SEC VOTED TO PROPOSE RULE TO IMPLEMENT VOLKER RULE REQUIREMENTS

The following is an excerpt from the SEC website: Washington, D.C., Oct. 12, 2011 - The Securities and Exchange Commission today voted to propose a rule implementing the so-called "Volcker Rule" requirements. The requirements stem from Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC is issuing the proposal jointly with the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency. "This proposal is intended to curb the proprietary trading of commercial banks in order to reduce potential conflicts between the banks' own interests and the interests of their customers," said SEC Chairman Mary L. Schapiro. # # # FACT SHEET Background Section 619 of the Dodd-Frank Act, among other things, generally prohibits two activities of banking entities. It prohibits federally insured depository institutions and their affiliates (banking entities) from engaging in short-term proprietary trading of any security, derivative, and certain other financial instruments for a banking entity’s own account. It prohibits owning, sponsoring, or having certain relationships with a hedge fund or private equity fund. To implement Section 619, the SEC is considering – along with other financial regulators – a proposal that would clarify the scope of the section’s prohibitions and, consistent with statutory authority, provide certain exemptions. The Proposal Under the proposed rule, banking entities would be required to establish an internal compliance program subject to supervisory oversight and designed to ensure and monitor compliance with the prohibitions and restrictions of Section 619. The proposal also would require firms with significant trading operations to report to the appropriate federal supervisory agency certain quantitative measurements designed to assist the supervisory agency and banking entities in identifying prohibited proprietary trading from permitted activities. At the same time, the proposal would exempt transactions in certain instruments from the prohibition on proprietary trading, including obligations of: The U.S. government or a U.S. government agency The government-sponsored enterprises State and local governments Additionally, the proposal would exempt activities such as: Market making Underwriting Risk-mitigating hedging Notwithstanding the general prohibition on investments in and certain relationships with hedge funds and private equity funds, the statute contains several exemptions. The proposal, for example, would exempt: Organizing and offering a hedge fund or private equity funds under certain conditions, including limiting investments in such funds to a de minimus amount. Making risk-mitigating hedging investments. Making investments in certain non-U.S. funds. The jointly-proposed rule includes regulatory commentary intended to assist banking entities in distinguishing permitted market making-related activities from prohibited proprietary trading activities, and in identifying permitted activities in hedge funds and private equity funds. It also includes a number of elements intended to reduce the effect of the proposal on smaller, less-complex banking entities. For example, the proposal limits the extent to which smaller banking entities are required to report quantitative measurements.”

PROGRESSIVE ENERGY PARTNERS GUY GETS COMPLAINT FROM SEC

OCTOBER 12, 2011 “On October 11, 2011, the Securities and Exchange Commission ("Commission") filed a complaint alleging that Jerry L. Aubrey used his now-defunct company Progressive Energy Partners, LLC ("PEP") to contact investors through cold calls and high-pressure sales tactics. PEP salespeople falsely claimed that investors' money would be used to develop and support oil and gas wells in West Virginia. Investors were misled to believe they could expect annual returns of greater than 50 percent. The Commission also charged Jerry Aubrey's brother and two PEP salesmen in its complaint filed in U.S. District Court in Orange County, California. The Commission's complaint alleges that PEP never engaged in any profitable business operations. Instead, from approximately 2005 to April 2010, Jerry Aubrey paid existing investors with money raised from new investors. The Commission's complaint also alleges that Jerry Aubrey and his brother Timothy J. Aubrey diverted more than $3.2 million of investor funds for their personal use, including: Rent for the Aubrey family's lavish house equipped with giant fish aquariums with miniature sharks, a hot tub, pool, and tennis court. Box seats at Los Angeles Lakers basketball games and limousine rides to and from the games. Vacations to Hawaii, Las Vegas, and Palm Springs. According to the Commission's complaint, Jerry and Timothy Aubrey and PEP salesmen Brian S. Cherry and Aaron M. Glasser failed to inform investors that up to 35 percent of their money would be used to pay sales commissions. Jerry Aubrey paid more than $2.2 million in commissions to PEP salespeople. Glasser received nearly $750,000 and Cherry received more than $300,000. Jerry Aubrey is currently serving a five-year sentence in Florida state prison for a securities fraud he perpetrated in Florida. The Commission's complaint charges all defendants with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also charges Jerry Aubrey with aiding and abetting his company's Section 10(b) and Rule 10b-5 violations. The Commission also seeks permanent injunctions against all defendants and a conduct based injunction against Jerry Aubrey prohibiting him or any entity he owns or controls from offering unregistered securities in the future. In addition, the Commission seeks disgorgement plus prejudgment interest and civil penalties against Timothy Aubrey, Cherry, and Glasser“.

U.S. AND EUROPEAN ANTITRUST AGENCIES ISSUE REVISION OF BEST PRACTICES FOR MERGER REVIEW COORDINATION

The following excerpt is from the Department of Justice Website: Friday, October 14, 2011 Agencies Celebrate 20th Anniversary of Cooperation Agreement WASHINGTON – The Department of Justice, Federal Trade Commission (FTC) and the European Commission today issued an updated set of “best practices” that they use to coordinate their merger reviews. The agencies also celebrated the 20th anniversary of the United States-European Union bilateral antitrust agreement. Following their annual antitrust consultations earlier today, Sharis A. Pozen, Acting Assistant Attorney General for the Department of Justice’s Antitrust Division, Jon Leibowitz, Chairman of the FTC, and Joaquín Almunia, European Union (EU) Vice-President and Competition Commissioner, praised the success of the cooperation agreement, and noted that international coordination and cooperation have steadily increased over 20 years. The agencies reaffirmed their commitment to cooperation and coordination in order to benefit consumers and business. The 1991 agreement, which was signed in Washington, D.C. on September 23, provided for mutual notification of enforcement activities affecting each other’s important interests; exchange of non-confidential information and regular meetings among the agencies; cooperation and coordination of enforcement activities; consideration of requests by one party to pursue enforcement activities against anticompetitive conduct affecting the interests of the requesting party; and taking into account at all stages of enforcement, the important interests of the other party. “In a world of multiple competition regimes, the strength of the U.S.-E.U. relationship and the depth of cooperation between the U.S. agencies and the European Commission serve as a model for the sound enforcement of competition laws,” said Acting Assistant Attorney General Pozen. “The revised best practices on U.S./E.U. merger cooperation are a prime example of how our working relationship will go forward with cooperation, trust and respect as its guiding principles. I have no doubt that our relationship will continue to grow, building on the 20 years of cooperation under the ground-breaking bilateral agreement of 1991.” “Over the last two decades we’ve learned a lot about how to work together to preserve competition and protect consumers on both sides of the Atlantic, while at the same time enabling firms to pursue their mergers and acquisitions without undue delay,” said FTC Chairman Jon Leibowitz. “These updated best practices will ensure that we continue these efforts effectively and efficiently.” The best practices, originally issued in 2002, provide an advisory framework for interagency cooperation when one of the U.S. agencies and the European Commission’s Competition Directorate review the same merger. The revised U.S.-E.U. best practices: Provide more guidance to firms about how to work with the agencies to coordinate and facilitate the reviews of their proposed transactions; Recognize that transactions that authorities in the U.S. and Europe review may also be subject to antitrust review in other countries; and Place greater emphasis on coordination among the agencies at key stages of their investigations, including the final stage in which agencies consider potential remedies to preserve competition. The heads of the three agencies also marked the U.S.-E.U. cooperation agreement’s anniversary by hosting a high-level symposium reviewing 20 years of U.S.-E.U . competition agency cooperation on Oct.13, 2011. The symposium brought together many senior officials who were responsible for the adoption of the 1991 agreement, with present and former senior officials from all three agencies, along with leading academic experts, practitioners and business executives from both jurisdictions. The symposium highlighted the agreement’s success in expanding communication and understanding among the agencies; enlarging the scope of cooperation and coordination in merger, cartel and single-firm conduct investigations; coordinating approaches to global antitrust developments; pursuing convergence on better procedures and substantive analysis; and helping to overcome the rare difference in outcomes. The symposium also reflected on the future of transatlantic cooperation in a global economy with more than 120 competition agencies, and how U.S.-E.U. cooperation might serve as a model in the global context. The United States also has cooperation agreements with: Australia, Brazil, Canada, Chile, China, Germany, Israel, Japan, Mexico and Russia.

ELECTRONIC STOCK EXCHANGES AND BROKER-DEALER ARE SANCTIONED BY THE SEC

The following is an excerpt from the SEC website: “Washington, D.C., Oct. 13, 2011 — The Securities and Exchange Commission today sanctioned two electronic stock exchanges and a broker-dealer owned by Direct Edge Holdings LLC for violations of U.S. securities laws arising out of weak internal controls that resulted in millions of dollars in trading losses and a systems outage. EDGA Exchange Inc., EDGX Exchange Inc., and their affiliated routing broker Direct Edge ECN LLC – all based in Jersey City, N.J. — agreed to settle cease-and-desist and administrative proceedings without admitting or denying the Commission’s findings. The exchanges and the routing broker, known as DE Route, cooperated with the SEC’s investigation and agreed to be censured and undertake remedial measures, many of which are underway, to correct the deficiencies that led to the systems problems and the violations at the all-electronic exchanges. The SEC’s Division of Enforcement, Division of Trading and Markets, and Office of Compliance Inspections and Examinations coordinated efforts and conducted the investigation jointly. “Direct Edge was required to police not only its members’ conduct, but its own conduct as well,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Despite those responsibilities, it violated the principal obligations of self-regulatory organizations and national securities exchanges to put the public interest first by ensuring the strength and security of their systems, complying with their own Commission-approved rules, providing for adequate backup and failover systems, and preventing or responding appropriately to significant system outages and failures. The SEC will continue to closely coordinate its oversight, inspection and enforcement activities to ensure that self-regulatory organizations demonstrate the robust compliance necessary to protect investors.” Carlo di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations, added, “Direct Edge has agreed to substantial remedial undertakings that, when fully implemented, will significantly enhance the governance, risk management and compliance culture of these entities as well as information technology systems and controls.” According to the SEC’s order instituting administrative proceedings, in the first incident on Nov. 8, 2010, untested computer code changes resulted in EDGA and EDGX overfilling orders submitted by three members. The unwanted trades involved an estimated 27 million shares in about 1,000 stocks, totaling roughly $773 million. At the exchanges’ instruction, one member traded out of the overfilled shares and submitted a claim to the exchanges for $105,000 of losses. When the other members refused to do likewise, the exchanges assumed and traded out of the overfilled shares through the routing broker’s error account, in violation of their own rules. The Commission also found that in resolving the overfilled trades, which cost the exchanges about $2.1 million, DE Route violated rules on short selling, which involves sales of borrowed shares. DE Route failed to mark the orders as short or mismarked them as long, and failed to locate or document the availability of shares to borrow before selling them short, violating the SEC’s Regulation SHO. According to the SEC’s order, in the second incident on April 13, 2011, an EDGX database administrator inadvertently disabled database connections, disrupting the exchange’s ability to process incoming orders, modifications, and cancellations, and leading several EDGX members to file claims for more than $668,000 in losses. EDGX received internal alerts immediately and got external notifications soon after, including from members seeking to cancel unfilled trades and from numerous trading centers that were bypassing EDGX because it wasn’t responding immediately to incoming orders. EDGX waited approximately 24 minutes after the outage to remove its quotations from public market data, and violated the SEC’s Regulation NMS by failing to immediately identify its quotations as manual quotations. Based on the incidents, the Commission found that EDGA violated Sections 19(b) and 19(g) of the Exchange Act, EDGX violated Sections 19(b) and 19(g) of the Exchange Act and Rule 602(a)(3) thereunder, and DE Route caused violations of Section 19(g) of the Exchange Act and violated Rules 200(g) and 203(b) thereunder. All three consented to an order censuring them and requiring them to cease and desist from further violations of U.S. securities laws and to take remedial efforts to strengthen their information technology systems and controls and compliance procedures. After the incidents, the exchanges and DE Route voluntarily began to put substantial remedial measures in place. A comprehensive remediation plan submitted by the exchanges to the SEC staff requires the exchanges to: Enhance their policies and procedures for systems development and maintenance. Implement an enterprise risk management framework and information security program, including the hiring of an information security director, and enhancing their information technology control framework and underlying controls. Hire a corporate training director to train employees about U.S. securities laws and the exchanges’ policies and procedures. Retain outside counsel to review the circumstances leading to the two systems incidents at the exchanges. Hire a chief compliance officer whose responsibilities include implementing policies and procedures reasonably designed to ensure that respondents fulfill their regulatory and compliance obligations. EDGA, EDGX and DE Route also agreed to spend sufficient funds to put the remediation plan into effect, including the retention of outside counsel or other outside professionals.”

SEC CHAIRMAN MARY SCHAPIRO SPEECH ON REGISTRATION OF SECURITIES FOR BASED SWAP DEALERS AND PARTICIPANTS AT OPEN MEETING

The following excerpt is from the SEC website: “Washington, D.C. October 12, 2011 We will next consider a proposal that would establish registration rules for security-based swap dealers and major security-based swap participants. As with our prior proposals regarding security-based swaps, today’s proposal stems from Title VII of the Dodd-Frank Act. Among other things, the Act authorizes the Commission to put in place a regulatory framework for entities that effect transactions in these derivatives. Registering the major market participants in the largely unregulated security-based swap markets is a critical step toward better protecting investors. Today’s proposal draws from our experience with registration rules regarding broker-dealers — rules that are familiar to many market participants. However, there are some differences. For instance, today’s proposal would require that a senior officer of each security-based swap registrant provide a certification to the Commission. That proposed certification would provide assurance as to the registrant’s financial, operational, and compliance capabilities. We ask a series of detailed questions about this approach, and whether there are other ways to fulfill the purpose of such a certification. Additionally, although the proposed rules and forms are not identical to those proposed by the CFTC for a number of reasons, they are similar in many significant ways. Importantly, both proposed registration regimes would provide for a conditional or phased implementation to allow firms to register even before full compliance is required. In addition, firms that must register with both the CFTC and the SEC would — under the proposal — be able to prepare a shortened registration form. After proposing all of the key rules under Title VII, we intend to seek public comment on a detailed implementation plan that will permit a roll-out of the new securities-based swap requirements in a logical, progressive, and efficient manner, while minimizing unnecessary disruption and costs to the markets. We expect to propose the last of the Title VII rules — rules regarding capital, margin, segregation, and recordkeeping requirements for security-based swaps — in the near future, as well as a proposed approach to address cross-border security-based swap transactions and the regulatory treatment of non-U.S. persons who act in capacities regulated under the Dodd-Frank Act. Before I turn to David Blass from the Division of Trading and Markets to discuss the proposed rules, I would like to thank David, as well as Joe Furey, Bonnie Gauch, Darren Vieira, and Nathaniel Stankard from the Division of Trading and Markets for their hard work on this rulemaking. I also would like to thank Meridith Mitchell, Paula Jenson and Uzma Wahhab from the Office of General Counsel; Jennifer Marietta-Westberg, Scott Bauguess, Jeff Naumann and Charles Dale from the Division of Risk, Strategy, and Financial Innovation; Norm Champ, John Polise, Juanita Bishop-Hamlet, Judy Lee, and Christine Sibille from the Office of Compliance Inspections and Examinations; Jeffrey Cohan in the Office of the Chief Accountant; Jason Anthony in the Division of Enforcement; and Kathleen Kelley in the Office of International Affairs. And finally, of course, I would like to thank my colleagues on the Commission and their counsels for their work and comments on the proposed rules."

SEC ANNOUNCES PANELISTS AND FINAL AGENDA FOR MICROCAP ROUNDTABLE

The following is from the SEC website: “Washington, D.C., Oct. 11, 2011 – The Securities and Exchange Commission today announced the panelists and final agenda for a public roundtable on microcap securities to be held next week. The October 17 roundtable, announced last month, is being sponsored by the SEC’s Microcap Fraud Working Group and will feature three panels discussing key regulatory issues, including anti-money laundering monitoring, compliance challenges, and potential changes to the microcap regulatory framework. The event will begin at 1 p.m. in the multi-purpose room at the SEC’s Washington D.C. headquarters, with public seating on a first-come, first-served basis. The event also can be viewed by live webcast, and will be archived on the website for later viewing. Members of the public who wish to provide their views on the matters to be considered at the roundtable discussion may submit comments through one of the following methods: Electronic Comments Use the SEC’s Internet comment form or send an e-mail to rule-comments@sec.gov and include File Number 4-639 on the subject line. Paper Comments Send paper submissions in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090, and refer to File Number 4-639. Any comments submitted in connection with the roundtable will be made available to the public. # # # Agenda and Panelists 1:00 p.m. Call to Order and Opening Remarks: Chairman Mary Schapiro and Robert Khuzami, Director of the Division of Enforcement 1:15 p.m. Panel 1 — Compliance Challenges Associated with Microcap Securities Moderator: Peter Curley, Associate Director, Division of Trading and Markets. Panelists: Claire Santaniello — Managing Director and Chief Compliance Officer, Pershing Mihal Nahari — Chief Compliance Officer, The Depository Trust & Clearing Corporation (“DTCC”) Thomas Merritt — Senior Managing Director, Deputy General Counsel and Corporate Secretary, Knight Capital Group Steven Nelson — Chairman, Continental Stock Transfer and Trust Company Marvin Pickholz — Partner, Duane Morris Brian Lebrecht — Founder, The Lebrecht Group, APLC David Chapman — Director, Department of Market Regulation, FINRA 2:15 p.m. Break 2:30 p.m. Panel 2 — Anti-Money Laundering Monitoring Moderator: Sarah Green, Bank Secrecy Act Specialist for the Office of Market Intelligence Panelists: Betty Santangelo — Partner, Schulte Roth & Zabel Susan DeSantis — Managing Director and Deputy Chief Compliance Officer, DTCC Lynne Johnston — US Head of Anti-Money Laundering Compliance, RBC Capital Markets Harold Crawford — Global Director of Anti-Money Laundering & Sanctions, Brown Brothers Harriman & Co. Aaron Fox — Managing Director, IPSA International Inc. Jeff Horowitz — Managing Director and Chief Anti-Money Laundering and OFAC Officer, Pershing Bill Park — Director, FINRA Department of Enforcement 3:30 p.m. Break 3:45 p.m. Panel 3: Potential Changes to the Regulatory Framework Concerning Microcap Securities Moderator: John Polise, Associate Director, Office of Compliance, Inspections and Examinations. Panelists: David Feldman — Partner, Richardson & Patel LLP Susan Merrill — Partner, Bingham McCutchen Chris Stone— Vice President of Equity Products, FINRA Susan Grafton — Of Counsel, Gibson, Dunn & Crutcher Walter Van Dorn — Partner, SNR Denton US LLP R. Cromwell Coulson — President, Chief Executive Officer and Director, OTC Markets Group 4:45 p.m. Concluding Remarks (John Polise) 5:00 p.m. End