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COMMISSION ANNOUNCEMENTSStatements of SEC Chairman Christopher Cox and Enforcement Division Director Linda Thomsen Regarding Immediate Commission Actions to Combat Market ManipulationSecurities and Exchange Commission Chairman Christopher Cox and SEC Enforcement Division Director Linda Chatman Thomsen issued the following statements today concerning ongoing and forthcoming Commission actions to investigate fraud and manipulation in the nation's securities markets: "Millions of investors entrust their savings to our securities markets because they can be confident that our markets are orderly, liquid, efficient, and rational," said Chairman Cox. "The turmoil in today's markets, particularly in the financial sector, is challenging that assumption for ordinary Americans. Markets are the best tool a free society has to price and allocate assets across a complex economy, but as is well known from experience, sometimes the wisdom of crowds is supplanted by crowd behavior. We need well-functioning markets to help us draw the line between reasonable miscalculation and error or something worse involving the failure of due diligence, self-dealing, and conflicts of interest. It is thus vitally important that the market mechanism continue to inspire investor confidence. "In order to ensure that hidden manipulation, illegal naked short selling, or illegitimate trading tactics do not drive market behavior and undermine confidence, the SEC today took several actions to address short selling abuses," Chairman Cox continued. "In addition to these initiatives, which will take effect at 12:01 a.m. ET on Thursday, I am asking the Commission to consider on an emergency basis a new disclosure rule that will require hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Division of Investment Management and the Division of Corporation Finance, the new rule will be designed to ensure transparency in short selling. Managers with more than $100 million invested in securities would be required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC." Chairman Cox continued, "Director Thomsen and the Division of Enforcement will also expand their ongoing investigations by undertaking a series of additional enforcement measures against market manipulation. The Enforcement Division will obtain disclosure from significant hedge funds and other institutional traders of their past trading positions in specific securities. Those institutions will also be required immediately to secure all of their communication records in anticipation of subpoenas for these records." SEC Director of Enforcement Linda Chatman Thomsen said, "The Enforcement Division has been investigating and will continue to investigate any suggestion of manipulative trading. We are committed to using every weapon in our arsenal to combat market manipulation that threatens investors and capital markets." The Commission is actively considering additional actions as appropriate. (Press Rel. 2008-209) Change in the Meeting: Cancellation of MeetingThe closed meeting scheduled for Thursday, Sept. 18, 2008, at 1:00 p.m., has been cancelled. For further information please contact the Office of the Secretary at (202) 551-5400. ENFORCEMENT PROCEEDINGSIn the Matter of Carl Q. LeeOn September 17, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Carl Q. Lee (Lee). The Order finds that on Sept. 5, 2008, an order of permanent injunction was entered by consent against Lee, permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-10 thereunder and from aiding and abetting violations of Exchange Act Rule 10b-10, in the civil action entitled Securities and Exchange Commission v. Michael E. Kelly, et al., Civil Action Number 07-cv-4979, in the United States District Court for the Northern District of Illinois. In the Order, the Commission finds that the Commission's complaint alleged that Lee and his business, Carl Lee and Associates, Inc., participated in a massive fraud orchestrated by Michael E. Kelly that victimized thousands of investors across the United States by raising at least $428 million through the offer and sale of fraudulent and unregistered securities called Universal Leases. Universal Leases were securities in the form of investment contracts that were structured as timeshares in several hotels in Cancun, Mexico, coupled with pre-arranged servicing agreements with a purportedly independent leasing agent that promised investors a safe investment and guaranteed returns. The complaint alleged that Lee offered and sold Universal Leases to investors and recruited others to do so. The complaint further alleged, among other things, that Lee made false and misleading statements about the safety of the Universal Leases and about the purportedly independent leasing agent, and also failed to make required disclosures about the commissions he was being paid for his Universal Lease sales. Based on the above, the Order bars Lee from association with any broker or dealer. Lee consented to the issuance of the Order without admitting or denying any of the findings in the Order except as to the entry of the order of permanent injunction against him, which he admitted. (Rel. 34-58562; File No. 3-13205) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Eight Public Companies for Failure to Make Required Periodic FilingsOn September 17, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of eight companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the eight issuers are delinquent in their 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 or thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents 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. 34-58565; File No. 3-13207) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Four Public Companies for Failure to Make Required Periodic FilingsOn September 17, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of four companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the four issuers are delinquent in their 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 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents 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. 34-58566; File No. 3-13206) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Nine Public Companies for Failure to Make Required Periodic FilingsOn September 17, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of nine companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the nine issuers are delinquent in their 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 registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents 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. 34-58567; File No. 3-13208) Wall Street Professionals Settle SEC Insider Trading Charges; Commission Bars Six Individuals from Associating with any Broker, Dealer and/or Investment AdviserThe Commission announced today that on Sept. 12, 2008, the Honorable P. Kevin Castel, United States District Judge for the Southern District of New York, entered final judgments against seven defendants -- Robert D. Babcock, Mark E. Lenowitz, David A. Glass, Jasper Capital LLC, Randi E. Collotta, Christopher K. Collotta and Marc R. Jurman -- in SEC v. Guttenberg, et al., C.A. No. 07 CV 1774 (S.D.N.Y.), an insider trading case the Commission filed on March 1, 2007. In related administrative proceedings, the Commission also announced today that it instituted orders barring six individuals from future association with any broker, dealer and/or investment adviser, and suspending one individual from appearing or practicing before the Commission as an attorney. The Commission's complaint in this case alleged illegal insider trading charges in connection with two related schemes in which Wall Street professionals serially traded on material, nonpublic information tipped, in exchange for cash kickbacks, by insiders at UBS Securities LLC and Morgan Stanley & Co., Inc. The Commission alleged that from 2001 through 2006, Mitchel S. Guttenberg, an executive director in the equity research department of UBS, illegally tipped material, nonpublic information concerning upcoming UBS analyst upgrades and downgrades to two Wall Street traders, Erik R. Franklin and David M. Tavdy, in exchange for sharing in the illicit profits from their trading on that information. Both Franklin and Tavdy had downstream tippees who traded on the information including Babcock, Lenowitz, Glass and Jasper Capital. The complaint also alleged that from 2005 to 2006, Randi Collotta, an attorney who worked in the global compliance department of Morgan Stanley, together with her husband, Christopher Collotta, an attorney in private practice, tipped material, nonpublic information concerning upcoming corporate acquisitions involving Morgan Stanley's investment banking clients, to Marc Jurman, a registered representative in Florida, in exchange for sharing in his illicit trading profits. Jurman had several downstream tippees, including Babcock, who also traded on the information. Without admitting or denying the allegations in the complaint, the following defendants settled the SEC's insider trading charges:
The Commission also announced today that Laurence McKeever, a former general securities principal at Assent LLC, consented to a Commission Order Instituting Administrative Proceedings pursuant to Section 15(b) of the Exchange Act barring him from future association with any broker or dealer. The Order finds that McKeever was convicted of conspiracy to commit securities fraud, wire fraud and commercial bribery. U.S. v. Samuel W. Childs, Jr. and Laurence McKeever, No. 1:07-CR-142 (S.D.N.Y.). In that case, McKeever pled guilty to charges that he accepted bribes from Glass and Tavdy in exchange for not reporting their illegal trading to Assent management. McKeever consented to the Order without admitting or denying the findings in the order except as to his guilty plea. (Rel. 34-58575; File No. 3-13212) The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. [SEC v. Mitchel S. Guttenberg, Erik R. Franklin, David M. Tavdy, Mark E. Lenowitz, Robert D. Babcock, Andrew A. Srebnik, Ken Okada, David A. Glass, Marc R. Jurman, Randi E. Collotta, Christopher K. Collotta, Q Capital Investment Partners, LP, DSJ International Resources Ltd. (d/b/a Chelsey Capital), and Jasper Capital LLC, C.A. No. 07 CV 1774 (S.D.N.Y) (PKC)] (LR-20725) David S. Davidson Barred From Association with Any Broker or DealerThe Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against David S. Davidson. The Order finds that, on July 24, 2008, the United States District Court for the Eastern District of Pennsylvania entered a final judgment by consent against Davidson permanently enjoining him 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. The Commission's complaint, filed on February 17, 2005, alleged that, from late October 2002 through March 2003, a now defunct broker-dealer named D.L. Cromwell Investments, Inc. (Cromwell) conducted a fraudulent short selling scheme in the stock of Expedia, Inc. (Expedia). The complaint alleged that Davidson, the former chairman and chief executive officer of Cromwell, and his co-defendants used the access that Cromwell, as an introducing broker, had to its clearing broker's trading system to falsely place Expedia buy orders, which they knew they would cancel the next day, claiming the orders were placed in error. The complaint further alleged that defendants entered and cancelled these fictitious buys almost daily for five months, concealing the size of Cromwell's short position, and avoiding serious financial consequences until the scheme unraveled when Expedia's price rose, and Cromwell could not cover its short position, leaving the clearing broker to pay $18 million to cover the position. The Order also finds that, on June 26, 2003, Davidson pled guilty to one count of conspiracy to commit securities fraud, two counts of securities fraud, and one count of making false statements to the Securities and Exchange Commission before the United States District Court for the Eastern District of New York. On October 31, 2007, an amended judgment in the criminal case was entered against Davidson. He was sentenced to probation for five years to run concurrently on all counts, ordered to make restitution in the amount of $6.9 million and to pay a $400 fine. Based on the above, the Order bars Davidson from association with any broker or dealer. Davidson consented to the issuance of the Order without admitting or denying the findings in the Order, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.2 and III.4 of the Order, which are admitted. (Rel. 34-58579; File No. 3-13216) Lloyd S. Beirne Barred From Association with Any Broker or DealerThe Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Lloyd S. Beirne. The Order finds that, on July 24, 2008, the United States District Court for the Eastern District of Pennsylvania entered a final judgment by consent against Beirne permanently enjoining him 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. The Commission's complaint, filed on Feb. 17, 2005, alleged that, from late October 2002 through March 2003, a now defunct broker-dealer named D.L. Cromwell Investments, Inc. (Cromwell) conducted a fraudulent short selling scheme in the stock of Expedia, Inc. (Expedia). The complaint alleged that Beirne, the former president of Cromwell, and his co-defendants used the access that Cromwell, as an introducing broker, had to its clearing broker's trading system to falsely place Expedia buy orders, which they knew they would cancel the next day, claiming the orders were placed in error. The complaint further alleged that defendants entered and cancelled these fictitious buys almost daily for five months, concealing the size of Cromwell's short position, and avoiding serious financial consequences until the scheme unraveled when Expedia's price rose, and Cromwell could not cover its short position, leaving the clearing broker to pay $18 million to cover the position. The Order also finds that, on June 26, 2003, Beirne pled guilty to one count of conspiracy to commit securities fraud, two counts of securities fraud, and one count of making false statements to the Securities and Exchange Commission before the United States District Court for the Eastern District of New York. On October 31, 2007, an amended judgment in the criminal case was entered against Beirne. He was sentenced to probation for five years to run concurrently on all counts, ordered to make restitution in the amount of $6.9 million and to pay a $400 fine. Based on the above, the Order bars Beirne from association with any broker or dealer. Beirne consented to the issuance of the Order without admitting or denying the findings in the Order, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.2 and III.4 of the Order, which are admitted. (Rel. 34-58580; File No. 3-13217) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2008/dig091808.htm
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