SEC Announces Agenda and Panelists for Second Field Hearing on State of Municipal Securities Markets
Hearing Scheduled for December 7 in Washington, D.C.
On November 23, the Securities and Exchange Commission announced that it will hold its second field hearing to examine the municipal securities markets at its Headquarters in Washington, D.C., on December 7. Topics will include market stability and liquidity, investor impact, and self-regulation.
This is the second in a series of hearings, which SEC Chairman Mary Schapiro first announced in May, taking place across the country and examining a wide range of issues that affect investors in the municipal securities market. Following the hearings, the Commission will release a staff report addressing information learned, including their recommendations for further action the Commission should pursue, which may include rulemaking, recommendation for changes in industry "best practices," or legislation.
The Washington, D.C., hearing will take place from 9 a.m. to 4:50 p.m. The event is open to the public. The hearing also will be webcast live at www.sec.gov.
The first hearing was conducted in San Francisco on September 21. Other hearings will be conducted in Florida, Texas, Alabama and Illinois. Each hearing will include participants from that local region, and will examine different sets of issues.
The SEC invites members of the public and other interested parties to submit comments related to field hearing topics by using the comment form on the SEC website or sending an e-mail to firstname.lastname@example.org.
For more about the Commission's oversight of the securities market, see http://www.sec.gov/spotlight/municipalsecurities.shtml. (Press Rel. 2010-233)
Closed Meeting - Thursday, December 2, 2010 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, Dec. 2, 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.
In the Matter of Robert M. Jaffe
On November 23, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Robert M. Jaffe (Jaffe). The Order finds that Jaffe was a vice president of Cohmad Securities Corp. (Cohmad) and an unregistered representative of Bernard L. Madoff Investment Securities LLC (BMIS). The Order further finds that on Nov. 2, 2010, a final judgment was entered by consent against Jaffe, permanently enjoining him from violating, or aiding and abetting violations of, anti-fraud and other provisions of the federal securities laws in the civil action entitled SEC v. Cohmad Securities Corp. et al., Civil Action Number 09 Civ. 5680 (LLS), in the United States District Court for the Southern District of New York.
The Order further finds that the Commission's complaint in that action alleges that, in connection with the purported purchase and sale of securities by Bernard L. Madoff (Madoff) and BMIS, Jaffe, acting as a broker, introduced scores of investors who opened at least 160 accounts with BMIS, which brought more than $1 billion over more than 15 years into Madoff's fraudulent scheme. In doing so, Jaffe recklessly disregarded material facts and/or recklessly failed to disclose to investors material facts that would have raised serious questions about the propriety of the Madoff investment. Among other things, the amended complaint also alleges that Jaffe received tens of millions of dollars in transaction-based compensation from BMIS in the form of proceeds from fictitious securities transactions and that Jaffe recklessly concealed his relationship with BMIS, which helped Madoff to avoid scrutiny of BMIS's advisory business.
Based on the above, the Order bars Jaffe from association with any broker, dealer, or investment adviser. Jaffe 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. 34-63365; IA-3115; File No. 3-14137)
In the Matter of Spendthrift Farm, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Spendthrift Farm, Inc., Administrative Proceeding No. 3-14101. The Order Instituting Proceedings (OIP) alleged that Respondents repeatedly failed to file required annual and quarterly reports while their securities were registered with the Commission. The Default Order finds these allegations to be true and revokes the registrations of each class of registered securities of Spendthrift Farm, Inc., Sport of Kings, Inc., Sportsend, Inc., Stacey's Buffet, Inc., Star Partners, Ltd., Sterling Equity Holdings, Inc., Sterling Financial Corp., and Storage @ccess Technologies Inc. (n/k/a Bluepoint Data, Inc.) pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-63369; File No. 3-14101)
In the Matter of ElectroSound Group, Inc.
On November 24, an Administrative Law Judge issued an Order Making Findings and Revoking Registrations by Default as to ElectroSound Group, Inc., Evolutions, Inc., Executive National Development Corp., and Ezcony Interamerica, Inc. (Default Order), in ElectroSound Group, Inc., Administrative Proceeding No. 3-14092. The Default Order finds that these four Respondents failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 13a-1 and 13a-13 because each Respondent failed to make periodic filings with the Commission for a number of years. Based on these findings, the Default Order, pursuant to Section 12(j) of the Exchange Act, revokes the registration of each class of registered securities of each of these companies. (Rel. 34-63370; File No. 3-14092)
In the Matter of John Briner
On November 24, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Remedial Sanctions (Order) against John Briner (Briner). The Order finds that Briner provided legal services to Golden Apple Oil and Gas, Inc., and that a final judgment was entered by consent against Briner in SEC v. Golden Apple Oil and Gas, Inc., et al. (Civil Action No. 09-Civ-7580(HB)). That final judgment permanently enjoined Briner from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and provided the following additional relief: (a) prohibiting Briner, for five years following the date of entry of final judgment, 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; (b) barring Briner, for five years following the date of entry of final judgment, from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock; and (c) requiring Briner to pay $52,488.32 in disgorgement of ill-gotten gains from his sales of stock, and $14,880.08 in prejudgment interest; and a $25,000 civil money penalty.
Based on the above, the Order suspends Briner from appearing or practicing before the Commission as an attorney. After five years from the date of the Order, Briner has the right to reapply for reinstatement by submitting an affidavit to the Commission's Office of the General Counsel truthfully stating, under penalty of perjury, that he has complied with the Order, that he is not subject to any suspension or disbarment as an attorney by a court of the United States or of any state, territory, district, commonwealth, or possession, and that he has not been convicted of a felony or misdemeanor involving moral turpitude as set forth in Rule 102(e)(2) of the Commission's Rules of Practice.
Briner consented to the issuance of the Order without admitting or denying any of the findings except for the finding that the judgment described above had been entered against him in SEC v. Golden Apple Oil and Gas, Inc., et al. (Civil Action No. 09-Civ-7580(HB)). (Rel. 34-63371; File No. 3-14138)
SEC Secures Settlement with Ohio Man Who Received Funds Misappropriated from Elderly Clients of Crossroads Financial Planning, Inc.
The Securities and Exchange Commission announced today that John Simpson of Columbus, Ohio, has agreed to settle the Commission's pending civil action against him. The Commission's amended complaint, filed in the United States District Court for the Southern District of Ohio on Oct. 21, 2009, named Simpson as a relief defendant and alleged that he received from Julie Jarvis funds and other assets purchased with misappropriated funds. Jarvis, the owner of Crossroads Financial Planning, Inc., formerly an investment advisory firm in Columbus, previously settled the SEC's allegations against her, admitting that she had misappropriated over $2.3 million from her investor clients.
Under today's announced settlement, Simpson admitted that, based on evidence of which he became aware after Jarvis was arrested, he had received benefits and other items of value from Jarvis that came from ill-gotten gains and for which he gave no consideration. Simpson consented to the entry of a judgment requiring him to disgorge $70,000 to the victims of Jarvis's fraud scheme. The judgment also requires Simpson to cooperate in tracing investor funds misappropriated by Jarvis. The proposed settlement is subject to approval by the U.S. District Court for the Southern District of Ohio.
In a related criminal matter, on Oct. 14, 2009, the United States District Court for the Southern District of Ohio sentenced Jarvis to 66 months in prison and ordered her to pay restitution to her victims.
The Commission notes the assistance and cooperation from the United States Attorney's Office for the Southern District of Ohio and the Federal Bureau of Investigation. [U.S. Securities and Exchange Commission v. Crossroads Financial Planning, Inc., and Julie M. Jarvis, et al, Case No. 2:09-cv-269 (MRA) (SDOH)] (LR-21755 and LR-21352). [SEC v. Crossroads Financial Planning, Inc., and Julie M. Jarvis, et al, Case No. 2:09-cv-269 (MRA) (SDOH)] (LR-21755)
In the Matter of Visionary Enterprises
The Securities and Exchange Commission announced the filing of a civil injunctive action in Atlanta, Georgia on Nov. 22, 2010, alleging that Charles William Petty, II and the companies he operates, Visionary Publishing International, LLC (Visionary) and Virtual Properties Worldwide, Inc. (Worldwide), are engaging in an ongoing offering fraud in violation of the antifraud and securities provisions of the federal securities laws.
The Commission's complaint alleges that since at least 2007 to the present, Petty has offered and sold at least $236,000 of promissory notes (Notes) issued by the Visionary companies to at least eleven investors in Georgia, North Carolina, Texas, California, New Jersey, and Canada. The complaint alleges that the defendants generally told investors that the Notes were "safe and high-yielding" and that the Note proceeds would be invested in real estate or "real estate related projects." The defendants also told investors that each Note would be secured by a mortgage security deed on a particular property in Georgia, Tennessee, Alabama, North Carolina, or South Carolina at a loan to value ratio of no more than 60 to 75%. The complaint alleges that these representations were false because no mortgage security deeds on properties were ever created, and Petty admitted that the Note proceeds were not invested in real estate or real estate related projects. The complaint further alleges that the defendants' scheme is ongoing and that as recently as Nov. 16, 2010, the defendants were posting messages on various Google Groups that solicit investors to purchase three month Notes that pay 18% quarterly which Petty describes as "72% Annualized Returns."
In its Complaint, the Commission alleges that the defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Also on Nov. 22, 2010, the court issued an order temporarily restraining defendants from violating these provisions, freezing their assets, providing for expedited discovery, prohibiting the destruction of documents and directing that they provide an accounting for the funds received. A hearing on the Commission's request for a preliminary injunction will be held on Dec. 6, 2010. [SEC v. Charles William Petty, II, et al., Case No. 1:10-CV-3842 (N.D. Ga.)] (LR-21756)
SEC Obtains Final Judgments Against Michael S. Spillan and Melissa K. Spillan for Running a Fraudulent Stock-Based Loan Operation
The Securities and Exchange announced that on Nov. 3, 2010, the Honorable Edmund A. Sargus, Jr. of the United States District Court for the Southern District of Ohio entered a final judgment against Michael S. Spillan and his wife, Melissa K. Spillan, (collectively, Spillans) in connection with their operation of a fraudulent stock-based loan enterprise. The final judgment permanently enjoins the Spillans from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and orders the Spillans to pay disgorgement of $1,816,265 and prejudgment interest in the amount of $515,389, for a total of $2,331,654, for which amount each defendant is jointly and severally liable with the other. Judge Sargus also imposed civil penalties of $908,132 upon each defendant.
The Spillans are former principals of One Equity Corporation, Triangle Equities Group, Inc., Victory Management Group, Inc. and Dafcan Finance, Inc. (One Equity Companies). The Commission's complaint, filed on July 10, 2008, alleged that, beginning in at least 2004, the Spillans and the One Equity Companies raised approximately $70 million from 125 borrowers by holding themselves out as stock-based lenders, underwriters, or administrators. According to the complaint, the defendants raised the money by inducing borrowers to transfer ownership of millions of shares of publicly traded stock to them as collateral for purported non-recourse loans based on a false promise to return the shares to borrowers who repaid their loans. In fact, the defendants generally sold all of the stock received from borrowers before funding each loan. After funding each loan, the Spillans did not set aside any cash reserves to repurchase and return shares to borrowers who repaid their loans. Instead, they used all of the money to pay expenses, including over $1 million in salaries and benefits to themselves. [SEC v. One Equity Corp., et al., Civil Action No. 2:08-cv-667 (S.D. Ohio)] (LR-21757)
Proposed Rule Change
The Fixed Income Clearing Corporation filed a proposed rule change (SR-FICC-2010-09) under Section 19(b)(2) of the Securities Exchange Act of 1934 that would allow FICC to enter into a cross-margining arrangement with a New York Portfolio Clearing, LLC (NYPC), which has applied to be registered with the Commodity Futures Trading Commission as a derivatives clearing organization. The proposed rule change would permit FICC to offer cross-margining of certain positions cleared at its Government Securities Division (GSD) and certain positions cleared at NYPC. The proposed rule change also would make certain other related changes to FICC's GSD rules. Publication is expected in the Federal Register during the week of November 29. (Rel. 34-63361)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change (SR-BX-2010-078) filed by NASDAQ OMX BX extending the pilot period for Boston Options Exchange to receive inbound routes of orders from Nasdaq Options Services 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 29. (Rel. 34-63364)
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