RULES AND RELATED MATTERS
SEC Proposes to Extend the Temporary Filing Accommodation for Static Pool Information in Filings with respect to Asset-Backed Securities
On August 30, the Securities and Exchange Commission issued for public comment a proposed rule that would extend the temporary filing accommodation provided by Rule 312 of Regulation S-T for static pool information for eighteen months so that the accommodation would apply to filings with respect to asset-backed securities filed on or before June 30, 2012. Rule 312 of Regulation S-T permits, but does not require, the posting of static pool information required by Item 1105 of Regulation AB on an Internet Web site under certain conditions rather than including the information in the EDGAR filing. While the Commission is proposing an eighteen-month extension of Rule 312, the Commission may take action on the proposals issued on April 7, 2010 (See Release No. 33-9117), at any time before the expiration of the proposed extension. The Commission's proposal has been posted on the SEC Web site. See Release No. 33-9137; File No. S7-18-10. Public comments on the proposed extension of Rule 312 must be received by the Commission within 30 days after its publication in the Federal Register. (Rel. 33-9137)
SEC Issues Report Cautioning Credit Rating Agencies
The Securities and Exchange Commission today issued a report cautioning credit rating agencies about deceptive ratings conduct and the importance of sufficient internal controls over the policies, procedures, and methodologies the firms use to determine credit ratings.
The SEC's Report of Investigation stems from an Enforcement Division inquiry into whether Moody's Investors Service, Inc. (MIS) — the credit rating business segment of Moody's Corporation — violated the registration provisions or the antifraud provisions of the federal securities laws. Under Section 21(a) of the Securities Exchange Act of 1934, the Commission may investigate violations of the federal securities laws and at its discretion "publish information concerning any such violations."
The Report says that because of uncertainty regarding a jurisdictional nexus between the United States and the relevant ratings conduct, the Commission declined to pursue a fraud enforcement action in this matter. The Report notes that the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act provided expressly that federal district courts have jurisdiction over SEC enforcement actions alleging violations of the antifraud provisions of the securities laws when conduct includes significant steps, or a foreseeable substantial effect, within the United States. The Report also notes that the Dodd-Frank Act amended the securities laws to require nationally recognized statistical rating organizations (NRSROs) to "establish, maintain, enforce, and document an effective internal control structure governing the implementation of and adherence to policies, procedures, and methodologies for determining credit ratings."
According to the Report, an MIS analyst discovered in early 2007 that a computer coding error had upwardly impacted by 1.5 to 3.5 notches the model output used to determine MIS credit ratings for certain constant proportion debt obligation notes. Nevertheless, shortly thereafter during a meeting in Europe, an MIS rating committee voted against taking responsive rating action, in part because of concerns that doing so would negatively impact MIS's business reputation.
MIS applied in June 2007 to be registered with the Commission as an NRSRO. The Report notes that the European rating committee's self-serving consideration of non-credit related factors in support of the decision to maintain the credit ratings constituted conduct that was contrary to the MIS procedures used to determine credit ratings as described in the MIS application to the SEC. (Rel. 34-62802; Press Rel. 2010-159)
Brian Breheny, Deputy Director in Division of Corporation Finance, to Leave After Seven Years at SEC
On August 30, the Securities and Exchange Commission announced that Brian V. Breheny, the Deputy Director for Legal and Regulatory Policy in the Division of Corporation Finance, will depart the agency after more than seven years of public service.
Mr. Breheny joined the SEC staff in July 2003 and has played a key role in the Division's policy and interpretive functions. He began as Chief of the SEC's Office of Mergers and Acquisitions, and in November 2007 he became a Deputy Director with responsibility for the Division's legal and regulatory policy support offices. Mr. Breheny will become a partner in the Washington, D.C., office of the law firm of Skadden, Arps, Slate, Meagher & Flom LLP.
"Brian has played a key role in a wide range of important Division initiatives during his seven years at the Commission, and our nation's investors have benefited greatly from his dedicated service to investor protection," said Meredith Cross, Director of the Division of Corporation Finance. "While I was only able to work with him for a small part of his time here, his guidance and leadership have been invaluable to us and we will miss him very much."
Mr. Breheny said, "It has been an honor to serve as a member of the Commission staff and to work with the smart, dedicated and hard working people in the Division of Corporation Finance and throughout the Commission. I am proud of all that we have accomplished together."
During his tenure, Mr. Breheny assisted the Commission with its consideration of significant rule amendments in a number of areas including shareholder director nominations, tender offers, beneficial ownership reporting, electronic delivery of proxy materials, electronic shareholder forums, short sale disclosure, and proxy voting and shareholder communications.
Mr. Breheny received the SEC's Law and Policy Award earlier this year for his work with the SEC's Office of Legislative Affairs on regulatory reform matters. He also has been awarded the Commission's Regulatory Simplification Award for his work on the amendments to the tender offer best-price rule, and the Supervisory Excellence Award, for his leadership of the Office of Mergers & Acquisitions. He received the Equal Employment Opportunity Award for his participation with the development and presentation of an advanced securities law class at Howard University School of Law.
Prior to joining the SEC staff, Mr. Breheny worked as an associate for seven years in the New York and London offices of law firm Clifford Chance US LLP. He began his career as a Certified Public Accountant with KPMG LLP. Mr. Breheny was an adjunct securities law faculty member at the Georgetown University Law Center for a number of years. He continues to lecture at both Georgetown and Howard University School of Law.
Mr. Breheny earned a JD, cum laude, in 1996 from St. John's University School of Law, where he was an editor of the St. John's Journal of Legal Commentary. He received his BS in Accounting from St. John's University's Peter J. Tobin School of Business Administration in 1990. (Press Rel. 2010-158)
Commission Revokes Registration of Securities of American Bullion Minerals, Ltd. for Failure to Make Required Periodic Filings
On August 31, the Commission revoked the registration of each class of registered securities of American Bullion Minerals, Ltd. 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, American Bullion Minerals 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 American Bullion Minerals, Ltd. 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-16 thereunder and revoking the registration of each class of American Bullion Minerals' securities pursuant to Section 12(j) of the Exchange Act. This Order settled the proceedings brought against American Bullion Minerals in In the Matter of American Bullion Minerals, Ltd., et al., Administrative Proceeding File No. 3-14003.
Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:
For further information contact:
Additional Materials Available at www.sec.gov
Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to American Bullion Minerals, Ltd., In the Matter of American Bullion Minerals, Ltd., et al., Administrative Proceeding File No. 3-14003, Exchange Act Release No. 34-62800 (August 31, 2010).
Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of American Bullion Minerals, Ltd., et al., Administrative Proceeding File No. 3-14003, Exchange Act Release No. 62691, August 11, 2010. (Rel. 34-62691; File No. 3-14003)
In the Matter of David V. Siegel
On August 31, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 against David V. Siegel. The Order finds that while a registered representative with Axiom Capital Management, Inc. in Axiom's Boca Raton, Fla., office from May 2003 through January 2007, Siegel was the supervisor of Axiom registered representative Gary Gross. The Order also finds that Siegel failed reasonably to supervise Gross with a view to preventing and detecting Gross's violations of the federal securities laws. The Order additionally finds that while under Siegel's supervision, Gross violated 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 by, among other things, making unsuitable investment recommendations, engaging in unauthorized transactions and churning customer accounts.
Based on the above, the Order bars Siegel from association in a supervisory capacity with any broker, dealer, or investment adviser. The Order also requires Siegel to pay disgorgement of $10,600, prejudgment interest of $35.33, and a civil money penalty in the amount of $15,000. Siegel consented to the issuance of the Order without admitting or denying any of the Order's findings, except for the Commission's jurisdiction. (Rels. 34-62803; IA-3077; File No. 3-13787)
SEC Files Injunctive Action Against Boise Company and a Current and Former Officers
The Securities and Exchange Commission announced the filing of a complaint in federal district court against PCS Edventures!.com, Inc. (PCS), its current CEO, Anthony A. Maher, and its former CFO, Shannon M. Stith, based on the company's issuance of false press releases and false public filings, related to a purported license agreement.
The complaint alleges that in March 2007, PCS publicly announced that it had obtained a $7.15 million contract with PCS Middle East. PCS repeated this announcement in a Form 8-K filed with the Commission. The complaint alleges that the announcement was false because it failed to disclose that the purported contract was not valid, and that payment under the purported contract was contingent on PCS Middle East first obtaining a contract and funds from the government of the Kingdom of Saudi Arabia. Neither PCS nor PCS Middle East had a contract with Saudi Arabia. PCS repeated its false claims in additional press releases and filings with the Commission. PCS did not disclose that there was no contract with Saudi Arabia for several months, during which time the false information caused the price of PCS stock to be artificially inflated.
The Commission's complaint charges PCS, Maher, and Stith with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also alleges that PCS violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11 thereunder and that Maher and Stith violated Rule 13a-14 under the Exchange Act and aided and abetted violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11 thereunder. The complaint seeks an injunction, civil penalties, and officer-director bars. [SECv. PCS Edventures!.com, Inc., et al., Civil Action No. 1:10-cv-00433, D. Idaho, filed Aug. 26, 2010] (LR-21635)
INVESTMENT COMPANY ACT RELEASES
Notices of Deregistration under the Investment Company Act of 1940
For the month of August 2010, a notice has been issued giving interested persons until Sept. 21, 2010, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act declaring that the applicant has ceased to be an investment company:
(Rel. IC-29405 - August 27)
Designation of Longer Period for Commission Action on a Proposed Rule
The Commission has designated a longer period for Commission action under Section 19(b)(2) of the Securities Exchange Act of 1934 on proposed rule changes (SR-BATS-2010-016; SR-BX-2010-040; SR-CBOE-2010-056; SR-CHX-2010-13; SR-EDGA-2010-03; SR-EDGX-2010-03; SR-ISE-2010-62; SR-NASDAQ-2010-076; SR-NSX-2010-07; SR-NYSE-2010-47; SR-NYSEAmex-2010-60; SR-NYSEArca-2010-58) filed by the BATS Exchange, Inc.; NASDAQ OMX BX, Inc.; Chicago Board Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; International Securities Exchange, LLC; The NASDAQ Stock Market LLC; National Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE Amex LLC; and NYSE Arca, Inc., relating to clearly erroneous transactions. Publication is expected in the Federal Register during the week of August 30. (Rel. 34-62797).
The Commission has designated a longer period for Commission action under Section 19(b)(2) of the Securities Exchange Act of 1934 on a proposed rule change (SR-FINRA-2010-032) filed by the Financial Industry Regulatory Authority, Inc., relating to clearly erroneous transactions. Publication is expected in the Federal Register during the week of August 30. (Rel. 34-62798)
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