SEC News Digest

COMMISSION ANNOUNCEMENTS

Statement of Chairman Cox Regarding Progress Report of Advisory Committee on Improvements to Financial Reporting

Securities and Exchange Commission Chairman Christopher Cox today issued the following statement regarding the progress report presented by the Advisory Committee on Improvements to Financial Reporting:

"The Advisory Committee on Improvements to Financial Reporting today presented to the Commission a progress report on the Committee's work to date. This is an important step toward making financial information more useful for investors and reducing unnecessary complexity. I have asked the SEC's professional staff to analyze the report and its proposals, and to provide recommendations to the Commission for possible consideration later this year. I thank the Committee members for their diligent work to date and look forward to additional proposals and recommendations as the Committee continues its important work over the next few months." (Press Rel. 2008-21)

RULES AND RELATED MATTERS

Order Regarding Review of FASB Accounting Support Fee for 2008 Under Section 109 of the Sarbanes-Oxley Act of 2002

The Commission has determined that the 2008 annual accounting support fee for the Financial Accounting Standards Board (FASB) is consistent with Section 109 of the Sarbanes-Oxley Act of 2002 and that the FASB may act in accordance with this determination of the Commission. (Rels. 33-8893; 34-57319)

Application For Registration as a National Securities Exchange

The Commission has published for public comment BATS Exchange, Inc.'s Application (File No. 10-182) and Amendment No. 1 thereto for Registration as a National Securities Exchange under Section 6 of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57322)

ENFORCEMENT PROCEEDINGS

In the Matter of James A. Jeffery and Thomas E. Repke

On February 14, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act), Making Findings, and Imposing Remedial Sanctions against James A. Jeffery (Jeffery) and Thomas E. Repke (Repke), (Order). The Order finds that on January 25, 2008, an order of permanent injunction was entered against Jeffery and Repke, permanently enjoining them from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. The civil action is entitled Securities and Exchange Commission v. Coadum Advisors, Inc. et al., Civil Action Number 1:08-CV-0011-ODE, in the United States District Court for the Northern District of Georgia, Atlanta Division.

Based upon the above, the Order bars Jeffery and Repke from association with any investment adviser. Jeffery and Repke consented to the issuance of the Order without admitting or denying any of the findings, except as to the entry of the permanent injunction. (Rel. IA-2704; File No. 3-12956)

In the Matter of Trautman Wasserman & Company, Inc., et al.

On February 14, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Section 9(b) of the Investment Company Act of 1940 as to Forde H. Prigot (Order). The Order finds that Forde H. Prigot (Prigot), the former chief compliance officer of registered broker-dealer Trautman Wasserman & Company, Inc. (TWCO), participated in a scheme to defraud mutual funds through, among other conduct, deceptive market timing. TWCO employed deceptive tactics to evade mutual funds' efforts to restrict TWCO's hedge fund customers' market timing of mutual funds. This illegal conduct generated significant revenues for TWCO and harmed mutual fund investors by diluting the value of their investment. TWCO's mutual fund trading department consisted principally of two registered representatives, James A. Wilson, Jr. (Wilson) and Scott A. Christian (Christian). Numerous mutual funds notified Wilson, Christian, and others at TWCO that frequent trading by TWCO's customers violated prohibitions in the mutual funds' prospectuses, and the mutual funds instructed TWCO to stop permitting its customers to trade those funds. Christian and others, acting at Wilson's direction, then employed deceptive tactics to continue trading the mutual funds that had requested TWCO's customers to stop. Prigot also participated in TWCO's deceptive market timing. Prigot took steps to deceive mutual fund companies about TWCO's customers' market timing to evade the mutual fund companies' efforts to curtail the practice. As a result of his conduct, Prigot willfully aided and abetted and caused violations of Sections 10(b) and 15(c) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-3 and 10b-5 thereunder.

Based on the above, the Order directs Prigot to cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from causing any violations and any future violations of Section 15(c) of the Exchange Act and Rule 10b-3 thereunder. The Order directs Prigot to pay a civil money penalty in the amount of $30,000. Finally, the Order suspends Prigot from association with any broker or dealer, and prohibits Prigot from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, for a period of six (6) months. Prigot consented to the issuance of the Order without admitting or denying the Commission's findings, except as to the Commission's jurisdiction over him and the subject matter of the proceedings. For further information see Rel. 33-8780 (Feb. 5, 2007). (Rels. 34-57329; IC-28154; File No. 3-12559)

In the Matter of Trautman Wasserman & Company, Inc.

Commission Settles with Former Chief Financial Officer of Formerly Registered Broker-Dealer Trautman Wasserman & Company, Inc.

On February 14, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 9(b) of the Investment Company Act of 1940, and Instituting a Cease-and-Desist Proceeding Pursuant to Section 8A of the Securities Act of 1933, Section 21C of the Securities Exchange Act of 1934 and Section 9(f) of the Investment Company Act of 1940, Making Findings and Imposing a Cease-and-Desist Order as to Mark Barbera (Order). The Order finds that registered broker-dealer Trautman Wasserman & Company, Inc. (TWCO) engaged in a scheme to defraud mutual funds through, among other conduct, late trading. Between January 2001 and September 2003, TWCO accepted thousands of orders from its hedge fund customers to trade mutual funds after 4:00 p.m. ET, but executed the trades as though they had been received prior to 4:00 p.m. ET. This illegal conduct generated significant revenues for TWCO and harmed mutual fund investors by diluting the value of their investment. Mark Barbera (Barbera), TWCO's chief financial officer, sought capacity that could be used for mutual fund trading. Additionally, Barbera was present for parts of various discussions between TWCO partners and officers where the practice of submitting trades after 4:00 p.m. ET was discussed. Further, Barbera approved using TWCO assets to trade mutual funds through a proprietary account, which subsequently traded on the basis of news and market conditions after the market close, but those trades were priced at that day's net asset value. The CEO of TWCO generally placed the trades in the proprietary account, and Barbera monitored the TWCO proprietary account for net capital purposes. As a result of his conduct, Barbera willfully violated Section 17(a)(2) of the Securities Act of 1933 (Securities Act), and caused violations of Section 15(c) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 22c-1, as adopted under Section 22(c) of the Investment Company Act of 1940 (Investment Company Act).

The Order directs Barbera to cease and desist from committing or causing any violations and any future violations of Section 17(a)(2) of the Securities Act, from causing any violations and any future violations of Section 15(c) of the Exchange Act, and from committing or causing any violations and any future violations of Rule 22c-1, as adopted under Section 22(c) of the Investment Company Act. Further, the Order suspends Barbera from association with any broker or dealer, and prohibits Barbera from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, for a period of six (6) months. Barbera consented to the issuance of the Order without admitting or denying the Commission's findings, except as to the Commission's jurisdiction over him and the subject matter of the proceedings. (In the Matter of Trautman Wasserman & Company, Inc.; Rel. 33-8794 (Feb. 5, 2007); Rel. 34-57327 (Feb. 14, 2008); File No. 3-12559).

Barbera also consented to the entry of a final judgment in the U.S. District Court directing him to pay a civil money penalty of $60,000 pursuant to Section 20(d) of the Securities Act. The final judgment resolves similar allegations contained in a complaint filed in the Southern District of New York, which charged Barbera with violating Section 17(a)(2) of the Securities Act. Barbera consented, without admitting or denying the allegations in the complaint, to the entry of the final judgment. (Rels. 33-8894; 34-57327; IC-28152; File No. 3-12559); [SEC v. Mark Barbera, Civil Action Number 08 CV 1538 (MGC) (S.D.N.Y.)] (LR-20458)

In the Matter of Trautman Wasserman & Company, Inc., et al.

On February 14, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Sections 9(b) and 9(f) of the Investment Company Act of 1940 as to James A. Wilson, Jr. (Order). The Order finds that James A. Wilson, Jr. (Wilson), a registered representative at registered broker-dealer Trautman Wasserman & Company, Inc. (TWCO), directed a scheme to defraud mutual funds through late trading and deceptive market timing. Between January 2001 and September 2003, TWCO accepted thousands of orders from its hedge fund customers to trade mutual funds after 4:00 p.m. ET, but executed the trades as though they had been received prior to 4:00 p.m. ET. In addition, TWCO employed deceptive tactics to evade mutual funds' efforts to restrict TWCO's hedge fund customers' market timing of mutual funds. This illegal conduct generated significant revenues for TWCO and harmed mutual fund investors by diluting the value of their investment. TWCO's mutual fund trading department consisted principally of two registered representatives, Wilson and Scott A. Christian (Christian). Wilson directed the late trading and market timing schemes, and he personally accepted customers' late trading orders. Christian handled day-to-day communications with customers, and he regularly accepted and entered late trades. In carrying out the fraudulent late trading scheme, Wilson and Christian created records falsely indicating that customers had placed trades before 4:00 p.m. ET. Further, numerous mutual funds notified Wilson, Christian, and others at TWCO that frequent trading by TWCO's customers exceeded restrictions in the mutual funds' prospectuses, and the mutual funds instructed TWCO to stop permitting its customers to trade those funds. Wilson, Christian and others, acting at Wilson's direction, then employed deceptive tactics to continue trading the mutual funds that had requested TWCO's customers to stop. As a result of his conduct, Wilson willfully violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, and willfully aided and abetted and caused violations of Sections 15(c) and 17(a) of the Exchange Act and Rules 10b-3 and 17a-3, and Rule 22c-1, as adopted under Section 22(c) of the Investment Company Act of 1940 (Investment Company Act).

Based on the above, the Order directs Wilson to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, from causing any violations and any future violations of Sections 15(c) and 17(a) of the Exchange Act and Rules 10b-3 and 17a-3 thereunder, and from committing or causing any violations and any future violations of Rule 22c-1, as adopted under Section 22(c) of the Investment Company Act. The Order directs Wilson to pay disgorgement of $534,160 and prejudgment interest of $145,840, and a civil money penalty in the amount of $120,000. Finally, the Order bars Wilson from association with any broker or dealer, and prohibits Wilson from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter. Wilson consented to the issuance of the Order without admitting or denying the Commission's findings, except as to the Commission's jurisdiction over him and the subject matter of the proceedings. For further information see Rel. 33-8780 (Feb. 5, 2007). (Rels. 33-8895; 34-57328; IC-28153; File No. 3-12559)

SEC Sanctions Westinghouse Air Brake Technologies Corporation for Improper Payments to Indian Government Employees

On February 14, the Commission instituted settled enforcement proceedings charging Westinghouse Air Brake Technologies Corporation (Wabtec), which is headquartered in western Pennsylvania, with violations of the Foreign Corrupt Practices Act (FCPA) in connection with certain improper payments that Wabtec's Indian subsidiary, Pioneer Friction Limited (Pioneer), made to employees of the government of India in order to obtain or retain business from the Indian national railway system. Wabtec manufactures, among other things, brake subsystems and related products for locomotives, freight cars and passenger vehicles.

In an administrative order, the Commission found that Wabtec violated the anti-bribery, books-and-records and internal controls provisions of the FCPA. The Commission ordered Wabtec to cease and desist from such violations and to disgorge $259,000, together with $29,351 in prejudgment interest. The Commission also required Wabtec to retain an independent consultant to review and make recommendations concerning the company's FCPA compliance policies and procedures.

Pioneer, incorporated and headquartered in India, manufactures low and high friction brake blocks for rail operations. Pioneer's financial results are reported on a consolidated basis as part of Wabtec's consolidated financial statements. The Commission found that, from at least 2001 through 2005, Pioneer made over $137,400 in improper cash payments to employees of the Indian government in order to have its competitive bids for government business granted or considered. As a result of being awarded contracts in 2005, Pioneer realized profits of $259,000. In connection with the improper payments, Wabtec failed to keep accurate books and records, and failed to have effective internal controls.

As a result of the conduct described above, the Commission found that Wabtec violated Sections 13(b)(2)(A), 13(b)(2)(B) and 30A of the Securities Exchange Act of 1934. In a separate civil action filed in the U.S. District Court for the Eastern District of Pennsylvania, Wabtec agreed to the entry of a final judgment requiring it to pay a civil penalty in the amount of $87,000. Wabtec consented to settle both the administrative proceeding and the civil action without admitting or denying the findings in the Commission's administrative order or the allegations in the Commission's civil complaint.

In addition, in a separate non-prosecution agreement with the United States Department of Justice, Wabtec will pay a $300,000 fine. (Rel. 34-57333; AAE Rel. No. 2785; File No. 3-12957); [SEC v. Westinghouse Air Brake Technologies Corporation, Civil Action No. 08-CV-706 (E.D. Pa.)] (LR-20457)

INVESTMENT COMPANY ACT RELEASES

Morgan Stanley Investment Management Inc., et al.

An order has been issued on an application filed by Morgan Stanley Investment Management Inc., et al. under Sections 6(c) and 17(b) of the Investment Company Act for an exemption from Section 17(a) of the Act. The order permits certain registered investment companies (Funds) to engage in principal transactions involving money market instruments with a broker dealer that is an affiliated person of an affiliated person of the Funds. (Rel. IC-28150 - February 13)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-Phlx-2008-10) filed by the Philadelphia Stock Exchange. relating to payment for order flow and linkage P/A orders 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 18. (Rel. 34-57313)

A proposed rule change and Amendment No. 1 filed by the Chicago Stock Exchange (SR-CHX-2008-01) relating to participant fees and credits 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 February 18. (Rel. 34-57315)

A proposed rule change and Amendment No. 1 filed by the National Stock Exchange (SR-NSX-2008-01) to amend Exchange Rule 16 and the Fee Schedule to modify fees and market data rebates for AutoEx transactions and other changes 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 February 18. (Rel. 34-57316)

A proposed rule change filed by NYSE Arca (SR-NYSEArca-2008-15), through its wholly owned subsidiary, NYSE Arca Equities, Inc., to continue to list and trade the shares of the iShares MSCI Mexico Index Fund has become immediately 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 18. (Rel. 34-57320)

A proposed rule change (SR-Amex-2008-11) filed by the American Stock Exchange to delete the Amex's AEMI-One rules, which are no longer in effect, 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 February 18. (Rel. 34-57321)

A proposed rule change, and Amendment No. 1 thereto, filed by New York Stock Exchange to permit the exchange to modify or cancel clearly erroneous trades (SR-NYSE-2008-09) 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 February 18. (Rel. 34-57323)

Approval of Proposed Rule Changes

A proposed rule change (SR-CBOE-2007-143) filed by the Chicago Board Options Exchange relating to the imposition of fines for minor rule violations has been approved. Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57314)

The Commission approved a proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2007-151) relating to Linkage Fees. Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57317)

Proposed Rule Changes

The NYSE Arca filed a proposed rule change (SR-NYSEArca-2007-91), and Amendment No. 1 thereto, relating to listing and trading of six iShares® S&P GSCI™ Commodity-Indexed Trusts. Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57318)

The American Stock Exchange filed a proposed rule change (SR-Amex-2008-04) related to index dissemination requirements for Index-Linked Securities. Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57325)

Accelerated Approval of Proposed Rule Change

The Commission granted accelerated approval to a proposed rule change (SR-BSE-2008-07) submitted by the Boston Stock Exchange to list and trade options already listed on another national securities exchange. Publication is expected in the Federal Register during the week of February 18. (Rel. 34-57324)

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