Securities and Exchange Commission Suspends Trading in the Securities of China 9D Construction Group for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of China 9D Construction Group (CNAG), commencing at 9:30 a.m. EST on Feb. 2, 2011 and terminating at 11:59 p.m. EST on Feb. 15, 2011.
The Commission temporarily suspended trading in the securities of CNAG due to a lack of current and accurate information about the company because it has not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by this company.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspension, no quotation may be entered relating to the securities of the subject company unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of this company that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-63816)
SEC Proposes Rules for Security-Based Swap Execution Facilities
The Securities and Exchange Commission today voted unanimously to propose rules defining security-based swap execution facilities (SEFs) and establishing their registration requirements, as well as their duties and core principles.&
The Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the SEC to implement a regulatory framework for security-based swaps, which currently trade exclusively in the over-the-counter markets with little transparency or oversight.
The Dodd-Frank Act sought to move the trading of security-based swaps onto regulated trading markets, and therefore created security-based SEFs as a new category of market intended to provide more transparency and reduce systemic risk.
“Our objective here is to provide a framework that allows the security-based swap market to continue to develop in a more transparent, efficient, and competitive manner,” said SEC Chairman Mary L. Schapiro. “This is an important and complex undertaking that adds a significant new component to the regulatory framework for over-the-counter derivatives.”
The Commission’s proposed rules:
Public comments on the rule proposal should be received by the Commission by April 4, 2011. (Press Rel. 2011-35)
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, February 9, 2011 - 10:00 a.m.
The subject matter of the Open Meeting will be:
The Commission will consider whether to propose amendments to rules and forms under the Securities Act of 1933 and Schedule 14A under the Securities Exchange Act of 1934, to replace references to credit ratings with alternative criteria. These amendments are in accordance with Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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.
Commission Orders Hearings on Registration Suspension or Revocation Against CNAG for Failure to Make Required Periodic Filings
In conjunction with today’s trading suspension, the Commission also instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities CNAG for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that CNAG is delinquent in its 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 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 judge in the proceeding will then determine whether the registration pursuant to Exchange Act Section 12 of each class of the securities of this Respondent 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. 34-63817; File No. 3-14215)
In the Matter of Deerfield Capital Corp. and Danielle Valkner, CPA
On Feb. 2, 2011, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 (Exchange Act), Making Findings, Imposing Sanctions and a Cease-and-Desist Order (Order) against Deerfield Capital Corp. (Deerfield Capital) and Danielle Valkner, CPA.
The Order finds that Deerfield Capital violated the books and records and internal control provisions of the Exchange Act in connection with three transactions involving securities issued by a Real Estate Mortgage Investment Conduit (REMIC). In each of the transactions, one of which occurred in December 2005 and two in March 2006, Deerfield Capital improperly recognized a gain from the purported sales of the REMIC while simultaneously purporting to purchase a “new” security representing nearly the same rights to nearly the same stream of payments. Deerfield Capital’s recognition of a gain on the sale of the REMIC was contrary to U.S. Generally Accepted Accounting Principles. The improperly recognized gains were material to the financial results for the year ended Dec. 31, 2005, reported in Deerfield Capital’s Form 10-K for 2005 on March 17, 2006, and for the quarter ended March 31, 2006, reported in Deerfield Capital’s Form 10-Q on May 15, 2006.
The Order finds that Deerfield Capital violated 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 Order further finds that Valkner was a cause of Deerfield Capital’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder.
Without admitting or denying the SEC’s findings, Deerfield Capital agreed to the entry of an Order requiring it to cease and desist from committing or causing any violations and any future 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 and to pay disgorgement in the amount of $977,000 and prejudgment interest totaling $300,070.36. Danielle Valkner, also without admitting or denying the SEC’s findings, agreed to the entry of an order requiring her to cease and desist from causing any violations and any future violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. (Rel. 34-63818; AAE Rel. 3237; File No. 3-14216)
In the Matter of Eric A. Holzer, CPA
On Feb. 2, 2011, the Commission issued an Order of Forthwith Suspension Pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice, which finds that Eric A. Holzer, a certified public accountant and a former attorney, has been convicted of a felony involving moral turpitude within the meaning of Rule 102(e)(2), and forthwith suspends Mr. Holzer from appearing or practicing before the Commission. (Rel. 34-63822; AAE Rel. 3239; File No. 3-14217)
In the Matter of Steven Byers
On Feb. 2, 2011, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-Desist Order (Order) against Don S. Hershman (Hershman).
In the Order, the Commission finds that between 2005 and 2008, Wextrust Capital, LLC and its affiliates (Wextrust) raised approximately $270 million from over 1,400 investors in at least 70 fraudulent private placement securities offerings for real estate, African diamond mining, commodities, and other ventures. On Aug. 11, 2008, the Commission filed an emergency civil enforcement action against Wextrust and its principals in Federal District Court in the Southern District of New York in a case titled SEC v. Byers, et al., No. 08-cv-7104 (S.D.N.Y.). Wextrust and its assets are now being administered by an equity receiver (Receiver) appointed in the case.
In 2005, the law firm of Much Shelist Denenberg Ament & Rubenstein, PC (Much Shelist) began to provide real-estate related legal services to Wextrust. Soon thereafter, Don Hershman, who was one of Much Shelist’s securities lawyers, became Wextrust’s primary outside securities counsel. In that role he prepared or reviewed disclosure documents disseminated by Wextrust and its affiliates to potential investors in approximately 16 offerings that raised over $127 million.
Over the course of his representation of Wextrust between 2005 and 2008, Hershman became increasingly aware of facts that he knew or should have known were material facts that were not disclosed in Wextrust offering documents. In 2006 and early 2007, Hershman learned that Wextrust engaged in the undisclosed over-raising of funds and had taken actions inconsistent with prior disclosures made to investors in an offering that he believed were sufficiently material to require Wextrust to offer rescission rights to investors. By late 2007, Hershman also learned that Joseph Shereshevsky, one of Wextrust’s two principal executives, pleaded guilty to conspiracy to commit bank fraud in June 2003 and that he had lied to Hershman about his criminal conviction at the inception of the client relationship. By that time he also learned that a major investor had sued Wextrust for rescission of an offering he had worked on alleging material misrepresentations and omissions in the offering documents. In February of 2008, approximately two months after learning of Shereshevsky’s fraud conviction, Hershman was alerted by Wextrust’s CFO that Shereshevsky controlled Wextrust’s bank accounts and that the CFO was having difficulty accessing those accounts to pay business expenses. Notwithstanding Hershman’s knowledge of these facts, he continued to work or supervise work on private placement offerings for Wextrust that failed to disclose the principal’s prior felony fraud conviction and Wextrust’s prior over-raises. In April 2008, Hershman also worked on one offering that he knew would have the effect of diluting cash flow from investors in a prior offering that he had supervised. Because of that inconsistency, Hershman advised Wextrust that he did not condone the structure of the deal, but nonetheless agreed to advise Wextrust regarding the deal and did not insist on disclosure of the dilution to the prior investors. Based on Hershman’s conduct, the Commission find in the Order that Hershman was a cause of Wextrust’s violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act.
Based on the above, the Order orders Hershman to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and to pay $25,291 in disgorgement and $4,042.10 in prejudgment interest to the Receiver. (Rel. 33-9180; File No. 3-14218)
Administrative Proceeding Instituted Against Mitchell Porter & Williams, Inc. and Thomas L. Mitchell
On Feb. 2, 2011, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and pursuant to Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act) against Thomas L. Mitchell (Mitchell) and pursuant to Section 203(e) of the Advisers Act against Mitchell, Porter & Williams, Inc. (MPW) (jointly Respondents). The Division of Enforcement alleges in the OIP that on October 26, 2010, the District Court for the Central District of California, Western Division enjoined MPW and Mitchell from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, enjoined MPW from future violations of Sections 203A and 204 of the Advisers Act and Rule 204-2 thereunder and enjoined Mitchell from aiding and abetting violations of Section 203A and 204 of the Advisers Act and Rule 204-2 thereunder and from future violations of Section 15(a) of the Exchange Act.
The Commission’s Complaint alleged that from at least 1995 until March 2010, MPW and Mitchell operated a $14.7 million Ponzi scheme targeting retiring Los Angeles County Metropolitan Transit Authority bus operators. The Complaint alleged Respondents raised at least $14.7 million from at least 82 clients nationwide through the offer and sale of promissory notes paying 10% to 15% a year issued by entities controlled by Mitchell. The Complaint further alleged that Respondents used new client funds to pay interest on old clients’ promissory notes and to pay MPW’s operating expenses and Mitchell’s living expenses. The Complaint finally alleged that MPW, aided and abetted by Mitchell, improperly registered with the Commission as an investment adviser even though it had less than $25 million under management and failed to make and keep required books and records.
A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations contained in the OIP are true, to afford Respondents MPW and Mitchell an opportunity to respond, and to determine what, if any, remedial sanctions are appropriate and in the public interest.
The OIP 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. (Rels. 34-63823; IA-3147; File No. 3-14219)
SEC Obtains Consent Orders and Final Judgments as to Defendants Robert Moffat and Mark Kurland, and Dismisses Action as to New Castle Funds LLC
The SEC announced that the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Consent Order and Final Judgment as to Robert Moffat on Feb. 1, 2011, and, on Jan. 31, 2011, entered a Consent Order and Final Judgment as to Mark Kurland and a Stipulation and Order of dismissal as to New Castle Funds LLC, in the SEC’s insider trading case, SEC v. Galleon Management, LP, et al., 09-CV-8811 (SDNY) (JSR). The SEC filed its action on Oct. 16, 2009, against Raj Rajaratnam Galleon Management, LP, Danielle Chiesi, Moffat, Kurland, and others, alleging a widespread and repeated insider trading scheme involving hedge funds, industry professionals, and corporate insiders. When the SEC’s complaint was filed, Moffat was Senior Vice President and Group Executive of IBM’s Systems and Technology Group. Kurland was Chief Executive Officer of New Castle, which was a registered investment adviser based in White Plains, New York, that advised several hedge funds and, as of April 2009, had assets under management of over $970 million. Chiesi was a portfolio manager at New Castle, and she reported to Kurland.
The SEC alleged that Moffat tipped Chiesi, a close personal friend, to material nonpublic information about (i) Sun Microsystems, Inc.’s quarterly earnings for its second quarter, (ii) IBM’s fiscal quarters ending December 2008 and March 2009, and (iii) pending transactions concerning Advanced Micro Devices, Inc. Moffat had learned of the inside information by virtue of his senior position at IBM. Chiesi traded in funds advised by New Castle on the basis of the inside information. Chiesi also tipped others, including Kurland, who also traded on the basis of the inside information. Chiesi also was tipped inside information about Akamai Technologies, Inc.’s earnings for its second quarter from an Akamai executive who was a family friend of Chiesi’s. Chiesi and Kurland traded in New Castle funds based on this information. The SEC charged Moffat, Kurland, and New Castle, among others, with violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and further charged Kurland and New Castle with violations of Section 17(a) of the Securities Act of 1933 (Securities Act).
The Consent Order and Final Judgment entered against Moffat: (1) permanently enjoins him from violations of Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; and (2) permanently bars 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.
The Consent Order and Final Judgment entered against Kurland: (1) permanently enjoins him from violations of Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act; (2) orders him liable for disgorgement of $4,213,630.18, representing profits made and/or losses avoided as a result of the unlawful trading alleged to have occurred at New Castle, together with prejudgment interest thereon in the amount of $204,553.59, for a total of $4,418,183.77.
The Court also entered a Stipulation and Order of dismissal as to New Castle, which is no longer operating as an investment advisor and has filed Form ADV-W with the Commission, withdrawing its registration as an investment advisor. It has agreed to cooperate with the Commission’s staff and has represented, as a condition of the dismissal of the Commission's action against it, that it will not engage in further operations. [SEC v. Galleon Management, LP, et al., Civil Action No. 09-CV-8811 (SDNY) (JSR)] (LR-21834)
Settlement of SEC Enforcement Action By Rodney B. Johnson and Robert T. Hoffman Concludes Case Against Six Former Fischer Imaging Executives
The Securities and Exchange Commission announced that on Jan. 31, 2011, the United States District Court for the District of Colorado entered Final Judgments against Defendants Rodney B. Johnson, former CFO of Fischer Imaging Corp. (Fischer) and Robert T. Hoffman, a former Fischer sales executive. In its complaint, filed on June 7, 2005, the Commission alleged that the Defendants were involved in improper revenue recognition and other accounting misstatements by Fischer.
Johnson, without admitting or denying the Commission’s allegations, consented to the entry of a Final Judgment that enjoins him from violations of Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, 13b2-2 and 13a-14 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; prohibits him from acting as an officer or director of a public company for five years; orders him to pay disgorgement of $36,761 and prejudgment interest of $23,268; and does not impose a civil penalty based on Johnson’s sworn statement of financial condition and other documents and information submitted to the Commission.
Hoffman, without admitting or denying the Commission’s allegations, consented to the entry of a Final Judgment that enjoins him from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The court also approved the Commission’s motion for dismissal of a claim against Hoffman for aiding and abetting violations of Section 10(b) of the Exchange Act and rule 10b-5 thereunder.
On Aug. 12, 2010, the Court entered the following Final Judgments against the four other Defendants in this enforcement action, which the Defendants consented to without admitting or denying the Commission’s allegations:
On Aug. 24, 2010, the Commission issued an administrative order that directs Burke to cease and desist from committing or causing any violations and any future violations of Section 13(b)(5) of the Exchange Act and Rules 13b2-1, 13b2-2, and 13a-14 promulgated thereunder; and from causing any violations and any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20 and 13a-13 promulgated thereunder. The Order also suspends Burke from appearing or practicing before the Commission as an accountant with the right to apply for reinstatement after three years. Burke consented to the issuance of the order without admitting or denying the Commission’s findings.
For further information, see Litigation Release No. 19255 (June 8, 2005); Securities Exchange Act of 1934 Release No. 62761 (Aug. 24, 2010). [SEC v. Louis E. Rivelli, et al., Civil Action No. 1:05-cv-01039-RPM (D.Colo.)] (LR-21835; AAE Rel. 3238)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by BATS Exchange to establish a $5 Strike Price Program (SR-BATS-2011-003) 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 February 7. (Rel. 34-63803)
A proposed rule change filed by The NASDAQ Stock Market regarding the listing of option series with $1 strike prices (SR-NASDAQ-2011-018) 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 February 7. (Rel. 34-63809)
A proposed rule change filed by NASDAQ OMX PHLX regarding the listing of option series with $1 strike prices (SR-Phlx-2011-14) 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 February 7. (Rel. 34-63810)
Accelerated Approval of Proposed Rule Change
The Commission issued notice of filing of Amendment No. 1, and granted accelerated approval of a proposed rule change (SR-FINRA-2010-053), as modified by Amendment No. 1 and submitted by the Financial Industry Regulatory Authority to amend the Panel Composition Rule, and related rules, of the Code of Arbitration Procedure for Customer Disputes, to provide the option to choose an all public arbitration panel in all cases involving a customer. Publication is expected in the Federal Register during the week of February 7. (Rel. 34-63799)
Proposed Rule Change
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2011-02) under Section 19(b)(1) of the Exchange Act to accommodate the clearance of options on certain indexes measuring the relative performance of one reference security or reference index relative to a second reference security or reference index. Publication is expected in the Federal Register during the week of February 7. (Rel. 34-63811)
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