FORMER SAP EMPLOYEE CHARGE BY SEC WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Former SAP Employee with Insider Trading

The Securities and Exchange Commission announced that, on December 23, 2013, it charged David F. Marchand, of Campbell, California, a former Board Assistant to the Co-Chief Executive Officer of SAP AG, with unlawful insider trading in the securities of three issuers: SuccessFactors, Inc. (“SuccessFactors”), Ariba, Inc. (“Ariba”) and SAP AG (“SAP”). According to the SEC’s complaint filed in the U.S. District Court for the District of New Jersey, Marchand made a total of $43,500 in illicit profits through his trading.

The SEC’s complaint alleges that, while in possession of material nonpublic information concerning SAP’s intention to acquire SuccessFactors, Marchand purchased SuccessFactors common stock between November 21, 2011 and November 28, 2011, in advance of the December 3, 2011 public announcement that SAP and SuccessFactors had entered into a merger agreement pursuant to which a subsidiary of SAP would acquire SuccessFactors for $40 per share in a tender offer. The price of SuccessFactors common stock increased 51.4 percent after the announcement, and Marchand sold his shares, realizing illicit profits of $28,061.

The complaint further alleges that, in early January 2012, Marchand became aware of material nonpublic information regarding SAP’s favorable financial performance for the fourth quarter and year ended 2011, including its “best ever” software revenue numbers. After learning this information, Marchand purchased SAP American Depositary Receipts (ADRs) prior to SAP’s January 13, 2012 public release of its preliminary fourth quarter 2011 results. Marchand sold his SAP ADRs after the announcement, realizing illicit profits of $2,157.

The SEC also alleges that, a few months later, after he learned material nonpublic information about SAP’s intentions to acquire Ariba, Marchand purchased Ariba common stock on April 16, 2012, May 2, 2012 and May 8, 2012, in advance of the May 22, 2012 public announcement that a subsidiary of SAP and Ariba had entered into a merger agreement pursuant to which a subsidiary of SAP would acquire Ariba for $45 per share of common stock. The price of Ariba common stock increased approximately 19 percent after the announcement, and Marchand sold his Ariba shares, realizing illegal profits of $13,282.

Marchand has consented, without admitting or denying the SEC’s allegations, to the entry of a final judgment permanently enjoining him from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder; requiring him to pay $43,500 in disgorgement, $2,155 in prejudgment interest, and a penalty of $43,500. The settlement is subject to court approval.

The SEC’s ongoing investigation is being conducted by Brendan P. McGlynn, Oreste P. McClung and Daniel L. Koster of the Philadelphia Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

ADM CHARGED WITH FOREIGN CORRUPT PRACTICES VIOLATIONS

FROM:  SECURITIES AND EXCHANGE COMMISSION  
Charges Archer-Daniels-Midland Company with FCPA Violations

The Securities and Exchange Commission today charged global food processor Archer-Daniels-Midland Company (ADM) for failing to prevent illicit payments made by foreign subsidiaries to Ukrainian government officials in violation of the Foreign Corrupt Practices Act (FCPA).

An SEC investigation found that ADM's subsidiaries in Germany and Ukraine paid $21 million in bribes through intermediaries to secure the release of value-added tax (VAT) refunds. The payments were then concealed by improperly recording the transactions in accounting records as insurance premiums and other purported business expenses. ADM had insufficient anti-bribery compliance controls and made approximately $33 million in illegal profits as a result of the bribery by its subsidiaries.

ADM, which is based in Decatur, Ill., has agreed to pay more than $36 million to settle the SEC's charges. In a parallel action, the U.S. Department of Justice today announced a non-prosecution agreement with ADM and criminal charges against an ADM subsidiary that has agreed to pay $17.8 million in criminal fines.

According to the SEC's complaint filed in U.S. District Court for the Central District of Illinois, the bribery occurred from 2002 to 2008. Ukraine imposed a 20 percent VAT on goods purchased in its country. If the goods were exported, the exporter could apply for a refund of the VAT already paid to the government on those goods. However, at times the Ukrainian government delayed paying VAT refunds it owed or did not make any refund payments at all. On these occasions, the outstanding amount of VAT refunds owed to ADM's Ukraine affiliate reached as high as $46 million.

The SEC alleges that in order to obtain the VAT refunds that the Ukraine government was withholding, ADM's subsidiaries in Germany and Ukraine devised several schemes to bribe Ukraine government officials to release the money. The bribes paid were generally 18 to 20 percent of the corresponding VAT refunds. For example, the subsidiaries artificially inflated commodities contracts with a Ukrainian shipping company to provide bribe payments to government officials. In another scheme, the subsidiaries created phony insurance contracts with an insurance company that included false premiums passed on to Ukraine government officials. The misconduct went unchecked by ADM for several years because of its deficient and decentralized system of FCPA oversight over subsidiaries in Germany and Ukraine.

The SEC's complaint charges ADM with violating Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. ADM consented to the entry of a final judgment ordering the company to pay disgorgement of $33,342,012 plus prejudgment interest of $3,125,354. The final judgment also permanently enjoins ADM from violating those sections of the Exchange Act, and requires the company to report on its FCPA compliance efforts for a three-year period. The settlement is subject to court approval. The SEC took into account ADM's cooperation and significant remedial measures, including self-reporting the matter, implementing a comprehensive new compliance program throughout its operations, and terminating employees involved in the misconduct.

The SEC's investigation was conducted by Nicholas A. Brady and supervised by Moira T. Roberts and Anita B. Bandy. The SEC appreciates the assistance of the Justice Department's Fraud Section and the Federal Bureau of Investigation.

FICTITIOUS TRADING RESULTS IN REAL PENALTY OF $600,000

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
December 19, 2013

Federal Court in New York Orders Defendant David M. Nunn to Pay a $600,000 Civil Monetary Penalty for Engaging in an Illegal Coffee Futures Trading Scheme and Making False Statements to ICE Futures U.S. Court Permanently Bans Nunn from Trading or Registration with the CFTC

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York entered a consent Order against David M. Nunn for entering into fictitious sales, engaging in illegal noncompetitive and fictitious trades in coffee futures contracts over a two-year period, and making false statements to representatives of ICE Futures U.S., Inc. (ICE). Nunn is a Vermont resident and a former ICE floor broker.

The consent Order of permanent injunction, entered on December 18, 2013, requires Nunn to pay a $600,000 civil monetary penalty and, among other sanctions, permanently bans Nunn from trading on a registered entity, soliciting or receiving funds for trading on a registered entity, applying for registration or claiming exemption from registration with the CFTC, or acting as a principal or agent of any CFTC registrant or person exempted from registration.

The Order stems from a CFTC Complaint filed on October 18, 2012 (see CFTC Press Release 6393-12). The Complaint alleged that, from at least July 2008 through September 2010, Nunn engaged in over 1,300 non-competitive, fictitious coffee futures trades on ICE. The Complaint further alleged that, through this illegal scheme, Nunn transferred over $1.68 million to another account that he controlled.

The Order states that Nunn engaged in a series of unlawful, non-competitive commodity futures transactions involving coffee futures on ICE. The Order also states that Nunn intentionally made non-competitive, fictitious sales by placing virtually simultaneous orders to buy or sell in accounts either held in his name or held under another person’s name that he controlled. Nunn made false statements to ICE officials during an interview when he denied that monies were transferred to him from the account held under the other person’s name, according to the Order.

In a related ICE proceeding, Nunn was expelled from ICE membership and is prohibited from directly or indirectly accessing the exchange’s markets. The CFTC appreciates the assistance of ICE in this matter.

CFTC Division of Enforcement staff members responsible for this case are Trevor Kokal, Michael Geiser, David Oakland, David Acevedo, Lenel Hickson, and Manal Sultan.

FAQ DOCUMENT ISSUED BY GOVERNMENT REGARDING FINAL RULES THAT IMPLEMENT "VOLCKER RULE"

Agencies Issue FAQ Document Regarding Collateralized Debt Obligations Backed by Trust Preferred Securities under Final Rules Implementing the “Volcker Rule”

Three federal financial institution regulatory agencies today issued a FAQ (Frequently Asked Questions) document to provide clarification and guidance to banking entities regarding investments in “Covered Funds” and whether collateralized debt obligations backed by trust preferred securities (TruPS CDOs) could be determined to be Covered Funds under the final rules to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The FAQs are intended to clarify that banking entities that have holdings in TruPS CDOs are not required to sell these holdings immediately under the final rules, but instead may use the conformance period to determine if they can be brought into conformance by the end of the conformance period, which is July 21, 2015.

The document released by the agencies provides an overview of some of the key legal issues banking entities should consider in determining whether holdings of TruPS CDOs are subject to the provision of the final rules implementing section 619, commonly known as the Volcker Rule. The issues identified and discussed in the document are whether a TruPS CDO qualifies in its current form as a Covered Fund under the final rules; whether it can be restructured or otherwise conformed to the final rules by the end of the conformance period of July 21, 2015; and whether a bank’s investment in the CDO constitutes an ownership interest.

The final rules were approved by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Commodity Futures Trading Commission on December 10, 2013.

# # #

Attachment:
FAQ Regarding Collateralized Debt Obligations Backed by Trust Preferred Securities under the Final Volcker Rule - PDF (PDF Help)

SEC CHARGES WOMAN & STEPSON IN NORTH CAROLINA-BASED PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today announced charges against a woman and her stepson for their involvement in a North Carolina-based Ponzi and pyramid scheme that the agency shut down last year.

The SEC alleges that Dawn Wright-Olivares and Daniel Olivares, who each now live in Arkansas, provided operational support, marketing, and computer expertise to sustain ZeekRewards.com, which offered and sold securities in the form of “premium subscriptions” and “VIP bids” for penny auctions.  While the website conveyed the impression that the significant payouts to investors meant the company was extremely profitable, the payouts actually bore no relation to the company’s net profits.  Approximately 98 percent of total revenues for ZeekRewards – and correspondingly the share of purported net profits paid to investors – were comprised of funds received from new investors rather than legitimate retail sales.

Wright-Olivares and Olivares have agreed to settle the SEC’s charges.  In a parallel action, the U.S. Attorney’s Office for the Western District of North Carolina today announced criminal charges against the pair.

“Wright-Olivares was a marketing and operational mastermind behind the scheme and Olivares was the chief architect of the computer databases they used,” said Stephen Cohen, an associate director in the SEC’s Division of Enforcement.  “After they learned ZeekRewards was under investigation by law enforcement, they accepted substantial sums of money from the scheme while keeping investors in the dark about its imminent collapse.”

Pyramid schemes are a type of investment scam often pitched as a legitimate business opportunity in the form of multi-level marketing programs. According to the SEC’s complaint filed in federal court in Charlotte, N.C., the ZeekRewards scheme raised more than $850 million from approximately one million investors worldwide.

The SEC alleges that Wright-Olivares served as the chief operating officer for much of the existence of ZeekRewards.  She helped develop the program and its key features, marketed it to investors, and managed some of its operations.  She also helped design and implement features that concealed the fraud.  Olivares managed the electronic operations that tracked all investments and managed payouts to investors.  Together, Wright-Olivares and Olivares helped perpetuate the illusion of a successful retail business.

The SEC’s complaint charges Wright-Olivares with violating the registration and antifraud provisions of Sections 5 and 17 of the Securities Act, and Section 10 of the Exchange Act and Rule 10b-5.  The complaint charges Olivares with violating Section 17 of the Securities Act and Section 10 of the Exchange Act and Rule 10b-5.  To settle the SEC’s charges, Wright-Olivares agreed to pay at least $8,184,064.94 and Olivares agreed to pay at least $3,272,934.58 – amounts that represent the entirety of their ill-gotten gains plus prejudgment interest.  Payments will be made as part of the parallel criminal proceeding in which additional financial penalties could be imposed in a restitution order.

The SEC’s investigation, which is continuing, has been conducted by Brian Privor, Alfred Tierney, and John Bowers.  The SEC appreciates the assistance of the U.S. Attorney’s Office of the Western District of North Carolina and the U.S. Secret Service.

6 JURISDICTIONS APPROVED BY CFTC FOR COMPARABILITY DETERMINATIONSREGARDING SWAP PROVISIONS OF DODD-FRANK

FROM:  U.S. COMMODITIES FUTURES TRADING COMMISSION 
December 20, 2013
CFTC Approves Comparability Determinations for Six Jurisdictions for Substituted Compliance Purposes

Australia, Canada, the European Union, Hong Kong, Japan, and Switzerland are deemed comparable with respect to certain swaps provisions of the Dodd-Frank Act

Washington, DC — The Commodity Futures Trading Commission (Commission) today approved a series of broad comparability determinations that would permit substituted compliance with non-U.S. regulatory regimes as compared to certain swaps provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Commission’s regulations. Substituted compliance describes the circumstances where the Commission’s general policy would be to permit non-U.S. swap dealers or non-U.S. MSPs whose swaps activities might bring them within the scope of certain Commission regulations, to use compliance with regulations in their home jurisdiction as a substitute for compliance with the relevant Commission regulations. This approach builds on the Commission’s long-standing policy of recognizing comparable regulatory regimes based on international coordination and comity principles with respect to cross-border activities involving futures and options.

The vote was conducted via seriatim, which was approved by three commissioners. The comparability determinations will be published in the Federal Register.

In accordance with the Commission’s general policy and procedural framework described in its Interpretative Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations published on July 26, 2013 (the Cross-Border Guidance), the comparability determinations are part of substituted compliance with respect to Commission regulations applicable to swaps activities outside the U.S.

This approval by the Commission also reflects a collaborative effort with authorities and market participants from each of the six jurisdictions that has registered swap dealers. Working with authorities in Australia, Canada, the European Union (EU), Hong Kong, Japan, and Switzerland, the Commission was able to issue comparability determinations for a broad range of entity-level requirements (see related attached summary chart). In two jurisdictions, the EU and Japan, the Commission also approved substituted compliance for a number of key transaction-level requirements. For the EU, the Commission is issuing comparability determinations for transaction-level requirements under Commission regulations 23.501, 23.502, 23.503, and certain provisions of 23.202 and 23.504. For Japan, the Commission is issuing comparability determinations for transaction-level requirements under certain provisions of Commission regulations 23.202 and 23.504.

As jurisdictions outside the U.S. continue to strengthen their regulatory regimes, the Commission may determine that additional foreign regulatory requirements are comparable to and as comprehensive as certain requirements under the CEA and the Commission’s regulations.