Closed Meeting on Thursday, November 14, 2013 at 2:00 p.m.
The subject matter of the Closed Meeting will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; adjudicatory matters; 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.
Commission Charges Royal Bank of Scotland Subsidiary with Misleading Investors in Subprime RMBS Offering
The Securities and Exchange Commission (Commission) today charged RBS Securities Inc., a subsidiary of the Royal Bank of Scotland plc, with misleading investors in a 2007 subprime residential mortgage-backed security (RMBS) offering. RBS agreed to settle the matter and pay more than $150 million, which the SEC will use to compensate investors for harm suffered as a result of RBS’s conduct.
The SEC alleges that RBS said the loans backing the offering “generally” met the lender’s underwriting guidelines even though nearly 30 percent fell so short of the guidelines that RBS should have excluded them from the offering entirely. Stamford, Connecticut-based RBS, then known as Greenwich Capital Markets, quickly reviewed a very small portion of the loans and was paid approximately $4.4 million for its work as the lead underwriter on the transaction, the SEC said in a complaint filed in federal court in Connecticut.
“In its rush to meet a deadline set by the seller of these loans, RBS cut corners and failed to complete adequate due diligence, with predictable results,” said George S. Canellos, co-director of the SEC’s Division of Enforcement. “Today’s action punishes that misconduct and secures more than $150 million in relief for those harmed by this shoddy securitization.”
RBS told investors the loans backing the offering were “generally in accordance with” the lender’s underwriting guidelines, which consider the value of the home relative to the mortgage and the borrower’s ability to repay the loan. RBS knew or should have known that was false because due diligence before the offering showed that almost 30% of the loans underlying the offering did not meet the underwriting guidelines. In its complaint, the SEC said RBS gave investors a misleading impression of the quality of the loans backing the offering and the likelihood of their repayment.
The SEC’s complaint charges Stamford-based RBS with violations of Sections 17(a)(2) and (3) of the Securities Act of 1933. RBS, without admitting or denying the SEC’s allegations, has agreed to a final judgment that orders it to disgorge $80.3 million, plus prejudgment interest of $25.2 million, and pay a civil penalty of $48.2 million.
The SEC thanks the federal-state Residential Mortgage-Backed Securities Working Group for its assistance in this matter. The SEC’s investigation was conducted by members of the SEC’s Complex Financial Instruments Unit and the Boston Regional Office – Kerry Dakin, Jim Goldman, Rua Kelly, and Kevin Kelcourse. (Press Rel. 2013-239; LR-22866)
Commission Charges New York-Based Audit Firm and Four Accountants for Failures in Audits of China-Based Companies
The Commission today announced sanctions against a New York-based audit firm, its founder, two other partners, and an audit manager for their roles in the failed audits of three China-based companies publicly traded in the U.S.
An SEC investigation found that Sherb & Co. LLP and its auditors falsely represented in audit reports that they had conducted the audits in accordance with U.S. auditing standards when it fact they were riddled with failures and improper professional conduct. One of the companies they audited – China Sky One Medical Inc. – has since been charged by the SEC with financial fraud.
To settle the SEC’s charges, the firm and the four auditors agreed to be barred from practicing as accountants on behalf of any publicly traded company or other entity regulated by the SEC. The firm agreed to pay a $75,000 penalty.
“Auditors are critical gatekeepers in the financial reporting process, but Sherb & Co. and its auditors failed to live up to their professional obligations in multiple audits during a five-year period,” said Andrew Ceresney, co-director of the SEC’s Division of Enforcement.
According to the SEC’s order instituting settled administrative proceedings, the flawed audits involved China Sky One Medical, China Education Alliance Inc., and Wowjoint Holdings Ltd. The individuals responsible for the audits were the firm’s founder Steven J. Sherb, fellow partners Christopher A. Valleau and Mark Mycio, and audit manager Steven N. Epstein. They failed to properly plan and execute the audits, and they did not obtain sufficient competent evidential matters concerning sales, revenue, or bank balances. They ignored clear red flags and failed to exercise professional skepticism and due care. They also failed to maintain complete audit work papers.
According to the SEC’s order, Sherb engaged in improper professional conduct as the concurring partner for the China Sky audit and as concurring partner and engagement quality review (EQR) partner for the Wowjoint audits. Valleau engaged in improper professional conduct as the engagement partner for the China Sky audit and four of five Wowjoint audits, and as the EQR for the China Education audit. Mycio engaged in improper professional conduct as the engagement partner for the China Education audit and one of the Wowjoint audits. Epstein engaged in improper professional conduct as the senior audit manager on the China Sky audit, China Education audit, and four of five Wowjoint audits.
The SEC order finds that Sherb & Co., Sherb, Valleau, Mycio, and Epstein violated Rule 102(e)(1)(ii) of the SEC’s Rules of Practice and Section 4(C) of the Securities Exchange Act of 1934. The SEC’s order also finds that Sherb & Co. and Mycio violated Exchange Act Section 10A(b)(1). Sherb & Co. and Mycio are ordered to cease and desist from committing or causing any violations of Section 10A(b)(1) of the Exchange Act. Sherb, Valleau, and Mycio are prohibited from practicing before the SEC as an accountant for at least five years, and Epstein is barred for at least three years.
The SEC’s investigation has been conducted by Rhoda Chang, Junling Ma, C. Dabney O’Riordan, Kam Lee, Osman Handoo, Yuri Zelinsky, Neil Welch, and Gregory Faragasso. (Press Rel. 2013-238; Rel. 34-70823)
The Commission Dismisses Its Claims for Disgorgement and Prejudgment Interest against Charles O. Morgan, Jr., as Personal Representative of the Estate of Frederick J. Kunen
The Commission announced that it dismissed its claims for disgorgement and prejudgment interest against Charles O. Morgan, Jr., in his capacity as personal representative of the probate estate of Frederick J. Kunen (Kunen's Estate), because Kunen's Estate was placed under Receivership. Morgan had not been sued in his personal capacity.
On August 23, 2007 the Commission filed an emergency civil action against Charles O. Morgan, Jr., as personal representative of Kunen's Estate, in connection with a fraudulent options trading scheme orchestrated by Frederick J. Kunen (Kunen). Kunen died on July 11, 2007 at age 55. That same day, the Honorable Alan S. Gold, United States District Judge for the Southern District of Florida entered, among other things, an emergency order temporarily freezing the assets of Kunen's Estate and appointed a receiver over Kunen's estate. The court appointed receiver filed his final report and has since been discharged. [SEC v. Charles O. Morgan, Jr., as Personal Representative of the Estate of Frederick J. Kunen; SEC v. Terry E. Provence and DT Capital LLC, Case No. 07-22204-CIV-GOLD (S.D. Fla.) (Consolidated Cases)] (LR-22864)
Commission Obtains Final Judgment against Defendants Charged with Perpetrating $35 Million International Boiler Room Scheme
The Commission announced that the United States District Court for the Central District of California entered a final, settled judgment against defendants Nicholas Louis Geranio, The Good One, Inc., and Kaleidoscope Real Estate, Inc. for their roles in a $35 million scheme to manipulate the market and to profit from the issuance and sale of certain U.S. companies’ stock through offshore boiler rooms.
Pursuant to the judgment issued on November 1, 2013, the court ordered Geranio, The Good One and Kaleidoscope jointly and severally to pay disgorgement of $2,135,000, prejudgment interest thereon of $427,270, and a civil penalty of $500,000, barred them from participating in any offering of penny stock, and permanently enjoined them from violations of the antifraud provisions of the federal securities laws. The judgment also barred Geranio from acting as an officer or director of any public company and ordered him to pay an additional $279,000 in disgorgement plus prejudgment interest thereon of $55,835, representing monies received by another defendant, Keith Field, provided that the SEC shall not obtain double recovery from Geranio and Field. Finally, the judgment ordered relief defendant BWRE Hawaii, LLC to pay, jointly and severally with Geranio, The Good One, and Kaleidoscope, an additional $240,000 in disgorgement plus prejudgment interest thereon of $55,295.
The SEC’s investigation was conducted by Ricky Sachar, Carolyn Kurr and Joshua Felker in the home office, and the SEC’s litigation is being led by Duane Thompson in the home office. [SEC v. Nicholas Louis Geranio, et al., Civil Action No. CV12-04257 (C.D. Calif. May 16, 2012)] (LR-22865)
In the Matter of Victoria A. Hunt and Prestige Capital Advisors, LLC
The Commission today announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Victoria A. Hunt. The Order finds that Hunt was the CEO, managing member, and majority owner of Prestige Capital Advisors, LLC (Prestige), an investment adviser registered with the Commission. The Order further finds that on January 11, 2013, Hunt pled guilty to one count of racketeering conspiracy in violation of Title 18 United States Code, Section 1962(d); one count of securities fraud in violation of Title 15 United States Code, Sections 78j(b) and 78ff; one count of mortgage fraud in violation of Title 18 United States Code, Section 1344; one count of wire fraud in violation of Title 18 United States Code, Section 1343; and one count of money laundering in violation of Title 18 United States Code, Section 1956(h) before the United States District Court for the Western District of North Carolina, in United States v. Victoria Hunt, Crim. No. 3:12-CR-00239-FDW-5. The counts of the criminal indictment to which Hunt pled guilty alleged, among other things, that in connection with Prestige, Hunt defrauded investors and obtained money from them by means of materially false and fraudulent representations concerning her relevant experience, Prestige’s past performance, and the use of investor funds.
Based on the above, the Order bars Hunt from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. The Commission simultaneously announced the issuance of an additional Order Instituting Administrative Proceedings Pursuant to Section 203(e) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions against Prestige, which revoked its registration as an investment adviser. Hunt and Prestige each consented to the issuance of the respective Orders. (IA-3713; IA-3714)
Toby G. Scammell Sanctioned
Toby G. Scammell (Scammell) has been barred from the securities industry. The sanction was ordered in an administrative proceeding before an administrative law judge, following a June 2012 injunction against violations of the antifraud provisions of the federal securities laws. Scammell had engaged in insider trading in the securities of Marvel Entertainment, Inc. (Marvel), a few weeks before the August 31, 2009, announcement that the Walt Disney Company planned to acquire Marvel. Scammell had obtained material nonpublic information shortly before his trades by misappropriating it from his girlfriend. (ID-516)
On Sept. 9, 2013, the Commission issued an order granting conditional exemptive relief from the arranging prohibitions of Section 11(d)(1) of the Securities Exchange Act of 1934 for broker-dealers participating in the proposed global offering of Meridian Energy Limited. Publication is expected in the Federal Register during the week of November 11, 2013. (Rel. 34-70349)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change filed by Topaz Exchange, LLC relating to exchange Trading Days and hours of business and Trading Halts (SR-TOPAZ-2013-10) 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 11, 2013. (Rel. 34-70830)
A proposed rule change filed by the International Securities Exchange, LLC relating to exchange trading days and hours of business and trading halts (SR-ISE-2013-55) 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 11, 2013. (Rel. 34-70834)
A proposed rule change filed by Chicago Board Options Exchange, Incorporated to amend the CBSX Fees Schedule (SR-CBOE-2013-105) 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 11th. (Rel. 34-70827)
Notice of Proposed Rule Change
ICE Clear Credit LLC filed a proposed rule change (File No. SR-ICC-2013-08) under Section 19(b)(1) of the Securities Exchange Act of 1934 to add rules related to the clearing of MCDX index CDX contracts and make conforming changes to existing rules. Publication is expected in the Federal Register during the week of November 11th. (Rel. 34-70826)
The Fixed Income Clearing Corporation (FICC) filed a proposed rule change (File No. SR-FICC-2013-09) under Section 19(b)(1) of the Securities Exchange Act of 1934 to make the U.S. Department’s floating rate notes eligible for the Government Securities Division’s Netting Service and GCF RepoŽ at the Government Securities Division. Publication is expected in the Federal Register during the week of November 11th. (Rel. 34-70831)
Approval of a Proposed Rule Change
The Commission granted approval of a proposed rule change (SR-NASDAQ-2013-121), submitted by NASDAQ Stock Market LLC pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, and Rule 19b-4 thereunder, to list and trade Shares of the First Trust Low Beta Income Fund of First Trust Exchange-Traded Fund VI. Publication is expected in the Federal Register during the week of November 11th. (Rel. 34-70828)
The Commission granted approval of a proposed rule change (SR-NASDAQ-2013-122), submitted by NASDAQ Stock Market LLC pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, and Rule 19b-4 thereunder, to list and trade Shares of the First Trust High Income Fund of First Trust Exchange-Traded Fund VI. Publication is expected in the Federal Register during the week of November 11th. (Rel. 34-70829)
The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.
Registration statements may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.
S-1 PREMIER PACIFIC CONSTRUCTION, INC., 13103 GOLDEN WAY, POWAY, CA, 92064, (858)748-7152 - 286,000 ($28,600.00) Equity, (File 333-192107 - Nov. 6) (BR. 06) S-8 BARRACUDA NETWORKS INC, 3175 WINCHESTER BOULEVARD, CAMPBELL, CA, 95008, 408-342-5400 - 11,232,965 ($172,713,029.28) Equity, (File 333-192111 - Nov. 6) (BR. 03B) S-1 ROYAL HAWAIIAN ORCHARDS, L.P., 688 KINOOLE STREET, SUITE 121, HILO, HI, 96720, 8089698032 - 0 ($9,555,000.00) Other, (File 333-192112 - Nov. 6) (BR. 05A) S-3ASR GULFPORT ENERGY CORP, 14313 NORTH MAY AVENUE, SUITE 100, OKLAHOMA CITY, OK, 73134, 4058488807 - 0 ($0.00) Unallocated (Universal) Shelf, (File 333-192113 - Nov. 6) (BR. 04A) S-8 Sanofi, 54 RUE LA BOETIE, PARIS, I0, 75008, 33153774400 - 0 ($122,370,000.00) Equity, (File 333-192114 - Nov. 6) (BR. 01B) F-3ASR WPP Finance 2010, 27 FARM STREET, LONDON, X0, W1J 5RJ, 0044 20 7408 2204 - 0 ($0.00) Debt, (File 333-192115 - Nov. 6) (BR. 11A) S-8 SCIENTIFIC INDUSTRIES INC, 70 ORVILLE DR, AIRPORT INTERNATIONAL PLZ, BOHEMIA, NY, 11716, 6315674700 - 157,000 ($516,530.00) Equity, (File 333-192116 - Nov. 6) (BR. 10B) S-3 BIOCRYST PHARMACEUTICALS INC, 2190 PARKWAY LAKE DR, BIRMINGHAM, AL, 35244, 2054444600 - 0 ($125,000,000.00) Unallocated (Universal) Shelf, (File 333-192117 - Nov. 6) (BR. 01B) S-8 Frontier Beverage Company, Inc, 1837 HARBOR AVENUE, P.O. BOX 13311, MEMPHIS, TN, 38113, 901-947-4111 - 21,000,000 ($420,000.00) Equity, (File 333-192118 - Nov. 6) (BR. 09B) S-3 CYTOKINETICS INC, 280 EAST GRAND AVENUE, ., SOUTH SAN FRANCISCO, CA, 94080, (650) 624-3000 - 0 ($150,000,000.00) Equity, (File 333-192125 - Nov. 6) (BR. 01B) S-3 PowerShares DB G10 Currency Harvest Fund, C/O DB COMMODITY SERVICES LLC, 60 WALL STREET, NEW YORK, NY, 10005, 212-250-5883 - 0 ($1.00) Other, (File 333-192126 - Nov. 6) (BR. 08B) S-8 Quad/Graphics, Inc., N61 W23044 HARRY'S WAY, SUSSEX, WI, 53089-3995, 414-566-6000 - 2,000,000 ($69,970,000.00) Equity, (File 333-192127 - Nov. 6) (BR. 05C) S-3 CAPITAL SENIOR LIVING CORP, 14160 DALLAS PARKWAY, SUITE 300, DALLAS, TX, 75254, 9727705600 - 0 ($150,000,000.00) Unallocated (Universal) Shelf, (File 333-192128 - Nov. 6) (BR. 11C) S-3 GLOWPOINT, INC., 430 MOUNTAIN AVENUE, SUITE 301, MURRAY HILL, NJ, 07974, 9738553411 - 0 ($1.32) Equity, (File 333-192129 - Nov. 6) (BR. 11C) S-3ASR INTUIT INC, 2700 COAST AVENUE, MOUNTAIN VIEW, CA, 94043, 650-944-6000 - 116,064 ($8,257,953.60) Equity, (File 333-192130 - Nov. 6) (BR. 03B) S-3 BRIGHTCOVE INC, 290 CONGRESS STREET, BOSTON, MA, 02210, (888) 882-1880 - 0 ($100,000,000.00) Unallocated (Universal) Shelf, (File 333-192131 - Nov. 6) (BR. 03A) S-3 AMAG PHARMACEUTICALS INC., 100 HAYDEN AVENUE, LEXINGTON, MA, 02421, 6174983300 - 0 ($250,000,000.00) Other, (File 333-192132 - Nov. 6) (BR. 01A) S-4 21ST CENTURY FOX AMERICA, INC., 1211 AVENUE OF THE AMERICAS, NEW YORK, NY, 10036, 212-852-7000 - 0 ($1,000,000,000.00) Debt, (File 333-192133 - Nov. 6) (BR. 11C) S-8 TWENTY-FIRST CENTURY FOX, INC., 1211 AVENUE OF THE AMERICAS, NEW YORK, NY, 10036, 212-852-7000 - 0 ($2,915,937,500.00) Equity, (File 333-192134 - Nov. 6) (BR. 11C) S-1 Diamond Technology Enterprises Inc., 21 WEST 47TH STREET, #24, NEW YORK, NY, 10036, 212-382-2133 - 18,454,000 ($18,454,000.00) Equity, (File 333-192135 - Nov. 6) (BR. ) S-8 Truett-Hurst, Inc., 4035 WESTSIDE ROAD, HEALDSBURG, CA, 95448, 707-431-4423 - 266,000 ($1,327,340.00) Equity, (File 333-192136 - Nov. 6) (BR. 09) S-3ASR CHAMBERS STREET PROPERTIES, 47 HULFISH ST., SUITE 210, PRINCETON, NJ, 08542, 609-683-4900 - 0 ($0.00) Unallocated (Universal) Shelf, (File 333-192137 - Nov. 6) (BR. 08B) S-3 Millennial Media Inc., 2400 BOSTON STREET, SUITE 301, Baltimore, MD, 21224, (410) 552-8705 - 0 ($174,950,473.00) Equity, (File 333-192138 - Nov. 6) (BR. 11A) S-8 Millennial Media Inc., 2400 BOSTON STREET, SUITE 301, Baltimore, MD, 21224, (410) 552-8705 - 0 ($4,411,310.08) Equity, (File 333-192139 - Nov. 6) (BR. 11A) S-1 LIBERTY STAR URANIUM & METALS CORP., 5610 E SUTLER LANE, TUCSON, AZ, 85712, 520-731-8786 - 244,500,000 ($4,890,000.00) Equity, (File 333-192141 - Nov. 6) (BR. 09A)
RECENT 8K FILINGS
Form 8-K is used by companies to file current reports on the following events:
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