SEC News Digest

COMMISSION ANNOUNCEMENTS

Securities and Exchange Commission Temporarily Suspends Trading in VMT Scientific, Inc.

The Securities and Exchange Commission announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act), of trading of the securities of VMT Scientific, Inc. (VMT), of Las Vegas, Nevada at 9:30 a.m. EDT on July 8, 2008, and terminating at 11:59 p.m. EDT on July 21, 2008.

The Commission temporarily suspended trading in the securities of VMT because of questions that have been raised regarding the accuracy of assertions in press releases concerning, among other things: (1) the legal status of VMT Scientific; (2) VMT Scientific's business combinations; (3) VMT Scientific's current financial condition; and (4) VMT Scientific's assets.

The Commission cautions broker dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not he has complied with the rule, he should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5760. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, he should refrain from entering quotations relating to VMT securities until such time as he has familiarized himself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action. (Rel. 34-58116)

James Overdahl to Testify

James Overdahl, Chief Economist of the Commission, will testify before the Senate Subcommittee on Securities, Insurance, and Investment on Wednesday, July 9. The testimony, which concerns Reducing Risks and Improving Oversight in the OTC Credit Derivatives Market, will be presented at a hearing scheduled to begin at 2:00 p.m. in Room 538 of the Dirksen Senate Office Building.

ENFORCEMENT PROCEEDINGS

Alex Rabinovich Permanently Enjoined, and Pleaded Guilty to Criminal Securities Fraud Charges

The Commission announced today that on June 10, 2008, the Honorable Gerard E. Lynch, United States District Judge for the Southern District of New York, entered a Judgment of Permanent Injunction and Other Relief Against Defendant Alex Rabinovich, permanently enjoining Rabinovich from violating the registration and antifraud provisions of the federal securities laws. More specifically, the judgment enjoins Rabinovich from violating Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 206(4) of the Investment Advisers Act (Investment Advisers Act) and Rule 206(4)-8 thereunder. The judgment further orders Rabinovich to disgorge ill-gotten gains, together with prejudgment interest, and pay a civil penalty, but defers the Court's determination of the amount of disgorgement and penalty to be paid until a later date, pending a motion by the Commission. Rabinovich consented to entry of the judgment without admitting or denying the allegations in the Commission's complaint.

The Commission's complaint, filed on Nov. 26, 2007, alleged that defendants Rabinovich, Rabinovich & Associates, LP, an unregistered investment company and broker-dealer managed by Rabinovich, and Joseph Lovaglio, operating out of a storefront boiler room in Brooklyn, sold limited partnership interests in Rabinovich & Associates (sometimes referred to hereafter as the Fund or the firm) and other securities to investors, including senior citizens and retirees. The complaint further alleged that the defendants obtained investments in the Fund by cold-calling and making fraudulent statements to investors and prospective investors in the Fund, including: (1) false claims that the Fund had been extraordinarily profitable whereas the Fund's actual performance had been dismal; and (2) false representations that Rabinovich & Associates was a Wall Street firm and a member of the NASD, the New York Stock Exchange, and the Securities Investor Protection Corporation. The defendants allegedly also failed to disclose to investors that Rabinovich had been barred by the NASD from associating with any broker or dealer and that there was a pending action by the Financial Industry Regulatory Authority, Inc. seeking to bar Lovaglio from associating with any broker or dealer.

The complaint charged that the defendants defrauded Fund investors and prospective investors, unlawfully operated as unregistered broker-dealers and offered and sold securities in an unregistered offering; and that defendant Rabinovich & Associates unlawfully operated as an unregistered investment company. The complaint alleged that all defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5, thereunder; that Rabinovich violated Section 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder, and Lovaglio aided and abetted those violations; and Rabinovich & Associates violated Section 7(a) of the Investment Company Act of 1940.

When it filed the complaint, the Commission also sought emergency and preliminary relief.

On Nov. 26, 2007, Judge Lynch entered an order temporarily restraining Rabinovich, Rabinovich & Associates, and Lovaglio from violating the statutes and rules charged in the complaint. The court also ordered that the defendants' assets be frozen, ordered the defendants to promptly provide sworn accountings, ordered that discovery be accelerated and that defendants be prohibited from destroying documents, and scheduled a preliminary injunction hearing. On Jan. 15, 2008, Judge Lynch entered a preliminarily injunction against Rabinovich, Rabinovich & Associates, and Lovaglio pending a final disposition of the action, and continued the emergency relief the court had ordered on Nov. 26, 2007.

Rabinovich has also been criminally charged, and pleaded guilty to a single count criminal information, in connection with the conduct alleged in the Commission's complaint. United States v. Alex Rabinovich, Crim. Information No. 1:08-Cr-220 (S.D.N.Y.) (DC).

The Commission's litigation is continuing against defendants Rabinovich & Associates and Lovaglio, and is also continuing against Rabinovich for purposes of determining penalties and disgorgement. For further information see Litigation Release No. 20372 (Nov. 27, 2007). [SEC v. Rabinovich & Associates, LP, Alex Rabinovich and Joseph Lovaglio, 07 Civ. 10547 (S.D.N.Y.) (GEL)] (LR-20637)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Change

A proposed rule change filed by the Chicago Board Options Exchange (SR-CBOE-2008-70) to extend the Short Term Option Series Pilot Program until July 12, 2009, has become immediately 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 July 7. (Rel. 34-58094)

Proposed Rule Change

The NASDAQ Stock Market filed a proposed rule change (SR-NASDAQ-2008-033), as modified by Amendment No. 1 thereto, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 related to the submission of non-tape reports. Publication is expected in the Federal Register during the week of July 7. (Rel. 34-58101)

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http://www.sec.gov/news/digest/2008/dig070808.htm