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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2010-189
October 6, 2010


SEC to Hold Small Business Capital Formation Forum

The Securities and Exchange Commission today announced that it will hold its annual forum on small business capital formation on November 18 at its Washington, D.C., headquarters.

The forum enables the SEC and its staff to interact with the small business community and exchange ideas on issues that impact the ability of small companies to raise capital. One session will include a panel of representatives from small business organizations making recommendations to improve small business capital formation.

"Facilitating capital formation is a vital component of the three-part mission of the SEC, and this forum will continue to provide ideas on ways for the SEC to improve access to capital for smaller businesses," said Gerald Laporte, Chief of the SEC's Office of Small Business Policy.

The names of panel participants and the full agenda for the forum will be announced at a later date and posted on the small business page of the SEC website. The forum will begin at 9 a.m. ET with morning panel discussions that will be webcast on the SEC's website. During the afternoon breakout group sessions, which will be accessible by teleconference but not webcast, participants will work together to formulate specific policy recommendations. Anyone wishing to participate in the forum breakout groups either in-person or by teleconference must register for the forum online by November 15.

The SEC is looking for suggestions on specific topics to be discussed at the forum and for recommendations to be considered by the forum breakout groups. These suggestions, or any questions about the forum, can be e-mailed to the SEC's Office of Small Business Policy at SmallBusiness@sec.gov. For more information, call (202) 551-3460. (Press Rel. 2010-181)

SEC Seeks Public Comment on Asset-Backed Securities Rule Proposal Under Dodd-Frank Act

The Securities and Exchange Commission is seeking public comment on proposed regulations to require issuers of asset-backed securities (ABS) - and credit rating agencies that rate ABS - to provide investors with new disclosures about representations, warranties, and enforcement mechanisms.

Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Commission to prescribe regulations on the use of representations and warranties in the ABS market by Jan. 14, 2011 (180 days after enactment). A complete list of regulatory actions taken to date as required by the Dodd-Frank Act is available on the SEC's website.

ABS are created by buying and bundling loans - such as residential mortgage loans, commercial loans or student loans - and creating securities backed by those assets that are then sold to investors. In the transaction agreements that govern a securitization, ABS issuers or originators of those loans typically make "representations and warranties" about the characteristics and the quality of those loans. If a loan does not comply with the representation or warranty, an ABS issuer or lender can be required to repurchase the loan from the pool or replace it with a substitute asset.

Since the financial crisis, many investors and other transaction parties have questioned whether the loans in the bundle meet the characteristics specified by the representations and warranties in transaction agreements, and have been seeking to enforce repurchase provisions. The Dodd-Frank Act imposes new disclosure obligations so that investors receive information about the representations and warranties and repurchase history so they may identify originators with clear underwriting deficiencies.

The SEC's proposed rules would:

Require Disclosure of Repurchase History

Issuers would be required to file with the SEC in tabular format an issuer's repurchase history for its outstanding ABS so that investors may identify originators with clear underwriting deficiencies. Specifically, at the time an issuer commences its first offering of the ABS (after the effective date of the rule), an issuer would be required to provide the last five years of repurchase history in an initial filing. After the initial filing, the ABS issuer would be required to file updated information on a monthly basis, including:

  • Repurchase history for all outstanding ABS (regardless of whether the securities were offered in a transaction registered with the SEC) if the underlying transaction agreements include a covenant to repurchase or replace a pool asset.
  • History of all fulfilled and unfulfilled repurchase requests, including investor demands upon a trustee and pending requests.

Require Disclosure of Repurchase History in Prospectuses and Ongoing Reports

The proposed rules would provide investors with ready access to the most current information regarding an issuer's repurchase history by requiring an issuer of a registered ABS offering to include - in the body of a prospectus - repurchase history for the last three years for ABS of the same asset class as the securities being registered. In its ongoing reports, an issuer would be required to provide updated repurchase history for the particular, related asset pool.

Require NRSROs to Provide Disclosure in Any Report Accompanying a Credit Rating

The proposed rules would require Nationally Recognized Statistical Rating Organizations (NRSROs) to provide a description of the representations, warranties and enforcement mechanisms available to investors for an ABS offering. Credit rating agencies would be required to disclose how the representations, warranties, and enforcement mechanisms differ from those of similar ABS. NRSROs would be required to make the disclosures in any report accompanying a credit rating, including in presale reports that are distributed prior to the sale of the security.

The public comment period ends on Nov. 15, 2010. (Press Rel. 2010-182)

Heather Seidel Named Associate Director in Division of Trading and Markets

The Securities and Exchange Commission today announced that Heather Seidel has been named an Associate Director in the Division of Trading and Markets.

In her new position, Ms. Seidel together with David Shillman will direct the Division's Office of Market Supervision, which has responsibility for matters including oversight of the stock and option markets.

"Heather brings a wealth of experience and insight to her new position," said Robert Cook, Director of the SEC's Division of Trading and Markets. "Her leadership will be critical as we move forward with our agenda to implement the Dodd-Frank Act and continue our oversight of exchanges and alternative trading systems."

Ms. Seidel said, "I am honored to continue to work with my talented and dedicated colleagues in the Division of Trading and Markets and throughout the SEC in this new position. I look forward to supporting the SEC's mission to protect investors and the public interest, particularly during this time of significant change."

Ms. Seidel has served as Acting Associate Director in the Division of Trading and Markets since June 2010. She had previously served as an Assistant Director since 2007 and as a Senior Special Counsel from 2005 to 2007. She was an Attorney Fellow from 2003 to 2005. Ms. Seidel previously worked at the SEC from 1996 to 1999 in the Divisions of Market Regulation (now Trading and Markets) and Investment Management. Ms. Seidel's other experience includes her work as an Associate and Vice President in the Law Division of Morgan, Stanley & Co. Incorporated from 2001 to 2003, and as an Associate at the law firm of Wilmer, Hale, and Dorr (formerly Wilmer, Cutler and Pickering) from 1999 to 2001.

Ms. Seidel received in 2006 the SEC's Jay Manning Award, which is given annually to an employee in the Division of Trading Markets who has demonstrated an outstanding commitment to excellence in preserving fair and honest markets. Ms. Seidel earned her JD from Georgetown University Law Center in 1995 and her BS from the University of Connecticut in 1992. (Press Rel. 2010-183)

Commission Meetings

Following is a schedule of Commission meetings, which will be conducted under provisions of the Government in the Sunshine Act. Meetings will be scheduled according to the requirements of agenda items under consideration.

Open meetings will be held in the Auditorium, Room L-002 at the Commission's headquarters building, 100 F Street, N.E., Washington, D.C. Visitors are welcome at all open meetings, insofar as space is available. Persons wishing to photograph or videotape Commission meetings must obtain permission in advance from the Secretary of the Commission. Persons wishing to tape record a Commission meeting should notify the Secretary's office 48 hours in advance of the meeting.

Any member of the public who requires auxiliary aids such as a sign language interpreter or material on tape to attend a public meeting should contact SECInterpreter@SEC.gov at least three business days in advance. For any other reasonable accommodation related disability contact DisabilityProgramOfficer or call 202-551-4158.

Open Meeting - October 13, 2010 - 10:00 a.m.

The subject matter of the Open Meeting will be:

  1. The Commission will consider whether to adopt an interim final temporary rule under Section 766 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, to provide for the reporting of certain security-based swap transactions and including an interpretive note regarding retention and recordkeeping requirements for certain security-based swap transactions.

  2. The Commission will consider whether to propose Regulation MC pursuant to Section 765 of the Dodd-Frank Act to mitigate conflicts of interest at security-based swap clearing agencies, security-based swap execution facilities, and national security exchanges that post or make available for trading security-based swaps.

  3. The Commission will consider whether to propose rules that would implement Section 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires an issuer of asset-backed securities (ABS) to perform a review of the assets underlying the ABS and disclose information relating to the review. The Commission will also consider whether to propose rules that would implement Section 15E(s)(4)(A) of the Exchange Act as added by Section 932 of the Act, which requires an ABS issuer or underwriter to make publicly available the findings and conclusions of any third party due diligence report.

Closed Meeting - Wednesday, October 13, 2010 - 11:30 a.m.

The subject matter of the Closed Meeting scheduled for Wednesday, October 13, 2010 will be: institution of injunctive actions; institution of administrative proceedings; and other matters relating to enforcement proceedings.

Closed Meeting - Thursday, October 14, 2010 - 2:00 p.m.

The subject matter of the Closed Meeting scheduled for Thursday, October 14, 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.


Robert Comiskey Sanctioned

Robert Comiskey (Comiskey), of Palm Beach Gardens, Florida, has been barred from association with any broker or dealer. The sanction was ordered in an administrative proceeding before an administrative law judge, following a court-ordered injunction against him. In June 2010, Comiskey was enjoined from violating the antifraud and registration provisions of the federal securities laws based on his involvement telemarketing unregistered securities of a company known as Winning Kids, Inc. (Rel. 34-63047; File No. 3-14002)

Securities and Exchange Commission Orders Hearing On Registration Revocation Against Six Public Companies For Failure to Make Required Periodic Filings

Today the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of six companies for failure to make required periodic filings with the Commission:

  • AOB Holdings, Inc.
  • Applied Data Communications, Inc.
  • Appoint Technologies, Inc.
  • Aqua Care Systems, Inc. (AQCR)
  • AquaSciences International, Inc.
  • Arix Corp.

In this Order, the Division of Enforcement (Division) alleges that the six issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-63048; File No. 3-14086)

SEC Charges Former Dell Employee and Broker Husband for Insider Trading Ahead of Dell-Perot Systems Deal

On October 5, 2010, Securities and Exchange Commission charged Austin, Texas resident and former Dell Inc. employee Marleen Jantzen and her husband, John Jantzen, a licensed broker employed by an SEC-registered broker-dealer, with insider trading around the public announcement of Dell's tender offer for Perot Systems in September 2009.

In the SEC's complaint, filed in the U.S. District Court for the Western District of Texas, Austin Division, the SEC alleges that Marleen Jantzen learned about the deal during the course of her duties for Dell and was under explicit, written instructions not to trade. Nevertheless, the Complaint alleges, on the last trading day before the deal announcement, Marleen Jantzen made a highly unusual cash transfer to a brokerage account held jointly by both Jantzens. According to the Complaint, within minutes of the cash transfer, John Jantzen started buying Perot Systems call options and common stock in the joint account-in total, purchasing 500 shares of Perot Systems common stock and 24 Perot Systems call option contracts.

According to the Complaint, the public announcement of the deal on September 21, 2009 resulted in a substantial increase in the price of Perot System shares. Immediately following the announcement, the Jantzens liquidated their entire position in Perot Systems stock and call options. The complaint alleges that, as a result of their illegal trading in Perot Systems securities, Defendants realized net trading profits totaling $26,813.58.

The SEC's complaint alleges that the Jantzens violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. In addition, the Complaint alleges that Marleen Jantzen violated Exchange Act Rule 14e-3(d). The SEC has asked the Court to permanently enjoin the Jantzens from future violations of these provisions of the federal securities laws, and to order them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest. [SEC v. Marleen Jantzen and John Jantzen, Case No.1:10-cv-00740-JRN (W.D. Texas, Austin Division] (LR-21685)


Tri-Continental Corporation, et al.

An order has been issued on an application filed by Tri-Continental Corporation, et al., under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order permits certain registered closed-end management investment companies to make periodic distributions of long-term capital gains (i) with respect to their common stock as frequently as monthly in any one taxable year, and (ii) with respect to their preferred stock as often as specified by or determined in accordance with the terms of such preferred stock. (Rel. IC-29457 - October 5)


Approval of Proposed Rule Changes

The Commission approved a proposed rule change (SR-NASDAQ-2010-099) submitted by NASDAQ Stock Market pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to adopt a definition of Professional and require that all Professional Orders be appropriately marked. Publication is expected in the Federal Register during the week of October 4. (Rel. 34-63028)

The Commission issued notice and granted approval of a proposed rule change submitted by NYSE Arca (SR-NYSEArca-2010-084) pursuant to Rule 19b-4 under the Securities Exchange Act to list and trade Shares of the Sprott Physical Silver Trust. Publication is expected in the Federal Register during the week of October 4. (Rel. 34-63043)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the Chicago Board Options Exchange to modify the trading hours for the CBOE Stock Exchange (SR-CBOE-2010-090) 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 October 4. (Rel. 34-63035)

A proposed rule change (SR-Phlx-2010-131), filed by NASDAQ OMX PHLX to update Rule 1014 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 October 4. (Rel. 34-63036)





Modified: 10/06/2010