SEC CHAIRMAN SPEAKS

The following speech is from the SEC website: "Speech by SEC Chairman: Remarks Before the Financial Stability Oversight Council Meeting by Chairman Mary L. Schapiro U.S. Securities and Exchange Commission Washington, D.C. July 18, 2011 After one year, it’s already clear that the Dodd-Frank Act is reshaping the regulatory landscape, filling gaps, reducing systemic risk, and helping to restore confidence in the financial system. And it is beginning to strengthen the financial system so it is less prone to a financial crisis. In the specific area of securities, Dodd-Frank will have a significant impact. It brings hedge fund advisers under the regulatory umbrella, creates a new whistleblower program, establishes an entirely new regime for the over-the-counter derivatives market, enhances the SEC’s authority over credit rating agencies, provides for specialized corporate disclosures, and heightens regulation of asset-backed securities — among other things. Although there is much to do to fully implement the law, we at the SEC have already established a program to incentivize insiders to bring us information about financial fraud. We have already established the process to require hedge fund and other fund advisers to register with the SEC and be subject to our rules. We have already taken advantage of an array of new enforcement tools to pursue fraud. And we have proposed virtually all of the rules necessary to build the regulatory structure for the security-based swaps market. To help fulfill the Act’s promise, the SEC was tasked with writing a large portion of the rules and, over the past year, we have accomplished a great deal. Of the more than 90 mandatory rulemaking provisions, the SEC already has proposed or adopted rules for three-quarters of them (nearly 70). And this does not include additional rules stemming from the dozens of other provisions that give the SEC discretionary rulemaking authority. The rules we’ve proposed and adopted have been strengthened because of the process we’ve put in place. We have increased transparency and made it easier for the public to provide input. And we have forged a collaborative relationship with other federal and international regulators. It is so important that we not forget the harm that the financial crisis inflicted upon our economy and our people, or ignore its lessons. That is one of the reasons it will be critical that all the regulators receive the appropriate funding to be able to fully implement this law and further protect investors — as the law intended. So after one year, I’m pleased with our progress and I’m looking forward to an even busier year to come."

SEC COMMISSIONER LUIS A. AGUILAR SPEAKS AGAIN

The following is an excerpt from the SEC website: Commissioner Luis A. Aguilar U.S. Securities and Exchange Commission Washington, D.C. July 26, 2011 Poorly designed collateralized debt obligations and other asset-backed securities (“ABS”) contributed significantly to the collapse of the credit markets of 2008 and the subsequent financial crisis. These effects are still being felt by American families and businesses. It was demonstrated that the creation and distribution of these instruments significantly increased the degree of risk in our financial system, and caused great harm to investors and to the real economy.1 In response to the problems laid bare by the crisis, in 2010 the SEC proposed amendments to its ABS regulations. Shortly thereafter, Congress, sharing many of the SEC’s concerns, included significant reforms to asset-backed securities in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). As you have heard this morning, in light of the ABS requirements in the Dodd-Frank Act and the comments received on the 2010 proposal,2 the Commission is re-proposing a subset of its amendments to the ABS regulations primarily regarding shelf eligibility. I would like to highlight that today’s proposals include transactional standards that I hope will better empower investors and begin to level the playing field between investors and ABS sponsors. The proposed rules would require securitization agreements to require that a credit risk manager, an independent third party, scrutinize underlying assets in certain circumstances. We also anticipate these new requirements will facilitate communication between ABS investors, as well as require the adoption of procedures to resolve disputes between the issuer and investors. We are requesting comment on today’s proposals, and I am interested to hear if the rules proposed today, in conjunction with the rules already under consideration, establish greater integrity in the securitization process. I look forward to the comments we will receive. I join with my colleagues to thank the staff for their hard work on this re-proposal. 1 See, e.g., “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” Majority and Minority Staff Report of the Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs (April 13, 2011), p. 12. 2 Although the focus of the release being considered today is improvements to the regulation of asset-backed securities (ABS) in light of the Dodd-Frank Act and the financial crisis, the package of proposed reforms also would repeal the transactional eligibility condition for ABS shelf registration based on credit ratings, and replace it with conditions to such eligibility that the SEC preliminarily believes would be appropriate under the circumstances, as substitute indicators of credit quality. It is important to recognize that the approach to credit ratings in this release (the “Re-proposal of Shelf Eligibility Conditions for Asset-Backed Securities and Other Additional Requests for Comment”) differs from the approach to credit ratings in another release being considered today that would adopt amendments to the eligibility standards for shelf registration of non-convertible debt securities (the “Security Ratings” release). These approaches differ notwithstanding that Section 939A of the Dodd-Frank Act encourages the SEC “to establish, to the extent feasible, uniform standards of credit-worthiness.” There are several reasons for these differences, I will highlight a few. Asset-backed securities are different from traditional debt securities. Traditional debt securities are issued by operating companies, and the investment analysis of such debt differs from ABS, which are [often] structured and require analysis of underlying assets and that structure (among other things) rather than an issuer’s operations. The differences between ABS and traditional securities has resulted in longstanding differences in treatment under the securities laws, including separate regulations for asset-backed securities offerings and separate eligibility conditions for different types of offering registrations. The purposes of the eligibility conditions that apply to shelf registrations of ABS, on the one hand, and to traditional non-convertible debt securities, on the other hand, differ. In the context of non-convertible debt securities offerings, which are the subject of the Security Ratings release, the purpose of the eligibility conditions is to permit issuers whose securities are “widely followed” to perform shelf registered offerings; the SEC does not believe the credit-worthiness of non-convertible debt securities is the appropriate criterion for whether such securities should be eligible to use registered shelf offerings."

ALLEGED INSIDE TRADER SETTLES WITH SEC

The following is a case below is an excerpt from the SEC website: “July 20, 2011 On July 19, 2011, the Securities and Exchange Commission filed a settled civil action in the United States District Court in New York City against Robert Doyle. The Commission alleges that Doyle unlawfully traded in securities of Brink’s Home Security. According to the Commission, between August 2009 and December 2009, Doyle misappropriated material nonpublic information showing that Tyco International, Ltd. had offered to acquire Brink’s. On the basis of this information, Doyle purchased Brink’s common stock and call options. Doyle earned $88,555 from his illegal trading in Brink’s securities. Without admitting or denying the complaint’s allegations, Doyle has agreed to settle the Commission’s charges by consenting to entry of a final judgment permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and ordering him to pay a $44,277.50 civil penalty, $88,555 in disgorgement and $4,288.66 in prejudgment interest.”

JUDGEMENTS ENTERED AGAINST FIVE FORMER BROOKE COMPANIES EXECUTIVES

The following was an excerpt from the SEC website:

July 18, 2011

The Securities and Exchange Commission announced today that the United States District Court for the District of Kansas entered judgments, dated July 13, 2011, against five former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses. Robert D. Orr, Leland G. Orr, Michael S. Lowry, Michael S. Hess, and Travis W. Vrbas, without admitting or denying the Commission's allegations, consented to judgments enjoining them from future violations of the federal securities laws, barring them from serving as officers or directors of public companies, and requiring the payment of disgorgement and penalties. The SEC Complaint alleges that in SEC filings and other public statements for year-end 2007, and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees, and their financial health, the deterioration of Aleritas' corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies.

According to the SEC's Complaint, Brooke Capital's former management inflated the number of franchise locations by including failed and abandoned locations in totals. They also concealed the nature and extent of Brooke Capital's financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees. Aleritas' former management hid the company's inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company's operating expenses. Aleritas' former management also concealed the rapid deterioration of the company's loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets.

The positions held by the former Brooke executives were:

Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas
Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital
Michael S. Lowry, former chief executive officer and member of the board of Aleritas
Michael S. Hess, former chief executive officer and member of the board of Aleritas
Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital

The judgments enjoin each of the defendants from violating Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The judgments further enjoin Robert Orr, Leland Orr, Lowry, and Hess from violating Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, and Vrbas from violating Exchange Act Rule 13a-14 and from aiding and abetting violations of Rule 13a-1; Robert Orr and Hess from aiding and abetting violations of Exchange Act Rule 13a-11; and Robert Orr from violating Exchange Act Section 16(a) and Rule 16a-3 thereunder.

In addition to the injunctions, the judgments bar the defendants from serving as an officer or director of a public company. Lowry's judgment requires him to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91. Hess' judgment requires him to pay a $250,000 civil penalty, and Vrbas' judgment requires him to pay a $130,000 civil penalty. The judgments against Robert Orr and Leland Orr require them to pay civil penalties and disgorgement in amounts to be determined by the Court.”

EPA FINALIZES ADDITIONAL CLEAN AIR ACT PROTECTIONS

WASHINGTON – Building on the Obama Administration’s strong record of protecting the public’s health through common-sense clean air standards – including proposed standards to reduce emissions of mercury and other air toxics, as well as air quality standards for sulfur dioxide and nitrogen dioxide – the U.S. Environmental Protection Agency (EPA) today finalized additional Clean Air Act protections that will slash hundreds of thousands of tons of smokestack emissions that travel long distances through the air leading to soot and smog, threatening the health of hundreds of millions of Americans living downwind. The Cross-State Air Pollution Rule will protect communities that are home to 240 million Americans from smog and soot pollution, preventing up to 34,000 premature deaths, 15,000 nonfatal heart attacks, 19,000 cases of acute bronchitis, 400,000 cases of aggravated asthma, and 1.8 million sick days a year beginning in 2014 – achieving up to $280 billion in annual health benefits. Twenty seven states in the eastern half of the country will work with power plants to cut air pollution under the rule, which leverages widely available, proven and cost-effective control technologies. Ensuring flexibility, EPA will work with states to help develop the most appropriate path forward to deliver significant reductions in harmful emissions while minimizing costs for utilities and consumers.

“No community should have to bear the burden of another community's polluters, or be powerless to prevent air pollution that leads to asthma, heart attacks and other harmful illnesses. These Clean Air Act safeguards will help protect the health of millions of Americans and save lives by preventing smog and soot pollution from traveling hundreds of miles and contaminating the air they breathe,” said EPA Administrator Lisa P. Jackson. “By maximizing flexibility and leveraging existing technology, the Cross-State Air Pollution Rule will help ensure that American families aren’t suffering the consequences of pollution generated far from home, while allowing states to decide how best to decrease dangerous air pollution in the most cost effective way.”

Carried long distances across the country by wind and weather, power plant emissions of sulfur dioxide (SO2) and nitrogen oxide (NOx) continually travel across state lines. As the pollution is transported, it reacts in the atmosphere and contributes to harmful levels of smog (ground-level ozone) and soot (fine particles), which are scientifically linked to widespread illnesses and premature deaths and prevent many cities and communities from enjoying healthy air quality.

The rule will improve air quality by cutting SO2 and NOx emissions that contribute to pollution problems in other states. By 2014, the rule and other state and EPA actions will reduce SO2 emissions by 73 percent from 2005 levels. NOx emissions will drop by 54 percent. Following the Clean Air Act’s “Good Neighbor” mandate to limit interstate air pollution, the rule will help states that are struggling to protect air quality from pollution emitted outside their borders, and it uses an approach that can be applied in the future to help areas continue to meet and maintain air quality health standards.

The Cross-State Air Pollution Rule replaces and strengthens the 2005 Clean Air Interstate Rule (CAIR), which the U.S. Court of Appeals for the D.C. Circuit ordered EPA to revise in 2008. The court allowed CAIR to remain in place temporarily while EPA worked to finalize today’s replacement rule.

The rule will protect over 240 million Americans living in the eastern half of the country, resulting in up to $280 billion in annual benefits. The benefits far outweigh the $800 million projected to be spent annually on this rule in 2014 and the roughly $1.6 billion per year in capital investments already underway as a result of CAIR. EPA expects pollution reductions to occur quickly without large expenditures by the power industry. Many power plants covered by the rule have already made substantial investments in clean air technologies to reduce SO2 and NOx emissions. The rule will level the playing field for power plants that are already controlling these emissions by requiring more facilities to do the same. In the states where investments in control technology are required, health and environmental benefits will be substantial.

The rule will also help improve visibility in state and national parks while better protecting sensitive ecosystems, including Appalachian streams, Adirondack lakes, estuaries, coastal waters, and forests. In a supplemental rulemaking based on further review and analysis of air quality information, EPA is also proposing to require sources in Iowa, Kansas, Michigan, Missouri, Oklahoma, and Wisconsin to reduce NOX emissions during the summertime ozone season. The proposal would increase the total number of states covered by the rule from 27 to 28. Five of these six states are covered for other pollutants under the rule. The proposal is open for public review and comment for 45 days after publication in the Federal Register."

SEC EXPRESSES DISAPPOINMENT AT COURT OF APPEALS DECISION

The following is an excerpt from the SEC website: "Regarding Court of Appeals Decision on Proxy Access by Meredith Cross Director, Division of Corporation Finance U.S. Securities and Exchange Commission July 22, 2011 "We are disappointed by today's decision striking down a rule that made it easier for shareholders to nominate a candidate to a company's board of directors. We are considering our options going forward. We note that our rule allowing shareholders to submit proposals for proxy access at their companies, which we adopted at the same time, is unaffected by the court's decision." Corporations are not democracies and therefore have no interest in listening to shareholders unless there are just a few shareholders who have together enough voting shares in the company to actually be able to bring about a successful revolution and roust the top managers from their office lair. Unfortunately, too many corporations are run much like despotic dictatorships and the only way that management is ever changed is when the lights go out and the business is shut down due to the incompetence of management. So, in terms of how the owners are treated the modern corporation is like something dreamt up by Lenin except for the only workers who have rights at a corporation are the top managers (party leaders).