SEC News Digest

COMMISSION ANNOUNCEMENTS

Fee Rate Advisory #4 for Fiscal Year 2009

The continuing resolution funding the Securities and Exchange Commission for fiscal year 2009 since Oct. 1, 2008, is being extended through March 11, 2009. 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.

As previously announced, 30 days after the date of enactment of the Commission's regular fiscal year 2009 appropriation, the Section 31 fee rate applicable to securities transactions on the exchanges and in the over-the-counter markets will increase to $25.70 per million dollars from the current rate of $5.60 per million dollars. The assessment on security futures transactions under Section 31(d) will remain unchanged at $0.0042 for each round turn transaction.

In addition, five days after the date of enactment of the Commission's regular 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 increase to $55.80 per million dollars from the current rate of $39.30 per million dollars.

The Office of Interpretation and Guidance within the Division of Trading and Markets is available to answer questions relating to Section 31. That office may be reached by phone at 202-551-5777 or by email at tradingandmarkets@sec.gov.

A copy of the Commission's May 2, 2008, order regarding the annual fee rates for fiscal year 2009 is available at http://www.sec.gov/rules/other/2008/33-8916.pdf. Also, the Commission's Feb. 27, 2009, order announcing the mid-year adjustment for Section 31 transaction fees for fiscal year 2009 is available at http://www.sec.gov/rules/other/2009/34-59477.pdf.

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 Web site at http://www.sec.gov. (Press Rel. 2009-50)

Senior Supervisors Group Issues Report on Management of Recent Credit Default Swap Credit Events

The Senior Supervisors Group that comprises senior financial supervisors from seven countries (United States, Canada, France, Germany, Japan, Switzerland, United Kingdom) today issued a report that assesses how firms manage their credit default swap activities related to the settlement of credit derivatives transactions terminated by the occurrence of a credit event.

This report - Observations on Management of Recent Credit Default Swap Credit Events - summarizes a review that the Senior Supervisors Group initiated in December 2008. The observations in the report are based on discussions with senior members of selected institutions, comprising major dealers, buy-side firms, service providers, and an industry association.

Surveyed participants reported that recent credit events were managed in an orderly manner, with high participation rates and no major operational disruptions or liquidity problems.

This review was conducted to support the priorities established by the Financial Stability Forum in its April 2008 report, including enhancing the infrastructure for over-the-counter derivatives markets and encouraging market participants to act promptly to ensure that the settlement, legal, and operational infrastructure underlying these markets is sound.

NOTE: The SEC along with the Board of Governors of the Federal Reserve System, Federal Reserve Bank of New York, and Office of the Comptroller of the Currency comprise the U.S. contingent of the Senior Supervisors Group. (Press Rel. 2009-52)

ENFORCEMENT PROCEEDINGS

In the Matter of Stephan Husi

On March 6, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Stephan Husi, who was the head of corporate planning and controlling of Centerpulse Ltd. (Centerpulse). The Order finds that on Jan. 23, 2009, a final judgment was entered against Husi, permanently enjoining him from violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (the Exchange Act) and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting future violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-16 thereunder, in the civil action entitled SEC v. Urs Kamber, et al., Civil Action Number 1:07-cv-01867 (JDB), in the United States District Court for the District of Columbia. Husi was also ordered to pay $14,216 in disgorgement of ill-gotten gains, $5,868 in prejudgment interest, and a $30,000 civil money penalty.

According to the Order, the Commission finds that the Commission's complaint alleged that Husi and others engaged in a fraudulent scheme to inflate Centerpulse's reported earnings during the second half of 2002 by manipulating reserves and refusing to recognize expenses and liabilities. The complaint also alleged that, as a result of the scheme, Centerpulse issued and furnished to the Commission false and misleading earnings releases for the third and fourth quarters of 2002, and issued and filed with the Commission a false and misleading annual report for fiscal 2002, which materially overstated Centerpulse's third quarter 2002 reported pretax income by approximately $32 million, and its fourth quarter 2002 and fiscal year 2002 reported pretax income by at least $26.4 million.

Based on the above, the Order suspends Husi from appearing or practicing before the Commission as an accountant, with a right to apply for reinstatement after five years from the date of the Order. Husi consented to the issuance of the Order without admitting or denying any of the findings of the Commission's Order, other than to admit the entry of the injunction against him. (Rel. 34-59530; AAE Rel. 2944; File No. 3-13400)

In the Matter of Christopher J. Johndrow

On March 6, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order as to Christopher J. Johndrow.

The Order finds as follows. From January 2004 to December 2005, Christopher J. Johndrow made misrepresentations to investors in connection with purported private placement offerings of the securities of Credit First, LLC and Credit First Income Plus, LLC (Credit First). During this time, Johndrow was associated with Grant Bettingen, Inc., a registered broker-dealer owned and managed by M. Grant Bettingen. Johndrow misrepresented to investors and instructed the sales agents he supervised to misrepresent to investors that they would receive at least 1% monthly returns of profits from Credit First's allegedly lucrative distressed debt business. Johndrow also offered and sold Credit First securities, and instructed the sales agents he supervised to offer and sell Credit First securities through general solicitations. By virtue of his conduct, Johndrow willfully violated Sections 5(a), 5(c), and 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 thereunder.

Based on the above, the Order requires Johndrow to cease and desist from committing violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Order also requires Johndrow to pay ill-gotten gains of $270,720 plus prejudgment interest of $25,814.55, but waives this payment. The Order does not impose a civil penalty based on Johndrow's sworn financial statements. Finally, the Order bars Johndrow from associating with any broker or dealer with a right to reapply after three years. Johndrow consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 33-9012; 34-59531; File No. 3-13401)

In the Matter of Grant Bettingen, Inc. and M. Grant Bettingen

On March 6, 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 as to Grant Bettingen, Inc. (GBI Order); and an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions as to M. Grant Bettingen (Bettingen Order).

The GBI Order finds that Grant Bettingen, Inc. (GBI), a registered broker-dealer located in Orange County, California, failed reasonably to supervise Christopher J. Johndrow in connection with purported private placement offerings of the securities of Credit First, LLC and Credit First Income Plus, LLC (Credit First). From January 2004 to December 2005, Johndrow was associated with GBI. During this time, Johndrow 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 thereunder by misrepresenting to investors that they would receive at least 1% monthly returns of profits from Credit First's allegedly lucrative distressed debt business. He also instructed sales agents he supervised to make similar misrepresentations to investors. Additionally, Johndrow violated Sections 5(a) and 5(c) of the Securities Act by offering and selling Credit First securities through general solicitations. GBI did not have a supervisory policy in place regarding the sale of securities in private placement offerings until November 2004, almost a year after Johndrow began selling Credit First securities. By virtue of its conduct, GBI failed reasonably to supervise Johndrow.

The Bettingen Order finds that M. Grant Bettingen failed reasonably to supervise Johndrow because he did not have a supervisory policy in place at GBI regarding the sale of securities in private placement offerings until November 2004. Even after Bettingen established a supervisory policy for private placement offerings, he failed to follow the firm's own procedures with respect to the Credit First offerings. Additionally, during the two years that Johndrow violated the securities laws, Bettingen failed to follow existing supervisory procedures with respect to conducting periodic inspections of Johndrow's office, which could have led to the prevention and detection of Johndrow's violations. Bettingen also knew of Johndrow's discharge by a former broker-dealer for "selling away" violations and failing to adequately supervise his branch, but Bettingen nevertheless failed to place Johndrow on heightened supervision as required by GBI's policy. Thus, Bettingen failed reasonably to supervise Johndrow.

The GBI Order censures GBI and requires GBI to pay disgorgement of $88,675 and prejudgment interest of $8,460.51. GBI consented to the issuance of the GBI Order without admitting or denying any of the findings in the GBI Order. The Bettingen Order requires Bettingen to pay a $35,000 civil penalty. The Order also bars Bettingen from associating in a supervisory capacity with any broker or dealer with a right to reapply after three years. Bettingen consented to the issuance of the Bettingen Order without admitting or denying any of the findings in the Bettingen Order. (Rels. 34-59532, File No. 3-13402; 34-59533; File No. 3-13403)

In the Matter of BBJ Environmental Technologies, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) in BBJ Environmental Technologies, Inc., Administrative Proceeding No. 3-13346. The Order Instituting Proceedings alleged that BBJ Environmental Technologies, Inc., failed repeatedly to file required annual and quarterly reports while its securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true. It revokes the registrations of each class of registered securities of BBJ Environmental Technologies, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-59535; File No. 3-13346)

In the Matter of Lisa W. Zappala

On March 9, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Lisa W. Zappala (CPA). The Order finds that Zappala, age 49, served as Senior Vice President and Chief Financial Officer (CFO) at Aspen Technology, Inc. from at least September 1998 until she resigned as CFO in approximately July 2003. Thereafter, she took on an advisory role at Aspen until she resigned in approximately December 2004. Zappala was previously a certified public accountant (CPA) licensed to practice in the Commonwealth of Massachusetts; her CPA license lapsed in or about 1994. Aspen was, at all relevant times, a Delaware corporation with its principal place of business in Cambridge, Massachusetts. During the relevant period, Aspen was engaged in the business of selling computer software and related services to industries such as petroleum, chemicals, and pharmaceuticals. At all relevant times, Aspen's common stock was registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act), and traded on the NASDAQ National Market system.

The Order also finds that on Jan. 8, 2007, the Commission filed a complaint against Zappala in SEC v. Evans, et al. (Civil Action No. 1:07-cv-10027-JLT). On Feb. 26, 2009, the court entered an order permanently enjoining Zappala, by consent, from future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and 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, 13a-11, and 13a-13 thereunder. Zappala was also ordered to pay $49,653 in disgorgement of ill-gotten gains from her sales of stock during the period of the alleged fraud, together with prejudgment interest thereon in the amount of $20,347 and a $75,000 civil money penalty, and was barred from serving as an officer and director of a public company for two years.

The Order further finds that the Commission's complaint alleged, among other things, that between at least 1999 and 2002, Zappala and two other former senior executives at Aspen engaged in a fraudulent scheme which resulted in Aspen's improperly recognizing revenue on at least six different transactions involving at least five different customers worldwide and the filing of materially false and misleading statements in various Form 10-K annual reports, Form 10-Q quarterly reports, and Form 8-K current reports during periods including fiscal years 2000 through 2004. The Complaint further alleged that Zappala engaged in a number of improper accounting practices that materially overstated Aspen's net income and revenue in fiscal years 2000 and 2001 and that materially understated Aspen's net income and revenue in fiscal years 2002, 2003, and 2004, in a departure from generally accepted accounting principles. According to the Complaint, these practices included, among other things, prematurely and improperly recognizing revenue on contracts that had not been signed within the appropriate fiscal period or for earnings that had not been completed due to side letters or other contingency arrangements which changed the terms of the customers' contractual payment obligations. In addition, the complaint alleged that Zappala provided numerous false management representation letters to Aspen's outside auditors between August 1999 and April 2002. The Complaint also alleged that Zappala obtained proceeds from exercising stock options and selling artificially inflated Aspen stock into the marketplace.

Based on the above, the Order suspends Zappala from appearing or practicing before the Commission as an accountant. After two years from the date of the Order, Zappala may request that the Commission consider her reinstatement to appear or practice before the Commission as an attorney or accountant. Zappala consented to the issuance of the Order without admitting or denying any of the findings therein except as to the final judgment entered against her, which she admits. (Rel. 34-59541; AAE Rel. 2945; File No. 3-13399)

SEC v. Shelby Dean Martin, D. Martin Enterprises, Inc. and DM Ventures, LLC

The Commission announced that on March 6, 2009, it filed a Complaint in the United States District Court for the Western District of North Carolina to halt an ongoing Ponzi scheme. The Complaint was filed against Shelby Dean Martin (Martin), D. Martin Enterprises, Inc. (DM Enterprises) and DM Ventures, LLC (DM Ventures). The Complaint alleges that Martin is a resident of Mooresville, North Carolina, and has served as president of DM Enterprises and as the managing member of DM Ventures. The Complaint further alleges that DM Enterprises is a North Carolina corporation formed in 1985 that has its principal place of business in Mooresville, North Carolina. The Complaint also alleges that DM Ventures is an entity that was formerly registered in the State of Nevada as a limited liability company with its principal place of business in Mooresville, NC.

The Complaint alleges that since at least 1998, Martin, operating through DM Enterprises and DM Ventures, has raised more than $10 million from over 150 investors in North Carolina and in several other states through a variety of false and misleading statements. The Complaint alleges that Martin told most of his investors that he was going to invest their funds in private companies that he would take public, and told other investors that their money would be used to provide working capital to companies in financial trouble. According to the Complaint, Martin told investors that they would not lose their principal investment and that they would receive anywhere from a 15% to 50% rate of return on their investment. Further, the Complaint alleges that Martin personally guaranteed the promissory notes he gave investors and, in several instances, told investors that their principal was insured. The Complaint alleges that Martin did not invest the money in companies as he claimed, but instead pooled investor funds in the bank accounts of DM Enterprises and DM Ventures, and used those funds as they were received from later investors to pay Ponzi returns to earlier investors.

The Complaint alleges that the defendants have violated 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 Complaint further alleges that Martin has violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

On March 6, 2009, the Court issued an order granting the Commission's requests for (i) a temporary restraining order; (ii) an asset freeze; and (iii) an order expediting discovery and preventing the destruction of documents. The Commission's Complaint also seeks (i) preliminary and permanent injunctions against future violations; (ii) disgorgement of ill-gotten gains plus prejudgment interest; and (iii) imposition of civil penalties. The Court scheduled a hearing on March 13, 2009 to determine whether to issue a preliminary injunction.

The Commission thanks the Securities Division of the North Carolina Secretary of State for its assistance in this matter. [SEC v. Shelby Dean Martin, D. Martin Enterprises, Inc. and DM Ventures, LLC, 5:09-CV-22 (WD N.C.)] (LR-20935)

SEC Files Fraud Action Against Investment Adviser Locke Capital Management, Inc. and its Owner Leila Jenkins

On March 9, 2009, the Securities and Exchange Commission announced the filing of securities fraud charges against Locke Capital Management, Inc., an investment adviser based in Newport, Rhode Island and New York City, and Leila C. Jenkins, its founder and sole owner.

According to the Commission's Complaint, in order to gain credibility and attract legitimate investors, Jenkins invented a large client, purportedly based in Switzerland, and repeatedly claimed the accounts of that client contained more than $1 billion in assets. From at least 2003 to 2009, falsehoods concerning the fake client were made in brochures, meetings, submissions to online databases that prospective clients used to select money managers, and in SEC filings. The Complaint further alleges that Jenkins lied to the Commission staff about the existence of the invented client and furnished the staff with fake documents in 2008.

The Complaint further alleges that Locke and Jenkins misrepresented Locke's performance for years in which Locke had no clients and deceived clients about the makeup of the firm, including the number, identity, and role of its employees.

The Complaint, filed in federal court in Providence, Rhode Island, charges Locke and Jenkins with fraud and other violations of the federal securities laws, including deceptive advertising. The Commission is seeking a monetary penalty, disgorgement of ill-gotten gains, and a permanent injunction against future violations of the antifraud and other provisions of the securities laws. [SEC v. Locke Capital Management, Inc. and Leila C. Jenkins, Civil Action No. 09-cv-100-WES (D.R.I.)] (LR-20936)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

Stock Clearing Corporation of Philadelphia filed a proposed rule change SR-SCCP-2009-01) under Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934, which proposed rule change became effective upon filing, to amend the certificate of incorporation of the NASDAQ OMX Group, Inc. Publication is expected in the Federal Register during the week of March 9. (Rel. 34-59494)

Boston Stock Exchange Clearing Corporation filed a proposed rule change (File No. SR-BSECC-2009-01) under Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934, which proposed rule change became effective upon filing, to amend the certificate of incorporation of the NASDAQ OMX Group, Inc. Publication is expected in the Federal Register during the week of March 9. (Rel. 34-59496)

A proposed rule change (SR-CBOE-2009-13) filed by the Chicago Board Options Exchange to eliminate the CBSX Direct Connectivity Charge and the Trading Permit Application Fee 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 March 9. (Rel. 34-59509)

A proposed rule change (SR-NYSE-2009-21) filed by the New York Stock Exchange to temporarily suspend its price continued listing standard and extend the period of the temporary lowering of its average global market capitalization continued listing standard 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 March 9. (Rel. 34-59510)

A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2009-014) relating to temporary membership status and interim trading permit access fees 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 March 9. (Rel. 34-59515)

A proposed rule change filed by the BATS Exchange (SR-BATS-2009-007) relating to fee 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 March 9. (Rel. 34-59516)

A proposed rule change filed by the NYSE Arca (SR-NYSEArca-2009-15) implementing a fee change 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 March 9. (Rel. 34-59521)

Proposed Rule Change

The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-004) to amend the definition of TRACE-eligible security to include securities eligible for public sale and additional securities that are restricted securities. Publication is expected in the Federal Register during the week of March 9. (Rel. 34-59519)

Approval of Proposed Rule Changes

The Commission granted approval of a proposed rule change (SR-FINRA-2008-052) filed by the Financial Industry Regulatory Authority under Section 19(b)(1) of the Securities Exchange Act of 1934 to adopt FINRA Rule 2140 (Interfering With the Transfer of Customer Accounts in the Context of Employment Disputes) in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of March 9. (Rel. 34-59495)

The Commission granted approval of a proposed rule change, as modified by Amendment No. 1 thereto, filed by NYSE Arca (SR-NYSEArca-2008-134) under Section 19(b)(1) of the Securities Exchange Act of 1934, to amend Rule 10.16, sanctioning guidelines. Publication is expected in the Federal Register during the week of March 9. (Rel. 34-59522)

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