Chief Economist James Overdahl to Leave SEC
The Securities and Exchange Commission announced today that Chief Economist James A. Overdahl will leave the agency to rejoin the private sector after serving since July 2007 as principal economic advisor to the Commission on policy, rulemaking, and litigation support.
As Director of the Commission's Office of Economic Analysis, Mr. Overdahl supervised the agency's economics program, advising policymakers on a wide variety of topics affecting securities markets including the role of securities lending and short selling, market structure issues, money market mutual funds, credit rating agencies, and litigation matters. The Office of Economic Analysis is part of the SEC's new Division of Risk, Strategy, and Financial Innovation.
"Given the importance of rigorous economic analysis to the Commission, we truly appreciate Jim's dedication and his many contributions during a time of extraordinary challenges in our financial markets," said SEC Chairman Mary L. Schapiro.
"Both as a member of the staff in the early 1990's and then later as Chief Economist, Jim brought to the Commission real expertise in a number of economic areas, including market structure, enforcement issues, and derivative securities," said Henry Hu, Director of the Division of Risk, Strategy, and Financial Innovation. "Jim's a fine, thoughtful economist who provided leadership related to the economic analysis so material to the Commission's activities."
Mr. Overdahl said, "It has been my honor to serve as the Commission's Chief Economist during a period that posed extraordinary challenges to our financial markets - when rigorous economic analysis was absolutely crucial to the Commission's work. I will miss working day-to-day with my talented colleagues, who always rose to the occasion and gave their best when things were at their worst. I am extremely proud of the accomplishments of the SEC's economists during extremely difficult economic times."
During his time at the SEC, Overdahl's team of economists completed a major study of the impact of provisions of the Sarbanes-Oxley Act regarding internal control over financial reporting requirements. Overdahl also testified before Congress on behalf of the Commission on over-the-counter derivatives, and worked closely with the financial agencies in the President's Working Group on Financial Markets on policy issues related to the recent market crisis.
Mr. Overdahl will leave the SEC at the end of March to join National Economic Research Associates (NERA), an economic consulting firm, as a Vice President in their Washington, D.C., office.
Before joining the SEC staff, Overdahl served as Chief Economist of the Commodity Futures Trading Commission from 2002 to 2007. (Press Rel. 2010-36)
Jury Finds Darko S. Mrakuzic Guilty in Connection with a Pump-and-Dump Scheme
The Securities and Exchange Commission announced today that a jury found Darko S. Mrakuzic liable for violating the anti-fraud and registration provisions of the federal securities laws in connection with a scheme to illegally convert several million illegally issued shares of a small, Florida corporation into purportedly unrestricted shares that netted Mrakuzic more than $6 million in profits.
Following a five-day trial in U.S. District Court in Tampa, Florida, the seven-member jury found Mrakuzic, a Canadian citizen who resides in Vancouver, British Columbia, liable for violating Sections 5(a) and (c) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. U.S. District Judge James D. Whittemore will determine remedies and sanctions at a later date.
Mrakuzic was the only one of the seven defendants whom the Commission sued in May 2008 to take the case to trial. The other six defendants resolved the action earlier. The Commission's evidence at trial showed Mrakuzic and the other defendants engaged in a complex scheme from June through August 2005 to create and sell shares of Global Development and Environmental Resources Inc., a purported environmental remediation company that was based in Las Vegas, Nevada.
The evidence showed the scheme involved creating a promissory note convertible into Global Development shares that was fraudulently backdated to avoid the holding requirements for restricted stock under Rule 144. The defendants then arranged a forged assignment of the note to three foreign entities, one of which was under Mrakuzic's control and two others where he secretly owned brokerage accounts. The third step in the scheme was to convert the note into unrestricted shares.
The last step involved the defendants promoting the stock by arranging for Global to issue press releases that contained false and misleading information relating to the company's purported clients, pending contracts and revenue projections. The resulting inflated market allowed Mrakuzic to sell the shares through the foreign entities for profits in excess of $6 million.
The other defendants, Global Development, Carmine J. Bua, Anthony M. Cimini Sr., Philip Prichard, Pietro Cimino, and Dante M. Panella, all previously settled the Commission's anti-fraud and securities registration charges against them by consenting, without admitting or denying the Commission's allegations, to permanent injunctions. All the individuals consented to penny stock bars, and Cimini, Pritchard, and Cimino consented to officer-and-director bars. The Court previously ordered disgorgement and civil penalties against Bua and Panella, with monetary orders still to be decided against the others. [SEC v. Darko S. Mrakuzic, Civil Action No. 8:08-cv-993-T-27-MAP (M.D. Fla.)] (LR-21441)
SEC Charges Former Stock Loan Trader in Cash Kickback Scheme
On March 9, 2010, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Eastern District of New York against a former securities lending, or "stock loan," trader for participating in a long-running cash kickback scheme involving stock loan transactions at several major Wall Street brokerage firms. The Commission's complaint alleges that from March 2004 through December 2005, Salvatore Zangari (Zangari), a former stock loan trader at Morgan Stanley & Co., Inc. (Morgan Stanley) and Banc of America Securities, LLC (Banc of America), received well-over $100,000 in cash kickbacks from a Brooklyn, New York stock loan finder in exchange for sending stock loan orders to brokerage firms that paid the finder for purportedly locating the stocks.
The defendant named in the Commission's complaint is:
Zangari, age 33, of New York, New York. For eleven years, from 1998 to 2009, he was employed as a stock loan trader at several major Wall Street brokerage firms where he was responsible for negotiating, arranging and entering into stock loan transactions on behalf of the firms. Most recently, from October 2006 to July 2009, Zangari worked as a stock loan trader at UBS Securities, LLC. Prior to UBS, he worked at Banc of America from May 2005 to October 2006, and before that, at Morgan Stanley from August 1998 to May 2005. During the course of his employment in the securities industry, Zangari held Series 7 and 63 professional licenses.
The Commission's complaint specifically alleges as follows:
For nearly two years, from March 2004 through December 2005, Zangari participated in a cash kickback scheme while arranging daily stock loan transactions for Morgan Stanley and Banc of America. Zangari received well over $100,000 in cash from a stock loan finder located in Brooklyn, New York in exchange for sending Morgan Stanley and Banc of America stock loan orders to other brokerage firms that paid the finder a fee for purportedly locating the securities being borrowed and loaned. The finder shared part of the fees he received on the transactions with Zangari by paying him thousands of dollars in cash each month. Zangari used a portion of the kickback money as a down-payment to purchase an apartment in New York City. Zangari's misconduct defrauded and otherwise harmed Morgan Stanley and Banc of America because he purposely arranged stock loan transactions on their behalf at borrowing and lending rates that were designed to generate finder fee payments rather than to maximize the firms' profits.
Zangari is charged with violating 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, in the alternative, with aiding and abetting others' violations of certain of these provisions. The Commission's complaint seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties against Zangari. The Commission's investigation is ongoing. [SEC v. Salvatore Zangari, Civil Action No. 10-1058 (EDNY)] (LR-21442)
SEC Files Regulation FD Charges Against Presstek, Inc. and Its Former CEO
The Securities and Exchange Commission filed a civil injunctive action today against Presstek, Inc. (Presstek), a Greenwich, Connecticut based manufacturer and distributor of high-technology digital imaging equipment and its former chief executive officer, Edward J. Marino, of Boston, Massachusetts, for violations of Regulation FD and Section 13(a) of the Securities and Exchange Act of 1934 (Exchange Act). Regulation FD prohibits public companies from selectively disclosing material non-public information to certain investors without simultaneously disclosing it to all investors.
The Commission's complaint alleges that on Sept. 28, 2006, while acting on behalf of Presstek, Marino selectively disclosed material non-public information regarding Presstek's financial performance during the third quarter of 2006 to a managing partner of a registered investment adviser. In addition, the complaint alleges that within minutes of receiving the information from Marino, the partner decided to sell all of the shares of Presstek stock managed by the investment adviser. The complaint also alleges that Presstek did not simultaneously disclose to the public the information provided by Marino to the partner.
Presstek has agreed to settle the Commission's charges, without admitting or denying the allegations in the complaint, by consenting to an order that enjoins Presstek from further violations of Regulation FD and Section 13(a) of the Exchange Act and directs it to pay a $400,000 civil penalty. The Commission took into account certain remedial measures taken by Presstek, including revising its corporate communications policies and corporate governance principles, replacing its management team and appointing new independent board members, and creating a whistleblower's hotline.
In the ongoing civil action against Marino, the Commission is seeking injunctive relief and the imposition of civil penalties. [SEC v. Presstek, Inc. and Edward J. Marino, 1:10-CV-10406 (D. Mass.)] (LR-21443)
INVESTMENT COMPANY ACT RELEASES
Lincoln Variable Insurance Products Trust, et al.
A notice has been issued giving interested persons until March 30, 2010, to request a hearing on an application filed by Lincoln Variable Insurance Products Trust, et al., under Section 12(d)(1)(J) of the Investment Company Act for an exemption from Sections 12(d)(1)(A) and (B) of the Act, under Sections 6(c) and 17(b) of the Act for an exemption from Sections 17(a)(1) and 17(a)(2) of the Act, and under Section 6(c) of the Act for an exemption from Rule 12d1-2(a) under the Act. The requested order would permit certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies. (Rel. IC-29168 - March 5)
The Chile Fund, Inc.
A notice has been issued giving interested persons until March 29, 2010, to request a hearing on an application filed by The Chile Fund, Inc. (Fund) for an order under Section 17(b) of the Investment Company Act for an exemption from Section 17(a) of the Act to permit in-kind repurchases of shares of the Fund held by certain affiliated persons of the Fund. (Rel. IC-29169 - March 8)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the Municipal Securities Rulemaking Board consisting of revised interpretive Questions & Answers on the Application of Rule G-37 (SR-MSRB-2010-01) 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 March 8. (Rel. 34-61647)
A proposed rule change filed by BATS Exchange relating to fees for use of BATS Exchange, Inc. (SR-BATS-2010-005) 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 March 8. (Rel. 34-61650)
A proposed rule change filed by The Chicago Stock Exchange (SR-CHX-2010-04) to aggregate trading activity of affiliated participants to calculate average daily trading volume for billing purposes 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 March 8. (Rel. 34-61656)
A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2010-023) to amend the CBSX fees schedule to adopt a document request fee and transaction fees for cross trades that settle non-regular-way 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 March 8. (Rel. 34-61659)
A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2010-024) 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 March 8. (Rel. 34-61660)
A proposed rule change filed by NASDAQ OMX PHLX relating to routing fees (SR-Phlx-2010-32) 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 March 8. (Rel. 34-61664)
A proposed rule change filed by NASDAQ OMX PHLX, as modified by Amendment No. 2, relating to reestablishing certain fees (SR-Phlx-2010-25) 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 March 8. (Rel. 34-61665)
A proposed rule change filed by NASDAQ OMX PHLX to establish procedures to prevent informational advantages resulting from the affiliation between Phlx and NOS (SR-Phlx-2010-36) 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 March 8. (Rel. 34-61667)
Proposed Rule Changes
New York Stock Exchange filed a proposed rule change (SR-NYSE-2010-15) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 making permanent the Exchange's Pilot Program with respect to its continued listing standards. Publication is expected in the Federal Register during the week of March 8. (Rel. 34-61657)
The Commission issued notice of filing of a proposed rule change (SR-CBOE-2010-015) submitted by Chicago Board Options Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to enable the listing and trading of options on the ETFS Palladium Trust and the ETFS Platinum Trust. Publication is expected in the Federal Register during the week of March 8. (Rel. 34-61663)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change (SR-FINRA-2010-001), submitted by the Financial Industry Regulatory Authority relating to publication of certain aggregate daily trading volume data. Publication is expected in the Federal Register during the week of March 8. (Rel. 34-61658)
The Commission approved a proposed rule change submitted by The NASDAQ Stock Market (SR-NASDAQ-2009-081) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, to modify the fees for listing on the Nasdaq Stock Market and the fee for written interpretations of Nasdaq listing rules. Publication is expected in the Federal Register during the week of March 8. (Rel. 34-61669)
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