SEC News Digest

ENFORCEMENT PROCEEDINGS

In the Matter of J. Michael Broullire (CPA)

On April 1, 2010, the Commission an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against J. Michael Broullire. The Order suspends Broullire from appearing or practicing before the Commission as an accountant, based on the entry of a Final Judgment against Broullire permanently enjoining him from aiding and abetting future violations of the antifraud and other provisions of the federal securities laws.

The Order finds that on March 25, 2010, the Commission filed a complaint in the United States District Court for the District of Maryland alleging that, among other things, Broullire participated in fraudulent schemes with the former President and CEO and former Executive Vice President of TVI Corporation. At the time, TVI was a public company based in Glenn Dale, Maryland, but, subsequently, its securities registration was revoked. The Complaint alleged that Broullire and the former TVI executives created two companies to purchase products and resell them to TVI at approximately a 100% or greater markup. The Complaint also alleged that TVI paid one of these companies a fictitious finder's fee in connection with a corporate acquisition. The Complaint alleged that these fraudulent schemes enriched Broullire and the former TVI executives and materially reduced the net income that TVI reported in its 2004 Form 10-KSB and 2006 Form 10-K.

The Commission also finds that Broullire was a certified public accountant at all relevant times.

Broullire consented to the entry of the Order without admitting or denying the findings contained therein except those findings specifically identified as admitted in the Order.

For more information about this matter, see the Commission's Litigation Release No. 21462 (March 25, 2010). (Rel. 34-61827; AAE Rel. 3123; File No. 3-13840)

SEC Charges Former Corporate Director of Real Estate and Real Estate Broker for Insider Trading

On March 31, 2010, the Securities and Exchange Commission filed a first amended complaint against Ralph Pirtle, the former Director of Real Estate for Philips Electronics North America, Inc., a wholly-owned subsidiary of Royal Philips, N.V. (Philips), and his friend and business associate, Morando Berrettini, for insider trading in the securities of Lifeline Systems, Inc., Invacare, Inc., and Intermagnetics Corporation. The original complaint was filed on March 11, 2010. According to the first amended complaint, Philips considered acquiring each of these companies between December 2005 and June 2006. On each occasion Pirtle, a resident of Mount Pleasant, South Carolina, allegedly tipped Berrettini of Lake Forest, Illinois, about Philips' plans, and Berrettini purchased shares in the three companies. According to the first amended complaint, Berrettini earned an aggregate profit of $240,622 on his trades in Lifeline and Intermagnetics common stock when Philips announced it was acquiring those companies.

The first amended complaint alleges that Pirtle received material, nonpublic information about Philips' acquisition plans and provided this information to Berrettini in breach of his fiduciary duties to his employer. The first amended complaint also alleges that Berrettini, as a long-time real estate broker and consultant to Philips, knew or reasonably should have known that Pirtle gave him the information in breach of Pirtle's duties, and that trading on the information would violate Berrettini's own obligations to Philips. According to the first amended complaint, Pirtle and Berrettini had other side-dealings over an extended period of time, unbeknownst to and undisclosed to Philips. The other side-dealings allegedly included a series of transactions in which Berrettini purchased goods and services for Pirtle through cashier's checks totaling approximately $226,000. The first amended complaint alleges that Pirtle and Berrettini violated the anti-fraud provisions of the Securities Exchange Act of 1934. The Commission is seeking permanent injunctions, disgorgement of ill-gotten gains, including prejudgment interest, and civil penalties from each defendant.

The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (formerly, the NASD) in this matter. [SEC v. Morando Berrettini and Ralph J. Pirtle, Civil Action No. 10-CV-01614 (N.D. Ill.)] (LR-21472)

SEC Files Settled Charges Against Investment Adviser for Misrepresenting Investment Risks and Failing to Disclose a Side Compensation Agreement

The Securities and Exchange Commission today filed fraud charges against the majority owner of a former Phoenix, Arizona-based investment advisory firm for misrepresenting investment risks and for failing to disclose a side compensation agreement.

The SEC's complaint, filed in the United States District Court for the District of Arizona, charges that Kevin H. Blood, of Scottsdale, Arizona, while serving as president and chief executive officer of former registered investment adviser, Capital Wealth Management, Inc. (CWM), compiled a $10.2 million investment pool from twenty of his CWM clients and formed a hedge fund, ABC-CWM, Inc. In recommending ABC-CWM to his clients, the complaint alleges that Blood represented to these clients that any investment opportunity that ABC-CWM made would be backed by a legitimate bank guarantee or other form of collateral. Blood also allegedly represented that their principal would never be at risk and that he would not personally profit from any transaction he recommended to them other than his CWM management fee.

The complaint further alleges that in February 2009, Blood recommended that his clients loan the $10.2 million to Adelaide Partners, LLC, which in turn would invest with Amkel Capital, a purported financial services firm based in the United Kingdom. According to the complaint, Blood represented to his clients that ABC-CWM would receive a bank guarantee in exchange for the $10.2 million loan and earn 20% per month for two months. The complaint alleges that in recommending this investment, Blood breached his fiduciary duty to his clients by failing to disclose a side compensation agreement with Adelaide Partners wherein he would receive 85% of any excess profits resulting from the investment. The complaint alleges that Blood then caused Adelaide Partners to transfer the $10.2 million to an Amkel Capital bank account in Switzerland without ever securing a bank guarantee or any other form of collateral. Yet, according to the complaint, from February to April 2009, Blood falsely assured his clients that their funds were safe in an account under Blood's control. The complaint claims that, in reality, Amkel Capital was a sham operation run by a convicted felon and that Blood's ABC-CWM clients have yet to receive the return of their $10.2 million investment.

Blood agreed to settle this matter without admitting or denying the allegations in the complaint. Blood consented to a permanent injunction from further violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Based on Blood's sworn financial statements and other documents and information submitted to the Commission, a civil penalty was not imposed. Blood also consented to the entry of a Commission order that will permanently bar him from association with an investment adviser. [SEC v. Kevin H. Blood, United States District Court for the District of Arizona, Civil Action No. 2:10-cv-00731-SRB (D. Ariz.)] (LR-21473)

SEC Files Securities Fraud and Registration Charges Against Former President of Paradigm Tactical Products, Inc.

The Securities and Exchange Commission today filed a settled civil injunctive action against Daniel O'Riordan of Providence Village, Texas, the former president of Paradigm Tactical Products, Inc. (Paradigm), formerly based in Georgetown, Massachusetts, alleging violations of the anti-fraud and registration provisions of the federal securities laws. O'Riordan consented to the entry of a judgment that, among other things, bars him from serving as an officer or director of a public company and from participating in any offering of a penny stock. In a related federal criminal matter, O'Riordan today was also charged with securities fraud by the United States Attorney's Office for the District of Massachusetts. If convicted, O'Riordan faces up to 20 years imprisonment to be followed by up to 5 years of supervised release, and a $5 million fine.

The Commission's Complaint, filed in federal district court in Massachusetts, alleges that O'Riordan, then the president of Paradigm, signed a false Form D filed with the Commission in 2005 reporting that a private placement of Paradigm stock had occurred, when in fact the private placement never happened. Instead, according to the Complaint, Paradigm's founder controlled the vast majority of the stock, and later sold it into the market without registering it with the Commission and after the stock price had been pumped by false and misleading statements. The Complaint alleges, among other things, that O'Riordan helped to perpetrate the scheme to avoid registration by signing backdated stock certificates and assisted in preparing a list of purported accredited investors who, in fact, were nominee shareholders who had never paid for or received Paradigm stock and were under the control of Paradigm's founder. In fact, according to the Complaint, the list of purported investors included the name of a deceased person. The Complaint alleges that Paradigm's stock price increased from $2.85 per share to $3.15 per share over the two day period following an August 18, 2005 press release issued by Paradigm in which O'Riordan made false and misleading positive statements concerning Paradigm's sales revenues. The Complaint further alleges that O'Riordan received shares from Paradigm which he sold between 2007 and 2009, after he had left the company, in unregistered transactions.

O'Riordan has agreed to settle this matter without admitting or denying the allegations in the Commission's Complaint. O'Riordan has consented to the entry of a permanent injunction prohibiting him from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. O'Riordan will also be barred from serving as an officer or director of a public company and permanently barred from participating in any offering of a penny stock.

The United States Attorney's Office for the District of Massachusetts today also charged O'Riordan with criminal securities fraud. The criminal Information charging O'Riordan alleges that O'Riordan made false statements to the public and to the Commission in connection with the sale of Paradigm stock. If convicted on the securities fraud charge, O'Riordan faces up to 20 years imprisonment to be followed by up to 5 years of supervised release, and a $5 million fine.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Massachusetts, the New England Field Division of the Federal Bureau of Investigation, the Boston Field Division of the Internal Revenue Service and the Massachusetts Securities Division. [SEC v. Daniel O'Riordan, 1:10-CV-10550 (D. Mass.)] (LR-21474)

INVESTMENT COMPANY ACT RELEASES

Lincoln Variable Insurance Products Trust and Lincoln Investment Advisors Corporation

An order has been issued on an application filed by Lincoln Variable Insurance Products Trust and Lincoln Investment Advisors Corporation 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 Section 17(a) of the Act, and under Section 6(c) of the Act for an exemption from Rule 12d1-2(a) under the Act. The order (a) permits certain registered open-end management investment companies that operate as "funds of funds" to acquire shares of certain registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies as the acquiring investment companies, and (b) permits funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-29196 - March 31)

Lincoln Investment Advisors Corporation and Lincoln Variable Insurance Products Trust

An order has been issued on an application filed by Lincoln Investment Advisors Corporation and Lincoln Variable Insurance Products Trust exempting applicants from Section 15(a) of the Investment Company Act and Rule 18f-2 under the Act. The order permits the applicants to enter into and materially amend subadvisory agreements without shareholder approval and grants relief from certain disclosure requirements. (Rel. IC-29197 - March 31)

Pioneer Bond Fund, et al.

A notice has been issued giving interested persons until April 26, 2010, to request a hearing on an application filed by Pioneer Bond Fund, et al. for an order under Section 6(c) of the Investment Company Act for an exemption from Rule 12d1-2(a) under the Act. The order would permit funds of funds relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-29198 - March 31)

American Vantage Companies

An amended notice has been issued giving interested persons until April 26, 2010, to request a hearing on an application filed by American Vantage Companies. Applicant requests an order under Section 8(f) of the Investment Company Act declaring that American Vantage Companies has ceased to be an investment company. A notice of application was issued on March 11, 2010 (Investment Company Act Release No. 29174). Applicant subsequently amended the application to indicate it had not yet made certain filings with the Commission, to undertake to make them, and to add certain conditions. This amended notice incorporates the changes in the application made by applicant's amendment. (Rel. IC-29200 - April 1)

Medallion Financial Corp.

A notice has been issued giving interested persons until April 23, 2010, to request a hearing on an application filed by Medallion Financial Corp. (Medallion) for an order under Section 6(c) of the Investment Company Act for an exemption from Sections 23(a), 23(b) and 63 of the Act, and under Sections 57(a)(4) and 57(i) of the Act and Rule 17d-1 under the Act authorizing certain joint transactions otherwise prohibited by Section 57(a)(4) of the Act. The order would permit Medallion to issue restricted shares of its common stock to its officers and employees under the terms of its equity incentive compensation plan. (Rel. IC-29201 - April 1)

SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Change

The Commission granted approval to a proposed rule change (SR-NYSEAmex-2010-09) submitted by NYSE Amex amending its trust unit rules and proposing the listing of the Nuveen Diversified Commodity Fund. Publication is expected in the Federal Register during the week of April 5. (Rel. 34-61807)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-NYSEAmex-2010-29) filed by NYSE Amex amending NYSE Amex Equities Rule 1 to provide for the designation of qualified employees and NYSE Amex Equities Rule 51 to clarify the scope of authority vested in the Chief Executive Officer 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 April 5. (Rel. 34-61809)

A proposed rule change (SR-NYSE-2010-26) filed by New York Stock Exchange amending NYSE Rule 1 to provide for the designation of qualified employees and NYSE Rule 51 to clarify the scope of authority vested in the Chief Executive Officer 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 April 5. (Rel. 34-61810)

A proposed rule change filed by NASDAQ OMX BX (SR-BX-2010-025) to permit the concurrent listing of $3.50 and $4 strikes for classes participating in the $0.50 Strike and $1 Strike Programs 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 April 5. (Rel. 34-61811)

A proposed rule change filed by NASDAQ OMX PHLX to establish $2.50 strike price intervals for options on the NASDAQ Internet IndexSM (SR-Phlx-2010-49) 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 April 5. (Rel. 34-61812)

A proposed rule change (SR-NYSE-2010-27) filed by the New York Stock Exchange extending the pilot period to receive inbound routes of certain equities orders from Archipelago Securities LLC 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 April 5. (Rel. 34-61814)

A proposed rule change (SR-NYSEAmex-2010-32) filed by NYSE Amex extending the pilot period to receive inbound routes from Archipelago Securities LLC 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 April 5. (Rel. 34-61815)

A proposed rule change filed by the Financial Industry Regulatory Authority (SR-FINRA-2010-011) modifying certain FINRA/Nasdaq Trade Reporting Facility fees 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 April 5. (Rel. 34-61817)

A proposed rule change filed by NASDAQ OMX PHLX relating to amendment of the fee schedule (SR-Phlx-2010-47) 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 April 5. (Rel. 34-61822)

Accelerated Approval of Proposed Rule Changes

The Commission granted accelerated approval to a proposed rule change (SR-NYSEAmex-2010-18) submitted by NYSE Amex pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, relating to the designation of a "Professional Customer." Publication is expected in the Federal Register during the week of April 5. (Rel. 34-61818)

The Commission approved on an accelerated basis a proposed rule changed filed by the Financial Industry Regulatory Authority (SR-FINRA-2009-061) as modified by Amendment Nos. 1 and 2 thereto, to require Members to report OTC transactions in equity securities within 30 seconds of execution. Publication is expected in the Federal Register during the week of April 5. (Rel. 34-61819)

Proposed Rule Change

The Options Clearing Corporation filed a proposed rule change (SR-OCC-2010-05) under Section 19(b)(1) of the Securities Exchange Act. The proposed rule change would make clear that cash-settled foreign currency options traded on national securities exchanges will be treated and cleared as securities options notwithstanding that they may have a nominal exercise price such as one cent. Publication is expected in the Federal Register during the week of April 5. (Rel. 34-61820)

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