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

Monday, May 23, 2011

SEC RULES FOR INDIVIDUAL STOCK CIRCUIT BREAKERS

The following is an excerpt from the SEC web page:



"The Securities and Exchange Commission approved rules on Sept. 10, 2010, to expand the existing circuit breaker program that currently is triggered by large, sudden price moves in an individual stock. The new rules follow changes adopted on June 10, 2010, that impose a uniform market-wide pause in trading in individual stocks whose price moves 10% or more in a five-minute period. The trading pause, which was proposed by U.S. exchanges and the Financial Industry Regulatory Authority (FINRA), initially was limited to stocks in the Standard & Poor’s 500 Index, but has been extended to stocks in the Russell 1000 Index and to certain exchange-traded products.

Why were stock-by-stock circuit breakers put in place?
The SEC staff asked U.S. exchanges and FINRA to propose rules in response to the unusually volatile trading that occurred on May 6, 2010. Although some stocks fell very sharply and quickly that afternoon, the downturn was not broad enough to trigger existing market-wide circuit breakers. Trading in some stocks was halted or slowed on some exchanges but continued on others, sometimes at drastically lower prices. Exchanges and FINRA later cancelled transactions at prices that moved 60% or more from prices just before the market drop, deeming these trades to be erroneous. The Commission is concerned that events such as these can seriously undermine the integrity of U.S. markets and is working to put policies in place to help prevent such events from recurring.

What do the new rules require?
Under the new rules, a U.S. stock exchange that lists a stock is required to issue a trading “pause” in a stock if the stock price moves up or down by 10% or more in a five-minute period. The same pause will be in effect on all other U.S. stock and stock option markets, and the single-stock futures market, resulting in a uniform halt. After five minutes, the exchange that issued the pause may extend it if there are still significant imbalances between orders to buy and sell shares of the affected stock. After a ten-minute pause, other exchanges are free to resume trading in the stock and once that occurs, trading may resume in the over-the-counter markets.

What securities are covered by the new rules?
The new rules first covered stocks in the S&P 500 Index. Starting the week of Sept. 13, the circuit breakers have been extended to stocks that are included in the Russell 1000 Index and to a list of exchange-traded products, including those that track broad-based stock indexes, such as the S&P 500. Some exchange-traded funds also experienced sharp price moves in trading on May 6.

Will the new stock-by-stock circuit breakers apply throughout the trading day? What about after-hours trading?
To avoid potential disruption to market openings and closings (which already have special procedures designed to maintain fair and orderly markets), the individual stock circuit-breakers are in effect from 9:45 a.m. Eastern Time until 3:35 p.m. Eastern Time. They do not apply to after-hours trading. On days when the markets close early, the individual stock circuit breakers are in effect until 25 minutes before the close of the markets, for example, until 1:35 p.m. if the markets are closing at 2:00 p.m.

Are these rules permanent?
The new rules were approved on a trial basis and are set to end on April 11, 2011, unless the industry self-regulatory organizations propose to extend the trial period or request permanent approval of the rules. Extending the trial period or giving permanent approval to the rules could only occur through the filing of proposed rule changes by the exchanges and FINRA.

How do these rules differ from what was in place?
Exchanges have had the ability to halt trading in stocks where there is a large imbalance between buy and sell orders, but those trading halts were not binding on other markets, which remained free to trade the stock. Under the new rules, once a trading pause in a stock is called, it applies to all U.S. stock markets, stock option markets and the single-stock futures market.

The new circuit breaker rules apply to individual stocks, unlike market-wide circuit breakers that were put into effect after market breaks in the 1980s. Market-wide circuit breakers halt trading in all stocks for between 30 minutes to several hours if the Dow Jones Industrial Average falls by 10%, 20% or 30% from preset levels during the course of a trading day. Under existing rules, the New York Stock Exchange sets the circuit breaker levels at the beginning of each calendar quarter based on the average closing level of the Dow Jones Industrial Average in the prior month.

Are other changes being considered?
The exchanges and FINRA may file additional proposed rule changes to expand the circuit breaker approach once more or modify the program in other ways. The SEC staff also has asked exchanges to revisit existing market-wide circuit breakers, which are set at a threshold that is rarely triggered. Other proposed changes may be forthcoming."

SEC TALKS ABOUT LIFE SETTLEMENTS

The following information has been excerpted from the SEC web site:

“The Office of Investor Education and Advocacy is issuing this Investor Bulletin to highlight information about life settlements and some of the risks these types of transactions may pose for investors. Individual investors considering a life settlement transaction may wish to keep the following points in mind and seek guidance from an unbiased financial professional who will not receive a commission or any other financial benefit from the transaction.
What is a life settlement?
In a “life settlement” transaction, a life insurance policy owner sells his or her policy to an investor in exchange for a lump sum payment. The amount of the payment from the investor to the policy owner is generally less than the death benefit on the policy, but more than its cash surrender value. The dollar amount offered by the investor usually takes into account the insured’s life expectancy (age and health) and the terms and conditions of the insurance policy.
Why would a policy owner wish to sell a life insurance policy?
Due to changed family or other circumstances, a life insurance policy owner may no longer need the insurance provided by the policy. A spouse may have died, children may have grown up, or a company with life insurance on a key officer may have been sold or gone out of business. Other policy owners may have difficulty making premium payments or simply need cash. In such circumstances, many policy owners surrender their policies or let their policies lapse by ceasing to make premium payments. Selling a policy to an investor may be another alternative. Such sales may be made through life settlement brokers who charge commissions.
How does a life settlement take place and who are the parties involved?
A policy owner may discuss a possible settlement with his or her insurance agent or financial adviser, who then contacts a life settlement broker. In some cases, the policy owner may be solicited directly by a life settlement broker. Life settlement brokers may also be life insurance agents or securities brokers. Depending on the requirements of the states in which they do business, life settlement brokers may be licensed.
The life settlement broker obtains the insured’s authorization to release medical records and forwards the policy owner’s application and medical information to one or more companies known as life settlement providers. Many, but not all, states regulate life settlement providers, who also charge a commission.
The life settlement provider obtains life expectancy estimates on the insured and bids on the application. Life expectancy underwriters (who are not the insured’s personal physician) evaluate the risk of mortality of the insured based on his or her personal characteristics. If the life settlement provider’s bid is accepted, the provider may add that policy to a large group of policies, interests in which may be offered to investors. Institutional investors analyze the information provided by the life settlement provider, often obtaining their own life expectancy estimates. Retail investors, on the other hand, may have to rely on life settlement personnel or other investment professionals to assess the advantages and disadvantages of the transaction. In either case, the investor makes a cash payment to the policy owner or policy owners and continues to pay premiums necessary to keep the policy or policies in effect. Upon the insured’s death, the investor receives the death benefit.
Considerations for investors in life settlements
Before investing in a life settlement, investors may wish to keep the following points in mind.
The return on a life settlement depends on the insured’s life expectancy and the date of the insured’s death. As a result, the accuracy of a life expectancy estimate is essential. If the insured dies before his or her estimated life expectancy, the investor may receive a higher return. If the insured lives longer than expected, the investor’s return will be lower. If the insured lives long enough or if life expectancy is miscalculated, additional premiums may need to be paid and the cost of the investment could be greater than anticipated.
In response to investors’ concerns about the uncertainty of life expectancy estimates, some companies have incorporated purported life expectancy guarantee bonds into their offerings. These companies claim that if the insured does not die by the life expectancy date, they will pay investors the amount they would have received had the insured died by that date. Investors should be aware that the Commission has recently brought enforcement action against a company alleging that it made fraudulent claims about these bonds.

Under certain circumstances, the investor may not receive the death benefit. For example, the life insurance company that issued the policy may refuse to pay out the death benefit if it believes the policy was sold under fraudulent circumstances. In addition, the heirs of the insured may challenge the life settlement or the insurance company may go out of business.

The competence of a life expectancy underwriter and the accuracy of the life expectancy estimate are critical to the return on a life settlement. For the most part, life expectancy underwriters are not licensed or registered by state insurance regulators, and information about the methodologies and review procedures that life expectancy underwriters use is not generally disclosed.

Life settlements can give rise to privacy issues. Insured individuals generally wish to keep their medical records and personal information confidential. Investors, on the other hand, want access to the insured’s medical and other personal information to assess the advisability of their investment and to monitor it on a continuing basis.”

NEED TAX DEDUCTIONS? TRY MAKING THEM UP

Many years ago I remember that in an episode of the “Three Stooges” the boys came up with some fraudulent tax dodges that they sold to clients. The Stooges became rich selling their scheme to clients. Of course at the end of the short film the IRS came calling and of course the boys were in trouble. Well, it seems that a couple of modern day stooges have been caught. The case below is an excerpt from the Department of Justice web site:

“Federal Court Bars Ohio Accountant and Former Business Partner from Promoting Oil-and-Gas Tax Fraud Scheme
Government Estimates Alleged Tax Loss of $5.7 Million to $6.9 Million

WASHINGTON – A federal court has permanently barred two men from promoting an alleged tax fraud scheme involving interests in purported oil and gas wells, the Justice Department announced today. Judge James L. Graham of the U.S. District Court for the Southern District of Ohio entered the permanent injunction orders against Daniel D. Weddington of Newark, Ohio, and James R. Earl of Heath, Ohio. Both men were preliminarily enjoined in 2008. A third defendant, Jeffrey L. Gaumer of Newark, N.J., was permanently enjoined in 2008. All three men agreed to the permanent injunctions without admitting to the government’s allegations against them in the amended complaint.
Weddington recently pleaded guilty in federal court to two counts of aiding and assisting the filing of false income tax returns and one count of obstructing the administration of the internal revenue laws in connection with his role in the oil-and-gas well scheme.
The amended complaint in the civil injunction case alleged that Weddington, Earl and Gaumer marketed a scheme to claim tax deductions for fictitious well-drilling costs to more than 200 customers across the country. Customers allegedly paid for their purported investments using sham notes that were supposedly paid off by fictitious gas royalty payments from fictitious wells. The amended complaint also alleged that the defendants used a shell corporation, Aurora Capital Group Inc., to issue sham letters of credit to customers in an attempt to make the customers’ sham notes appear legitimate, so as to deceive the Internal Revenue Service (IRS).
The amended complaint also asserted that Weddington is a public accountant, that Gaumer is a certified public accountant in the same accounting firm, and that they prepared tax returns for the majority of the scheme’s participants. According to the amended complaint, the IRS estimated that the scam caused tax revenue losses of $5.7 million to $6.9 million from 2001 to 2004.
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax return preparers and tax fraud promoters.”

Sunday, May 22, 2011

SEC HAS ASSETS FROZE AT CHINA VOICE HOLDING CORP.

Whenever rates of returns are offered to investors which are too good to be true guess what? Usually the investor is being set up to have his money stolen. After decades as both an investor and investment salesman I will always be amazed at how people who are really cautious about putting up money for an investment that earns a descent rate of return but, those same cautious investors will throw all into a game which promises rates of return which are more like gambling winnings than rates of return from an honest investment. In the following excerpt from the SEC web site the SEC alleges that a multi-million dollar Ponzi scheme was perpetrated on investors who thought they were going to earn a very large rate of return:

“Washington, D.C., April 29, 2011 — The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of China Voice Holding Corp., which trades in over-the-counter markets and has claimed to have a portfolio of telecommunications products and services in both the U.S. and China. The SEC alleges that China Voice's co-founder and his two associates are operating an $8.6 million Ponzi scheme and misusing its proceeds, in part, to help fund the company's operations.

The SEC alleges that David Ronald Allen, who also was China voice's chief financial officer, and his associates Alex Dowlatshahi and Christopher Mills promised investors in a series of offerings of limited partnerships that they would earn returns of at least 25 percent on their investments. Investors were falsely told that their money would be loaned to companies with a demonstrated track record and large profit margins. Instead, Allen and his cohorts used investor funds to pay back investors in earlier partnerships and funneled investor money to China Voice and a complicated web of other companies that Allen controls. Allen and his associates also siphoned investor money to enrich themselves and family members.
In order to maintain the scheme, Allen and his associates have increased the pace and size of the offerings to obtain a steady stream of proceeds from defrauded investors. They are planning or have begun to solicit funds from investors in at least two more limited partnerships in the ongoing fraud. The court order obtained late yesterday freezes the assets of Allen and several others in addition to China Voice. The court also temporarily enjoined these defendants from participating in the offering of securities like those used to perpetrate the fraudulent scheme as alleged by the SEC.
"These promoters falsely touted what they claimed to be a prudent investment with reliable returns through loans made to carefully selected businesses," said Stephen L. Cohen, Associate Director of the SEC's Division of Enforcement. "This fraud illustrates that when extraordinarily high returns are promised in a supposedly low-risk investment, that's a tell-tale sign that something likely is amiss."
In addition to the Ponzi scheme, the SEC's complaint filed in U.S. District Court for the Northern District of Texas (Dallas Division) charges China Voice, its former chairman and CEO William F. Burbank IV, and Allen, for a series of fraudulent company statements about its financial condition and business prospects. Among other things, the SEC alleges that China Voice greatly overstated the value of certain business relationships and misled investors by failing to disclose significant loans from related parties needed to fund its operations.
The SEC also alleges that beginning in at least September 2006, China Voice overstated its business in China by claiming to provide telephone and other communications software in China on a much more extensive basis than it actually did. Company press releases and public filings extensively publicized contracts signed by Chinese subsidiaries to provide services to the government and other entities in China, which would provide high levels of projected revenue to the company. But the company recanted in audited financial statements in June 2008, when it disclosed that the majority of the company's revenue came from its U.S. subsidiaries. Nevertheless, China Voice and its stock promotion campaigns continued to tout purported Chinese contracts.
The SEC's complaint additionally charges two China Voice shareholders, Gerald Patera and Ilya Drapkin, for helping Allen finance stock promotion campaigns to pump up the company's stock price. These campaigns included a blast fax campaign orchestrated by Robert Wilson, who also is charged in the SEC's complaint. The spam faxes were sent to thousands of people at once and contained false and misleading statements about China Voice and who was paying for the faxes. At the same time they were spending more than a million dollars on stock promotion, Patera and Drapkin dumped millions of shares of the company into the market.
The SEC's complaint charges Allen, Dowlatshahi, Mills, and various related companies with violations of 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, and seeks a temporary restraining order, preliminary and permanent injunctions, disgorgement of unlawful proceeds plus prejudgment interest, and a financial penalty. The SEC's complaint charges Burbank, Patera, Drapkin, and Wilson with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder for their roles in the scheme. With regard to them, the SEC seeks a permanent injunction, disgorgement of unlawful proceeds plus prejudgment interest, and a financial penalty. The SEC's complaint also seeks penny stock bars against Allen, Burbank, Patera, Drapkin, and Wilson as well as officer and director bars against Allen and Burbank.”

Saturday, May 21, 2011

SEC ISSUES ALERT ON FRAUDULANT PRE-IPO OFFERINGS

technology based social media companies are becoming prominent on many investors’ stock screen and the fraudsters are coming up with scams to steal money. According to the SEC there are fraudsters out there trying to take advantage of interested investors by selling them fake pre-IPO securities. The following excerpt is from the SEC web site:

"The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn you about investment scams that purport to offer investors the opportunity to buy pre-IPO shares of Facebook, Twitter, Groupon, or other popular companies. SEC staff is aware of a number of complaints and inquiries about these types of pre-IPO investment scams, which may be promoted on social media and Internet sites, by telephone, email, in person, or by other means.

In September 2010, a judgment order was entered in favor of the SEC based on allegations that a scam artist had misappropriated more than $3.7 million from 45 investors in four states by offering fake pre-IPO shares of companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc., and Rosetta Stone, Inc. In addition, the Financial Industry Regulatory Authority (FINRA) issued a recent investor alert about these types of scams. While offerings of pre-IPO shares in a company are not uncommon, unregistered offerings may violate federal securities laws unless they meet a registration exemption, such as restricting the private offering to “accredited investors” -- investors who meet certain income or net worth requirements.

Investors should be mindful of the risks involved with an offer to purchase pre-IPO shares in a company. As with any investment, we encourage investors to research thoroughly both the investment product and the professional offering the product before making any investment decision."

Friday, May 20, 2011

POLITICIANS BEWARE: YOU MAY BE LOOSING SOME OF YOUR BRIBERY INCOME

Congress and other career politicians will not be at all happy with the rule outlined below. “Pay to Play” is a great source of political contributions (Income) for politicians. Any rule will hurt the purses of politicians however, any change can generate only good returns for the country. The following is an excerpt from the SEC web site:

“The Securities and Exchange Commission approved a new rule on June 30, 2010 to curb so-called “pay to play” practices in which investment advisers make campaign contributions to elected officials in order to influence the award of contracts to manage public pension plan assets and other government investment accounts.

Why did the SEC adopt the new rule?
The rule is intended to combat pay to play arrangements in which advisers are chosen based on their campaign contributions to political officials rather than on merit. The potential for fraud to invade the various, intertwined relationships created by pay to play arrangements is without question, and the new rule is meant to reduce the occurrence of fraudulent conduct resulting from these practices and to protect public pension plans, beneficiaries, and other investors from the resulting harms.
The corrupting influence of pay to play practices could, for example, lead a political official to choose an investment adviser with higher fees or inferior investment performance because the adviser contributed funds to the official’s election campaign. Choosing an adviser with higher fees or weaker performance could reduce the amount of money available to plan participants. Moreover, advisers’ participation in pay to play activities may diminish investor confidence, as pay to play practices are inconsistent with the high standards of ethical conduct required of investment advisers.

Pay to play practices often are not explicit, but appear to be widespread. In recent years, the SEC has brought enforcement actions against investment advisers involved in pay to play activities. In addition, other authorities in various states have brought civil and criminal cases alleging pay to play activities.

Who might be affected by the new rule?
The new rule, adopted under the Investment Advisers Act of 1940, applies to SEC-registered investment advisers and certain advisers exempt from registration with the SEC who provide investment advisory services, or are seeking to provide investment advisory services, to government entities. The rule will subject these advisers to certain restrictions (described below) designed to curb pay to play activities.

The rule will help protect the interests of government entities that hire investment advisers and others, including participants in public pension plans and state-sponsored college savings plans (known as 529 plans). It will also help level the playing field so that the advisers selected to manage retirement funds and other investments for the public are more likely to be selected based on the quality of their advisory services.

What does the new rule do?
The new rule:
Prohibits an investment adviser from providing advisory services for compensation to a government entity, either directly or through a pooled investment vehicle, for two years after the adviser or certain of its executives or employees makes a political contribution to an elected official or candidate for political office who is in a position to influence that government entity’s selection of the adviser;

Prohibits an investment adviser and certain of its executives and employees from paying or agreeing to pay a third party placement agent or “finder” to solicit business from a government entity on the adviser’s behalf unless the third party is a registered broker-dealer or SEC-registered investment adviser subject to pay to play restrictions; and

Prohibits an investment adviser and certain of its executives and employees from soliciting or coordinating contributions (i.e., “bundling”) from others to a political official, candidate or political party in a state or locality where the adviser provides or is seeking to provide advisory services.

An SEC-registered investment adviser subject to the rule also will have to maintain certain records under a related amendment to the Investment Advisers Act recordkeeping rule that the Commission adopted along with the new rule.”

Now if only some of the politicians receive some serious jail time would our nation move back to a sound financial footing. Unfortunately, many of the same people who want to balance the budgets in state and federal governments also are vehemently against any rules that curtail the bribes these politicians are taking. The government of the United States is not the problem; crooked politicians are the problem.