SEC News Digest (Issue 2011-19; January 28, 2011)

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COMMISSION ANNOUNCEMENTS

Commission Meetings

Closed Meeting - Thursday, February 3, 2011 - 10:00 a.m.

The subject matter of the Closed Meeting scheduled for Thursday, Feb. 3, 2011, will be: consideration of amicus participation; institution and settlement of injunctive actions; institution and settlement of administrative proceedings; 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.

ENFORCEMENT PROCEEDINGS

SEC Institutes Administrative Proceedings Against California Attorney

On Jan. 28, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 4C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice against David M. Tamman, Esq. of Santa Monica, California. The Office of the General Counsel alleges in the Order that during the course of a Commission examination and investigation Tamman altered documents to be produced to the Commission in an effort to hide his client's fraudulent conduct. The Office of the General Counsel alleges that Tamman's conduct constitutes unethical and improper professional conduct in violation of Section 4C and Rule 102(e). An administrative hearing will be scheduled to determine whether the allegations in the Order are true, to provide Tamman an opportunity to establish any defenses to the allegations, and to determine what sanctions, if any, are appropriate and in the public interest. As directed by the Commission, the administrative law judge shall issue an initial decision in this matter no later than 300 days from the date of service of the Order. (Rel. 34-63785; File No. 3-14207)

In the Matter of Tzemach David Netzer Korem

On Jan. 28, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 17A(c)(4)(C) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Tzemach David Netzer Korem based upon the entry of a Permanent Injunction entered against him in the United States District Court for the Southern District of Florida, in the civil action entitled SEC v. Jean R. Charbit and Tzemach David Netzer Korem, Civil Action Number 10-23604-CIV.

In the Order, the Division of Enforcement alleges that on Dec. 17, 2010, a judgment was entered by consent against Korem, permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933.

A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations contained in the Order are true, and to provide the Respondent an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.

The Order requires the Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-63788; File No. 3-14208)

In the Matter of Delilah A. Proctor

On Jan. 28, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Notice of Hearing (Order) against Delilah A. Proctor (Proctor or Respondent) based upon the entry of a permanent injunction entered against her in the United States District Court for the Central District of California (SEC v. Sun Empire, LLC, et al., Civil Action No. SACV09-399).

In the Order, the Division of Enforcement alleges that on Jan. 12, 2011, the United States District Court for the Central District of California entered a judgment of permanent injunction and other relief against Proctor, which permanently enjoined her from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder.

A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations contained in the Order are true, and to provide Proctor an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.

The Order requires the Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of the Order pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-63789; File No. 3-14209)

In the Matter of Johnny E. Johnson

On Jan. 28, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Notice of Hearing (Order) against Johnny E. Johnson (Johnson or Respondent) based upon the entry of a permanent injunction entered against him in the United States District Court for the Central District of California (SEC v. Sun Empire, LLC, et al., Civil Action No. SACV09-399).

In the Order, the Division of Enforcement alleges that on Jan. 12, 2011, the United States District Court for the Central District of California entered a judgment of permanent injunction and other relief against Johnson, which permanently enjoined him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder.

A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations contained in the Order are true, and to provide Johnson an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.

In the Matter of Bich Quyen Nguyen

On Jan. 28, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Notice of Hearing (Order) against Bich Quyen Nguyen (Nguyen or Respondent) based upon the entry of a permanent injunction entered against her in the United States District Court for the Central District of California (SEC v. Sun Empire, LLC, et al., Civil Action No. SACV09-399).

In the Order, the Division of Enforcement alleges that on Jan. 12, 2011, the United States District Court for the Central District of California entered a judgment of permanent injunction and other relief against Nguyen, which permanently enjoined her from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder.

A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations contained in the Order are true, and to provide Nguyen an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.

SEC Charges Connecticut-Based Hedge Fund Manager for Fraudulent Misuse of Investor Assets

The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of a Stamford, Conn.-based investment adviser and its principal, Francisco Illarramendi, charging that they misappropriated at least $53 million in investor funds and used the money for self-dealing transactions. Illarramendi is the majority owner of the Michael Kenwood Group LLC - a holding company for, among other entities, investment adviser Michael Kenwood Capital Management LLC. Through this adviser entity, Illarramendi manages several hedge funds, including one that contains up to $540 million in assets.

The SEC alleges that Illarramendi defrauded investors in the several hedge funds he managed by improperly transferring their money into bank accounts that he personally controlled. He then invested the money for his own benefit or for the benefit of the entities that he controlled, rather than for the benefit of the hedge fund investors. The SEC's complaint alleges that Illarramendi took at least $53 million in investor money out of a hedge fund without the knowledge or consent of the hedge fund's investors.

The SEC sought an asset freeze and other emergency relief because it alleged that Illarramendi was imminently planning to make additional investments using investor funds without the knowledge or consent of the investors. After a series of hearings pertaining to the SEC's request for the emergency relief, the judge entered an order freezing the assets of the defendants.

The SEC's complaint charges Illarramendi and Michael Kenwood Capital Management, LLC, with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also names the following Illarramendi-controlled entities as relief defendants, alleging that they received investor funds to which they have no right: Michael Kenwood Asset Management LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP. In addition to preliminary emergency relief, the SEC's complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties from the defendants, and disgorgement plus prejudgment interest from the relief defendants. [SEC v. v. Francisco Illarramendi and Michael Kenwood Capital Management, LLC, as Defendants, and Michael Kenwood Asset Management, LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar, LP, as Relief Defendants, Civil Action No. 3:11cv00078 (D. Conn.)] (LR-21828)

SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Changes

The Commission approved a proposed rule change submitted by NYSE Arca (SR-NYSEArca-2010-106) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 regarding the listing of options series with $1 Strike Prices. Publication is expected in the Federal Register during the week of January 31. (Rel. 34-63770)

The Commission approved a proposed rule change submitted by NYSE Amex (SR-NYSEAmex-2010-109) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 regarding the listing of options series with $1 Strike Prices. Publication is expected in the Federal Register during the week of January 31. (Rel. 34-63773)

The Commission approved a proposed rule change (SR-Phlx-2010-157), as modified by Amendment Nos. 1 and 2, filed by NASDAQ OMX PHLX under Rule 19b-4 of the Securities Exchange Act of 1934 relating to complex orders. Publication is expected in the Federal Register during the week of January 31. (Rel. 34-63777)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by International Securities Exchange regarding the listing of option series with $1 strike prices (SR-ISE-2011-06) 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 January 31. (Rel. 34-63771)

A proposed rule change filed by the Chicago Board Options Exchange regarding the listing of option series with $1 strike prices (SR-CBOE-2011-006) 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 January 31. (Rel. 34-63772)

A proposed rule change filed by NASDAQ OMX BX regarding the listing of option series with $1 strike prices on the Boston Options Exchange Facility (SR-BX-2011-006) 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 January 31. (Rel. 34-63774)

A proposed rule change filed by EDGA Exchange (SR-EDGA-2011-01) to amend Rule 11.9 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 January 31. (Rel. 34-63778)

A proposed rule change filed by EDGX Exchange (SR-EDGX-2011-01) to amend Rule 11.9 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 January 31. (Rel. 34-63779)

A proposed rule change as filed by NASDAQ OMX PHLX (SR-Phlx-2011-07) relating to firm related equity option cap, active SQF port fees and other membership fees 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 January 31. (Rel. 34-63780)

A proposed rule change as filed by NASDAQ OMX PHLX (SR-Phlx-2011-09) relating to the order entry port fee 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 January 31. (Rel. 34-63781)

Proposed Rule Change

The Depository Trust Company filed a proposed rule change (SR-DTC-2011-01) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 that would allow DTC to amend its Dividends Service Guide (Guide) to: 1) clarify DTC's policy of payment allocations; 2) begin allocation of funds from agents received with corresponding CUSIP-level identification information at 8:20 a.m.; and 3) make other conforming changes. Publication is expected in the Federal Register during the week of January 31. (Rel. 34-63775)

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