SEC FILES SUBPOENA ENFORCEMENT ACTION AGAINST DELOITE & TOUCHE SHANGHI

The following excerpt is from the SEC website: “The Securities and Exchange Commission today filed a subpoena enforcement action against Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to the SEC’s investigation into possible fraud by the Shanghai-based public accounting firm’s longtime client Longtop Financial Technologies Limited. According to the SEC’s application and supporting papers filed in U.S. District Court for the District of Columbia, the SEC issued a subpoena on May 27, 2011, and D&T Shanghai was required to produce documents by July 8, 2011. Although D&T Shanghai is in possession of vast amounts of documents responsive to the subpoena, it has not produced any documents to the SEC to date. As a result, the Commission is unable to gain access to information that is critical to an investigation that has been authorized for the protection of public investors. According to the court papers, D&T Shanghai was Longtop’s auditor since at least 2007, and the firm consented that its audit reports for Longtop could be filed annually with the SEC while knowing full well that they would be relied upon by U.S. investors. On May 22, D&T Shanghai resigned as Longtop’s auditor after discovering numerous improprieties during an audit for the year ended March 31, 2011. In its resignation letter, which was included in a Form 6-K furnished by Longtop on May 23, D&T Shanghai identified numerous indicia of financial fraud at Longtop and indicated that D&T Shanghai’s prior year audit reports for Longtop could no longer be relied upon by investors. As part of the Longtop investigation, the SEC staff issued and served the subpoena on D&T Shanghai seeking production of documents related to the incomplete audit of Longtop for the year ended March 31 as well as prior year audits that D&T Shanghai completed. According to the court papers, these documents may reveal information about D&T Shanghai’s discovery of false financial records at Longtop, how any fraud schemes at Longtop were able to continue undetected, and basic information necessary to ferret out whether there was a fraud, who was behind it, how significant it was, and how it was conducted. The SEC’s court papers note that Longtop is a foreign private issuer whose American depositary shares (ADSs) traded on the NYSE from the date of its initial public offering in October 2007 until May 17, 2011, when the NYSE halted trading prior to delisting Longtop’s securities in August 2011. When trading was halted, Longtop’s ADSs were priced at $18.93 per share with 57 million shares outstanding, resulting in a market capitalization of approximately $1.08 billion. Pursuant to its application filed in court, the SEC is seeking a court order directing D&T Shanghai to show cause why the court should not enter an order requiring D&T Shanghai to produce documents responsive to the subpoena.”

SEC GETS TEMPORARY RESTRAINING ORDER TO RESTRAIN A STOCK TRANSFER COMPANY FROM CONTINUED VIOLATIONS

The following is from the SEC website: “On September 2, 2011, the Securities and Exchange Commission obtained a temporary restraining order and other relief in a civil injunctive action in the United States District Court for the District of Utah against National Stock Transfer, Inc. (National), National’s president Kay Berenson-Galster (Galster) and National’s owner, Roger Greer (Greer). The complaint alleges that, for at least five years, National Stock Transfer, Inc., a transfer agent registered with the Securities and Exchange Commission, has been violating federal securities laws and important obligations it has as a transfer agent. The Complaint alleges, among other things, that National has failed to report lost or stolen securities in a timely manner, failed to maintain certain records, failed to maintain control books for all of its issuers and failed to file its annual report with the Securities and Exchange Commission. During the time period covered by the complaint, National acted as the transfer agent for 58 issues of common and preferred stock. National has recently been physically locked out of its office by its creditor, Woodward Capital Partners, LLC, as part of a private state court case. The Commission has moved the court for a temporary restraining order and preliminary injunction against National and its principals, enjoining them from continued violations. The Court order granted the temporary restraining order against future violations of the federal securities laws regulating transfer agents, accelerated discovery and enjoined further litigation in the private state court action. The Commission’s complaint charges National with violations of Sections 17(a)(3) and 17A(d) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 17Ad-2, 17f-1, 17f-2(a), 17Ac2-1(c), 17Ac-2-2, 17Ad-6, 17Ad-7, 17Ad-10, 17Ad-13, 17Ad-15(c), 17Ad-17 and 17Ad-19 thereunder, and Galster and Greer with aiding and abetting violations of Sections 17(a)(3) and 17A(d) of the Exchange Act and Rules 17Ad-2, 17f-1, 17f-2(a), 17Ac2-1(c), 17Ac-2-2, 17Ad-6, 17Ad-7, 17Ad-10, 17Ad-13, 17Ad-15(c), 17Ad-17 and 17Ad-19 thereunder. The complaint also seeks civil penalties against National, Galster and Greer.”

MAN INDICTED FOR LYING TO THE SEC

The following excerpt is from the SEC web site: The Commission announced that on August 24, 2011, the United States Attorney’s Office for the Southern District of Florida unsealed an Indictment charging Steven Steiner a/k/a Steven Steinger, a defendant in a now settled SEC action, with obstructing justice by lying to the SEC. The 54 count Indictment charges Steiner, along with Henry Fecker, III, with money laundering and other violations. According to the Indictment, Steiner and Fecker, among other things, concealed assets and lied in financial statements that they submitted to the SEC. Steiner and Fecker submitted the financial statements during settlement negotiations to resolve the SEC’s case against Steiner for his antifraud and other violations in a billion dollar offering fraud conducted by Mutual Benefits Corporation (MBC). Fecker was the sole officer and director of Camden Consulting, Inc., a relief defendant in that case. The Commission first halted the on-going fraud at MBC in May 2004 when it filed a contested emergency civil enforcement action against MBC and its principals, including Steiner’s brothers, Joel and Leslie Steinger. In its complaint, the SEC alleged that the defendants had raised over $1 billion from more than 29,000 investors through a fraudulent, unregistered offering of securities in the form of fractionalized interests in viatical and life settlements. The SEC obtained a restraining order to halt the alleged fraud at MBC, and thereafter a receiver was appointed by the United States District Court for the Southern District of Florida (the “MBC Receiver”), to identify and trace the assets of MBC. In June 2005, the SEC filed an amended complaint adding Steiner as a defendant and naming SKS Consulting, Inc. (SKS) a company he controlled, and Camden, as relief defendants. In the amended complaint, the SEC alleged that Steiner was the "public face" of MBC, who participated in all or most initial sales training sessions for new in-house and outside sales agents, met with prospective and existing MBC investors, and made misrepresentations to investors about the safety of investing with MBC and the manner in which it obtained life expectancies for the insurance policies that formed the basis of an investment in MBC. The SEC also alleged that Fecker – Steiner’s life partner – was Camden’s sole officer and director and shared signatory authority with Steiner on the company’s bank accounts. In January 2006, the SEC filed a second amended complaint and further alleged relief defendant Camden acted as a conduit for MBC to make undisclosed payments to Steiner. On April 10, 2007, the Court entered a settled Final Judgment of Permanent Injunction and Other Relief against Steiner and Relief Defendants SKS and Camden. The Final Judgment enjoins Steiner from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Final Judgment also holds Steiner, SKS, and Camden jointly and severally liable for disgorgement and prejudgment interest in the amount of $5,000,000, but orders them to pay $3,925,000 based on their financial statements and other information submitted to the Commission and waives the remainder of the amount and did not impose a penalty based on the financial information. According to the Indictment, in the years after 2004 when MBC was shut down, Steiner and Fecker engaged in a series of transactions to hide assets from the SEC and the MBC Receiver by placing funds attributable to Steiner with third parties or in Fecker’s name alone, and later by causing third parties to make payments of monies due to Steiner, instead to Fecker. Fecker used the funds to support a lavish lifestyle for Fecker and Steiner. To obtain a favorable settlement of the SEC’s case against Steiner, SKS, and Camden, the Indictment alleges that in 2006 and early 2007, Steiner and Fecker submitted a series of false and misleading documents to conceal their true financial condition. The Indictment further alleges that in late 2009, to further conceal assets from the SEC and the MBC receiver, Steiner sold a luxury New York apartment for $1.3 million, but caused false documents to state that the sales price was $1.1 million, and submitted these documents to the SEC and the MBC Receiver. The Indictment alleges that Steiner caused the purchaser to make an additional $200,000 in undisclosed side payments to Fecker, and that these undisclosed and concealed funds were thereafter used to support the lavish lifestyle of Steiner and Fecker. To further thwart the SEC’s efforts to recover assets attributable to MBC, the Indictment alleges that Steiner provided false and misleading testimony under oath to the MBC Receiver concerning his assets and financial condition. The SEC’s actions regarding Mutual Benefits resulted in injunctions and other relief against eight defendants and eight relief defendants, and orders to pay disgorgement and civil penalties totaling $30 million. In addition, before the August 24 Indictment, the United States Attorney’s Office for the Southern District of Florida had charged 10 defendants in criminal actions for their roles in the fraud. The SEC acknowledges the work of the United States Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation, Miami Field Office, and the Internal Revenue Service, Criminal Investigation Division in this matter.”

SEC CHARGES EXECUTIVE AND FIRM WITH INSIDER TRADING SCHEME INVOLVING MOLDFLOW CORPORATION, AUTODESK, INC. AND SALESFORCE,COM, INC

The following is an excerpt from the SEC website: “On August 31, 2011, the Securities and Exchange Commission charged James F. Turner II and his New Jersey-based hedge fund firm Clay Capital Management, LLC with engaging in an insider trading scheme that involved the securities of three companies – Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc. The SEC also charged Turner’s brother-in-law Scott A. Vollmar, Turner’s friend Scott A. Robarge and Vollmar’s neighbor Mark A. Durbin for their roles in the scheme. In total, the scheme generated illicit gains of nearly $3.9 million. Filed in the U.S. District Court for the District of New Jersey, the SEC’s complaint alleges that Vollmar was a director of business development for Autodesk and tipped Turner and Durbin with inside information about Autodesk’s planned tender offer for Moldflow in advance of Autodesk’s public merger announcement on May 1, 2008. Turner traded on the information in his personal accounts, his family members’ accounts and the account of his hedge fund, Clay Capital Fund, LP. Turner also tipped Robarge about the tender offer and recommended that several other friends and family members purchase Moldflow stock. Robarge and Durbin traded on the inside information in their personal accounts. Robarge also recommended that one of his friends buy Moldflow stock. In total, the traders made illicit gains of $2.3 million from their trading in Moldflow stock. According to the SEC’s complaint, Vollmar also tipped Turner with inside information about Autodesk’s fourth quarter 2008 earnings in advance of Autodesk’s public earnings announcement on February 26, 2008. Turner traded on the information in his personal accounts, his family members’ accounts and the Clay Fund’s account. He again tipped Robarge and recommended that several other friends and family members sell short Autodesk stock and purchase Autodesk put options. In total, the traders made illicit gains of nearly $1.1 million from their trading in Autodesk securities. The SEC’s complaint further alleges that Robarge, a recruiting technology manager for Salesforce at the time, tipped Turner with confidential information about Salesforce’s performance in advance of the company’s public earnings announcement on February 27, 2008. Turner traded on the inside information in his personal accounts, his family members’ accounts and the Clay Fund’s account. Turner also recommended that several other friends and family members, including Vollmar, purchase Salesforce stock and call options. Robarge traded on the information in his personal account and recommended that one of his friends buy Salesforce securities. In total, the traders made illicit gains of nearly $500,000 from their trading in Salesforce securities. The SEC alleges that Clay Capital, Turner and Vollmar violated Section 17(a) of the Securities Act of 1933 and that Clay Capital, Turner, Vollmar, Robarge and Durbin violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. Without admitting or denying the SEC’s allegations, Robarge and Durbin have consented to the entry of final judgments permanently enjoining them from violating Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3 thereunder. Robarge also agreed to pay disgorgement of $232,591.91, prejudgment interest of $31,884.93, and a penalty of $232,591.91. Durbin agreed to pay disgorgement of $8,391.26, prejudgment interest of $1,110.86, and a penalty of $8,391.26. The SEC appreciates the assistance of the Financial Industry Regulatory Authority (FINRA) and also thanks the U.S. Attorney’s Office for the District of New Jersey and the Federal Bureau of Investigation for their assistance in this matter.”

SEC CHAIRMAN DISCUSSES ASSET-BACKED INSURERS AND MORTGAGE-RELATED POOLS

The following is an excerpt from the SEC website. The following is from a speech given by Chairman Mary Schapiro of the SEC: Chairman Mary Schapiro U.S. Securities and Exchange Commission Washington, D.C. August 31, 2011 The next item on our agenda involves two companion releases requesting public comment on the treatment of asset-backed issuers and the treatment of real estate investment trusts and other mortgage-related pools under the Investment Company Act. Treatment of Asset-Backed Issuers Under the Investment Company Act The first of these companion releases is an advance notice of proposed rulemaking regarding Rule 3a-7. That rule, adopted in 1992, provides an exclusion from the definition of “investment company” for certain asset-backed securities issuers. This is important because an entity that is excluded from this definition is exempt from the requirements of the Investment Company Act. To rely on this exclusion, ABS issuers must meet conditions designed to appropriately distinguish these vehicles from mutual funds and other registered investment companies. In addition, the rule contains conditions designed to provide for the safekeeping of assets and some level of independent oversight – both of which are traditional concerns under the Investment Company Act. Also, among the conditions of the rule, are several references to credit rating requirements. We have been examining Rule 3a-7 in the context of the mandate under the Dodd-Frank Act to review and remove credit ratings from our rules and substitute other appropriate standards of creditworthiness. Unlike our other rules, Rule 3a-7 does not use credit ratings to serve as standards of creditworthiness. Instead, the ratings review by the ratings agencies was intended to serve as a type of proxy for addressing traditional investor protection concerns under the Investment Company Act. Our review therefore has focused on substitutes to enhance investor protections, as opposed to substitutes for creditworthiness. In addition, given that the rule is nearly 20 years old, that the asset-backed securities market has experienced tremendous upheaval, and that the primary regulatory regime for asset backed securities is being substantially revised by the Dodd-Frank Act and SEC rulemaking, we are inviting public comment on Rule 3a-7. Among other things, we are requesting comment on ways to update and improve the conditions applicable to the exception for certain asset-backed issuers under the Investment Company Act. We want to assure that our investor protection concerns are appropriately addressed by the rule’s conditions, taking into account various other regulations that are applicable to ABS issuers, including Regulation AB. Among the ideas we discuss is requiring an ABS issuer to undergo an independent review to protect investors in asset-backed securities from self-dealing and overreaching by insiders, in lieu of the credit rating requirement currently in the rule. Treatment of Mortgage-Related Pools Under the Investment Company Act In a companion concept release, we also are requesting public comment on ways to update our interpretation of section 3(c)(5)(C) of the Investment Company Act. That provision is relied upon by some real estate investment trusts, known as REITs, and other mortgage-related pools engaged in the business of acquiring mortgages and mortgage-related instruments. However, certain asset-backed issuers, particularly those backed by mortgages also potentially rely on this provision. So it is helpful and instructive for the Commission to request comment on the treatment of asset-backed issuers and mortgage companies in tandem. In addition, the exception for REITs and other mortgage-related pools under the Investment Company Act is an area of the law that has not received significant focus from the Commission over the years. Indeed, the last time the Commission issued a formal interpretation in this area was in 1960, upon the emergence of REITs. Needless to say, tremendous changes have occurred in the mortgage markets, the securities markets, and the regulatory environment in the intervening five decades. As a result, we are taking this opportunity to seek public input on whether Commission guidance, and the few staff interpretations regarding the status of mortgage-related pools under the Investment Company Act, should be updated or made more clear and comprehensive. We do this with a view that, in some cases, certain REITs and potentially other mortgage-related pools relying on the exclusion can to some investors – particularly retail investors – look very much like traditional investment companies. I look forward to public comments on the nature of the REIT and mortgage markets as well as input on the clarity, scope and even the relevance of our existing guidance.”

SEC FILES INJUNCTION AGAINST BARRED INVESTMENT ADVISOR

September 1, 2011 “The Securities and Exchange Commission announced that it filed a civil injunctive action today in federal district court in Massachusetts against John A. “Jack” Grant (“Jack Grant”), Sage Advisory Group, LLC, a Massachusetts-based investment adviser registered with the Commission, and its sole principal, owner, and employee, Benjamin Lee Grant (“Lee Grant”). The Commission’s complaint alleges that Jack Grant, a lawyer and former stockbroker, has violated and continues to violate a Commission bar from association with investment advisers by associating with his son Lee Grant’s investment advisory firm, Sage, and by acting as an investment adviser himself. The Complaint further alleges that Jack Grant, Lee Grant and Sage fraudulently failed to disclose Jack Grant’s barred status and disciplinary history to Sage’s advisory clients. According to the Complaint, the Commission filed a previous enforcement action against Jack Grant in 1988 alleging that he sold $5,500,000 of unregistered securities and misappropriated investors’ funds. At that time, Jack Grant agreed to settle the case and to settle related administrative proceedings that resulted in a July 1988 Order issued by the Commission barring Jack Grant from association with broker, dealers, and investment advisers. Notwithstanding his bar from associating with investment advisers, Jack Grant did not remove himself from the securities business. Jack Grant continued to advise individuals and small businesses on the management of their assets and investments, including prior brokerage customers. He retooled his service as the Law Offices of Jack Grant, and continued providing investment advice, using his son, Lee Grant, to help implement his investment advice. The Complaint alleges that, from at least 1998, Jack Grant has advised clients to invest through his son Lee Grant, who worked first as an associated person of an investment adviser, then as a registered representative of a broker-dealer and, since 2005, as the principal and sole director of a registered investment adviser, Sage. Lee Grant has been fully aware of Jack Grant’s bar from associating with investment advisers, but allowed his association with Sage nonetheless. Jack Grant, Lee Grant, and Sage failed to inform their advisory clients that Jack Grant is barred from associating with investment advisers. They also failed to disclose Jack Grant’s other disciplinary history: his suspension from practicing law for one year, imposed in 1994 following an indictment and conviction for bankruptcy fraud. The Commission’s complaint alleges that Jack Grant, Sage and Lee Grant violated Section 206 of the Investment Advisers Act of 1940 (“Advisers Act”) and that Sage and Lee Grant violated Section 207 of the Advisers Act. The Commission seeks, among other things, the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Jack Grant, Sage and Lee Grant. The Commission filed a separate civil injunctive action against Sage and Lee Grant on September 29, 2010, alleging that Sage and Lee Grant made material misrepresentations and omissions to his former brokerage customers in order to induce them to transfer their assets to Sage, his new advisory firm. That action is still pending.”