Former San Diego Officials Agree to Pay Financial Penalties in Municipal Bond Fraud Case
The Securities and Exchange Commission today announced that four former San Diego officials have agreed to pay financial penalties for their roles in misleading investors in municipal bonds about the city's fiscal problems related to its pension and retiree health care obligations.
It's the first time that the SEC has secured financial penalties against city officials in a municipal bond fraud case.
The SEC settlement with the four former city officials requires the approval of U.S. District Judge Dana M. Sabraw in the Southern District of California.
The SEC filed charges in April 2008 against former San Diego City Manager Michael Uberuaga, former Auditor & Comptroller Edward Ryan, former Deputy City Manager for Finance Patricia Frazier, and former City Treasurer Mary Vattimo. The SEC alleged that the officials knew the city had been intentionally under-funding its pension obligations so that it could increase pension benefits but defer the costs. They also were aware that the city would face severe difficulty funding its future pension and retiree health care obligations unless new revenues were obtained, benefits were reduced, or city services were cut. However, despite this extensive knowledge, they failed to inform municipal investors about the severe funding problems in 2002 and 2003 bond disclosure documents.
"Municipal officials have a personal obligation to ensure that investors are provided with complete and accurate information about the issuer's financial condition," said Rosalind Tyson, Director of the SEC's Los Angeles Regional Office. "These former San Diego officials are paying a price for their actions that jeopardized the interests of investors and put the city's current and future retirees at risk."
The four former officials agreed to settle the SEC's charges without admitting or denying the allegations and consented to the entry of final judgments that permanently enjoin them from future violations of Securities Act of 1933 Section 17(a)(2). Under the settlement terms, Uberuaga, Ryan, and Frazier each pay a penalty of $25,000 and Vattimo pays a penalty of $5,000.
The SEC's charges against a fifth former city official - Assistant Auditor & Comptroller Teresa Webster - are still pending.
The SEC litigation was handled by John M. McCoy III, David J. Van Havermaat, and Catherine W. Brilliant.
For more information about this enforcement action, contact:
John M. McCoy, III, Associate Regional Director, SEC's Los Angeles Regional Office, (323) 965-4561
David J. Van Havermaat, Senior Trial Counsel, SEC's Los Angeles Regional Office,(323) 965-3866
(Press Rel. 2010-204)
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 - Wednesday, November 3, 2010 - 10:00 a.m.
The subject matter of the Open Meeting will be:
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 Requests Comment on Study Required by Section 929Y of the Dodd-Frank Act Regarding the Extent to Which Private Rights of Action under the Antifraud Provisions of the Exchange Act Should Be Extended to Cover Transnational Securities Frauds
On October 25, the Securities and Exchange Commission issued a release requesting public comment to determine the extent to which private rights of action under the antifraud provisions of the Securities Exchange Act of 1934 should be extended to cover: (1) conduct within the United States that constitutes a significant step in the furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; and (2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States. Comments should be submitted on or before February 18, 2011. This request for comment is made pursuant to Section 929Y of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which directs the Commission to conduct a study to make this determination and to submit a report of the study to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House not later than January 21, 2012. (Rel. 34-63174)
Commission Revokes Registration of Securities of American Classic Voyages Co. for Failure to Make Required Periodic Filings
On October 27, the Commission revoked the registration of each class of registered securities of American Classic Voyages Co. (American Classic Voyages) 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 Classic Voyages 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 Classic Voyages Co. 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 American Classic Voyages' securities pursuant to Section 12(j) of the Exchange Act. This Order settled the proceedings brought against American Classic Voyages in In the Matter of Amereco, Inc., et al., Administrative Proceeding File No. 3-14075.
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 Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Amereco, Inc., et al., Administrative Proceeding File No. 3-14075, Exchange Act Release No. 63001, September 29, 2010. (Rel. 34-63182; File No. 3-14075)
In the Matter of Edward Tamimi
On October 27, the Commission issued Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Edward Tamimi. The proceedings are based on the entry of an injunction in the civil action entitled Securities and Exchange Commission v. Edward Tamimi, et al., Civil Action Number 9:10-CV-80186, in the United States District Court for the Southern District of Florida.
In the Order, the Division of Enforcement (Division) alleges that from May 2007 through September 2008 Tamimi was a telemarketing sales agent who offered and sold unregistered securities of Winning Kids, Inc. while he was not registered as a broker or dealer nor associated with a registered broker or dealer.
A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true, to provide Tamimi an opportunity to respond to these allegations, and to determine what, if any, remedial action is appropriate in the public interest. The Order directed the Administrative Law Judge to issue an initial decision within 210 days from the date of service of the Order. (Rel. 34-63183; File No.3-14098)
In the Matter of Stuart E. Rawitt
On October 27, 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 Stuart E. Rawitt, a resident of Marina Del Rey, California, based on the entry of a permanent injunction against him in the civil action entitled Securities and Exchange Commission v. Rockwell Energy of Texas, LLC, et al., Civil Action No. 4:09-cv-4080 in the United States District Court for the Southern District of Texas, Houston Division.
In the Order, the Commission finds that, on July 15, 2010, an agreed judgment was entered by consent against Rawitt in the civil action, permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act of 1933, and Section 15(a) of the Exchange Act of 1934. The Commission's Complaint alleged that Rawitt sold limited partnership interests in a fraudulent and unregistered oil-and-gas offering based in Texas. According to the Complaint, Rawitt received, directly or indirectly, sales or other promotional commissions as high as 40%, and pocketed $275,000 in investor proceeds. The Complaint alleges he solicited investors through cold calls, and was neither licensed nor associated with a registered broker or dealer.
Under the Order, Rawitt is barred from association with any broker or dealer. Rawitt consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-63184; File No. 3-14099)
INVESTMENT COMPANY ACT RELEASES
American Fidelity Dual Strategy Fund, Inc. and American Fidelity Assurance Company
An order has been issued on an application filed by American Fidelity Dual Strategy Fund, Inc. and American Fidelity Assurance Company, exempting applicants from Section 15(a) of the Investment Company 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-29483 - October 25)
Northern Lights Fund Trust, et al.
An order has been issued on an application filed by Northern Lights Fund Trust, et al. under Section 6(c) of the Investment Company Act for an exemption from Rule 12d1-2(a) under the Act. The order permits open-end management investment companies relying on Rule 12d1-2 under the Act to invest in certain financial instruments. (Rel. IC-29487- October 26)
Highland Capital Management, L.P. and Highland Funds I
An order has been issued on an application filed by Highland Capital Management, L.P. and Highland Funds I 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-29488 - October 26)
RIEF RMP LLC and Renaissance Technologies LLC
An order has been issued on an application filed by RIEF RMP LLC and Renaissance Technologies LLC (RTC) to exempt certain limited liability companies and other investment vehicles formed for the benefit of eligible employees of RTC and its affiliates from certain provisions of the Investment Company Act. Each limited liability company and other investment vehicle will be an "employees' securities company" within the meaning of Section 2(a)(13) of the Act. (Rel. IC-29489 - October 26)
Van Eck Associates Corporation, et al.
An order has been issued on an application filed by Van Eck Associates Corporation (Adviser), et al., for an order to amend an existing order (Prior Order) that permits: (a) series of an open-end management investment company (each a Fund, collectively, the Funds) to issue shares that can be redeemed only in large aggregations (Creation Units); (b) secondary market transactions in shares to occur at negotiated prices; (c) dealers to sell such shares to secondary market purchasers unaccompanied by a statutory prospectus when prospectus delivery is not required by the Securities Act of 1933; (d) under specified limited circumstances, certain Funds to pay redemption proceeds more than seven days after the tender of shares; (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds to acquire shares; and (f) certain affiliated persons of the Funds to deposit securities into, and receive securities from, the Funds in connection with the purchase and redemption of Creation Units of such Funds. The amended order would: (a) permit certain Funds based on equity and/or fixed income securities indexes for which the Adviser or an "affiliated person" of the Adviser as defined in Section 2(a)(3) of the Act, is an index provider; (b) delete the relief granted from Section 24(d) of the Act and revise various disclosure requirements in the applications for the Prior Order (Prior Applications); (c) modify the 80% investment requirement in the Prior Applications; (d) revise the discussion of depositary receipts in the Prior Applications; and (e) revise the discussion in the Prior Applications of the composition of securities deposited with the Fund to purchase Creation Units and securities received in connection with redemption of Creation Units. (Rel. IC-29490 - October 26)
Capital Southwest Corporation
An order has been issued on an application filed by Capital Southwest Corporation (Capital Southwest) 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 permits Capital Southwest to issue restricted shares of its common stock to its officers and employees under the terms of its equity incentive compensation plan. (Rel. IC-29491 - October 26)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the International Securities Exchange (SR-ISE-2010-105) relating to a date for the Additional Expiration Months Pilot Program 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 October 25. (Rel. 34-63177)
A proposed rule change filed by the International Securities Exchange amending its Schedule of Fees (SR-ISE-2010-104) 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 October 25. (Rel. 34-63179)
Proposed Rule Change
The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2010-052) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to adopt FINRA Rules regarding books and records in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of October 25. (Rel. 34-63181)
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