RULES AND RELATED MATTERS
Extension of Temporary Exemptions for Eligible Credit Default Swaps to Facilitate Operation of Central Counterparties to Clear and Settle Credit Default Swaps
On Nov. 19, 2010, the Commission extended the expiration dates of the interim final temporary rules that provide exemptions under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Trust Indenture Act of 1939 for certain credit default swaps in order to facilitate the operation of one or more central counterparties for those credit default swaps. The Commission extended the expiration dates of the interim final temporary rules to July 16, 2011. The full text of the adopting release can be accessed on the Commission's web site at http://www.sec.gov/interim/final/2010/33-9158.pdf. (Rel. 33-9158)
Securities and Exchange Commission Orders Hearing on Registration Revocation Against Five Public Companies for Failure to Make Required Periodic Filings
On November 23, 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 five companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the five 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 or 13a-16 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. 34-63362; File No. 3-14136)
SEC Settles Options Backdating Case Against Jacob "Kobi" Alexander, Former CEO of Comverse Technology, Inc.; Relief Includes Officer-and-Director Bar and More Than $53 Million in Disgorgement, Prejudgment Interest, and Civil Penalties
The Securities and Exchange Commission today settled civil charges against Jacob "Kobi" Alexander, the co-founder and former Chairman and Chief Executive Officer of Comverse Technology, Inc., arising out of his role in the company's long-running stock options backdating scheme. This settlement resolves the Commission's long-standing action against Alexander. Under the terms of the settlement, Alexander will pay $47.6 million in disgorgement and prejudgment interest and a $6 million penalty, which is one of the largest penalties ever imposed in a stock options backdating case. Alexander will also be permanently enjoined from violating the antifraud and related provisions of the federal securities laws and will be permanently barred from serving as an officer or director of a public company.
Without admitting or denying the allegations of the Commission's Complaint, Alexander consented to the entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, 13b2-2, 14a-9, and 16a-3 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. The proposed final judgment, orders Alexander to pay $26,206,298 in disgorgement, plus prejudgment interest of $21,442,157, for a total of $47,648,455, and a $6 million civil penalty, and permanently prohibits him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Under the terms of the proposed judgment, Alexander's disgorgement and prejudgment interest will be deemed satisfied by the entry of a forfeiture order in a civil forfeiture action against Alexander's assets in the United States District Court for the Eastern District of New York. Subject to the Court's approval, the forfeited funds will be distributed to investors in accordance with the terms of the related class and derivative action settlements.
Separately, the United States Attorney's Office for the Eastern District of New York today filed a stipulation of settlement of their civil forfeiture action against certain of Mr. Alexander's assets (United States v. All Funds on Deposit at Citigroup Smith Barney Account No. 600-00338 Held in the Name of Kobi Alexander and Citigroup Smith Barney Account No. 600-27694 Held in the Name of Kobi J. Alexander, No. 06-CV-3730-NGG-RER (E.D.N.Y.)). This settlement is subject's the court's approval. [SEC v. Jacob (Kobi) Alexander, et al., United States District Court for the Eastern District of New York, Civil Action No. 06-CV-3844 (E.D.N.Y.) (NGG)] (LR-21753; AAE Rel. 3215)
Court Enters Asset Freeze Against Operator of Diamond Themed Ponzi Scheme
On November 22, the United States District Court for the District of Colorado issued an emergency court order freezing the assets of defendants Richard Dalton and Universal Consulting Resources LLC (UCR), and relief defendant Marie Dalton, in connection with a Ponzi scheme. The court also ordered that the defendants repatriate all funds or assets to the United States and prepare a sworn accounting describing the receipt and disbursement of all investor funds.
The Commission alleges that from about March 2007 through about June 2010, the Ponzi scheme raised approximately $17 million from 130 investors in 13 states. Dalton and his company, UCR, solicited investors for two fraudulent offerings that were generally referred to as the "Trading Program" and the "Diamond Program" and promised returns of between 60% to 120% per year. The Commission alleges that investors in both programs received monthly payments which Dalton told them were profits from successful trading. However, the majority of funds that came into UCR bank accounts were from new investors, not from any actual profit-generating activity. The complaint alleges that Dalton, who had no other employment or legitimate source of income, funded his personal life at the expense of investors and also transferred more than $900,000 in order to purchase a home in the name of his wife.
The SEC's complaint alleges that Dalton and UCR violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint also names Marie Dalton as a relief defendant in order to recover investor assets now in her possession. The SEC will also seek permanent injunctions, disgorgement plus pre-judgment interest, and financial penalties against Dalton and UCR, and disgorgement from Marie Dalton. [SEC v. Richard Dalton and Universal Consulting Resources LLC, Defendants, and Marie Dalton, Relief Defendant, Civil Action No. 10-CV-02794-JLK-KLM (D. Colo.)] (LR-21754)
INVESTMENT COMPANY ACT RELEASES
Templeton Capital Accumulator Fund
An order has been issued pursuant to Section 8(f) of the Investment Company Act declaring that Templeton Capital Accumulator Fund has ceased to be an investment company. (Rel. IC-29504 - November 22)
Nationwide Life Insurance Company, et al.
An order has been issued on an application filed by Nationwide Life Insurance Company (NWL), Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide Variable Account-II, Nationwide Variable Account-6, Nationwide Variable Account-7, Nationwide Variable Account-8, Nationwide Variable Account-9, Nationwide Variable Account-10, Nationwide Variable Account -14, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-4, Nationwide VLI Separate Account-7, Nationwide Provident VA Separate Account 1, Nationwide Provident VLI Separate Account 1; Nationwide VA Separate Account-B, Nationwide VL Separate Account-G, Nationwide Provident VA Separate Account A and Nationwide Provident VLI Separate Account A (collectively, Applicants) and Nationwide Variable Insurance Trust (together with Section 26 Applicants, Section 17(b) Applicants). Applicants have been authorized under Section 26(c) of the Investment Company Act to substitute securities issued by certain registered investment companies for shares of certain other registered investment companies. In addition, Section 17(b) Applicants have been granted an exemption from Section 17(a) of the Act in order to engage in certain in-kind transactions in connection with the substitutions so authorized. (Rel. IC-29505 - November 22)
Orders of Deregistration Under the Investment Company Act
Orders have been issued under Section 8(f) of the Investment Company Act declaring that each of the following has ceased to be an investment company:
Proposed Rule Change
NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-103) under Section 19(b)(1) of the Securities Exchange Act of 1934 relating to the listing and trading of the Jefferies S&P 500® VIX Short-Term Futures ETF. Publication is expected in the Federal Register during the week of November 22. (Rel. 34-63349)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change (SR-Phlx-2010-156) filed by NASDAQ OMX PHLX relating to the extension of a pilot program concerning disseminated quotations 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 November 22. (Rel. 34-63350)
A proposed rule change filed by NASDAQ OMX PHLX relating to fees for the PHOTO Historical Data product (SR-Phlx-2010-154) has become effective pursuant to Rule 19b-4 under the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of November 22. (Rel. 34-63351)
A proposed rule change (SR-ISE-2010-110) filed by the International Securities Exchange relating to the extension of a pilot program for directed orders has become effective under Section 19(b)(3)(A) under the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of November 22. (Rel. 34-63357)
A proposed rule change filed by BATS Exchange to modify the Minor Rule Violation Plan for BATS Options (SR-BATS-2010-033) 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 November 22. (Rel. 34-63359)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-CBOE-2010-046) submitted by Chicago Board Options Exchange to amend certain rules pertaining to Credit Options. Publication is expected in the Federal Register during the week of November 22. (Rel. 34-63352)
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