Federal Regulators Release Model Consumer Privacy Notice Online Form Builder
Eight federal regulators today released an Online Form Builder that financial institutions can download and use to develop and print customized versions of a model consumer privacy notice.
The Online Form Builder, based on the model form regulation published in the Federal Register on Dec. 1, 2009, under the Gramm-Leach-Bliley Act, is available with several options. Easy-to-follow instructions for the form builder will guide an institution to select the version of the model form that fits its practices, such as whether the institution provides an opt-out for consumers.
To obtain a legal "safe harbor" and so satisfy the law's disclosure requirements, institutions must follow the instructions in the model form regulation when using the Online Form Builder.
The model privacy form was developed jointly by the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission.
The Online Form Builder is available at: http://www.federalreserve.gov/bankinforeg/privacy_notice_instructions.pdf (Press Rel. 2010-57)
Closed Meeting - Thursday, April 22, 2010 - 1:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, April 22, 2010, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; an adjudicatory 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.
RULES AND RELATED MATTERS
SEC Proposes Amendments to Rules Relating to Access
On April 14, 2010, the Securities and Exchange Commission voted to propose amendments to Rule 610 under the Exchange Act relating to access to quotations in listed options as well as fees for such access. The proposed amendments would prohibit an exchange from imposing unfairly discriminatory terms that prevent or inhibit efficient access to quotations in a listed option on its exchange, and any fee or fees that exceeds or accumulates to more than $0.30 per contract for the execution of an order against any quotation in an options series that is the best bid or best offer of such exchange.
Public comments on this proposal must be received by the Commission within 60 days after its publication in the Federal Register. (Rel. 34-61902)
SEC Orders Hearing on NRSRO Registration
On April 14, 2010, the Commission issued an order to institute administrative proceedings and a hearing to determine whether the application of Dagong Global Credit Rating Co., Ltd. (Dagong) to register as a nationally recognized statistical rating organization (NRSRO) pursuant to Section 15E(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 17g-1 should be denied.
The proceedings will address: whether Dagong has a sufficient connection with U.S. interstate commerce to register as an NRSRO; and whether Dagong's application for registration should be denied on the grounds that, if it were registered as an NRSRO, Dagong would be subject to having its registration suspended or revoked because, in light of requirements in its home jurisdiction, Dagong would be unable to comply with certain provisions of the U.S. securities laws and rules.
The Commission also ordered that the time period for the conclusion of all proceedings, after which the Commission is required to grant or deny the application, be extended for an additional 90 days (pursuant to Section 15E(a)(2)(B)(iii) of the Exchange Act) to July 22, 2010. (Rel. 34-61906; File No. 3-13860)
In the Matter of Talisman Enterprises, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Talisman Enterprises Inc., Administrative Proceeding No. 3-13822. The Order Instituting Proceedings alleged that the Respondents failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true as to these Respondents and revokes the registrations of each class of registered securities of Talisman Enterprises Inc., Telepanel Systems Inc., Telesis North Communications Inc., and Tengtu International Corp. pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61909; File No. 3-13822)
Commission Revokes Registration of Securities of Universal Bio-Medical Enterprises, Inc. for Failure to Make Required Periodic Filings
On April 15, 2010, the Commission revoked the registration of each class of registered securities of Universal Bio-Medical Enterprises, Inc. (Universal Bio-Medical) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, Universal Bio-Medical consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Universal Bio-Medical Enterprises, Inc. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Universal Bio-Medical's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Universal Bio-Medical in In the Matter of Ultimate Security Systems Corp., et al., Administrative Proceeding File No. 3-13829.
Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:
No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .
For further information see Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Universal Bio-Medical Enterprises, Inc., In the Matter of Ultimate Security Systems Corp., et al., Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Ultimate Security Systems Corp., et al., Administrative Proceeding File No. 3-13829, Exchange Act Release No. 61765 (March 23, 2010). (Rel. 34-61910; File No. 3-13829)
In the Matter of Jack Maddock
On April 15, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against Jack Maddock. The Order finds that Maddock was a sales agent for 3001 AD, LLC, a North Carolina company based in Delray Beach, Florida, from approximately April 2006 through August 2007, and that during that time he solicited investors in 3001 AD and received commissions based on his sales of the securities of 3001 AD and its affiliates. The Order also finds that on Dec. 4, 2009 Maddock pled guilty to one count of conspiracy to commit mail and wire fraud committed during his time with 3001 AD, for which the United States District Court for the Southern District of Florida sentenced him to seventy months in prison and three years of supervised release, and ordered him to pay $1,890,000.66 in restitution on Feb. 17, 2010.
Based on the above, the Order bars Maddock from association with any broker or dealer. Maddock consented to the issuance of the Order without admitting or denying any of the findings in the Order except for his conviction and sentencing, which he admitted. (Rel. 34-61916; File No. 3-13861)
Court Enters Final Judgment Against Recidivists Gerald H. Levine and Marie A. Levine, As Well As Alan B. Copeland and Nu Star Holdings, Inc.
The Securities and Exchange Commission announced today that on April 7, 2010, Judge Lloyd George of the United States District Court for the District of Nevada entered a final judgment against two securities fraud recidivists, Las Vegas residents Gerald H. Levine and Marie A. Levine, as well as Santa Ana, California resident Alan B. Copeland and Nu Star Holdings, Inc. (Nu Star), a company run by the Levines' daughter. The final judgment: (1) enjoins the Levines, Copeland and Nu Star from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, as well as from violating Section 17(a) of the Securities Act of 1933 (Securities Act); (2) enjoins the Levines and Nu Star from violating Section 5 of the Securities Act; (3) enjoins the Levines from violating Section 15(b) of the Exchange Act; (4) orders the Levines, Copeland and Nu Star to pay $2,593,712 in disgorgement plus $787,977 in prejudgment interest, for a total of $3,381,689; (5) orders the Levines, Copeland and Nu Star to pay a civil penalty of $120,000; (6) bars the Levines and Copeland from participating in an offer of a penny stock; and (7) bars the Levines from acting as officers or directors of publicly traded companies.
The court issued the final judgment after granting the Commission's motion for summary judgment. In the motion for summary judgment, the Commission argued that from Oct. 1, 2003 through Dec. 31, 2005, the Levines and their associates worked with boiler rooms in Barcelona, Spain and set up their own boiler room in Santa Ana, California to sell various Pink Sheets stocks to innocent, overseas investors. The Levines were assisted in their endeavors by defendant Copeland, who introduced them to the individuals who operated the Barcelona boiler rooms and who assisted in setting up the Santa Ana, California boiler room.
The Commission's motion for summary judgment argued that these defendants made numerous material misrepresentations and omissions in violation of the anti-fraud provisions of the federal securities laws. These misrepresentations and omissions included the following: (a) failing to disclose that the promoters of these stocks had previously been found liable for fraud; (b) failing to disclose that the president of Nu Star had been suspended from the practice of law for three years; (c) failing to disclose to investors the excessive commissions that were paid from the proceeds of the sale of Nu Star stock; (d) misrepresenting the location of the unlicensed brokers who worked in the boiler rooms; and (e) assisting in the preparation of fake "independent" research reports which claimed Nu Star was a stock with a strong upside.
On Feb. 21, 2008, the court entered judgments against defendants Isaac B. Morley and Bruce C. Rothenberg, who settled with the Commission without admitting or denying the allegations against them.
The Commission's action against the remaining defendants is pending.
For further information this action, see Litigation Release No. 20077 (April 18, 2007), http://www.sec.gov/litigation/litreleases/2007/lr20077.htm.
For further information about the SEC's other action against the Levines, please see the following:
Litigation Release No. 20124 (May 22, 2007), http://www.sec.gov/litigation/litreleases/2007/lr20124.htm;
Litigation Release No. 18420 (Oct. 21, 2003), http://www.sec.gov/litigation/litreleases/lr18420.htm;
Litigation Release No. 17139 (Sept. 19, 2001), http://www.sec.gov/litigation/litreleases/lr17139.htm; and
Litigation Release No. 16299 (Sept. 28, 1999), http://www.sec.gov/litigation/litreleases/lr16299.htm.
[SEC v. Gerald Harold Levine, et al., Case No. 2:07-CV-00506 in the United States District Court for the District of Nevada] (LR-21485)
SEC Charges Santa Ana-Based Investment Adviser for Operating a Fraudulent Scheme
The Securities and Exchange Commission today announced that it has obtained a court order to halt a securities fraud orchestrated by an Orange County investment adviser.
In its complaint, the SEC charged Richard H. Nickles, age 53, of Dana Point, Calif., and his three companies, Innovative Advisory Services, Inc., Innovative Advisory Services LLC, and Island Trader LLC, all of which operate from the same location in Santa Ana, Calif. The complaint alleges that since March 2009, Nickles has raised approximately $3 million through advertisements in prominent newspapers for investments that are purportedly insured or U.S. Government guaranteed. In reality, Nickles did not invest the funds as promised.
The SEC alleges that Nickles provided investors with false trade confirmations that identified securities he had not purchased or that were non-existent. In an effort to portray his business as legitimate, Nickles issued the confirmations through Island Trader, a regulated broker-dealer which had no dealings with Nickles or Innovative Advisory since March 2009. According to the complaint, through these confirmations, Nickles succeeded in giving investors the false impression that he was associated with a legitimate broker-dealer and that their investments were insured with the Securities Investor Protection Corp. He allegedly used the name Island Trader LLC for his non-regulated company in order to give further credence to his misrepresentations. The SEC also alleges that Nickles held himself out as a certified financial planner, when, in fact, he was not.
The Honorable James V. Selna, United States District Judge, granted the SEC's application, on April 7, 2010, for a temporary restraining order against the defendants and issued orders freezing defendants' assets, requiring accountings, prohibiting the destruction of documents, and granting expedited discovery. On April 19, 2010, the Court will hold a hearing on the SEC's motion for a preliminary injunction.
The SEC's complaint charges Nickles and Innovative Advisory with violating the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It also charges Nickles and Island Trader LLC with violations of Section 15(a) of the Exchange Act. In addition to the emergency relief, the SEC's complaint seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against all defendants. [SEC v. v. Innovative Advisory Services, Inc., Innovative Advisory Services LLC, Island Trader LLC, and Richard H. Nickles, United States District Court for the Central District of California, Case No. 10-00423 JVS(RNBx)] (LR-21486)
SEC Charges Private Equity Firm in New York Pension Fund Probe
The Securities and Exchange Commission today announced charges against Quadrangle Group LLC and Quadrangle GP Investors II, L.P. in connection with the Commission's ongoing investigation into a multi-billion dollar kickback scheme involving New York's largest pension fund. The Quadrangle defendants agreed to settle the SEC's charges and pay a penalty of $5 million.
The SEC previously charged Henry Morris, the top political advisor and chief fundraiser for former New York State Comptroller Alan Hevesi, and David Loglisci, the former New York State Deputy Comptroller, for orchestrating a fraudulent scheme that extracted kickbacks from investment management firms seeking to manage the assets of the New York State Common Retirement Fund. In today's complaint, filed in federal district court in Manhattan, the Commission alleges that the Quadrangle defendants entered into undisclosed financial arrangements that benefited Morris and Loglisci in order to win investment business from the Retirement Fund.
Specifically, the SEC alleges that the Quadrangle defendants secured a $100 million investment from the Retirement Fund only after a former Quadrangle executive arranged for a Quadrangle affiliate to distribute the DVD of a low-budget film called "Chooch" that Loglisci and his brothers had produced and after that executive agreed to pay more than $1 million in sham "finder" fees to Morris. The scheme corrupted the integrity of the Common Fund's investment processes and resulted in the Retirement Fund's assets being invested with the undisclosed purpose of enriching Morris and Loglisci's brother.
In settling the SEC's charges without admitting or denying the allegations, Quadrangle Group LLC and Quadrangle GP Investors II, L.P. consented to the entry of a judgment that permanently enjoins them from violating Section 17(a)(2) of the Securities Act of 1933 and orders them to pay the financial penalty. The settlement is subject to court approval.
The SEC's investigation is continuing. The Commission acknowledges the assistance and cooperation of the New York Attorney General's Office which today announced an Assurance of Discontinuance with respect to the Quadrangle defendants. As part of that disposition, the defendants have agreed to repay the management fees they earned from the Retirement Fund's investment.
For further information, see Litigation Release No. 20963 (March 19, 2009); Litigation Release No. 21001 (April 15, 2009); and Litigation Release No. 21018 (April 30, 2009). [SEC v. Quadrangle Group LLC and Quadrangle GP Investors II, L.P., United States District Court for the Southern District of New York, 10-cv-3192] (LR-21487)
SEC Charges Four With $8 Million Fraudulent Unregistered Offering Connected to Arizona Real Estate
The Securities and Exchange Commission today alleged that Steven R. Long and Stanley M. Paulic - who formed and owned Integrity Financial AZ, LLC - and Walter W. Knitter and Robert C. Koeller - two salesmen who helped attract investors - raised more than $8 million between February 2008 and September 2009, in a fraudulent unregistered offering of promissory notes purportedly secured by real estate in Tonopah, Arizona, a town 55 miles west of Phoenix. The offering attracted at least 58 investors. More than half of the investors reside in northern Ohio, and several are associated with St. Paul's Croatian Church in Cleveland.
The complaint alleges that Integrity Financial and the four individuals violated the securities registration, antifraud, and broker registration provisions of the federal securities laws and seeks permanent injunctions as well as judgments ordering payment of disgorgement, with prejudgment interest, and civil penalties. [SEC v. Integrity Financial AZ, LLC, Steven R. Long, Stanley M. Paulic, Walter W. Knitter and Robert C. Koeller, No. 1:10-cv-00782 (N.D. Ohio)] (LR-21488)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by The NASDAQ Stock Market to make conforming changes to certain notification requirements (SR-NASDAQ-2010-041) 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 19. (Rel. 34-61887)
A proposed rule change filed by NASDAQ OMX BX relating to Chapter V, Section 7 (Customer Orders and Order Flow Providers) (SR-BX-2010-026) 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 19. (Rel. 34-61891)
A proposed rule change, as modified by Amendment No. 1, filed by NYSE Arca amending its fee schedule (SR-NYSEArca-2010-24) 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 19. (Rel. 34-61894)
A proposed rule change filed by the NASDAQ Stock Market to amend the Global Select Market initial listing requirements (SR-NASDAQ-2010-047) 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 19. (Rel. 34-61904)
Approval of Proposed Rule Change
The Commission granted approval to a proposed rule change (SR-CBOE-2010-015) submitted by the Chicago Board Options Exchange 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 April 19. (Rel. 34-61892)
Proposed Rule Change
NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-28) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 amending its schedule of fees. Publication is expected in the Federal Register during the week of April 19. (Rel. 34-61895)
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