CFTC COMMISSIONER CHILTON ON DODD-FRANK RULEMAKING

The following is an excerpt from the CFTC website: “Can’t Get it Outta My Head” Statement Before the CFTC Open Meeting on Dodd-Frank Rulemaking Commissioner Bart Chilton August 4, 2011 I’m pleased to support all three of these final rulemakings today. Perhaps the most talked about of the three is the whistleblower rule. This new provision will be an important tool in the Commissions’ enforcement arsenal. It can give needed incentives for folks—precisely the people we want to hear from, those who have an eye “from the inside” on essential information about nefarious schemes—to come forward, with needed protections. Frankly, this rule wasn’t too hot when we first proposed it. For example, there it didn’t provide for any kind of notification to the whistleblower if the agency actually used the information and successfully prosecuted—we fixed that. The proposal also had a very broad definition of excluded information—we fixed that. It would have incentivized internal reporting, rather than reporting to federal authorities—we fixed that. In short, the public comments we received surely gave us a lot of guidance on this one and I’m happy the process worked. Now, I’m going to put a song in your head that you can whistle all day. One of my favorite television shows when I was a kid was "The Andy Griffith Show." I used to whistle that theme song over and over. I used to whistle it in the tunnels on Capitol Hill. It was a clear and clarion whistle. There was nothing in doubt about it at all. That's the type of whistleblower rules and regulations we need. Clear, consistent and concise—and I think this rule is just that. Now, for those of you that are old enough let me put a second song in your head. In the late 1960s, there was a great song by the Fifth Dimension in the musical Hair called “Let the Sunshine In.” Some of you may remember it. Well, that’s really what SDRs are all about – ‘letting the sunshine in’ to what we used to call these dark markets for swaps trading. I think this is at the heart of the reforms made by the Dodd-Frank Act. One important issue—and I’ve raised this before, specifically with large trader reporting—it has to do with timing, and the inter-relatedness of rules. It’s obvious that the application of this rule, and others to come, will be dependent on our promulgation of definitional rules, and I’ve asked staff to ensure that, in this rule and in all others, we are mindful of this issue to ensure that markets and participants have clarity as to when and how we’re applying rules. Finally, I want to thank the Chairman and the staff for moving these rules forward. A few weeks ago, I said we need to put the pedal down on these rulemakings even though we had to delay some for good reason. Today, we bring three more rules to fruition, so thank you. Last Updated: August 4, 2011"

SEC CHARGED FORMER MARINER ENERGY BOARD MEMBER WITH INSIDER TRADING

The following is an excerpt from the SEC website: Washington, D.C., Aug. 5, 2011 — The Securities and Exchange Commission today charged a former board member at Mariner Energy Inc. and his son with insider trading on confidential information about the impending takeover of the oil and gas company. The SEC alleges that H. Clayton Peterson learned details about Mariner Energy’s upcoming acquisition by Houston-based Apache Corporation during various board meetings and tipped his son Drew Clayton Peterson with the nonpublic information. The son, who was a managing director at a Denver-based investment adviser, then purchased Mariner Energy stock for himself, his relatives, his clients, and a close friend. Drew Peterson also tipped several other close friends who traded on the nonpublic information ahead of the April 2010 acquisition announcement. The insider trading by the Petersons and others generated more than $5.2 million in illicit profits. “Clayton Peterson was entrusted with highly confidential information, and he abused that trust and misused his position and access to make a quick buck for his family,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit and Director of its Philadelphia Regional Office. “Drew Peterson then gratuitously tipped his friends and traded on this confidential information, leaving a trail of greed for investigators to follow.” Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit and Associate Director of the New York Regional Office, added, “Shareholders rely on company directors to honor their fiduciary responsibilities and not use confidential information for personal gain. Our enforcement action is a forceful reminder to corporate insiders that they cannot exploit their insider status without risking SEC scrutiny.” According to the SEC’s complaint filed in federal court in Manhattan, Clayton Peterson served on Mariner Energy's board of directors from 2006 to 2010 and violated his duty to keep Mariner Energy’s discussions with Apache confidential. Peterson explicitly instructed his son to purchase Mariner Energy stock for a family member based on positive news that the company was about to publicly announce. As the April 15 announcement date neared, Peterson was even clearer in 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 this inside information, Drew Peterson purchased Mariner Energy stock for his own accounts and others. Following the public announcement, Mariner’s share price rose 42 percent. Drew Peterson and his relatives and clients then sold the Mariner stock that he had accumulated for them. Among the close friends who Drew Peterson had tipped was a hedge fund portfolio manager who 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 them 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 publicly registered company. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in this matter. The SEC’s investigation is continuing.”

SEC ANNOUNCES A CONTINUED FREEZE ON ALLEGED INSIDER TRADER FUNDS

The following is an excerpt from the SEC website: August 1, 2011 The Securities and Exchange Commission announced today that it has obtained court orders continuing asset freezes on more than $32 million in assets controlled by three Swiss entities charged with insider trading ahead of a July 11, 2011 public announcement that Swiss-based Lonza Group Ltd. will acquire Connecticut-based Arch Chemicals, Inc. The Commission filed its action on July 15, 2011, in the U.S. District Court for the Southern District of New York, and the court issued a temporary asset freeze that day against defendants Compania International Financiera S.A. (Compania”), Coudree Capital Gestion S.A. (“Coudree”), and Chartwell Asset Management Services (“Chartwell”). The District Court has now entered orders continuing those asset freezes in specific amounts based on the size of the defendants’ profits plus potential penalty amounts. The Court entered an asset freeze order by consent as to defendants Compania and Coudree on July 26, 2011, freezing approximately $14.7 million of their assets. After a hearing as to defendant Chartwell on July 28, 2011, the court entered an order on July 29, 2011, freezing over $18 million of its assets. The Commission’s complaint was filed within days of the alleged insider trading. According to the Commission’s filings, Compania and Coudree purchased more than 687,000 common shares of Arch Chemicals between July 5 and July 8, mostly in accounts based in London, England. During the same time period, Chartwell purchased contracts for difference (“CFDs”) equivalent to 425,300 Arch Chemicals common shares through a brokerage account in London. The Court noted in its opinion and order that CFDs constitute securities as defined by the federal securities laws. Immediately after the acquisition announcement on July 11, the firms began selling the recently-purchased Arch Chemicals common stock and CFDs for millions of dollars in profits. The Commission’s complaint alleges that, at the time the defendants purchased the securities, they are believed to have been in possession of material, non-public information about Lonza’s proposed acquisition of Arch Chemicals. After a hearing on July 28, 2011, before the Honorable Denise L. Cote in the United States District Court for the Southern District of New York, the District Court on July 29, 2011, ordered an asset freeze against Chartwell in the amount of the trading profits ($4,651,995) plus a potential civil penalty of three times that amount ($13,955,985), totaling $18,607,980. The Court further ordered Chartwell to repatriate all assets obtained from the activities described in the Complaint to the United States, and to refrain from destroying any potentially discoverable materials related to the Complaint. In the Court’s Opinion and Order issued on July 29, Judge Cote found that “the discovery collected by the [Commission] … reveals a pattern of trading [by Chartwell] in the context of a tip that is not just consistent with, but also suggestive of, insider trading,” and concluded that the relief sought by the Commission was thus warranted because “there is a likelihood that the [Commission] will succeed on the merits in establishing a 10(b) violation” by Chartwell. Previously, on July 26, 2011, the District Court issued an asset freeze order by consent as to defendants Compania and Coudree. Those defendants have deposited $14,784,006 into a court-controlled bank account pending the outcome of the Commission’s action, including more than $7 million in trading profits, after agreeing to the entry of the asset freeze. The Commission’s complaint charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to a preliminary injunction, asset freeze and other equitable relief, the complaint seeks a permanent injunction, disgorgement of illegal trading profits plus prejudgment interest, and civil monetary penalties. The Commission’s investigation is continuing. The Commission acknowledges the assistance of the FINRA Office of Fraud Detection and Market Intelligence in its investigation.”

SEC ALLEGES BIOPHARMA COMPANY AND OTHERS OF MISLEADING INVESTORS

The following is an excerpt from the SEC website: “Washington, D.C., Aug. 2, 2011 — The Securities and Exchange Commission has charged a California-based biopharmaceutical company, three shareholder companies, and four senior executives for fraudulently misleading investors about the regulatory status of the company’s sole product. Three of the executives were additionally charged with insider trading. The SEC alleges that Immunosyn Corporation misleadingly stated in various public filings from 2006 to 2010 that its controlling shareholder – Argyll Biotechnologies LLC – either planned to commence or had commenced the U.S. regulatory approval process for human clinical trials for SF-1019, a drug derived from goat blood that was intended to treat a variety of ailments. The public filings failed to disclose that the U.S. Food and Drug Administration (FDA) had already twice issued clinical holds on drug applications for SF-1019, prohibiting clinical trials from occurring. The SEC alleges that Immunosyn also misleadingly stated that the regulatory approval process in Europe for human clinical trials for SF-1019 was imminent or underway, when in fact Argyll never submitted an application in Europe to conduct human clinical trials. According to the SEC’s complaint filed in federal court in Chicago on August 1, Immunosyn’s CFO Douglas McClain Jr., Argyll’s Chief Scientific Officer Douglas McClain Sr., and Argyll’s CEO James Miceli engaged in insider trading by raising approximately $20 million from their sale of Immunosyn shares while knowing that misrepresentations were being made about the regulatory status of SF-1019. They sold most of these shares through Argyll and two other shareholders named in the SEC’s enforcement action: Argyll Equities, which McClain Jr. and Miceli jointly owned, and an offshore entity Padmore Holdings Ltd., which McClain Jr., McClain Sr., and Miceli jointly owned. Immunosyn’s CEO Stephen D. Ferrone also is charged by the SEC in the securities fraud scheme. “These executives routinely authorized public filings that told investors a story about the status of the company’s prized drug that was far different from the behind-the-scenes reality,” said Merri Jo Gillette, Regional Director of the SEC’s Chicago Regional Office. “Three of these executives went one step further to illegally profit from their tall tales by selling their company stock and reaping more than $20 million while repeatedly misleading investors about the drug.” For example, according to the SEC’s complaint, McClain Sr. made misstatements about the regulatory approval status of SF-1019 in a video on Immunosyn’s website and in a 2008 presentation in which he sold Immunosyn stock he owned through Padmore to patients at a Texas holistic clinic, some of whom were terminally ill. The SEC alleges that McClain Sr. raised approximately $300,000 from these patients, but never gave them the shares they bought. The SEC’s complaint seeks a final judgment permanently enjoining the defendants from future violations of the antifraud provisions of the federal securities laws, ordering each defendant to disgorge all ill-gotten gains plus prejudgment interest and pay financial penalties, and barring Ferrone, McClain Jr., McClain Sr. and Miceli from serving as an officer or director of a public company. Tracy Lo, Eric Phillips and John Kustusch of the SEC’s Chicago Regional Office conducted the SEC’s investigation. The SEC’s litigation will be handled by Ms. Lo and Mr. Phillips. The SEC acknowledges the assistance of the U.S. Food and Drug Administration.”

FDIC APPOINTED RECEIVER FOR BANK OR SHOREWOOD, SHOREWOOD ILL.

The following is an excerpt from an FDIC e-mail: FOR IMMEDIATE RELEASE August 5, 2011 Bank of Shorewood, Shorewood, 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 Heartland Bank and Trust Company, Bloomington, Illinois, to assume all of the deposits of Bank of Shorewood. The three branches of Bank of Shorewood, including the location operating as Bank of Elwood, will reopen on Saturday as branches of Heartland Bank and Trust Company. Depositors of Bank of Shorewood will automatically become depositors of Heartland Bank and Trust Company. 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 Bank of Shorewood should continue to use their existing branch until they receive notice from Heartland Bank and Trust Company that it has completed systems changes to allow other Heartland Bank and Trust Company branches to process their accounts as well. This evening and over the weekend, depositors of Bank of Shorewood 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, Bank of Shorewood had approximately $110.7 million in total assets and $104.0 million in total deposits. In addition to assuming all of the deposits of the failed bank, Heartland Bank and Trust Company agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.6 million. Compared to other alternatives, Heartland Bank and Trust Company's acquisition was the least costly resolution for the FDIC's DIF. Bank of Shorewood is the 62nd FDIC-insured institution to fail in the nation this year, and the sixth in Illinois. The last FDIC-insured institution closed in the state was First Chicago Bank & Trust, Chicago, on July 8, 2011."

U.S. AND CHINA HOLD SYMPOSIUM ON AUDIT OVERSIGHT

The following is an excerpt from the SEC website: Washington, D.C., Aug. 8, 2011 – The Sino-U.S. Symposium on Audit Oversight was held in Beijing on July 11-12, 2011. In attendance were officials from the U.S. Securities and Exchange Commission, U.S. Public Company Accounting Oversight Board (PCAOB), China Securities Regulatory Commission (CSRC), and Chinese Ministry of Finance (MOF). The symposium, which was contemplated by the outcomes of the third U.S.-China Strategic and Economic Dialogue (S&ED), represented an important step toward Sino-U.S. cooperation on audit oversight of public companies. At the symposium, the officials briefed each other on their respective audit oversight system and inspection procedures. They also exchanged views on how to deepen cooperation on cross-border audit oversight. CSRC Chairman Shang Fulin met with the SEC-PCAOB delegation headed by PCAOB Board Member Lewis Ferguson and SEC Deputy Chief Accountant Mike Starr prior to the symposium. “The CSRC and MOF welcome constant communication and good cooperation with both the SEC and PCAOB. The regulators of both countries share common objectives in protecting investors’ rights and interests, raising the quality of accounting and auditing standards, and improving the transparency and disclosure of public companies. Therefore, the regulators of both countries should enhance cooperation on the basis of mutual trust and respect,” said Chairman Shang. The U.S. delegation brought Chairman Shang a letter from PCAOB Chairman James R. Doty, who stated his sincere hope for constructive discussions in Beijing and for enhanced cooperation between China and the U.S. on cross-border audit oversight in the near future. “The development of an effective cross-border oversight system is essential to market integrity and investor protection, and the PCAOB and CSRC share a common goal of promoting fair, open, and sound markets,” Chairman Doty wrote in the letter. Mr. Ferguson said, “Our delegates are willing to share with our Chinese counterparts the PCAOB inspection approaches as well as our practices in joint cross-border audit oversight. In return, the U.S. delegation expects to learn more, through future exchanges, about the methodology and practices of accounting and audit oversight in China.” As an outcome reached during the third U.S.-China Strategic and Economic Dialogue, both sides welcome continued dialogue concerning the oversight of accounting firms providing audit services to public companies in the two countries, so as to enhance mutual trust and strive to reach an agreement on cross-border audit oversight. During the two-day symposium, the PCAOB representatives gave detailed presentations on the background and organizational structure of the PCAOB, and its inspection process. With input from the SEC delegation, including officials from the SEC’s Office of International Affairs, the PCAOB explained how it works with foreign regulators on cross-border audit oversight cooperation. Senior officials from the CSRC and the MOF provided an overview of the auditing and accounting oversight framework governing China’s capital markets, supervision arrangements, and inspection methodology and process for accounting and auditing firms. Through candid discussions, the two sides enhanced mutual understanding, and discussed initial arrangements for follow-up collaboration. The two sides discussed a series of arrangements aiming to build mutual understanding and cooperation in the near future, including sending staff to observe the inspection of accounting firms in each other’s jurisdiction to learn more about each other’s inspection process and methodology. The U.S. delegation invited the CSRC and the MOF to send delegates to Washington, D.C. to have further discussions on the topics of common concern. Such trust and confidence-building exercises are helpful for both sides to fulfill their respective mandates. The parties believe that strengthened cooperation on audit oversight is an important part in implementing the S&ED outcomes. The symposium was very productive and served as a first step toward deeper cooperation. The parties share the view that increasing cooperation on cross-border audit oversight will help improve the quality of auditing and accounting information of public companies, protect the rights of investors, and assist in safeguarding of financial markets in both countries.”