SEC SEEKS MORE PUBLIC COMMENTS

The following excerpt is from the SEC website: Washington, D.C., Sept. 6, 2011 – The Securities and Exchange Commission today announced that it will seek public comment on a plan to conduct retrospective reviews of its existing regulations. Because today's financial markets are dynamic and fast-moving, the regulations affecting the markets and its participants must be reviewed over time and revised as necessary so that the regulations continue to fulfill the SEC's mission. The SEC has long had formal and informal processes in place to review its existing rules, and a considerable portion of its rulemaking already involves changes to existing rules. Most recently, in March, the Commission began a retrospective review of offering and reporting requirements, and posted a regulatory review webpage seeking public input. The Commission is seeking public comment on the process it should use to conduct retrospective reviews, such as how often rules should be reviewed, the factors that should be considered, and ways to improve public participation in the rulemaking process. Public comments should be received by Oct. 6, 2011. President Barack Obama issued an order on July 11 that recommended that independent regulatory agencies consider how they might best analyze rules that may be outmoded, ineffective or excessively burdensome, and modify, streamline or repeal them. The order also recommends analysis of regulations that might need to be strengthened or modernized, which may entail new rulemaking."

MANIPULATION OF CHINESE PENNY STOCK PRICES LAND U.S. BROKER IN PRISON

The following excerpt is from the Department of Justice website: Tuesday, September 6, 2011 “WASHINGTON - A New York stock broker was sentenced today to 24 months in prison for his role in a wide-ranging international stock fraud scheme involving the illegal use of bulk commercial emails, or “spamming,” to promote thinly-traded Chinese penny stocks, announced A ssistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Barbara McQuade for the Eastern District of Michigan. Gregg M. S. Berger, 47, of New York, N.Y., was ordered by U.S. District Judge Marianne O. Battani in Detroit to serve three years of supervised release following his prison term. Berger agreed to forfeit $600,000 to the United States. According to court documents, Berger conspired with Alan Ralsky, Francis Tribble, How Wai John Hui, Scott Bradley and others to carry out a sophisticated stock fraud scheme from January 2005 through December 2007. Ralsky, Tribble, Hui and Bradley have all been convicted and sentenced for their roles in the scheme. “Mr. Berger used his position as a stock broker to generate more than $30 million in illegal proceeds for his co-conspirators, and more than half a million dollars for himself,” said Assistant Attorney General Breuer. “Today’s sentence reflects our sustained commitment to ensuring the integrity of our financial markets, and to holding accountable those who try to manipulate them.” “Schemes that manipulate stock prices undermine public confidence in the stock market, and can have serious impact on our economy,” said U.S. Attorney McQuade. “Illegal activity involving the investment industry has brought financial ruin to many Americans. IRS Criminal Investigation is pleased to bring our forensic accounting skills to this joint venture to put a stop to this and other types of white collar fraud,” said Erick Martinez, Special Agent in Charge of the IRS Criminal Investigation Detroit Field Office. Berger was indicted in the Eastern District of Michigan in December 2010 and pleaded guilty in April 2011 to conspiring to commit securities fraud and wire fraud. The charges arose after a multi-year investigation, led by agents from the FBI, with assistance from the U.S. Postal Inspection Service and the Internal Revenue Service (IRS), revealed a sophisticated and extensive operation that largely focused on running a “pump and dump” scheme, whereby the defendants sent spam touting thinly-traded Chinese penny stocks, drove up their stock price, and reaped profits by selling the stock at artificially inflated prices. In pleading guilty, Berger acknowledged that he established brokerage accounts at the direction of Hui and Tribble, and communicated with Ralsky and Bradley during the conspiracy. Berger’s role was to trade the stocks that were illegally promoted by spam email campaigns, arrange for shares of the stocks to be transferred into the brokerage accounts, and execute stock trades at the direction of Tribble, rather than the direction of the named account holders. Berger also caused the transfer of the proceeds from the trading of the stocks to bank accounts controlled by the conspirators. He also provided confidential account information, including trade amounts, prices, cash balances and wire transfer details to Tribble, Bradley and others involved in the scheme who were not entitled to such information and did not have authorization from the actual named account holders. The stocks pumped-and-dumped included China World Trade Corporation (CWTD), Pingchuan Pharmaceutical Inc. (PGCN), China Digital Media Corporation (CDGT), World Wide Biotech and Pharmaceutical Co. (WWBP), China Mobility Solutions (CHMS) and m-Wise (MWIS). According to court documents, during the course of the scheme, Berger caused the sale of approximately 30 million shares of stock, generating approximately $30 million for the co-conspirators and over $600,000 in commissions for Berger. The case was prosecuted by Assistant U.S. Attorney Terrence Berg of the U.S. Attorney’s Office for the Eastern District of Michigan and Senior Counsel Thomas Dukes of the Criminal Division’s Computer Crime and Intellectual Property Section. The case was investigated by the FBI, IRS and U.S. Postal Inspection Service. The U.S. Securities and Exchange Commission’s Philadelphia Regional Office has provided significant ongoing assistance in this case.”

SEC CHAIRMAN SPEECH CONSIDERING SOLICITING PUBLIC COMMENT ON ISSUES RELATIVE TO THE INVESTMENT COMPANY ACT OF 1940

The following speech was given by SEC Chairman Mary Schapiro Chairman Mary Schapiro U.S. Securities and Exchange Commission Washington, D.C. August 31, 2011 Good morning. This is an open meeting of the U.S. Securities and Exchange Commission on August 31, 2011. Today we will consider whether to issue three separate releases soliciting public comment on issues arising under the Investment Company Act of 1940. The first relates to the use of derivatives by mutual funds and other investment companies regulated under that Act. The next two are companion releases regarding who is considered to be – and not to be – an “investment company” as that term is defined under the Act. In particular, we focus on asset-backed securities issuers and issuers that are in the business of acquiring mortgages and mortgage-related instruments. The derivatives, asset-backed and mortgage markets have undergone significant changes in recent years. And the Commission is taking this opportunity to seek public comment in order to help ensure that our regulatory approach and interpretations under the Investment Company Act remain current, relevant, and consistent with investor protection. Concept Release on Mutual Funds’ Use of Derivatives The first item on the agenda involves the use of derivatives by funds. In March 2010, the Commission announced a staff review of the use of derivatives by mutual funds, exchange traded funds, and other investment companies regulated under the Investment Company Act. That review focuses on the growing use of derivatives by funds and on whether the regulatory guidance surrounding that use can be improved. The concept release we are considering today would inform our review and help us determine whether we should update the regulatory regime for the benefit of fund investors. Background We face this issue today because in 1940, when the Investment Company Act was adopted, derivatives as we now know them did not exist. The Act imposes important leverage, valuation, diversification, and industry concentration requirements to help protect fund investors. However, those limitations were written with stocks and bonds in mind, not complex financial derivatives. As a result, fund investments in derivatives are not always wholly captured by the statutory limitations and requirements. Or if captured, the measures may not be quite right. The controls in place to address fund investments in traditional securities can lose their effectiveness when applied to derivatives. This is particularly the case because a relatively small investment in a derivative instrument can expose a fund to a potentially substantial gain or loss – or outsized exposure to an individual counterparty. The Commission’s approach to the regulation of funds’ use of derivatives has developed on an ad hoc basis as new derivative instruments were introduced and new derivative hedging strategies gained popularity. Current Review of Funds’ Use of Derivatives The current derivatives review gives us the opportunity to re-think our approach to regulating funds’ use of derivatives. We are engaging in this review with a holistic perspective, in the wake of the financial crisis, and in light of the new comprehensive regulatory regime for swaps being developed under the Dodd-Frank Act. But we want public input to help us get it right – input from those who use derivatives, input from those who invest in funds, and input from those who manage funds with derivatives strategies. I very much look forward to commenter input as we continue our in-depth review of the role of derivatives in fund portfolios and improvements that can be made to the regulatory regime.”

COURT ORDERS TRADER ON CME TO PAY NEARLY $2.5 MILLION IN PENALTIES AND RESTITUTION

The following excerpt is from the CFTC website: “Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced today that the U.S. District Court for the Northern District of Illinois entered a final default judgment on May 5, 2011, against defendant Carmine Garofalo, an Italian national who purports to reside in Tunisia, requiring him pay $614,925 in restitution and a $1,844,775 civil monetary penalty. The CFTC charged Garofalo with fraud and noncompetitive trading in connection with transactions executed on the Chicago Mercantile Exchange (CME) in March 2010 (see CFTC Press Release 5813-10, April 22, 2010). On August 16, 2011, the court entered a distribution order requiring that funds previously frozen in a personal account held by Garofalo at Interactive Brokers LLC be used to pay restitution and a portion of Garofalo’s civil monetary penalty. The court’s order requires that full restitution of $614,925 be paid to the victim of Garofalo’s fraudulent transactions. The court’s final judgment order finds that Garofalo simultaneously entered trades for his account at Interactive Brokers LLC and an account held at an Italian bank on behalf of a Luxembourg-based client. Garofalo intentionally executed parallel orders to buy and sell E-mini S&P 500 options and Euro/U.S. Dollar European Style Premium options during after-hours trading on the March 5, 2010 trading day -- a period of low volume options trading -- with the purpose of having the opposite orders find and match each other on the CME’s Globex trading platform, the order finds. According to the order, during a 5-hour period on the March 5, 2010 trading day, Garofalo fraudulently executed 168 trades in the account of the client and was successful in matching 119 of the orders with orders placed in his personal account, resulting in a money pass. The CFTC thanks the CME Group, the Italian Commissione Nazionale per le Società e la Borsa, and the U.S. Consulate in Milan, Italy, for their assistance.”

SEC SEEKS COMMENT ON THE USE OF DERIVATIVES BY MUTUAL FUNDS

The following is and excerpt from the SEC website: “Securities and Exchange Commission today voted unanimously to seek public comment on a wide range of issues raised by the use of derivatives by mutual funds and other investment companies regulated under the Investment Company Act. The SEC is seeking public input through a concept release, which is a Commission-approved document that poses an idea or ideas to the public to get their views. The Commission will use the comments received in response to this concept release to help determine whether regulatory initiatives or guidance is needed that would continue to protect investors and fulfill the purposes underlying the Investment Company Act. “The derivatives markets have undergone significant changes in recent years, and the Commission is taking this opportunity to seek public comment and ensure that our regulatory approach and interpretations under the Investment Company Act remain current, relevant, and consistent with investor protection,” said SEC Chairman Mary L. Schapiro. The concept release is a continuation of the SEC’s ongoing review of mutual funds’ use of derivatives announced last year. The concept release requests public input on the issues that the SEC staff has been examining for potential ways to improve the regulation of mutual funds’ use of derivatives. Public comments should be received within 60 days from the date of publication in the Federal Register. # # # FACT SHEET Soliciting Public Comment on the Use of Derivatives by Funds Background Investment Companies Investment companies regulated under the Investment Company Act such as mutual funds, ETFs, and closed-end funds play a significant role in the U.S. economy and world financial markets. At the end of 2010, for example, registered investment companies held more than $13.1 trillion in assets and more than 40 percent of all U.S. households owned their shares. Investors in these funds rely on investment advisers as well as boards of directors to manage and oversee the funds. Use of Derivatives Subject to the various safeguards contained in the Investment Company Act as well as SEC rules and guidance, funds are permitted to invest in derivatives. Derivatives, which are a type of financial instrument whose value is derived from another underlying product, include such things as futures, certain options, options on futures, and swaps. A common characteristic of most derivatives, which are among a panoply of investments that a fund may make in managing its portfolio, is that they involve leverage. Recent SEC Activity When the Investment Company Act was enacted in 1940, it did not contemplate funds investing in derivatives as they may do today. Indeed, the use and complexity of derivatives have grown significantly over the past two decades. Over the years, the Commission and its staff have addressed a number of issues raised by the use of derivatives on a case-by-case basis. In March 2010, the SEC announced that the staff had initiated a broad review to evaluate the use of derivatives by funds to determine whether and what additional protection might be necessary under the Investment Company Act: http://www.sec.gov/news/press/2010/2010-45.htm Purpose of the Concept Release To better inform its review, the staff is recommending that the Commission issue a Concept Release to solicit public comment on funds’ use of derivatives and on the current regulatory regime under the Investment Company Act as it applies to funds’ use of derivatives. The Commission would use the comments to help determine whether regulatory initiatives or guidance is needed that would continue to protect investors and fulfill the purposes underlying the Investment Company Act. What Does the Concept Release Ask? The Concept Release asks for information on how different types of funds use various types of derivatives as well as the benefits, risks and costs of using derivatives, among other things. Additionally, it asks for comment on several specific issues under the Investment Company Act implicated by funds’ use of derivatives, such as: Restrictions on Leverage – The Investment Company Act restricts the manner in which, and the extent to which, funds may incur indebtedness and may leverage their portfolios. The Concept Release discusses the treatment of derivatives under these restrictions. The Concept Release asks, among other things, how to measure the amount of leverage that a fund incurs when it invests in a derivative. Fund Portfolio Diversification – The Investment Company Act does not require the portfolios of funds to be diversified, but does require them to disclose in their registration statements whether they are diversified or not. The Act also prohibits a fund from changing its classification from diversified to non-diversified without shareholder approval. The Concept Release asks, among other things, how a fund should value a derivative to determine the percentage of the fund's assets that's invested in a particular company for diversification purposes. Fund Investments in Certain Securities-Related Issuers – The Investment Company Act generally prohibits funds from acquiring any security issued by, or any other interest in, the business of a broker, dealer, underwriter or investment adviser. However, funds that meet certain conditions may acquire some securities issued by companies engaged in such business. The Concept Release asks, among other things, how investing in a derivative issued by a broker-dealer may be different from, or similar to, investing in the broker-dealer's stock or bond. Fund Portfolio Concentration – The Investment Company Act does not prohibit funds from concentrating their investments in a particular industry, but does require funds to disclose their industry concentration policies in their registration statements. It also prohibits funds from deviating from those policies without shareholder approval. The Concept Release asks, among other things, how funds determine the industry or industries to which they may be exposed through a derivative investment. Valuation of Fund Assets – The Investment Company Act specifies how funds must determine the value of their assets. The Concept Release asks, among other things, whether the Commission should issue guidance on how funds should value derivatives in their portfolios. What’s Next? The Concept Release will be published in the Federal Register and commenters will have 60 days from the date of publication to submit their comments."

FEES PUBLIC COMPANIES WILL PAY IN 2012 TO REGISTER SECURITIES

The following is an excerpt from the SEC website: "Fee Rate Advisory #2 for Fiscal Year 2012 Washington, D.C., August 31, 2011 – The Securities and Exchange Commission today announced that in fiscal year 2012 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $114.60 per million dollars. The Commission determined this new rate in accordance with procedures required under the securities laws. Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment. A copy of the Commission's order, including the calculation methodology, is available at http://www.sec.gov/rules/other/2011/33-9255.pdf. Background The securities laws require the Commission to make annual adjustments to the rates for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934. The Commission must set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts. The statutory target amount for fiscal year 2012 is $425 million. The annual adjustment to the fee rate under Section 6(b) also sets the annual adjustment to the fee rates under Sections 13(e) and 14(g). Under changes made by the Dodd-Frank Act, the annual rate changes for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934 must take effect on the first day of each fiscal year. Therefore, effective Oct. 1, 2011, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities, and the Section 14(g) fee rates applicable to proxy solicitations and statements in corporate control transactions will decrease from $116.10 per million dollars to $114.60 per million dollars. The Section 6(b) rate is also the rate used to calculate the fees payable with the Annual Notice of Securities Sold Pursuant to Rule 24f-2 under the Investment Company Act of 1940." The Commission will issue further notices as appropriate to keep the public informed of the effective date of the fee rate changes under Section 6(b), Section 13(e) and Section 14(g)."