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This is a photo of the National Register of Historic Places listing with reference number 7000063

Wednesday, August 31, 2011

SEC ANNOUNCES FINAL JUDGEMENTS AGAINST ALLEGED FRAUDULENT STOCK OFFERING

"The Securities and Exchange Commission announced that on August 29, 2011, the United States District Court for the Southern District of Florida entered final judgments of permanent injunction against Pharma Holdings, Inc. ("Pharma Holdings"), Edward Klapp IV ("Klapp IV") and Edward Klapp, Jr. ("Klapp Jr."). The judgment against Klapp IV also imposed a disgorgement of $1,180,682.80, representing profits gained as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of $65,407.39; and a civil penalty in the amount of $130,000. The judgment against Klapp Jr. also imposed a disgorgement of $504,696.86, representing profits gained as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of $27,959.17; and a civil penalty in the amount of $130,000. In addition, both Klapp IV and Klapp Jr. are prohibited from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Securities and Exchange Act, 15 U.S.C. § 78, or that is required to file reports pursuant to Section 15(d) of the Exchange Act , 15 U.S.C. § 78o(d). The SEC's complaint alleged that from 2005 through September 2009, Pharma Holdings, purportedly in the pharmaceutical supply business, and the Klapps raised approximately $5 million from at least 80 European investors, primarily residing in the United Kingdom, through the fraudulent offer and sale of Pharma Holdings stock. In connection with its stock offerings, Pharma Holdings issued false press releases and made false postings on its website overstating Pharma Holdings' sales revenues and net profits, and touting non-existent business agreements with multinational corporations, including a purported IPO and/or acquisition by a large corporation or mutual fund. Further, Pharma Holdings and the Klapps failed to disclose that Edward Klapp IV had been criminally convicted of a felony involving fraud."

FORMER CFO BEAZER HOMES USA AGREES TO GIVE BACK NEARLY $1.5 MILLION

The following is an excerpt from the SEC website: “Washington, D.C., Aug. 30, 2011 – The Securities and Exchange Commission today announced a settlement with the former chief financial officer of Beazer Homes USA to recover his bonus compensation and stock sale profits from the period when the Atlanta-based homebuilder was committing accounting fraud. According to the SEC’s complaint filed in federal court in Atlanta, James O’Leary is not personally charged with misconduct, but is still required under Section 304 of the Sarbanes-Oxley Act to reimburse Beazer more than $1.4 million that he got after Beazer filed fraudulent financial statements during fiscal year 2006. The SEC’s settlement with O’Leary is subject to court approval. Earlier this year, the SEC reached a settlement with Beazer CEO Ian McCarthy to recover several million dollars in bonus compensation and stock profits that he received. Beazer settled an SEC enforcement action in September 2008, and the SEC charged its former chief accounting officer Michael Rand in July 2009. The litigation against Rand, who perpetrated the fraud, is still ongoing. “Section 304 of the Sarbanes-Oxley Act encourages senior management to take affirmative steps to prevent fraudulent accounting schemes from occurring on their watch,” said Rhea Kemble Dignam, Director of the SEC’s Atlanta Regional Office. “O’Leary received substantial incentive compensation and stock sale profits while Beazer was misleading investors and fraudulently overstating its income.” Section 304 requires reimbursement by some senior corporate executives of certain compensation and stock sale profits received while their companies were in material non-compliance with financial reporting requirements due to misconduct. This can include an individual who has not been personally charged with the underlying misconduct or alleged to have otherwise violated the federal securities laws. Without admitting or denying the SEC’s allegations, O’Leary agreed to reimburse Beazer $1,431,022 in cash within 30 days of entry of the court order approving the settlement. This amount includes O’Leary’s entire fiscal year 2006 incentive bonus: $1,024,764 in cash incentive compensation and $131,733 previously received from Beazer in exchange for all restricted stock units he received as additional incentive compensation for fiscal year 2006. The settlement amount also includes $274,525 in stock sale profits.”

Tuesday, August 30, 2011

SEC FILES ORDER TO SHOW CAUSE FOR DEFENDANT TO SELL FROZEN ASSETS

The following is an excerpt from the SEC website: "On August 29, 2011, the Securities and Exchange Commission filed an emergency application for an Order to Show Cause why Defendant Stanley J. Kowalewski (“Kowalewski”) should not be held in civil contempt for failing to comply with the Court’s Orders freezing his assets. The Court has ordered a hearing on the Commission’s application for August 31, 2011. The emergency application arises out of a complaint filed earlier this year by the Commission to stop an alleged offering and investment advisory fraud being perpetrated by Kowalewski against investors, primarily consisting of pension funds, school endowments, hospitals and foundations. See LR-21800, January 7, 2011. According to the Commission, Kowalewski misappropriated, misused and misspent at least $12.5 million of investor money entrusted to his management by, among other things, having his hedge fund: (1) buy his personal home for $2.8 million, (2) purchase a vacation beach home for his use for $3.9 million, and (3) pay his investment management company over $10 million in unfounded fees, of which he paid himself $7.6 million in “advances” and “salary draws”. To further conceal his scheme, the Commission alleges that Kowalewski sent fraudulent monthly account statements to the investors that grossly inflated the actual asset values and returns. Following the filing of the Commission’s complaint, the U.S. District Court entered and subsequently extended an asset freeze over Kowalewski’s assets, including over the house that he had previously caused his hedge fund to “purchase” from him for $2.8 million. As set forth in its emergency application, Kowalewski violated and is violating the Court’s asset freeze by removing and selling from that same house: kitchen and wall-mounted cabinets, light fixtures, doors, and other structural elements, with an estimated value of at least $176,000, while substantially damaging the house in the process. By its emergency application, the Commission seeks to stop the on-going harm, require Kowalewski to account for and return to the Receiver the items taken from the house, and pay the Receiver for the damage he has caused to it. The Commission previously filed a motion with the Court for disgorgement and penalties against Kowalewski seeking disgorgement of $8.4 million, plus prejudgment interest, and penalties in an amount to be determined by the Court, but which could be as high as an additional $67 million. That motion is currently pending." The SEC alleges in the above case that the defendant removed items from his home (a court ordered frozen asset) such as light fixtures and doors. This type of thing happens a lot in low rent districts when landlords evict tenants.

Monday, August 29, 2011

SEC ACCUSES TWO FLORIDA MEN OF OPERATING A PONZI SCHEME

There have been so many Ponzi schemes uncovered lately by the SEC and others it just seems very difficult to imagine that investors ae still not investigating potential investments that are purport to be able to generate huge profits. The case below alleges yet another Ponzi scheme. The following excerpt is from the Sec Website: "Washington, D.C., Aug. 29, 2011 – The Securities and Exchange Commission today charged two Florida men with operating a Ponzi scheme disguised as a purported private equity fund that fraudulently raised approximately $22 million from more than 100 investors, many of whom were Florida teachers or retirees. According to the SEC’s complaint filed in U.S. District Court for the Middle District of Florida, James Davis Risher of Sanibel was responsible for handling the fund’s trading operations, and Daniel Joseph Sebastian of Lakeland distributed offering materials and solicited investors for the fund. Risher boasted to investors that he had substantial experience in trading equities and providing wealth and asset management services. In reality, Risher had no such experience but rather a lengthy criminal history, spending 11 of the last 21 years in jail instead of growing a thriving retail brokerage business as he claimed. The SEC alleges that Risher and Sebastian falsely told investors that the fund earned annual returns ranging from 14 percent to 124 percent by investing in public equity securities through a broker-dealer. They sent investors fabricated account statements indicating such high returns to support their false claims. Only a fraction of the money raised was actually invested, and Risher instead misspent investor funds on such personal purchases as jewelry, gifts, and property in North Carolina and Florida. Risher and Sebastian also paid themselves millions of dollars in phony management and performance fees. “Risher, who masqueraded as a highly successful equity trader, teamed up with Sebastian to tout sophisticated trading strategies they claimed would generate substantial profits for investors. Instead, Risher and Sebastian used investors’ life savings and retirement nest eggs to line their own pockets,” said Eric Bustillo, Director of the SEC’s Miami Regional Office. According to the SEC’s complaint, Risher and Sebastian marketed the fund under the names Safe Harbor Private Equity Fund, Managed Capital Fund, and Preservation of Principal Fund. They described themselves in fund offering documents as “two unique individuals” who used their expertise to “create an investment vehicle that would allow investors to capitalize from both bull and bear markets.” The SEC alleges that Sebastian often solicited his former customers at his prior job as an insurance broker. He primarily pitched the investment opportunity to educators, retirees, and members of several churches in Florida, but also solicited investors in California, other states, and Canada. Sebastian persuaded former customers to roll over money in their insurance and annuity products into the fund. He told them the fund would provide a higher rate of return than they could receive from the products he had previously sold them. At least one investor liquidated an annuity she had purchased from Sebastian and invested the proceeds in the fund. The SEC alleges that Risher and Sebastian made a number of material false statements and omissions to investors about Risher’s criminal history, the fund’s investment strategy, the fund’s investment returns, the safety of investors’ principal, and the existence of audited financial statements. Risher misrepresented that the fund was registered in Bermuda, and he and Sebastian falsely claimed that the fund was audited annually by a Bermudan auditor. Sebastian verbally told investors during telephone calls and meetings that they would never lose their principal investments in the fund. He even provided some investors with written guarantees from a company he owned that would reimburse any loss. In reality, Sebastian knew that the company had no assets to reimburse investors for losses, making his guarantee meaningless. The SEC charged Risher and Sebastian with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC further charged Risher with violating Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and Sebastian with aiding and abetting Risher’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC seeks permanent injunctions, disgorgement, and financial penalties against Risher and Sebastian. The U.S. Attorney’s Office for the Middle District of Florida, which conducted a parallel investigation of this matter, has filed criminal charges against Risher. The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Middle District of Florida, Federal Bureau of Investigation, Internal Revenue Service, U.S. Postal Inspector Service, Florida Department of Law Enforcement, and Florida Office of Financial Regulation.”

COMMODITY POOL OPERATOR SETTLES CHARGES WITH CFTC

The following excerpt is from the CFTC website: Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against Dearborn Trading, Inc. (Dearborn), a commodity pool operator (CPO), and Joel Bronstein (Bronstein), Dearborn’s owner and principal, for failing to file a closing Annual Report (liquidation statement) for Dearborn Trading Fund, LLC, a commodity pool operated by Dearborn. The CFTC order requires Dearborn to pay a $180,000 civil monetary penalty and file the pool’s liquidation statement within 30 days of the entry of the order. The CFTC order finds that from about January 2009 until approximately June 2009, Dearborn was operating the pool when it ceased trading on or about June 30, 2009. Dearborn failed to file the pool’s closing Annual Report (liquidation statement) within 90 calendar days after the pool ceased trading, in violation of CFTC regulation 4.22(c), 17 C.F.R. § 4.22(c) (2009). The CFTC thanks the National Futures Association for its assistance."

Sunday, August 28, 2011

CFTC CHAIRMAN GENSLER ADRESSES CONFERENCE ON COMMODITY MARKETS

The following is an excerpt from the Commodity Futures Trading Commission website: Opening Remarks, Conference on Commodity Markets Chairman Gary Gensler August 25, 2011 Good morning and welcome to the Commodity Futures Trading Commission (CFTC). It’s great to see economists from so many fine universities across the globe gathered here along with an impressive group of government experts. Thank you for graciously sharing your time to discuss the issues affecting commodity markets. Your insights should be helpful to our surveillance and enforcement efforts at this agency. I want to thank Andrei Kirilenko and the Office of the Chief Economist for putting this conference together and for their contributions to this agency. Before you get started, I’m going to give you an update about where we stand today with the CFTC’s response to the aftermath of the 2008 financial crisis. 2008 Crisis Three years ago, our country’s largest financial institutions were trading swaps in the shadows and this marketplace contributed to and helped accelerate the financial system’s downward spiral. Though the crisis had many causes, it is clear that the swaps market played a central role. Swaps added leverage to the financial system – more risk was backed by less capital. There was a belief that certain financial institutions were not only too big to fail but too interconnected to fail. But when AIG, Lehman and others collapsed, it was the taxpayers who had to pick up the bill to prevent the economy from diving further into a depression. And it wasn’t just the financial system that failed. The regulatory system that was put in place to protect the public failed too. The Dodd-Frank Act Congress and the President came together and responded to this crisis by passing a historic law, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law includes many important provisions, but two overarching goals of reform include: bringing transparency to the swaps market and lowering the risks of this market to the overall economy. Both of these reforms protect taxpayers from again bearing the brunt of a crisis and lower costs for businesses and their customers. Promoting Transparency The first overarching goal of reform will resonate well with the economists in this room. The law brings critical transparency to the derivatives marketplace. As you know, the more transparent a marketplace is, the more liquid it is, the more competitive it is and the lower the costs for hedgers, borrowers and their customers. In short, when markets are open and transparent, they are safer and sounder and, again, costs will be lower for companies and the people who buy their products. The Dodd-Frank Act promotes both pre-trade and post-trade transparency. It moves certain standardized swaps transactions to exchanges or swap-execution facilities. This will allow buyers and sellers to meet in an open marketplace where prices are publicly available. It also requires real-time reporting of the price and volume of transactions, which ensures that everyone has this information. By minimizing what economists call “information asymmetry,” we reduce the advantages that Wall Street has over Main Street. Lowering Risk The second overarching goal of reform is equally as important. The law lowers risk to the overall economy by directly regulating dealers for their swaps activities and moving standardized swaps into central clearing, which will reduce interconnectedness in the swaps markets. Clearinghouses, which guarantee the obligations of both parties, have lowered risk for the public in the futures markets since the late-19th Century, and it’s time that we modernize the swaps market and provide the same protections for taxpayers. Turning the Corner This summer, we turned an important corner at the CFTC. We have now completed 11 final Dodd-Frank rules, and we have a robust schedule this fall to consider more final rules. We substantially completed the proposal phase this past spring. Starting next month, we are likely to take up rules relating to position limits, clearinghouse core principles, business conduct and entity definitions, trading, data reporting and the end-user exemption. It is important to point out that each of our final rules includes a careful consideration of costs and benefits completed with the involvement of the CFTC’s Office of the Chief Economist. We’ve also reached out broadly on what we call “phasing of implementation,” which is the timeline that our rules will take effect for various market participants. This is critically important so that market participants can take the time now to plan for new oversight of this industry. Next month, it is my hope that we vote on two proposed rulemakings seeking additional public comment on the implementation phasing of swap transaction compliance that would affect the broad array of market participants. The proposed rulemakings would provide the public an opportunity to comment on compliance schedules applying to core areas of Dodd-Frank reform, including the swap clearing and trading mandates, and the internal business conduct documentation requirements and margin rules for uncleared swaps. These proposed rules are designed to smooth the transition from an unregulated market structure to a safer market structure. When all of our Dodd-Frank rules are completed, I believe that it is appropriate that the Commission take a step back at the appropriate time in the future and carefully evaluate the new regulatory landscape as a whole – and how it is actually working. This is another example of our efforts to thoughtfully implement the reforms in the Dodd-Frank Act. Conclusion A year after the Dodd-Frank Act became law, there are those who would like to roll back its provisions and even return to the environment that led to the 2008 crisis. But as you know, economists have agreed for decades that transparency actually reduces costs. This law and our corresponding rules are about transparency. In addition, until we complete our reforms, the public remains at risk. That’s why the CFTC is working so hard to think through the Dodd-Frank law’s swap-market reforms and implement them in a way that promotes more open and transparent markets, lowers costs for companies and their customers, and protects taxpayers."

Saturday, August 27, 2011

THREE PLEAD GUILTY TO BID RIGGING MUNICIPAL TAX LIEN AUCTIONS

The following is from the Department of Justice website: Wednesday, August 24, 2011 Three New Jersey Investors Plead Guilty to Bid Rigging at Municipal Tax Lien Auctions WASHINGTON – Three financial investors who purchased municipal tax liens at auctions in New Jersey pleaded guilty today for their roles in a conspiracy to rig bids at tax liens auctions held by municipalities, the Department of Justice announced. Charges were filed today in U.S. District Court for the District of New Jersey in Newark, N.J., against Isadore H. May of Margate, N.J.; Richard J. Pisciotta Jr. of Long Beach Township, N.J.; and William A. Collins of Medford, N.J. According to the felony charges, from at least 2003 through approximately February 2009, the investors participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders which liens each would bid on. The investors proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates. “The collusion taking place at these auctions is artificially raising the interest rates that financially distressed home and property owners must pay, and is lining the pockets of the colluding investors,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division will vigorously pursue these kinds of collusive schemes that eliminate competition from the marketplace.” The department said that the primary purpose of the conspiracy was to suppress and restrain competition to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. State law requires that investors bid on the interest rate delinquent homeowners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached. According to the court documents, May, Pisciotta and Collins conspired with others not to bid against one another at municipal tax lien auctions in New Jersey. Because the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition. Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.”

Friday, August 26, 2011

DEFENDANT AND MANAGED COMPANIES CHARGED IN COMMODITY FUTURES AND FOREX SCHEME

The following excerpt is from the CFTC website: “Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 18, 2011 a federal court in California entered an order freezing the assets of defendants Douglas Elsworth Wilson of Poway, Calif., and three California companies that he controls and manages, Elsworth Berg Capital Management LLC (EBCM), Elsworth Berg Inc., and Elsworth Berg FX LLC (collectively, Elsworth Berg). The order also prohibits the destruction of their books and records. The order arises out of a CFTC civil complaint filed on July 27, 2011 in the U.S. District Court for the Southern District of California. The complaint alleges that the defendants solicited at least $4.4 million from over 60 customers to trade commodity futures contracts and foreign currency (forex). The defendants allegedly misappropriated customer funds, committed solicitation fraud, and issued false statements in the commodity futures and forex scheme. In connection with their fraud, defendants allegedly misrepresented to customers and prospective customers that regardless of Elsworth Berg’s commodity futures or forex trading results, the return of customers’ investment principal was guaranteed at the end of a five-year period through use of a purportedly innovative “Collateral Reserve” structure, which owned life insurance policies on third-parties. Wilson and EBCM also allegedly issued false statements to some customers that overstated the value of their investments. Wilson and EBCM misappropriated approximately $72,000 in customer funds and used the money for purposes other than trading, according to the complaint. In its continuing litigation against the defendants, the CFTC seeks restitution to defrauded customers, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of federal commodities law."

Thursday, August 25, 2011

CFTC: INDICATIONS OF FRAUD

The following excerpt is from the CFTC website. The article involves watching out for the signs of fraud: "Watch Out For These Warning Signs of Fraud Get-rich-quick schemes that sound too good to be true. There’s never a free lunch. Be very careful if you recently retired or came into money and you’re looking for a safe investment. You could be a very attractive target for a crook. Once your money is gone, it can be impossible to get it back. Predictions or guarantees of large profits. Always get as much information as you can about a firm or individual’s track record and verify that information—even if you know the people involved or they are recommended by friends or relatives. If you can’t get solid information about your investment and the company, don’t invest. Before you invest, always check it out with someone whose financial advice you can trust. Promises of little or no financial risk. Be suspicious if the firm or individual says there is little risk. Be suspicious if someone tells you that a written risk disclosure statement is only a routine formality. Written risk disclosure statements are important to read thoroughly and understand. Claims of trading in the “Interbank Market.” If a firm claims that they will trade foreign currency for you in the interbank market, or that you should trade in the interbank market, be cautious. The term “interbank market” refers to a loose network of currency transactions negotiated between financial institutions, usually banks and investment banks, and other large companies. Unsolicited telephone calls about investing. Be skeptical if someone you don’t know calls you about investment opportunities. Someone asking you to send cash immediately. Be very cautious if someone tries to convince you to send cash or transfer money to them immediately by overnight express, the Internet, mail, or any other method."

FDIC GOVERNORS SAY LARGE LOAN COMMITMENTS OWNED BY BANKS ARE IMPROVING

The following is an excerpt from an e-mail sent out by the FDIC: Joint Release Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Office of the Comptroller of the Currency August 25, 2011 Credit Quality of Large Loan Commitments Improves for Second Consecutive Year The credit quality of large loan commitments owned by U.S. banking organizations, foreign banking organizations (FBOs), and nonbanks improved in 2011 for the second consecutive year, according to the Shared National Credits (SNC) Review for 2011. A loan commitment is the obligation of a lender to make loans or issue letters of credit pursuant to a formal loan agreement. Total criticized loans declined more than 28 percent to $321 billion in 2011, although the percentage of criticized assets remained high compared to pre-financial crisis levels. A criticized loan is rated special mention, substandard, doubtful, or loss. Loans rated as doubtful or loss—the two weakest categories—fell 50 percent to $24 billion in 2011. Reasons for improvement in credit quality included better operating performance among borrowers, debt restructurings, bankruptcy resolutions, and ongoing access to bond and equity markets. Industries that led the improvement in credit quality were real estate and construction, media and telecommunications, and finance and insurance. Despite this progress, poorly underwritten loans originated in 2006 and 2007 continued to adversely affect the SNC portfolio. Approximately 60 percent of criticized assets were originated in these years. Refinancing risk remained elevated as nearly $2 trillion, or 78 percent of the SNC portfolio, matures by the end of 2014. Of this maturing amount, $204 billion was criticized. Although nonbank entities, such as securitization pools, hedge funds, insurance companies, and pension funds, owned the smallest share of loan commitments, they owned the largest share (58 percent) of classified credits (rated substandard, doubtful, or loss). In other highlights of the review: Total SNC commitments increased less than 1 percent from the 2010 review. Total SNC loans outstanding fell $93 billion to $1.1 trillion, a decline of 8 percent. Criticized assets represented 13 percent of the SNC portfolio, compared with 18 percent in 2010. Classified assets declined 30 percent to $215 billion in 2011 and represented 9 percent of the portfolio, compared with 12 percent in 2010. Credits rated special mention, which exhibited potential weakness and could result in further deterioration if uncorrected, declined 25 percent to $106 billion in 2011 and represented 4 percent of the portfolio, compared with 6 percent in 2010. Nonaccruals declined to $101 billion from $151 billion. Adjusted for losses, nonaccrual loans declined to $92 billion from $137 billion, a 33 percent reduction. The distribution of credits across entities—U.S. banking organizations, FBOs, and nonbanks—remained relatively unchanged. U.S. banking organizations owned 42 percent of total SNC loan commitments, FBOs owned 38 percent, and nonbanks owned 20 percent. The share owned by nonbanks declined for the first time since 2001. Nonbanks continued to own a larger share of classified (58 percent) and nonaccrual (60 percent) assets compared with their total share of the SNC portfolio. Institutions insured by the Federal Deposit Insurance Corporation owned only 17 percent of classified assets and 15 percent of nonaccrual loans. The media and telecommunications industry group led other industry groups in criticized volume with $70 billion. Finance and insurance followed with $37 billion, then real estate and construction with $35 billion. Although these groups had the largest dollar volume of criticized loans, the three groups with the highest percentage of criticized loans were entertainment and recreation, media and telecommunications, and commercial services. The 2011 review indicated that the number of credits originated in 2010 rose dramatically compared to 2009 and 2008. Although the overall quality of underwriting in 2010 was significantly better than in 2007, some easing of standards was noted compared to the relatively tighter standards in 2009 and the latter half of 2008. Federal banking agencies expect banks and thrifts to underwrite syndicated loans using prudential underwriting standards, regardless of the intent to hold or sell the loans. Poorly underwritten syndicated loan transactions are subject to regulatory criticism. The SNC program was established in 1977 to provide an efficient and consistent review and analysis of SNCs. A SNC is any loan or formal loan commitment, and any asset such as real estate, stocks, notes, bonds, and debentures taken as debts previously contracted, extended to borrowers by a federally supervised institution, its subsidiaries, and affiliates that aggregates to $20 million or more and is shared by three or more unaffiliated supervised institutions. Many of these loan commitments are also shared with FBOs and nonbanks, including securitization pools, hedge funds, insurance companies, and pension funds. In conducting the 2011 SNC Review, agencies reviewed $910 billion of the $2.5 trillion credit commitments in the portfolio. The sample was weighted toward non-investment grade and criticized credits. The results of the review are based on analyses prepared in the second quarter of 2011 using credit-related data provided by federally supervised institutions as of December 31, 2010, and March 31, 2011." # # #

Wednesday, August 24, 2011

ALLEGED INSIDER TRADER GETS FINAL JUDGMENT

The following is an excerpt from the SEC website: "The SEC announced that the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment as to Daniel L. DeVore on July 12, 2011, in the SEC’s insider trading case, SEC v. Mark Anthony Longoria, et al., 11-CV-0753 (SDNY) (JSR). The SEC filed its Complaint on February 3, 2011, charging two expert network employees and four consultants with insider trading for illegally tipping hedge funds and other investors. On February 8, 2011, the SEC filed an Amended Complaint, charging a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as AMD, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell. The charges were the first against traders in the SEC's ongoing investigation of insider trading involving expert networks.
The SEC alleged that DeVore, a Global Supply Manager at Dell, was privy to confidential information about Dell’s internal sales forecasts as well as information about the pricing and volume of Dell’s purchases from its suppliers. DeVore regularly provided Primary Global Research LLC (“PGR”) and PGR clients with this inside information so it could be used to trade securities. From 2008 to 2010, DeVore received approximately $145,000 for talking to PGR and its clients.
The Final Judgment entered against DeVore: (1) permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act of 1933; (2) orders him liable for disgorgement of ill-gotten gains of $145,750, together with prejudgment interest of $6,098.50, for a total of $151,848.50; and (3) permanently bars him from acting as an officer or director of a public company. Based on DeVore’s agreement to cooperate with the SEC, the Court is not ordering Defendant to pay a civil penalty.”

Tuesday, August 23, 2011

IS THE SEC STRENGTHENING PROTECTIONS FOR MUNI BOND PURCHASERS?:

The following is an excerpt from the SEC website: "What is the SEC doing to strengthen protections for municipal bond investors? Public companies that issue stocks are required to provide ongoing disclosure to the SEC and to investors. In contrast, most offerings by municipal issuers are exempt from the provisions of federal law requiring filings with the SEC. However, for most municipal securities issued after July 3, 1995, annual financial information and operating data, as well as notice of certain events, is required by SEC dealer regulations to be filed with the Municipal Securities Rulemaking Board and is available at no charge to investors at www.emma.msrb.org. Improved disclosure is underway: the SEC approved changes to its rules in May 2010 designed to increase the quality and timeliness of disclosure about municipal bonds, including newly issued variable rate demand obligations. Those changes are slated to take effect on the compliance date of December 1, 2010. Beginning in September, the SEC staff will hold field hearings to gather input from municipal market participants. Some of the topics to be considered include: disclosures in official statements when municipal bonds are first issued; the availability of continuing information on municipal bonds; accounting practices, including whether the bond issuer prepares its financial statements in accordance with the standards set by the Government Accounting Standards Board, or GASB; and sales practices and potential conflicts of interest. The hearings will help inform a planned SEC staff report that will recommend ways to better protect municipal bond invesTORS."

Monday, August 22, 2011

MIAMI BANK TO PAY $10.9 MILLION FOR ALLEGEDLY VIOLATING MONEY LAUNDERING LAWS

The following excerpt is from the FDIC website: August 22, 2011 The Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, and the State of Florida Office of Financial Regulation Assess Civil Money Penalties Against Ocean Bank WASHINGTON, DC - The Federal Deposit Insurance Corporation (FDIC), the Treasury's Financial Crimes Enforcement Network (FinCEN), and the State of Florida Office of Financial Regulation (OFR) today announced the assessment of concurrent civil money penalties of $10.9 million against Ocean Bank, Miami, Florida, for violations of federal and state Bank Secrecy Act (BSA) and anti-money (AML) laundering laws and regulations. Ocean Bank, without admitting or denying the allegations, consented to payment of the civil money penalties, which was satisfied by a single payment to the U.S. Government. In taking these actions, the FDIC, FinCEN, and OFR determined that the bank failed to implement an effective BSA/AML Compliance Program with internal controls reasonably designed to detect and report money laundering and other suspicious activity in a timely manner. The bank failed to conduct adequate independent testing, particularly with respect to suspicious activity reporting requirements. In addition, the bank failed to sufficiently staff the BSA compliance function with appropriately trained staff to ensure compliance with BSA requirements. "Effective Bank Secrecy Act/anti-money laundering programs commensurate with the risk profile of the institution is paramount in protecting our financial system and individual banks from harm," said Sandra L. Thompson, Director, Division of Risk Management Supervision. "This penalty underscores the significance for banks to have strong internal systems and controls to detect and report suspicious activity and ensure compliance with Bank Secrecy Act requirements." "The Bank failed to recognize and mitigate risks and report transaction activity often associated with money laundering involving direct foreign account relationships in high-risk jurisdictions, particularly Venezuela," noted FinCEN Director James H. Freis, Jr. "The Bank's failure to respond to such risk with commensurate systems and controls was both systemic and longstanding. The civil money penalties and forfeiture concludes joint investigations by FinCEN, the Drug Enforcement Administration, Internal Revenue Service-Criminal Investigation and the United States Attorney's Office for the Southern District of Florida, and parallel examinations conducted by the Federal Deposit Insurance Corporation and the Florida Office of Financial Regulation." "The OFR will continue to monitor Ocean Bank's efforts to enhance its BSA/AML program," said Tom Cardwell, Commissioner of the Florida Office of Financial Regulation. "We are confident the bank is committed to be in full compliance with the letter and spirit of the Consent Order and Agreement."

FIRST SOUTHERN NATIONAL BANK, GEORGIA, WAS CLOSED BY THE FEDS

The following excerpt is from the FDIC website: First Southern National Bank, Statesboro, Georgia, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Heritage Bank of the South, Albany, Georgia, to assume all of the deposits of First Southern National Bank. The sole branch of First Southern National Bank will reopen on Saturday as a branch of Heritage Bank of the South. Depositors of First Southern National Bank will automatically become depositors of Heritage Bank of the South. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First Southern National Bank should continue to use their existing branch until they receive notice from Heritage Bank of the South that it has completed systems changes to allow other Heritage Bank of the South branches to process their accounts as well. This evening and over the weekend, depositors of First Southern National Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, First Southern National Bank had approximately $164.6 million in total assets and $159.7 million in total deposits. Heritage Bank of the South will pay the FDIC a premium of 1.0 percent to assume all of the deposits of First Southern National Bank. In addition to assuming all of the deposits of the failed bank, Heritage Bank of the South agreed to purchase essentially all of the assets. The FDIC and Heritage Bank of the South entered into a loss-share transaction on $115.7 million of First Southern National Bank's assets. Heritage Bank of the South will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. . The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $39.6 million. Compared to other alternatives, Heritage Bank of the South's acquisition was the least costly resolution for the FDIC's DIF. First Southern National Bank is the 67th FDIC-insured institution to fail in the nation this year, and the seventeenth in Georgia. The last FDIC-insured institution closed in the state was High Trust Bank, Stockbridge, on July 15, 2011."

A PAY- TO- PLAY MUNI MARKET IS A NO, NO SAYS THE SEC

The following is an SEC website excerpt from 2010. With the worsening economic problems which municipalities are having and the current election hysteria heating up, it might be good to review the rules regarding the bribing of government officials involved with the marketing of municipal bonds. Washington, D.C., March 18, 2010 — The Securities and Exchange Commission today issued a report warning firms that municipal securities rules prohibiting pay-to-play apply to affiliated financial professionals, not just a firm's employees. The pay-to-play rule, MSRB Rule G-37, generally prohibits firms from underwriting municipal bonds for an issuer for two years after a municipal finance professional (MFP) involved with that firm makes a campaign contribution to an elected official of that municipality. In the Report of Investigation, the Commission makes clear that an executive who supervises the activities of a broker, dealer, or municipal securities dealer is not exempt from the MSRB's pay-to-play rule just because he or she may be outside the firm's corporate governance structure. As such, an executive may be deemed an MFP if he or she is not part of a broker-dealer, but oversees the broker-dealer from the vantage of the holding company. “Firms and associated persons must adhere strictly to municipal securities pay-to-play rules,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Firms cannot rely solely upon titles or organizational charts in determining whether a person is subject to those rules.” When the Commission approved the rule in 1994, it indicated that banks and bank holding companies affiliated with brokers, dealers and municipal securities dealers were excluded from the rule. Since then, the Commission has not directly addressed whether directors, officers or employees of such banks and bank holding companies are MFPs if they supervise the public finance activities of brokers, dealers and municipal securities dealers or serve on executive committees that engage in such supervision. The Commission's Report of Investigation stems from an Enforcement Division inquiry into whether JP Morgan Securities Inc. (JPMSI) violated the MSRB Rule. According to the Report, JPMSI underwrote municipal bonds issued by the state of California within two years after a then-Vice Chairman of JPMSI's parent bank holding company (JP Morgan Chase) gave a $1,000 contribution to a California elected official. Under Section 21(a) of the Securities Exchange Act, the Commission may investigate violations of the federal securities laws and at its discretion "publish information concerning any such violations." JPMSI consented to the issuance of the Report without admitting or denying any of the statements or conclusions."

Sunday, August 21, 2011

SEC AND CFTC SEEK COMMENT FOR JOINT STABLE VALUE CONTRACT STUDY

The following is an excerpt from the SEC website: "Issue 2011-161 August 19, 2011 Commission Announcements The Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) have approved for publication in the Federal Register a request for public comment that is expected to assist in conducting a joint study on stable value contracts. Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act provides for the comprehensive regulation of swaps and security-based swaps and includes definitions of key terms relating to such regulation. It requires the SEC and CFTC to jointly conduct a study to determine whether stable value contracts fall within the definition of a swap, and if so, whether exempting such contracts from the swap definition is appropriate and in the public interest. The Dodd-Frank Act calls for the SEC and CFTC to make the determination in consultation with the Department of Labor, the Department of the Treasury, and the state entities that regulate the issuers of stable value contracts. Public comments must be received on or before 30 days after publication in the Federal Register. (Press Rel. 2011-169) Enforcement Proceedings In the Matter of Peter Emrich, Alberto Ferreiras, James Frankfurth, Frank Rossi, and Dana Valensky The Commission announced that on August 18, 2011, it issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order or OIP) against Peter Emrich (Emrich), Alberto Ferreiras (Ferreiras), James Frankfurth (Frankfurth), Frank Rossi (Rossi), and Dana Valensky (Valensky) (jointly Respondents). The Division of Enforcement alleges in the Order that: Emrich pleaded guilty to one count of conspiracy to commit securities fraud in violation of 18 U.S.C. Section 371 before the United States District Court for the Eastern District of New York in United States v. Kozak, et al., 02-CR-879 (the Kozak Case), a criminal case arising from an unregistered offering of securities of Out of the Black Partners LLC, a California limited liability company. On May 10, 2010, a criminal judgment was entered against Emrich. Frankfurth pleaded guilty to one count of conspiracy to commit securities fraud in violation of 18 U.S.C. Section 371 in the Kozak Case. On June 21, 2010, a criminal judgment was entered against Frankfurth. Ferreiras pleaded guilty to the charges against him in the Kozak Case and United States v. Leonard, et al. 02-CR-881 (the Leonard Case), a related criminal case in the United States District Court for the Eastern District of New York arising from unregistered offerings of securities of two California limited liability companies, Little Giant, LLC and Heritage Film Group, LLC. In the Kozak and Leonard Cases, Ferreiras was charged with conspiracy and securities fraud. Ferreiras also pleaded guilty to one count of conspiracy to commit mail fraud in violation of 18 U.S.C. Sections 1349 and 3147 and eight counts of mail fraud in violation of 18 U.S.C. Sections 1341, 3147 and 2 before the United States District Court for the Eastern District of New York in United States v. Ferreiras, et al., 07-CR-325 (the ATM Case), a criminal case arising from a fraudulent scheme involving the sale of cashless ATM machines. On July 23, 2009, a criminal judgment was entered against Ferreiras in the Leonard, Kozak and ATM Cases. Rossi pleaded guilty to two counts of conspiracy to commit securities fraud in violation of 18 U.S.C. Section 371 in the Leonard Case. On March 21, 2011, a criminal judgment was entered against Rossi. Valensky pleaded guilty before the United States District Court for the Eastern District of New York to two counts of conspiracy to commit securities fraud in U.S. v. Noorai, et al., 02-CR-880 (the Noorai Case), a criminal case arising from an unregistered offering of securities, and one count of conspiracy to commit securities fraud in the Leonard Case. On Nov. 10, 2010, a criminal judgment was entered against Valensky in the Noorai and Leonard Cases. The Order finds that the indictments in the Kozak and Leonard Cases alleged, among other things, that the Respondents and others concealed or conspired to conceal from investors the actual amount of sales commissions that would be paid from the proceeds of the offerings. The indictment in the ATM Case alleged that Ferreiras and his co-conspirator carried out a scheme to obtain money and property from others by means of materially false representations and omissions in connection with the sale of cashless ATM machines. A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations contained in the OIP are true, to afford Respondents an opportunity to respond, and to determine what, if any, remedial sanctions are appropriate and in the public interest. The OIP requires the Administrative Law Judge to issue an initial decision no later than 210 days from the date of service of the Order, pursuant to Rule 360(a)(2) of the Commission’s Rules of Practice. (Rel. 34-65167; File No. 3-14509) In the Matter of International Poultry Co., Inc. (n/k/a Carley Enterprises, Inc.) An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default as to Respondent IPEX, Inc. (n/k/a Salus Labs International, Inc.) (Default Order) in International Poultry Co., Inc. (n/k/a Carley Enterprises, Inc.), Admin. Proc. No. 3-14439. The Order Instituting Proceedings alleged that Respondent repeatedly failed 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 and revokes the registration of each class of registered securities of IPEX, Inc. (n/k/a Salus Labs International, Inc.) pursuant to Section 12(j) of the Securities Exchange Act of 1934. The proceeding has ended as to all other Respondents. See International Poultry Co. Inc. (n/k/a Carley Enterprises Inc.), Securities Exchange Act Release No. 65027 (August 4, 2011). (Rel. 34-65168; File No. 3-14439) Commission Revokes Registration of Securities of Directcom, Inc. (n/k/a Directcom Marketing, Inc.) for Failure to Make Required Periodic Filings On August 19, 2011, the Commission revoked the registration of each class of registered securities of Directcom, Inc. (n/k/a Directcom Marketing, Inc.) (Directcom) for failure to make required periodic filings with the Commission. Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, Directcom consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Directcom, Inc. (n/k/a Directcom Marketing, Inc.) finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Directcom’s securities pursuant to Section 12(j) of the Exchange Act. This Order settled the proceedings brought against Directcom in In the Matter of Derand Real Estate Investment Trust, et al., Administrative Proceeding File No. 3-14489. Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows: No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . . For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Derand Real Estate Investment Trust, et al., Administrative Proceeding File No. 3-14489, Exchange Act Release No. 64971, July 26, 2011. (Rel. 34-65169; File No. 3-14489) Commission Revokes Registration of Securities of One IP Voice, Inc. (n/k/a Indian Hill Holdings Corporation) for Failure to Make Required Periodic Filings On August 19, 2011, the Commission revoked the registration of each class of registered securities of One IP Voice, Inc. (n/k/a Indian Hill Holdings Corporation) (OIVO) for failure to make required periodic filings with the Commission. Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, OIVO consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to One IP Voice, Inc. (n/k/a Indian Hill Holdings Corporation) finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of OIVO’s securities pursuant to Section 12(j) of the Exchange Act. This Order settled the charges brought against OIVO in In the Matter of bioMETRX, Inc., et al., Administrative Proceeding File No. 3-14465. Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows: No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . . For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of bioMETRX, Inc., et al., Administrative Proceeding File No. 3-14465, Exchange Act Release No. 64880 (July 14, 2011). (Rel. 34-65170; File No. 3-14465) Commission Settles With Two Defendants in Sedona Corporation Market Manipulation Fraud The Securities and Exchange Commission announced today that on August 8, 2011, the U.S. District Court for the Southern District of New York entered final judgments against defendants Mottes Drillman and Jacob Spinner in a Commission injunctive action arising from fraudulent manipulative trading in the securities of Sedona Corporation. Without admitting or denying the allegations in the Commission's complaint, Drillman and Spinner consented to the entry of judgments enjoining them from future violations of the anti-fraud provisions of the federal securities laws and from aiding and abetting violations of the broker-dealer record-keeping provisions, ordering each of them to pay disgorgement of $4,000, representing ill-gotten gains received as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of $3,107.25, and a civil penalty of $25,000. The Commission's complaint alleges that, from February to April 2001, Drillman, Spinner, and others participated in a scheme with Andreas Badian, an official of an unregistered investment adviser firm, to manipulate Sedona’s stock price. The complaint also alleges that Drillman and Spinner aided and abetted violations of the broker-dealer record-keeping requirements through the creation of trade tickets which falsely reported short sales of Sedona stock as “long” sales. Four individuals and one entity remain as defendants in the litigation. In related administrative proceedings, the Commission issued Orders suspending each of Drillman and Spinner from associating with any broker or dealer for a period of six months. Without admitting the Orders’ findings, except as to jurisdiction and as to the entry of the injunctions against them, Drillman and Spinner each consented to issuance of the Order suspending him. [SEC v. Andreas Badian, et al., Civ. Action. No.06 CV 2621 (LTS) (S.D.N.Y.)] (LR-22070); (Rel. 34-65171; File No. 3-14510; 34-65172; File No. 3-14511) In the Matter of Matthew J. Ryan On August 19, 2011, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Order) against Matthew J. Ryan. Ryan consented to a Commission Order barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of penny stock. This sanction was based on Ryan’s guilty plea to one count of an indictment in United States v. Matthew John Ryan, Crim. Indictment No. 1:10-cr-00319-NAM (N.D.N.Y.), on February 22, 2011. This count charged Ryan with securities fraud and alleged that he made false representations to investors and used investor funds for multiple purposes he concealed, including to pay other investors’ purported returns and his personal expenses, such as his loan payments on luxury cars. Ryan consented to the issuance of the Order without admitting or denying any of the findings therein, except as to jurisdiction and his guilty plea, which he admitted. (Rel. 34-65173; File No. 3-14297) Investment Company Act Releases Northern Lights Variable Trust, et al. An order has been issued on an application filed by Northern Lights Variable Trust (the Fund) and Gemini Fund Services, LLC (Gemini) pursuant to Section 6(c) of the Investment Company Act of 1940, as amended (1940 Act). The order exempts separate accounts of life insurance companies supporting variable annuity contracts and variable life insurance contracts that may invest in shares of the Fund and shares of an Insurance Fund (as defined below), from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, in situations where such shares are sold to and held by one or more of the following types of investors: (i) separate accounts registered as investment companies or separate accounts that are not registered as investment companies under the 1940 Act pursuant to exemptions from registration under Section 3(c) of the 1940 Act that fund variable annuity contracts (VA Accounts) and variable life insurance contracts (VLI Accounts) (VA and VLI Accounts together “Separate Accounts”) issued by both affiliated life insurance companies and unaffiliated life insurance companies; (ii) trustees of qualified group pension and group retirement plans outside of the Separate Account context; (iii) investment adviser(s) or affiliated person(s) of the investment adviser(s) to a series of an Insurance Fund, for the purpose of providing seed capital to a series of an Insurance Fund; and (iv) general accounts of insurance company depositors of VA Accounts and/or VLI Accounts. An Insurance Fund is any future investment company that is designed to fund VA Accounts and/or VLI Accounts and for which Gemini or any of its affiliates may serve in the future as investment adviser, sub-adviser, manager, administrator, principal underwriter or sponsor. (Rel. IC-29757 – August 16) Standards Setting Boards Approval of Proposed Rules The Commission approved proposed rules (PCAOB-2011-02) submitted by the Public Company Accounting Oversight Board pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the funding of the PCAOB’s operations. (Rel. 34-65162) The Commission approved proposed rules (PCAOB-2011-01) submitted by the Public Company Accounting Oversight Board pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 for an interim inspection program related to audits of brokers and dealers. (Rel. 34-65163) Self-Regulatory Organizations Proposed Rule Changes The Commission issued a notice of filing of a proposed rule change by the Municipal Securities Rulemaking Board pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, relating to amendments to Rule A-3, on Membership on the Board (SR-MSRB-2011-11). Publication is expected in the Federal Register during the week of August 22. (Rel. 34-65158) NYSE Arca filed a proposed rule change (SR-NYSEArca-2011-54) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder relating to listing and trading of the WisdomTree Dreyfus Australia & New Zealand Debt Fund under NYSE Arca Equities Rule 8.600. Publication is expected in the Federal Register during the week of August 22. (Rel. 34-65160) NYSE Arca filed a proposed rule change (SR-NYSEArca-2011-53) under Section 19(b)(1) of the Securities Exchange Act of 1934 to reflect a change to the benchmark index applicable to the Russell Equity ETF. Publication is expected in the Federal Register during the week of August 22. (Rel. 34-65161) Immediate Effectiveness of Proposed Rule Changes A proposed rule change filed by The NASDAQ Stock Market to change the name and modify the contents of the NASDAQ Ouch BBO Feed (SR-NASDAQ-2011-118) 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 August 22. (Rel. 34-65159) A proposed rule change filed by the New York Stock Exchange deleting the text of NYSE Rule 92 and adopting a new NYSE Rule 5320 that is substantially the same as Financial Industry Regulatory Authority Rule 5320 to prohibit trading ahead of customer orders with certain exceptions (commonly known as the Manning Rule) (SR-NYSE-2011-043) 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 August 22. (Rel. 34-65164) A proposed rule change filed by NYSE Amex deleting the text of NYSE Amex Equities Rules 92, 513, 514 and adopting new NYSE Amex Equities Rule 5320 that is substantially the same as Financial Industry Regulatory Authority Rule 5320 to prohibit trading ahead of customer orders with certain exceptions (commonly known as the Manning Rule) (SR-NYSEAmex-2011-59) 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 August 22. (Rel. 34-65165) A proposed rule change filed by NYSE Arca deleting the text of NYSE Arca Equities Rules 6.16 and 6.16A, and adopting new NYSE Arca Equities Rule 5320 that is substantially the same as Financial Industry Regulatory Authority Rule 5320 to prohibit trading ahead of customer orders with certain exceptions (commonly known as the Manning Rule) (SR-NYSEArca-2011-57) 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 August 22. (Rel. 34-65166)"

FIRST CHOICE BANK, ILLINOIS, WAS CLOSED TODAY; FDIC NAMED AS RECEIVER

The following is an excerpt from the FDIC website: “First Choice Bank, Geneva, Illinois, was closed today by the Illinois Department of Financial and Professional Regulation—Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Inland Bank & Trust, Oak Brook, Illinois, to assume all of the deposits of First Choice Bank. The sole branch of First Choice Bank will reopen on Saturday as a branch of Inland Bank & Trust. Depositors of First Choice Bank will automatically become depositors of Inland Bank & Trust. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First Choice Bank should continue to use their existing branch until they receive notice from Inland Bank & Trust that it has completed systems changes to allow other Inland Bank & Trust branches to process their accounts as well. This evening and over the weekend, depositors of First Choice Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, First Choice Bank had approximately $141.0 million in total assets and $137.2 million in total deposits. In addition to assuming all of the deposits of the failed bank, Inland Bank & Trust agreed to purchase essentially all of the assets. . The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $31.0 million. Compared to other alternatives, Inland Bank & Trust's acquisition was the least costly resolution for the FDIC's DIF. First Choice Bank is the 68th FDIC-insured institution to fail in the nation this year, and the seventh in Illinois. The last FDIC-insured institution closed in the state was Bank of Shorewood, Shorewood, on August 5, 2011.”

Saturday, August 20, 2011

THE OFFICE OF THE COMPTROLLER OF THE CURRENCY CLOSED A BANK IN PALM BEACH FLORIDA

The following excerpt is from the FDIC website: “Lydian Private Bank, Palm Beach, Florida, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Sabadell United Bank, National Association, Miami, Florida, to assume all of the deposits of Lydian Private Bank. The five branches of Lydian Private Bank will reopen on Monday as branches of Sabadell United Bank, National Association. Depositors of Lydian Private Bank will automatically become depositors of Sabadell United Bank, National Association. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of Lydian Private Bank should continue to use their existing branch until they receive notice from Sabadell United Bank, National Association that it has completed systems changes to allow other Sabadell United Bank, National Association branches to process their accounts as well. This evening and over the weekend, depositors of Lydian Private Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, Lydian Private Bank had approximately $1.70 billion in total assets and $1.24 billion in total deposits. In addition to assuming all of the deposits of the failed bank, Sabadell United Bank, National Association agreed to purchase essentially all of the assets. The FDIC and Sabadell United Bank, National Association entered into a loss-share transaction on $907.1 million of Lydian Private Bank's assets. Sabadell United Bank, National Association will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $293.2 million. Compared to other alternatives, Sabadell United Bank, National Association's acquisition was the least costly resolution for the FDIC's DIF. Lydian Private Bank is the 66th FDIC-insured institution to fail in the nation this year, and the tenth in Florida. The last FDIC-insured institution closed in the state was Landmark Bank of Florida, Sarasota, on July 22, 2011.”

BASIC OUTLINE OF THE TREASURY'S WALL STREET REFORM GOALS

The following is an excerpt from the U.S. Treasury website. It is the basic outline of the Treasury's version of what the goals should be to reform Wall Street. "The financial crisis cost millions of jobs, erased more than $16 trillion in household wealth, and deeply scarred confidence in the integrity of the financial markets. The Dodd-Frank Wall Street Reform and Consumer Protection Act addresses key gaps and weaknesses in the system to help make future financial shocks less likely and less damaging. That’s critical because investors need confidence in the underlying safety, stability, and integrity of the financial system if they are going to put their capital to work financing new products, new businesses, and new jobs. The Dodd-Frank Act’s reforms are vital to restoring that trust and rebuilding a pro-growth, pro-investment financial system. It helps achieve those objectives by: Promoting a Safer, More Stable Financial System Focused on Sustainable Growth and Job Creation. Putting in Place a Dedicated Watchdog for Consumers. Bringing the Derivatives Market Out of the Darkness and Into the Light of Day. Providing New Tools for Winding Down Failing Firms Without Putting the Economy in Jeopardy.

Friday, August 19, 2011

FORMER CITIGROUP GLOBAL MAKETS LIMITED IN UK VP ORDERED TO PAY OVER $1.49 MILLION

The following is an excerpt from the CFTC website: "Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court default judgment order requiring Otmane El Rhazi to pay over $1.49 million in restitution and a civil monetary penalty for unlawful trading, misappropriation, and fraud. El Rhazi is a Moroccan national and a former futures and options trader and Vice President for Citigroup Global Markets Limited in the U.K. The order, entered on July 29, 2011 by Judge Denise Cote of the U.S. District Court for the Southern District of New York, requires El Rhazi to pay $373,860 in restitution and a $1,121,580 civil monetary penalty. The order also imposes permanent trading and registration bans against El Rhazi. The order stems from a CFTC complaint filed on April 15, 2011 (see CFTC Press Release 6025-11, April 18, 2011). The CFTC complaint charged El Rhazi with noncompetitive trading, fraud, and misappropriation from a Citibank, N.A. proprietary account for which he exercised trading authority as an employee of Citigroup Global Markets Limited. The court’s order finds that El Rhazi engaged in numerous noncompetitive and fictitious futures trades in order to steal money from a Citibank, N.A. proprietary account and pass the money to his personal account. Starting on November 23, 2010, El Rhazi engaged in a series of noncompetitive palladium and platinum futures transactions executed on the New York Mercantile Exchange’s Globex trading platform “in order to steal money from the Citi Account and pass the money to his own Personal Account,” according to the order. The effect of the transactions was that there was no net change in the open positions of either El Rhazi’s account or the Citibank, N.A. proprietary account. The order finds that as a result of the transactions, El Rhazi’s Personal Account profited and the Citibank, N.A. account cumulatively lost $373,860. The CFTC thanks the U.K. Financial Services Authority and the National Futures Association for their assistance."

Thursday, August 18, 2011

PUBLIC SAVINGS BANK, HUNTINGDON VALEY PA., WAS CLOSED TODAY

The following is an e-mail press release from the FDIC website: “Public Savings Bank, Huntingdon Valley, Pennsylvania, was closed today by the Pennsylvania Department of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Capital Bank, National Association, Rockville, Maryland, to assume all of the deposits of Public Savings Bank. The sole branch of Public Savings Bank will reopen on Friday as a branch of Capital Bank, National Association. Depositors of Public Savings Bank will automatically become depositors of Capital Bank, National Association. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of Public Savings Bank should continue to use their existing branch until they receive notice from Capital Bank, National Association that it has completed systems changes to allow other Capital Bank, National Association branches to process their accounts as well. This evening, Friday and over the weekend, depositors of Public Savings Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, Public Savings Bank had approximately $46.8 million in total assets and $45.8 million in total deposits. In addition to assuming all of the deposits of the failed bank, Capital Bank, National Association agreed to purchase essentially all of the assets. Customers with questions about today's transaction should call the FDIC toll-free at 1-800-523-8089. The phone number will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Friday from 9:00 a.m. until 6 p.m., EDT; on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/publicsvgs.html. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $11.0 million. Compared to other alternatives, Capital Bank, National Association's acquisition was the least costly resolution for the FDIC's DIF. Public Savings Bank is the 65th FDIC-insured institution to fail in the nation this year, and the first in Pennsylvania. The last FDIC-insured institution closed in the state was Earthstar Bank, Southampton, on December 10, 2010.”

SEC ALLEGES GIRLFRIEND’S INFO NETS CALIFORNIA MAN 3000 PROFIT IN DISNEY-MARVEL DEAL

The following excerpt is from the SEC website: Washington, D.C., Aug. 11, 2011 — The Securities and Exchange Commission today charged a California man with insider trading for a 3000 percent profit based on confidential information that he learned from his girlfriend prior to Walt Disney Company’s acquisition of Marvel Entertainment. The SEC alleges that Toby G. Scammell, who worked at an investment fund at the time, purchased highly speculative Marvel call options beginning in mid-August 2009. He secretly used money in his brother’s accounts over which he had been given control when his brother was deployed to serve in Iraq a few years earlier. Just before Scammell purchased many of the Marvel securities, he searched the Internet for such terms as “insider trading,” “material, non-public information,” and “Rule 10b-5.” According to the SEC’s complaint filed in U.S. District Court for the Central District of California, Scammell’s girlfriend worked on the Marvel acquisition as an extern in Disney’s corporate strategy department, and she possessed confidential details about the pricing and timing of the deal. Scammell illegally traded on this non-public information in breach of his duty of trust and confidence to his girlfriend. Marvel’s stock price jumped more than 25 percent after the Aug. 31, 2009, public announcement, and Scammell then sold all of his Marvel options. He didn’t reveal his trades or profits to his brother or his girlfriend. “Scammell exploited his romantic relationship for a financial windfall. His misuse of confidential information gave him an unfair and illegal edge over other traders in the markets,” said Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office.‬‪ According to the SEC’s complaint, Scammell and his girlfriend often discussed her work projects at Disney. Scammell lived with his girlfriend in her Los Angeles apartment in late July 2009 when the Marvel deal heated up at Disney and his girlfriend was assigned to work on it. She explained to Scammell in an e-mail that she could not tell him the name of the company involved because of “confidentiality,” but she noted that “it’s very recognizable and nothing I’ve mentioned before.” According to the SEC’s complaint, Scammell and his girlfriend had multiple discussions about whether she should delay her business school applications so that she could write about the high-profile acquisition she was working on at Disney as part of her business school applications. She worked long hours on the Marvel acquisition — sometimes from home — in the five weeks leading up to the deal. She received detailed information about the anticipated acquisition including the $50 per share acquisition price. Scammell had access and the password to his girlfriend’s Blackberry on occasion. The SEC alleges that Scammell obtained the identity of the acquisition target from his girlfriend by overhearing one or more of her Marvel-related conversations, seeing electronic or paper documents in her possession related to the Marvel acquisition, or through his own work-related conversations with her. For instance, when Scammell’s girlfriend learned that the acquisition would be announced by Labor Day, she informed him the timing of the announcement would allow them to attend her friend’s wedding. It was around this time that Scammell began searching the Internet regarding call options. According to the SEC’s complaint, Scammell had never before traded in Marvel securities, and had only one previous experience trading call options that was unsuccessful. In the weeks leading up to the Disney-Marvel announcement, Scammell made several purchases totaling more than $5,400 in Marvel call options with remarkable strike prices of $50 and $45 even though Marvel had never traded above $41.74. Most of the Marvel options that Scammell purchased were set to expire on September 19, just weeks after the announcement. Scammell’s trades were so unusual that his purchase of options represented 100 percent of the market in many instances. After the public announcement that Marvel would be acquired by Disney, Scammell sold his Marvel options for a profit of more than $192,000 — a 3000 percent return in less than a month. The SEC’s complaint alleges that Scammell had limited personal funds at the time, so he secretly used his older brother’s money to buy the majority of the Marvel call options. Scammell had obtained trading authority over his brother’s account when he was deployed to serve in Iraq with the U.S. Army. Scammell never told his brother that he had invested his money in Marvel or that his brother’s account had increased by more than $100,000 in less than one month as a result of the Marvel trades. The SEC’s complaint alleges that Scammell, who now lives in Greenbrae, Calif., violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties. The SEC’s investigation was conducted by Teri M. Melson in the Los Angeles Regional Office, and the litigation effort will be led by Spencer E. Bendell. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority. The SEC’s investigation is ongoing.‬‪ ‬‪‬‪

Wednesday, August 17, 2011

NEW SEC WHISTLEBLOWER PROGRAM TAKES EFFECT

The following excerpt comes from the SEC website: Washington, D.C., Aug. 12, 2011 — With its new whistleblower program officially becoming effective, the Securities and Exchange Commission launched a new webpage for people to report a violation of the federal securities laws and apply for a financial award. The Dodd-Frank Wall Street Reform and Consumer Protection Act provided the SEC with the authority to pay financial rewards to whistleblowers who provide new and timely information about any securities law violation. Among other things, to be eligible, the whistleblower's information must lead to a successful SEC enforcement action with more than $1 million in monetary sanctions. The SEC's new webpage at www.sec.gov/whistleblower includes information on eligibility requirements, directions on how to submit a tip or complaint, instructions on how to apply for an award, and answers to frequently asked questions. "Early and quick law enforcement action is the key to preventing securities fraud and avoiding investor losses, and the whistleblower program gives us the tools to help achieve that goal," said Robert Khuzami, Director of the SEC's Division of Enforcement. Sean McKessy, Chief of the SEC's Office of the Whistleblower, added, "Securities fraud is not a victimless crime. That's why why it is so important for people to step forward when they witness an ongoing securities fraud or learn about one that has taken place or is about to occur. Our new whistleblower award program makes it easier for people to take that step." The SEC's new whistleblower program strengthens the SEC's ability to protect investors in several ways: Better Tips: Over the past several months, the SEC has seen an increase in the quality of tips that it has been receiving from individuals since Congress created the program. Timely Tips: Potential whistleblowers are incentivized to come forward sooner rather than later with "timely" information not yet known to the SEC. Maximizes Outside Resources: With fewer than 4,000 employees to regulate more than 35,000 entities, the SEC cannot be everywhere at all times. With a robust whistleblower program, the SEC is more likely to find and deter wrongdoing at firms it may not have otherwise uncovered New Protections Against Retaliation: Employees who come forward are provided with new tools to protect themselves against employers who retaliate. Bolsters Internal Compliance: The new rules provide significant incentives for employees to report any wrongdoing to their company's internal compliance department before coming to the SEC. Therefore, companies that would prefer their employees report internally first are incentivized to a have credible, effective compliance program in place. The SEC adopted final rules on May 25 to implement the Dodd-Frank whistleblower program. Individuals wishing to be considered for an award under the Whistleblower Program are required to submit an online questionnaire or the newly approved Form-TCR. Prior to the enactment of the Dodd-Frank Act, the SEC only had authority to reward whistleblowers in insider trading cases."

FIRST NATIONAL BANK OF OLATHE CLOSED

Enterprise Bank & Trust, Clayton, Missouri, Assumes All of the Deposits of First National Bank of Olathe, Olathe, Kansas FOR IMMEDIATE RELEASE August 12, 2011 Media Contact: First National Bank of Olathe, Olathe, Kansas, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Enterprise Bank & Trust, Clayton, Missouri, to assume all of the deposits of First National Bank of Olathe. The six branches of First National Bank of Olathe will reopen on Saturday as branches of Enterprise Bank & Trust. Depositors of First National Bank of Olathe will automatically become depositors of Enterprise Bank & Trust. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First National Bank of Olathe should continue to use their existing branch until they receive notice from Enterprise Bank & Trust that it has completed systems changes to allow other Enterprise Bank & Trust branches to process their accounts as well. This evening and over the weekend, depositors of First National Bank of Olathe can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, First National Bank of Olathe had approximately $538.1 million in total assets and $524.3 million in total deposits. Enterprise Bank & Trust will pay the FDIC a premium of 1.5 percent to assume all of the deposits of First National Bank of Olathe. In addition to assuming all of the deposits of the failed bank, Enterprise Bank & Trust agreed to purchase essentially all of the assets. The FDIC and Enterprise Bank & Trust entered into a loss-share transaction on $419.6 million of First National Bank of Olathe's assets. Enterprise Bank & Trust will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html. Customers with questions about today's transaction should call the FDIC toll-free at 1-800-913-3067. The phone number will be operational this evening until 9:00 p.m., Central Daylight Time (CDT); on Saturday from 9:00 a.m. to 6:00 p.m., CDT; on Sunday from noon to 6:00 p.m., CDT; and thereafter from 8:00 a.m. to 8:00 p.m., CDT. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/fnbo.html. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $116.6 million. Compared to other alternatives, Enterprise Bank & Trust's acquisition was the least costly resolution for the FDIC's DIF. First National Bank of Olathe is the 64th FDIC-insured institution to fail in the nation this year, and the first in Kansas. The last FDIC-insured institution closed in the state was Hillcrest Bank, Overland Park, on October 22, 2010. #

Monday, August 15, 2011

FUTURES TRADER ORDERED TO PAY OVER $1.49 MILLION

The following is an excerpt from the CFTC website: "August 8, 2011 Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court default judgment order requiring Otmane El Rhazi to pay over $1.49 million in restitution and a civil monetary penalty for unlawful trading, misappropriation, and fraud. El Rhazi is a Moroccan national and a former futures and options trader and Vice President for Citigroup Global Markets Limited in the U.K. The order, entered on July 29, 2011 by Judge Denise Cote of the U.S. District Court for the Southern District of New York, requires El Rhazi to pay $373,860 in restitution and a $1,121,580 civil monetary penalty. The order also imposes permanent trading and registration bans against El Rhazi. The order stems from a CFTC complaint filed on April 15, 2011 (see CFTC Press Release 6025-11, April 18, 2011). The CFTC complaint charged El Rhazi with noncompetitive trading, fraud, and misappropriation from a Citibank, N.A. proprietary account for which he exercised trading authority as an employee of Citigroup Global Markets Limited. The court’s order finds that El Rhazi engaged in numerous noncompetitive and fictitious futures trades in order to steal money from a Citibank, N.A. proprietary account and pass the money to his personal account. Starting on November 23, 2010, El Rhazi engaged in a series of noncompetitive palladium and platinum futures transactions executed on the New York Mercantile Exchange’s Globex trading platform “in order to steal money from the Citi Account and pass the money to his own Personal Account,” according to the order. The effect of the transactions was that there was no net change in the open positions of either El Rhazi’s account or the Citibank, N.A. proprietary account. The order finds that as a result of the transactions, El Rhazi’s Personal Account profited and the Citibank, N.A. account cumulatively lost $373,860. The CFTC thanks the U.K. Financial Services Authority and the National Futures Association for their assistance.”

Sunday, August 14, 2011

SEC ALLEGES INSIDER TRADING BY A COMPANY BOARD MEMBER

The following excerpt is from the SEC website: On August 5, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York charging a former member of Mariner Energy Inc.’s board of directors, and his son, a securities industry professional, with illegally tipping and trading on the basis of inside information about the impending acquisition of Mariner Energy. The SEC’s complaint alleges that H. Clayton Peterson, who served on Mariner Energy, Inc.’s board of directors from 2006 through 2010, provided his son, Drew Clayton Peterson, with confidential information, learned during various board meetings, about Apache Corporation’s upcoming acquisition of Mariner Energy. According to the allegations, in the week leading up to the April 15, 2010 announcement, Clayton Peterson tipped his son on multiple telephone calls and at in-person meetings about the impending takeover. Drew Peterson, a managing director at a Denver-based investment adviser, then traded on the illegally obtained inside information and purchased Mariner Energy stock for himself, his relatives, his clients, and for a close friend. Drew Peterson also tipped other close friends as to the impending acquisition of Mariner Energy who also traded on the illegally obtained information. The insider trading by the Petersons and others generated more than $5.2 million in illicit profits. According to the SEC’s complaint, Clayton Peterson explicitly instructed his son, Drew Peterson, to purchase Mariner Energy stock for a family member based on positive news that the company was about to announce. As the announcement date neared, Clayton Peterson was even clearer in his discussions with his son, telling him that the company was going to be acquired and would no longer be a public company within a few days. Based on the inside information Drew Peterson learned from his father, Drew Peterson purchased Mariner Energy stock for his own accounts, as well as for his relatives, his clients, and for a close friend. In addition, Drew Peterson used the nonpublic information provided by his father to tip several close friends. One of those friends, a portfolio manager at a hedge fund, reaped approximately $5 million in illegal profits for himself, his hedge funds and his relatives. The SEC’s complaint charges Clayton Peterson and Drew Peterson with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest on a joint and several basis, and ordering them to pay financial penalties. The SEC also seeks to permanently prohibit Clayton Peterson from acting as an officer or director of any registered public company.”

FIRST NATIONAL BANK OF OLATHE WAS CLOSED BY THE COMPTROLLER OF THE CURRENCY

Enterprise Bank & Trust, Clayton, Missouri, Assumes All of the Deposits of First National Bank of Olathe, Olathe, Kansas The following excerpt is from the FDIC website: August 12, 2011 Media Contact: First National Bank of Olathe, Olathe, Kansas, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Enterprise Bank & Trust, Clayton, Missouri, to assume all of the deposits of First National Bank of Olathe. The six branches of First National Bank of Olathe will reopen on Saturday as branches of Enterprise Bank & Trust. Depositors of First National Bank of Olathe will automatically become depositors of Enterprise Bank & Trust. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First National Bank of Olathe should continue to use their existing branch until they receive notice from Enterprise Bank & Trust that it has completed systems changes to allow other Enterprise Bank & Trust branches to process their accounts as well. This evening and over the weekend, depositors of First National Bank of Olathe can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, First National Bank of Olathe had approximately $538.1 million in total assets and $524.3 million in total deposits. Enterprise Bank & Trust will pay the FDIC a premium of 1.5 percent to assume all of the deposits of First National Bank of Olathe. In addition to assuming all of the deposits of the failed bank, Enterprise Bank & Trust agreed to purchase essentially all of the assets. The FDIC and Enterprise Bank & Trust entered into a loss-share transaction on $419.6 million of First National Bank of Olathe's assets. Enterprise Bank & Trust will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html. Customers with questions about today's transaction should call the FDIC toll-free at 1-800-913-3067. The phone number will be operational this evening until 9:00 p.m., Central Daylight Time (CDT); on Saturday from 9:00 a.m. to 6:00 p.m., CDT; on Sunday from noon to 6:00 p.m., CDT; and thereafter from 8:00 a.m. to 8:00 p.m., CDT. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/fnbo.html. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $116.6 million. Compared to other alternatives, Enterprise Bank & Trust's acquisition was the least costly resolution for the FDIC's DIF. First National Bank of Olathe is the 64th FDIC-insured institution to fail in the nation this year, and the first in Kansas. The last FDIC-insured institution closed in the state was Hillcrest Bank, Overland Park, on October 22, 2010.
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