SEC NEWS DIGEST Issue 2003-214 November 10, 2003 COMMISSION ANNOUNCEMENTS FEE RATE ADVISORY #5 FOR FISCAL YEAR 2004 The continuing resolution funding the Securities and Exchange Commission for fiscal 2004 since Oct. 1, 2003, has been extended further through Nov. 21, 2003. Therefore, fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e), 14(g) and 31 of the Securities Exchange Act of 1934 will remain at their current rates. Five days after enactment of the Commission's regular fiscal year 2004 appropriation, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities, and the Section 14(g) fee rate applicable to proxy solicitations and statements in corporate control transactions will be increased from the current rate of $80.90 per million to $126.70 per million, as previously announced. In addition, thirty days after enactment of the Commission's regular appropriation, the Section 31 fee rate applicable to securities transactions on the exchanges and Nasdaq will be reduced from the current rate of $46.80 per million to $39.00 per million, as previously announced. Additional information on the transition to the new Section 31 fee rate will be available before the new rate becomes effective on the Web sites of The New York Stock Exchange and NASD Regulation at http://www.nyse.com and http://www.nasdr.com. A copy of the Commission's April 30, 2003, order regarding fee rates for fiscal year 2003 is available at http://www.sec.gov/news/press/2003- 57.htm. The Commission will issue further notices as appropriate to keep the public informed of developments relating to enactment of the Commission's regular appropriation and the effective dates for the above fee rate changes. These notices will be posted at the SEC's Internet Web site at http://www.sec.gov. (Press Rel. 2003-153) AMENDMENTS TO RULE 10b-18's "SAFE HARBOR" AND NEW DISCLOSURE PROVISIONS REGARDING ISSUER REPURCHASES OF EQUITY SECURITIES The Commission today issued a release adopting amendments to Rule 10b-18 under the Securities Exchange Act of 1934. Rule 10b-18 provides issuers with a safe harbor from liability for manipulation if they repurchase their common stock in the open market in accordance with the rule's manner, time, price, and volume conditions. The amendments update the rule's provisions to reflect market developments since the rule's adoption including: * easing the timing condition to allow issuers that meet an average daily trading volume and public float test to stay in the market longer and qualify for the safe harbor; * extending the safe harbor to certain after-hours repurchases; * amending the pricing condition to apply a uniform price limit for all issuers; * increasing the volume limitation to 100% of average daily trading volume following a market-wide suspension; * modifying the block exception to include block repurchases in applying the 25% average daily trading volume limitation, or alternatively, to purchase one block per week; and * clarifying the scope of safe harbor eligibility with respect to mergers, acquisitions and similar transactions. To enhance the transparency of issuer repurchases, the Commission also adopted amendments to Regulations S-K and S-B under the Exchange Act, and Exchange Act Forms 10-Q, 10-QSB, 10-K, 10-KSB, 20-F (regarding foreign private issuers), and Form N-CSR under the Exchange Act and the Investment Company Act of 1940, which require periodic disclosure of all issuer repurchases of equity securities, regardless of whether the repurchases are effected in accordance with Rule 10b-18. The amendments require issuers to disclose, among other things, the total number of shares repurchased during the past quarter, the average price paid per share, and the number of shares purchased as part of a publicly announced repurchase plan or program. (Rels. 33-8335; 34-48766; IC- 26252; File No. S7-50-02) ENFORCEMENT PROCEEDINGS ADMINISTRATIVE ACTION AGAINST WENDELL BELDEN An Administrative Law Judge has issued an Order Making Findings and Imposing Sanctions By Default Against Wendell D. Belden in Administrative Proceeding No. 3-11213, Wendell D. Belden. The Order Instituting Proceedings alleged that on Nov. 21, 2002, the United States District Court for the Northern District of Oklahoma permanently enjoined Respondent Belden from violating and/or aiding and abetting violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 15b3-1 thereunder, and Sections 204, 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act and Rules 204-1(a)(2), 206(4)-4(a)(2), and 206(4)-4(c) thereunder. The Default Order finds the allegations to be true and bars Respondent Belden from association with any investment adviser and any broker or dealer. (Rels. 34-48753; IA-2191; File No. 3- 11213) COMMISSION STRIKES PETITION FOR REVIEW AND DECLARES DECISION AS TO PETER LYBRAND f/k/a PETER TOSTO FINAL The initial decision of an administrative law judge with respect to Peter C. Lybrand f/k/a Peter C. Tosto has become final. The law judge held that Lybrand willfully violated Securities Act Sections 5(a), 5(c) and 17(a), Exchange Act Section 10(b), and Exchange Act Rule 10b-5 in connection with his involvement with certain penny stocks. The law judge permanently barred Lybrand from participating in any offering of penny stock. Lybrand filed a petition for review of the law judge's decision, but was advised by the Office of the Secretary that, pursuant to the Commission's Rule of Practice 410(b), the petition was deficient, since it did not contain Lybrand's exceptions to the law judge's decision with supporting reasons. Lybrand did not cure the deficiencies of the petition. Nor did he respond to the Division of Enforcement's motion to strike the petition for noncompliance with Rule 410(b). The Commission is authorized to reject filings that fail to meet the requirements of its Rules of Practice. The Commission therefore granted the Division's motion and struck Lybrand's petition for review. In addition, because the time for filing a proper petition for review had expired, and because the Commission chose not to review the law judge's decision on its own initiative, the Commission gave notice that the law judge's initial decision has become the final decision of the Commission. (Rel. 34-48757; File No. 3-11028) COMMISSION SANCTIONS RICHMARK CAPITAL CORP. AND DOYLE WHITE The Commission has suspended the broker-dealer registration of RichMark Capital Corporation of Irving, Texas for 90 days, effective November 24, and fined RichMark $275,000. The Commission also suspended Doyle Mark White, RichMark's 50% owner and vice president, from association with any broker or dealer for 90 days effective November 24, and fined him $55,000. In addition, RichMark and White were ordered to cease and desist from further violations, and ordered to disgorge $25,617.86 plus prejudgment interest. The Commission found that respondents violated antifraud provisions in that they recklessly failed to disclose to customers to whom they recommended and sold stock of PCC Group, Inc. (PCCG) that, at the very same time, respondents were taking action contrary to their recommendation by selling their own shares of PCCG. The Commission also found that respondents were negligent in failing to disclose to PCCG customers that respondents had a strong financial incentive to promote the sale of PCCG because of the PCCG stock and options they received under an investment banking agreement between PCCG and RichMark. The Commission emphasized that, when a securities dealer recommends stock, it must disclose any economic self interest that could be influencing its recommendation. In assessing sanctions, the Commission cited respondents' egregious failure to disclose material information to investors, and faulted respondents for exploiting the relationship of trust between RichMark and its customers. (Rels. 33-8333; 34-48758; File No. 3-9954) PROCEEDINGS AGAINST ROBERT SETTEDUCATI DISMISSED The Commission has dismissed proceedings against Robert J. Setteducati, formerly executive vice president of H.J. Meyers & Co., Inc., a former registered broker-dealer based in Rochester, N.Y. Setteducati was alleged to have been part of an effort by his firm to manipulate the price of the stock of Borealis Technology Corporation during 1996. A Commission administrative law judge dismissed all of the allegations against Setteducati based on the law judge's conclusion that the market for Borealis had not been manipulated. The law judge further found that, even if the market for Borealis had been manipulated, Setteducati's role in the Borealis offering and the stock's aftermarket trading was insufficient to hold him liable for such misconduct. The Commission agreed with the law judge's decision to dismiss, finding that the evidence was insufficient to support the allegations against Setteducati. (Rels. 33-8334; 34-48759; File No. 3-10140) COMMISSION SUSTAINS NYSE DISCIPLINARY ACTION AGAINST DAVID M. LEVINE AND TRIPLE J PARTNERS, INC. The Commission has sustained disciplinary action taken by the New York Stock Exchange, Inc. against David M. Levine, a former lessee member of the NYSE, and Triple J Partners, Inc., a former member of the NYSE. The Exchange found that: applicants executed trades for an account in which they had an interest and with which they shared profits, and failed to comply with recordkeeping requirements; applicants accepted from a specialist executions to which they were not entitled, allowed Levine's badge number to be used in transactions for which he was not the executing broker, permitted applicants' clerks to transmit to a specialist a document that was neither a written market nor limit order, and failed reasonably to supervise their business and employees; applicants conducted business with a public customer without Exchange authorization; and Levine made material misstatements to the Exchange. The Commission concluded that the sanctions imposed by the NYSE -- censures, suspensions for six months from Exchange membership, allied membership, approved person status, and from employment or association in any capacity with any member or member organization, and a $100,000 joint fine -- were neither excessive nor oppressive, given these serious violations. (Rel. No. 34-48760; File No. 3-10816) FORMER ENRON CHAIRMAN AND CHIEF EXECUTIVE OFFICER AGREES TO STIPULATION AND ORDER REQUIRING PRODUCTION OF DOCUMENTS On November 7, the Commission announced that U.S. District Court Judge Royce C. Lamberth approved a Stipulation and Order entered into between the Commission and Kenneth L. Lay requiring Lay to produce, within three days, all documents subpoenaed by the Commission that have been withheld by Lay on Fifth Amendment grounds. The Order provides that the Commission may use all documents produced by Lay, and any leads derived therefrom, for any law-enforcement purpose, including in any future action or proceeding the Commission may bring against Lay. The Order further provides that Lay shall not assert the Fifth Amendment as a basis to exclude the admission into evidence of these documents or the use of these documents in pre-trial proceedings or for any other law- enforcement purpose. Further, the Order provides that Lay shall not assert at any time for any purpose that the Commission's use of the documents, directly or indirectly, violated any Fifth Amendment rights Lay may possess, and Lay shall not make such an assertion as a basis to dismiss any future Commission action or other proceeding against Lay. The Order also provides that production of such documents by Lay does not waive any Fifth Amendment rights he may otherwise have. [SEC v. Kenneth L. Lay, Civil Action No. 1:03 MS 01962, RCL, D.D.C. Nov. 7, 2003] (LR-18449) INVESTMENT COMPANY ACT RELEASES ALPINE EQUITY TRUST, ET AL. A notice has been issued giving interested persons until Dec. 2, 2003, to request a hearing on an application filed by Alpine Equity Trust, et al., for an order under Section 12(d)(1)(J) of the Investment Company Act for an exemption from Sections 12(d)(1)(A) and (B) of the Act, under Sections 6(c) and 17(b) of the Act for an exemption from Section 17(a) of the Act, and under Section 17(d) of the Act and Rule 17d-1 under the Act to permit certain joint transactions. The order would permit certain registered management investment companies and certain entities that are excluded from the definition of investment company under Section 3(c)(1) or 3(c)(7) of the Act to invest uninvested cash in affiliated money market funds in excess of the limits in Sections 12(d)(1)(A) and (B) of the Act. (Rel. IC-26250 - November 7) HOLDING COMPANY ACT RELEASES DOMINION RESOURCES, INC., et al. A notice has been issued giving interested persons until Dec. 3, 2003, to request a hearing on a proposal filed by Dominion Resources, Inc. (DRI), a registered holding company, and Dominion Energy, Inc. (DEI), its direct, wholly owned nonutility subsidiary. The applicants request authorization to organize and acquire Dominion Wholesale, Inc. (DWI), as a subsidiary of DEI to assist their nonutility electric generation and gas-related subsidiaries in the procurement, storage and maintenance of materials, machinery, equipment, services and supplies and, incidentally, to sell unaffiliated third parties. (Rel. 35-27749) NORTHEAST UTILITIES, et al. An order has been issued authorizing a proposal filed by Northeast Utilities (NU), a registered holding company, and Northeast Nuclear Energy Company (NNECO), its wholly owned subsidiary, for NNECO to pay dividends to and, or in the alternative, to repurchase its common stock from, NU out of paid-in-capital and unearned surplus in an amount of up to $16.2 million during the period through Dec. 31, 2004. (Rel. 35- 27748) STANDARDS SETTING BOARDS FINAL RULES The Commission approved on an accelerated basis proposed temporary hearing rules (PCAOB-2003-06) submitted by the Public Company Accounting Oversight Board relating to disapproved applications for registration from public accounting firms. Publication of the approval order is expected in the Federal Register during the week of November 10. (Rel. 34-48730) SELF-REGULATORY ORGANIZATIONS PROPOSED RULE CHANGES NASD filed with the Securities and Exchange Commission a proposed rule change under Rule 19b-4 (SR-NASD-2003-147) to amend the the NASD Delegation Plan to remove the Nasdaq Stock Market, Inc.'s representation of NASD in the UTP plan. Publication of the notice in the Federal Register is expected during the week of November 10. (Rel. 34-48761) Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, the New York Stock Exchange has filed a proposed rule change (SR-NYSE-2003- 34) relating to the amendment and restatement of the constitution of the Exchange to reform the governance and management architecture of the Exchange. Publication of the notice is expected in the Federal Register during the week of November 10. (Rel. 34-48764) APPROVAL OF PROPOSED RULE CHANGE The Commission approved a proposed rule change submitted under Rule 19b- 4 of the Securities Exchange Act of 1934 by the Chicago Board Options Exchange (CBOE-2003-34) amending the membership ownership requirements for Designated Primary Market-Makers. Publication of the order is expected to appear in the Federal Register during the week of November 10. (Rel. 34-48754) WITHDRAWAL A notice has been issued giving interested persons until Dec. 2, 2003, to comment on the application of Cannon Express, Inc. to with draw its Common Stock, $.01 par value, from listing and registration on the American Stock Exchange. (Rel. 34-48763)