BRITISH VIRGIN ISLANDS CORPORATION AND RESIDENT OF SWITZERLAND SETTLE CHARGES OF INSIDER TRADING IN THE OPTIONS OF INTERMUNE, INC.

The following excerpt is from the SEC website:
March 30, 2012
The Securities and Exchange Commission announced that, on March 29, 2012, the Honorable George B. Daniels,U.S. District Judge for the Southern District of New York, entered a settled final judgment for insider trading in the options of InterMune, Inc. as to Michael S. Sarkesian, a Swiss citizen and resident, and Quorne Ltd., a British Virgin Islands limited liability company wholly owned by a Cyprus trust maintained for the benefit of a Sarkesian relation. The alleged illicit trading by Sarkesian and Quorne took place ahead of a December 17, 2010 announcement that the European Union’s Committee for Medicinal Products for Human Use, or CHMP, had recommended to the European Commission that it permit InterMune to market its developmental drug, Esbriet, in the European Union. Sarkesian and Quorne consented to the entry of the final judgment, which imposes injunctive and monetary relief. The Commission also announced that on March 27, 2012, it amended its complaint, filed on December 23, 2010 against one or more unknown purchasers of the options of InterMune, to name Sarkesian and Quorne as defendants.

In its amended complaint, the Commission alleges that Sarkesian was tipped to material non-public information concerning the CHMP’s recommendation in advance of the December 17 announcement and that, while in possession of this material non-public information, Sarkesian exercised his authority to manage and administer Quorne’s funds by recommending to Quorne that it purchase InterMune call options. As a result, Sarkesian caused Quorne to purchase 400 InterMune call options through a brokerage account in Switzerland on December 7 and 8, 2010. The market price of the 400 options rose over 500% following the December 17 announcement.

On December 23, 2010, on the same day that the Commission filed its initial complaint, the Court entered a Temporary Restraining Order freezing assets and trading proceeds from the alleged illicit trading and prohibiting the then-unknown purchasers from disposing of the options or any proceeds from the sale of the options. Quorne later sold the 400 options, the proceeds of which have remained frozen by Court order.
Without admitting or denying the allegations of the amended complaint, Quorne and Sarkesian consented to entry of a final judgment enjoining them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and ordering them jointly and severally to pay $616,000 in disgorgement and $93,806.17 in civil penalties pursuant to Exchange Act Section 21A. The monetary sanctions will be paid out of the frozen funds. See Litigation Release No. 21794 (December 23, 2010).

The Commission acknowledges the assistance of the Options Regulatory Surveillance Authority, the Swiss Financial Market Supervisory Authority, the Cyprus Securities and Exchange Commission, and the British Virgin Islands Financial Services Commission.

SERIAL FRAUDSTER BROUGHT TO JUSTICE

The following excerpt is from the SEC website:
March 27, 2012
SEC Obtains Summary Judgment against Serial Fraudster Matthew J. Gagnon
The Securities and Exchange Commission announced today that on March 22, 2012, the Honorable George Caram Steeh of the United States District Court for the Eastern District of Michigan granted the SEC’s motion for summary judgment and entered a final judgment against defendant Matthew J. Gagnon of Portland, Oregon and Weslaco, Texas. The Court found that Gagnon violated the registration, anti-fraud, and anti-touting provisions of the federal securities laws by promoting and operating a series of securities offerings through his website, www.Mazu.com, and ordered Gagnon to pay $4.1 million in disgorgement with prejudgment interest and a $100,000 civil penalty.

The SEC filed this action against Gagnon on May 11, 2010, alleging that since 1997, Gagnon had billed himself as an Internet business opportunity expert and his website as “the world’s first and largest opportunity review website.” According to the SEC’s complaint, from January 2006 through approximately August 2007, Gagnon helped orchestrate a massive Ponzi scheme conducted by Gregory N. McKnight and his company, Legisi Holdings, LLC, which raised a total of approximately $72.6 million from over 3,000 investors by promising returns of upwards of 15% a month. The complaint also alleged that Gagnon promoted Legisi but in doing so misled investors by claiming, among other things, that he had thoroughly researched McKnight and Legisi and had determined Legisi to be a legitimate and safe investment. The complaint alleged that Gagnon had no basis for the claims he made about McKnight and Legisi. Gagnon also failed to disclose to investors that he was to receive 50% of Legisi's purported "profits" under his agreement with McKnight. According to the complaint, Gagnon received a net of approximately $3.8 million in Legisi investor funds from McKnight for his participation in the scheme.

The SEC's complaint further alleged that beginning in August 2007, Gagnon fraudulently offered and sold securities representing interests in a new company that purportedly was to develop resort properties. The complaint alleged that Gagnon, among other things, falsely claimed that the investment was risk-free and "SEC compliant," and guaranteed a 200% return in 14 months. In reality, however, Gagnon sent the money to a twice-convicted felon, did not register the investment with the SEC, and knew such an outlandish return was impossible. Gagnon took in at least $361,865 from 21 investors.
The SEC's complaint also alleged that in April 2009, Gagnon began promoting a fraudulent offering of interests in a purported Forex trading venture. Gagnon guaranteed that the venture would generate returns of 2% a month or 30% a year for his investors. Gagnon's claims were false, and he had had no basis for making them because Gagnon never reviewed his friend’s trading records before promoting the offering, which would have shown over $150,000 in losses over the previous nine months.

The SEC's complaint charged Gagnon with violating Sections 5(a), 5(c), 17(a) and 17(b) of the Securities Act of 1933 and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief already obtained, the complaint sought preliminary and permanent injunctions, disgorgement, and civil penalties from Gagnon. On May 24, 2010, the SEC obtained an emergency order freezing Gagnon’s assets and other preliminary relief. Subsequently, on August 6, 2010, the Court granted an order of preliminary injunction against Gagnon pursuant to his consent.

In granting the Commission’s motion and entering final judgment, the Court found that Gagnon “purposefully built up an image of trustworthiness in the on-line investing community and exploited this trust.” The Court also found that Gagnon “repeatedly committed egregious violations of the federal securities laws” and “has shown no remorse for his conduct.”

The Court’s final judgment against Gagnon permanently enjoins him from future violations of Sections 5(a), 5(c), 17(a) and 17(b) of the Securities Act of 1933 and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and orders Gagnon to pay $3,613,259 in disgorgement, $488,570.47 in prejudgment interest, and a $100,000 civil penalty.

FEDERAL AGENCIES WANT REVISIONS TO LEVERAGED FINANCE GUIDANCE

The following excerpt is from a FDIC e-mail:
Agencies Propose Revisions to Leveraged Finance Guidance
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (the agencies) are seeking comment on proposed revisions to the interagency leveraged finance guidance issued in 2001. Transactions that are covered by this guidance are characterized by a borrower with a degree of financial or cash flow leverage that significantly exceeds industry norms as measured by various debt, cash flow, or other ratios.

The agencies observed tremendous growth in the volume of leveraged credit leading up to the crisis and in the participation of non-regulated investors.  While there was a pull-back in leveraged lending during the crisis, volumes have since increased while prudent underwriting practices have deteriorated.  As the market has grown, debt agreements have frequently included features that provide relatively limited lender protection, including the absence of meaningful maintenance covenants and the inclusion of other features that can affect lenders’ recourse in the event of weakened borrower performance.  In addition, capital structures and repayment prospects for some transactions, whether originated to hold or to distribute, have been aggressive.  Management information systems (MIS) at some institutions have proven less than satisfactory in accurately aggregating exposures on a timely basis, and many institutions have found themselves holding large pipelines of higher-risk commitments at a time when buyer demand for risky assets diminished significantly.

Leveraged finance is an important type of financing for the economy, and banks play an integral role in making credit available and syndicating that credit to investors.  It is important that banks help provide financing to creditworthy borrowers in a safe and sound manner.
In light of the market’s evolution, the agencies propose replacing the 2001 guidance with revised leveraged finance guidance that refocuses attention to five key areas:
Establishing a Sound Risk-Management Framework:  The agencies expect that management and the board identify the institution’s risk appetite for leveraged finance, establish appropriate credit limits, and ensure prudent oversight and approval processes.  
Underwriting Standards:  These outline the agencies’ expectations for cash flow capacity, amortization, covenant protection, and collateral controls and emphasize that the business premise for each transaction should be sound and its capital structure should be sustainable irrespective of whether underwritten to hold or to distribute.
Valuation Standards:  These concentrate on the importance of sound methodologies in the determination and periodic revalidation of enterprise value.
Pipeline Management:  This highlights the need to accurately measure exposure on a timely basis, the importance of having policies and procedures that address failed transactions and general market disruption, and the need to periodically stress test the pipeline.
Reporting and Analytics:  This emphasizes the need for MIS that accurately capture key obligor characteristics and aggregates them across business lines and legal entities on a timely basis.  Reporting and analytics also reinforce the need for periodic portfolio stress testing.
Although some sections of the guidance should apply to all leveraged transactions (for example, underwriting), the vast majority of community banks should not be affected as they have no exposure to leveraged loans.
Comments on the proposed guidance must be submitted to the agencies no later than June 8, 2012.

SEC SAYS THERE ARE THREE NEW DEVELOPMENTS REGARDING SHAREHOLDER VOTING

The following excerpt is from the SEC website:
Voting in Annual Shareholder Meetings - What’s New in 2012
03/28/2012
Over the next few months, investors can expect to receive proxy materials for annual shareholder meetings or a related notice advising shareholders how they can access these materials. Shareholder voting typically takes place at the annual shareholder meeting, which most U.S. public companies hold each year between March and June.

There are three new or continuing developments this year:
Shareholder Proposals on Proxy Access. Shareholders may be asked to vote on shareholder proposals to establish procedures to include shareholder director nominations in company proxy materials.
Uninstructed Broker Votes. Restrictions have increased on the circumstances in which brokers may vote on behalf of clients who do not send in voting instructions. That means that brokers will be casting discretionary votes on a narrower range of items this year.

Say-on-pay Votes. Starting last year, most public companies were required to have advisory say-on-pay votes and to choose how often to hold such votes in the future. This year, shareholders will vote again to approve executive compensation at those companies that have chosen to hold annual advisory say-on-pay votes.

Shareholder Proposals on Proxy Access
Typically, the board of directors nominates board candidates, whose names appear in the company’s proxy materials for director elections. Shareholders do not have an automatic right to have their own director nominees included in these proxy materials. Where shareholders do have this ability, the names of director candidates nominated by qualified shareholders appear in the proxy materials alongside the names of the candidates nominated by the board of directors. This process gives shareholders direct access to the proxy materials for nominating directors and is often called “proxy access.”
This year, as a result of amendments to the shareholder proposal rule, eligible shareholders have the right to have proposals that call for the adoption of proxy access procedures included in company proxy materials. (Note that the right to submit shareholder proposals about proxy access procedures is different from the right to nominate director candidates.)Shareholder resolutions on proxy access may either be advisory or binding, and investors have filed both kinds this year. An advisory resolution approved by shareholders leaves the final decision to the company’s board of directors on whether to adopt a proxy access procedure. A binding resolution takes effect once it is approved by shareholders. (Depending on the company, approval may require more than a simple majority of votes.)
Court Decision on Proxy Access Rule

In August 2010, the SEC adopted a new rule that would have required companies to include eligible shareholders’ director nominees in company proxy materials in certain circumstances. The rule was contested in court, however, and in July 2011, the U.S. Court of Appeals for the D.C. Circuit struck down this rule.

Uninstructed Broker Votes
The New York Stock Exchange (NYSE) allows brokers to vote on certain items on behalf of their clients, if the broker has received no voting instructions from those clients within 10 days of the annual meeting. These votes are called uninstructed or discretionary broker votes. Brokers are only allowed to cast uninstructed broker votes on “routine” items, and the scope of routine items has narrowed over the years. This year, the NYSE announced that brokers may no longer cast uninstructed votes on certain corporate governance proposals. These include proposals to de-stagger the board of directors (so that all directors are elected annually), adopt majority voting in the election of directors, eliminate supermajority voting requirements, provide for the use of consents, provide rights to call a special meeting, and override certain types of anti-takeover provisions. Previously, the NYSE had permitted a broker to cast uninstructed votes on these proposals if they had the support of the company’s management.

Two other important restrictions on discretionary broker voting have been in effect since 2010. First, brokers can no longer cast uninstructed votes in the election of directors (except for certain mutual funds). Second, brokers are prohibited from voting uninstructed shares on executive compensation matters, including say-on-pay votes.

As the ability of brokers to vote uninstructed shares shrinks, the importance of shareholder voting grows. If shareholders do not vote, they cannot expect their broker to vote for them on an increasing range of issues.
Say-on-pay Votes

The say-on-pay rules took effect last year for most companies with two exceptions. First, smaller reporting companies have until 2013 to comply. The second exception concerns companies that borrowed money under the Troubled Asset Relief Program (TARP) and have not yet paid it back. TARP companies are required to hold annual say-on-pay votes until they pay back all the money they borrowed from the government, at which time they will become subject to the say-on-pay rules applicable to other companies.
The rules require three non-binding votes on executive compensation:
Say-on-pay Votes. Companies must provide their shareholders with an advisory vote on the compensation of the most highly compensated executives. The votes are non-binding, leaving final decisions on executive compensation to the company and its board of directors. Companies are now required to disclose whether and, if so, how their compensation policies and decisions have taken into account the results of their most recent say-on-pay vote. This disclosure generally appears in the compensation discussion and analysis section of the proxy statement. Shareholders can review this year’s proxy statements to find out how companies have responded to last year’s say-on-pay votes.

Frequency Votes. Companies also were required last year to provide their shareholders with an advisory vote on how often they would like to be presented with the say-on-pay votes—every year, every second year, or every third year. Like say-on-pay votes, frequency votes are non-binding. After each advisory vote on frequency, companies must disclose their decision as to how frequently they will hold advisory say-on-pay votes. Companies would typically provide this disclosure either in a Form 8-K or Form 10-Q, both of which are filed with the SEC. Many companies provide this information shortly after their annual meeting. These forms are publicly available on the Commission’s website
atwww.sec.gov/edgar/searchedgar/webusers.htm. Companies typically file several 8-Ks in a year. Look for those referring to Item 5.07.

Golden Parachute Arrangements. The term, “golden parachute” generally refers to compensation arrangements and understandings with top executive officers in connection with an acquisition, merger or similar transaction. When companies seek shareholder approval of a merger or acquisition, they are required to provide their shareholders with an advisory vote to approve, in the typical scenario, the disclosed golden parachute compensation arrangements between the target company and its own named executive officers or those of the acquiring company. The company is not required to conduct such a vote, however, if the golden parachute disclosures were included in executive compensation disclosures subject to a prior say-on-pay vote.

ALLEGEDLY, GOLD COIN DEALER INVESTED MONEY AT A CASINO

The following excerpt is from the Securities and Exchange Commission website:
March 26, 2012
SEC Charges Operator of Gold Coin Firm with Conducting Fraudulent Securities Offering
The Securities and Exchange Commission today announced that it filed a civil injunctive action against David L. Marion of Minneapolis, Minnesota and his company, International Rarities Holdings, Inc. (“IR Holdings”), accusing them of conducting a fraudulent, unregistered offer and sale of approximately $1 million in securities.

The SEC’s complaint, filed in U.S. District Court in Minneapolis, alleges that from at least November 2008 through July 2009, Marion and IR Holdings raised approximately $1 million from at least 26 investors through the offer and sale of IR Holdings securities. According to the complaint, Marion represented to investors that they were purchasing shares of IR Holdings, which he said was the parent company and 100% owner of International Rarities Corporation (“IR Corp.”). The complaint alleges that IR Corp. is a privately held Minneapolis based gold coin and bullion sales and trading firm that Marion also owned and operated. The complaint further alleges that Marion told investors that their investments were to be used to expand IR Holdings’ business and eventually take it public. According to the complaint, Marion’s representations were false because IR Holdings never owned IR Corp. and thus Marion sold investors shares of a worthless shell company. In addition, the complaint alleges that Marion did not use the investors’ funds to expand IR Holdings’ business and instead diverted the majority of the funds for his own personal use, including for casino gambling.

The SEC’s complaint charges Marion and IR Holdings 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. The SEC is seeking a permanent injunction and disgorgement of ill-gotten gains with prejudgment interest, jointly and severally, against Marion and IR Holdings and a civil penalty against Marion.

SEC CHARGES BAY AREA INVESTMENT ADVISER FOR DEFRAUDING INVESTORS WITH BOGUS AUDIT REPORT

The following excerpt is from the U.S. Securities and Exchange Commission website:
March 21, 2012
On March 15, 2012, the Securities and Exchange Commission charged a San Francisco-area investment adviser with defrauding investors by giving them a bogus audit report that embellished the financial performance of the fund in which they were investing.

The SEC alleges that James Michael Murray raised more than $4.5 million from investors in his various funds including Market Neutral Trading LLC (MNT), a purported hedge fund that claimed to invest primarily in domestic equities. Murray provided MNT investors with a report purportedly prepared by independent auditor Jones, Moore & Associates (JMA). However, JMA is not a legitimate accounting firm but rather a shell company that Murray secretly created and controlled. The phony audit report misstated the financial condition and performance of MNT to investors.

The U.S. Attorney’s Office for the Northern District of California also has filed criminal charges against Murray in a complaint unsealed yesterday.

According to the SEC’s complaint filed in federal court in San Francisco, Murray began raising the funds from investors in 2008. The following year, MNT distributed the phony audit report to investors claiming the audit was conducted by a legitimate third-party accounting firm. However, JMA is not registered or licensed as an accounting firm in Delaware, where it purports to do business. JMA’s website was paid for by a Murray-controlled entity and listed 12 professionals with specific degrees and licenses who supposedly work for JMA. However, at least five of these professionals do not exist, including the two named principals of the firm: “Richard Jones” and “Joseph Moore.” Murray has attempted to open brokerage accounts in the name of JMA, identified himself as JMA’s chief financial officer, and called brokerage firms falsely claiming to be the principal identified on most JMA documents.

The SEC alleges that the bogus audit report provided to investors understated the costs of MNT’s investments and thus overstated the fund’s investment gains by approximately 90 percent. The JMA audit report also overstated MNT’s income by approximately 35 percent, its member capital by approximately 18 percent, and its total assets by approximately 10 percent.

The SEC’s complaint charges Murray with violating Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, which prohibits fraud by investment advisers on investors in a pooled investment vehicle. The complaint seeks injunctive relief and financial penalties from Murray.

The SEC’s investigation was conducted by Karen Kreuzkamp and Robert S. Leach of the San Francisco Regional Office following an examination of MNT conducted by Yvette Panetta and Doreen Piccirillo of the New York Regional Office’s broker-dealer examination program. The SEC’s litigation will be led by Robert L. Mitchell of the San Francisco Regional Office. The SEC thanks the U.S. Attorney’s Office for the Northern District of California and the U.S. Secret Service for their assistance in this matter.