounts of the exorbitant commissions and fees USPT charged to investors. Finally, a Regions employee signed a certificate that USPT sent each investor after every contribution. This certificate identified the mutual funds held in trust, but reflected the amount of the total contribution without disclosing any of the commissions and fees charged.
Based on the above, the Order requires Regions to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, and Section 15(a)(1) of the Exchange Act. Regions consented to the issuance of the Order without admitting or denying any of the findings therein. (Rel. 33-9065; 34-60699; File No. 3-13618)
SEC v. John J. Bravata, et al.
On September 11, the SEC filed a Motion For An Order To Show Cause Why Defendant John Bravata Should Not Be Adjudicated in Civil Contempt For Violating The Court's Asset Freeze Orders. This motion alleged that John Bravata violated the Court's July 27, 2009 asset freeze by taking loans against certain life insurance policies in excess of $37,000. On September 14, the Honorable Judge David M. Lawson issued an Order to Show Cause, requiring John Bravata to appear before the Court on Oct. 1, 2009 to show cause why he should not be held in civil contempt and punished accordingly.
The SEC previously filed a complaint against John Bravata and other defendants on July 25, 2009. The SEC's complaint charges John Bravata with violating Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On July 27, 2009, the Honorable David M. Lawson issued a temporary restraining order and asset freeze against John Bravata. [SEC v. John J. Bravata, et al., Case No. 09-CV-12950 (E.D. Mich.)] (LR-21214)
SEC Obtains $1 Million Judgment Against Regions Bank in Settled Civil Action
The Securities and Exchange Commission announced today that on Sept. 21, 2009, the District Court for the Southern District of Florida entered a Final Judgment in its settled civil action against Regions Bank (Regions), imposing a $1 million penalty and ordering Regions to pay disgorgement in the amount of $1, for its role in facilitating a Florida-based offering fraud by unregistered broker-dealers U.S. Pension Trust Corp. and U.S. College Trust Corp. (collectively, USPT). For over six years, Regions or its predecessor bank served as trustee of investment plans through which USPT defrauded thousands of investors (residing primarily in Latin America) by charging exorbitant, undisclosed commissions and fees in connection with the sale of mutual funds. The Commission's civil action was filed on Sept. 21, 2009 to coincide with the Commission's institution of a settled cease-and-desist proceeding with Regions.
The Commission's Complaint alleges that since 1996, USPT has offered and sold to investors mutual funds, through a trust created at a U.S. bank. USPT sells the funds through a series of investment plans that give investors a choice of making either annual contributions for multiple years or a single, lump-sum contribution. Until March 2006, USPT did not disclose to new investors that it subtracted from their contributions up to 85% of investor's initial contributions in the annual plans, and as much as 18% in the single contribution plans, for payment of sales commissions, USPT's "net profit," and insurance premiums.
According to the Commission's Complaint, Regions - which has served as trustee of the plans since October 2001 (through its predecessor bank) - was central to the investment scheme because the primary selling point for USPT's investment plans was the trust relationship created between the investor and the U.S. bank. As trustee, Regions allowed USPT to use its name in marketing materials, prepared a promotional video that was posted on USPT's website, and sent representatives to Latin America to meet with sales agents and prospective investors to explain Regions' role as trustee. Regions entered into individual trust relationships with all investors, processed their contributions, and purchased the selected mutual funds for them. However, when it sent them confirming certificates, it failed to disclose the amounts taken out for fees and commissions. Regions' own Trust Agreement and Trust Summary were also misleading and failed to disclose the nature and amounts of the commissions and fees charged (except for Regions' own trust fees). Regions stopped accepting new USPT investor trust relationships in January 2008, and stopped accepting additional contributions under existing plans in August 2009.
The Commission's Complaint charges Regions with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, and with aiding and abetting USPT's violations of Section 15(a)(1) of the Securities Exchange Act of 1934 by serving as trustee. Regions has agreed to settle the civil action by consenting to the entry of a Final Judgment, without admitting or denying the allegations of the Commission's Complaint, providing for payment of a civil penalty of $1 million, which will be paid into a Fair Fund for the benefit of investors injured in the USPT offering fraud. [SEC v. Regions Bank, Civil Action No. 09-CV-22821-COOKE/Bandstra (S.D. Fla.)] (LR-21215)
INVESTMENT COMPANY ACT RELEASES
Clough Global Allocation Fund, et al.
An order has been issued on an application filed by Clough Global Allocation Fund, et al., under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order permits certain registered closed-end investment companies to make periodic distributions of long-term capital gains (i) with respect to their outstanding common stock as often as monthly in any one taxable year, and (ii) as frequently as distributions are specified by or in accordance with the terms of any outstanding preferred stock that such investment companies may issue. (Rel. IC-28904 - September 21)
SECURITIES ACT REGISTRATIONS
RECENT 8K FILINGS