SEC News Digest

COMMISSION ANNOUNCEMENTS

Dan Gallagher, Deputy Director of Trading and Markets, to Leave SEC and Return to Private Practice

The Securities and Exchange Commission announced today that Daniel M. Gallagher, Jr., a Deputy Director of the Division of Trading and Markets, will leave the agency at the end of this month to return to private practice as a partner in the Washington, D.C., office of WilmerHale.

Since joining the Division in 2008, Mr. Gallagher has played an integral role in the SEC's response to the financial crisis and other key Commission initiatives, such as overseeing issues arising from the bankruptcy of Lehman Brothers, rulemaking to address issues regarding credit rating agencies, and efforts to facilitate the central clearing of credit default swaps. Mr. Gallagher worked closely with the Treasury Department, the Federal Reserve Board, the Federal Reserve Bank of New York, the CFTC, and various international bodies in these and other efforts relating to the crisis. Mr. Gallagher served as Co-Acting Director of the Division from April 2009 to January 2010.

"Dan's knowledge and insight have served this agency well during a very difficult time in the markets," said SEC Chairman Mary Schapiro. "He has helped to simplify complex policies, worked on significant broker-dealer and market structure reforms, and demonstrated a true desire to serve the interests of the investing public."

Robert W. Cook, Director of the SEC's Division of Trading and Markets, added, "Dan has done a terrific job for the Division during his tenure as Deputy and Co-Acting Director, and we will miss his energy and enthusiasm."

Mr. Gallagher said, "It has been a tremendous honor to have worked in the Division of Trading and Markets during such a historic period. I have had the privilege of working on critical, cutting-edge matters with incredibly talented colleagues who embody the meaning of public service. It has been a pleasure to serve Chairman Schapiro and the Commissioners, and I wish them the best as they address new challenges."

Mr. Gallagher came to the SEC in January 2006, first serving as a Counsel to SEC Commissioner Paul S. Atkins and later as a Counsel to SEC Chairman Christopher Cox. In those capacities, he worked on most of the major Division of Trading and Markets and Division of Enforcement matters before the Commission.

Mr. Gallagher was formerly the General Counsel and Senior Vice President of Fiserv Securities, Inc., where he was responsible for managing all of the firm's legal and regulatory matters. Mr. Gallagher began his career in private practice, advising clients on broker-dealer regulatory issues, and representing clients in SEC and SRO enforcement proceedings.

Mr. Gallagher earned his JD, magna cum laude, from the Catholic University of America, where he was a member of the law review. He graduated from Georgetown University with a BA in English. (Press Rel. 2010-11)

Alleged Minneapolis-Based Fraudster Trevor Cook Jailed for Failing to Surrender Assets in SEC Case

A federal judge today ordered Minneapolis-area resident Trevor G. Cook jailed for failing to surrender more than $35 million in assets as a result of the Securities and Exchange Commission's fraud charges and asset freeze against him.

The SEC filed a motion last month in U.S. District Court for the District of Minnesota, alleging that Cook had violated the court's order freezing all of his assets. In a court hearing that concluded today, Chief Judge Michael J. Davis found Cook in civil contempt and U.S. Marshals escorted Cook from the courtroom to jail. Chief Judge Davis ordered that Cook remain in jail until he is in compliance with the court's orders.

"Mr. Cook has elected to disregard the court's orders and will now be a guest of the federal correctional system until he mends his ways," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office.

Chief Judge Davis ordered Cook incarcerated until he, among other things, surrenders $27 million located in offshore accounts, a BMW and two Lexus automobiles, a submarine, a houseboat, a collection of expensive watches, a collection of Faberge eggs, Bon Jovi concert tickets, and $670,000 in cash.

The SEC obtained the asset freeze on Nov. 23, 2009, when the Commission charged Cook, nationally syndicated radio host Patrick J. "Pat" Kiley, and four companies they controlled in an alleged $190 million foreign currency trading scheme. According to the SEC's complaint in the case, Cook and Kiley pooled investors' funds in bank and trading accounts in the names of entities they controlled. The foreign currency trading they did conduct resulted in millions of dollars in losses, and they misused approximately half of investor funds to make Ponzi-like payments to earlier investors and pay for Cook's gambling losses and the purchase of the historic Van Dusen Mansion in Minneapolis. (Press Rel. 2010-12)

ENFORCEMENT PROCEEDINGS

In the Matter of Donna M. McKelvy

On Jan. 22, 2010, 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 Donna M. McKelvy (McKelvy).

In the Order, the Division of Enforcement (Division) alleges that on Dec. 16, 2009, a final judgment was entered by consent against McKelvy, permanently enjoining her from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in the civil action entitled SEC v. Mantria Corporation, et al., Civil Action Number 1:09-CV-02676, in the United States District Court for the District of Colorado. The Commission's complaint alleged that, from at least September 2007 through at least November 2009, McKelvy sold the securities of Mantria Corporation and its subsidiaries and affiliates by making materially false representations to investors regarding, among other things, the intended use of the proceeds from the sale of such securities, the past rates of return that had been paid to other investors in such securities, and regarding the operational success of the companies issuing the securities. In selling these securities, McKelvy further omitted the material fact that the proceeds from the sale of these securities were used, in Ponzi-like fashion, to pay off earlier investors in these securities. The complaint also alleged that McKelvy acted as an unregistered broker and sold unregistered securities.

A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide McKelvy an opportunity to respond to these allegations, and to determine what sanctions, if any, are appropriate and in the public interest. The Order directs the administrative law judge to issue an initial decision within 210 days from the date of service of the Order. (Rel. 34-61410; File No. 3-13760)

In the Matter of Minecore International, Inc.

On Jan. 25, 2010, the Commission issued an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Order) against Minecore International, Inc. (Minecore). The Order finds that Minecore is a Delaware corporation headquartered in San Jose, California, with a class of equity securities registered with the Commission pursuant to Section 12(g) of the Exchange Act. Minecore's stock was quoted on the "Pink Sheets" operated by Pink OTC Markets, Inc. until trading was temporarily suspended by the Commission on Nov. 4, 2009. The Order also finds that Minecore failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, by not filing an Annual Report on Form 10-K since the fiscal year ended December 31, 2001 or periodic or quarterly reports on Form 10-Q for any fiscal period subsequent to its fiscal quarter ended Sept. 30, 2001.

Based on the above, the Order revokes the registration of each class of Minecore's securities registered with the Commission pursuant to Section 12 of the Exchange Act. (Rel. 34-61412; File No. 3-13672)

SEC v. Daryn Fleming

The Securities and Exchange Commission announced that on Dec. 22, 2009, the Commission filed a Motion for an Order to Show Cause (Motion) against Daryn P. Fleming due to his failure to make monetary payments as ordered by the Court.

Previously on Jan. 23, 2008, the Commission filed a complaint alleging that Fleming, then CEO of International Broadcasting Corporation, violated the antifraud provisions of the federal securities laws through the issuance of false press releases about the corporation's business operations including nonexistent broadcast affiliations with various radio stations. The complaint also alleged that when Fleming and an agent of the corporation were later questioned by investors about these supposed affiliations, they made public misrepresentations live on an International Broadcasting Corporation internet radio show to conceal the fact that the original press releases were false. On that same day the Commission also filed a settled civil injunctive action against International Broadcasting Corporation, in which the company consented to the entry of a permanent injunction from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

On April 14, 2009, the Honorable Robert H. Whaley of the United States District Court for the Eastern District of Washington entered a final judgment against Fleming pursuant to his consent, without either admitting or denying the SEC's allegations against him. The final judgment permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgment against Fleming also prohibits him from acting as an officer or director of any public company, and ordered him to pay disgorgement totaling $20,844 in ill-gotten gains, $3,865 in prejudgment interest, and a $35,000 civil penalty.

The Commission's Motion alleges that Fleming failed to make payments as required by the Court's final judgment against him (Judgment). That Judgment, which was entered with the consent of Mr. Fleming, required him to pay $59,709 in four installments. As set forth in the Commission's Motion, Fleming's first payment was made to the Court on time. However, Fleming failed to make the second and third payments despite notices from the Commission that he had failed to make payments as required by the Court.

The Commission's Motion asks that the Court enter an order finding Fleming in contempt of the Court's April 14, 2009 Judgment, order that the remaining $34,709 be paid to the Court immediately, and grant such other and further relief as this Court deems just and proper. [SEC v. Fleming, et al., Civil Action No. 1:08-CV-29 (E.D. Wa.) (Whaley J.)] (LR-21393)

Court Enters Judgment of Permanent Injunction Against Defendants Lancer Management Group, LLC and Lancer Management Group II, LLC and Disgorgement Judgment Against Relief Defendants Lancer Offshore, Inc., Lancer Partners, L.P., Omnifund, Ltd., LSPV, Inc. and LSPV, LLC and Commission Voluntarily Dismisses All Monetary Claims Against Them

The Securities and Exchange Commission announced that on Jan. 21, 2010, the Honorable Kenneth A. Marra, United States District Court Judge for the Southern District of Florida, dismissed with prejudice, the Commission's claims for disgorgement, prejudgment interest and civil penalties against Defendants Lancer Management Group, LLC and Lancer Management Group II, LLC (Corporate Defendants) and its claims for disgorgement and prejudgment interest against Relief Defendants Lancer Offshore, Inc., Lancer Partners, LP, Omnifund Ltd., LSVP, Inc. and LSPV, LLC (Relief Defendants). The Commission requested that the Court dismiss these claims, because all of the Corporate Defendants and Relief Defendants are under the control of the Court-Appointed Receiver, who will distribute these entities remaining assets to defrauded investors.

Previously, on Sept. 21, 2009, Judge Marra entered a permanent injunction against the Corporate Defendants and a disgorgement judgment against Relief Defendants. The judgment enjoins the Corporate Defendants from violating 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 Sections 206(1) and (2) of the Investment Advisers Act of 1940. The Corporate Defendants and Relief Defendants consented to entry of the judgment without admitting or denying the allegations in the Commission's complaint. [SEC v. Michael Lauer, et al., Case No. 03-80612-CIV-MARRA (S.D. Fla.)] (LR-21394)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-BX-2010-001) filed by NASDAQ OMX BX relating to Registered Representative Fee and Options Regulatory Fee 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 January 25. (Rel. 34-61388)

A proposed rule change filed by NASDAQ OMX BX amending Rule 2342 to reflect changes to the corresponding FINRA rule (SR-BX-2010-002) has become immediately 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 January 25. (Rel. 34-61389)

A proposed rule change filed by the Chicago Stock Exchange implementing a cancellation fee (SR-CHX-2010-02) 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 January 25. (Rel. 34-61392)

A proposed rule change filed by NYSE Amex amending Rule 975NY (SR-NYSEAmex-2010-02) 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 January 25. (Rel. 34-61394)

The Fixed Income Clearing Corporation filed a proposed rule change (SR-FICC-2009-11) under Section 19(b)(1) of the Exchange Act, which became effective upon filing to modify the fee schedule of its Government Securities Division. Publication is expected in the Federal Register during the week of January 25. (Rel. 34-61395)

A proposed rule change (SR-BX-2010-007) filed by NASDAQ OMX BX relating to the order routing pilot on the Boston Options Exchange Facility 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 January 25. (Rel. 34-61399)

A proposed rule change filed by New York Stock Exchange (SR-NYSE-2010-05) postponing the implementation date of Information Memo 10-03, which provides updated parameters for, and guidance on the application of, the Exchange's Gap Quote Policy 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 January 25. (Rel. 34-61401)

A proposed rule change filed by NYSE Amex (SR-NYSEAmex-2010-05) postponing the implementation date of Information Memo 10-03, which provides updated parameters for, and guidance on the application of, the Exchange's Gap Quote Policy 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 January 25. (Rel. 34-61402)

A proposed rule change filed by the Financial Industry Regulatory Authority (SR-FINRA-2010-004) relating to non-substantive technical changes to FINRA Rule 4521(d) 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 January 25. (Rel. 34-61408)

Approval of Proposed Rule Changes

The Commission approved a proposed rule change (SR-NYSEAmex-2009-85) submitted under Rule 19b-4 of the Securities Exchange Act of 1934 by NYSE Amex to establish the NYSE Amex Realtime Reference Prices service. Publication is expected in the Federal Register during the week of January 25. (Rel. 34-61403)

The Commission approved a proposed rule change (SR-NYSE-2009-120) submitted under Rule 19b-4 of the Securities Exchange Act of 1934 by the New York Stock Exchange relating to changes in NYSE Realtime Reference Prices service. Publication is expected in the Federal Register during the week of January 25. (Rel. 34-61406)

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