Remarks at the 2015 Mutual Funds and Investment Management Conference

Remarks at the 2015 Mutual Funds and Investment Management Conference

A Watched Pot Never Boils: the Need for SEC Supervision of Fixed Income Liquidity, Market Structure, and Pension Accounting

A Watched Pot Never Boils: the Need for SEC Supervision of Fixed Income Liquidity, Market Structure, and Pension Accounting

SEC.gov | Remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation

SEC.gov | Remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation

SEC CHARGES EIGHT IN RELATION TO STOCK OWNERSHIP DISCLOSURE CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

03/13/2015 01:45 PM EDT

The Securities and Exchange Commission charged eight officers, directors, or major shareholders for failing to update their stock ownership disclosures to reflect material changes, including steps to take the companies private.  Each of the respondents, without admitting or denying the SEC’s allegations, agreed to settle the proceedings by paying a financial penalty.

The charges involve outdated disclosures in reports filed by “beneficial owners” who hold more than 5 percent of a company’s stock.  Federal securities laws require beneficial owners to promptly file an amendment when there is a material change in the facts previously reported by them on Schedule 13D, commonly referred to as a “beneficial ownership report.” The disclosure requirements include plans or proposals that would result in certain transactions, such as a going private transaction.

“Investors are entitled to current and accurate information about the plans of large shareholders and company insiders,” said Andrew J. Ceresney, Director of the Division of Enforcement.  “Stale, generic disclosures that simply reserve the right to engage in certain corporate transactions do not suffice when there are material changes to those plans, including actions to take a company private.”

The SEC’s orders find that the respondents took steps to advance undisclosed plans to effect going private transactions.  Some determined the form of the transaction to take the company private, obtained waivers from preferred shareholders, and assisted with shareholder vote projections, while others informed company management of their intention to privatize the company and formed a consortium of shareholders to participate in the going private transaction.  As described in the SEC orders, each respective respondent took a series of significant steps that, when viewed together, resulted in a material change from the disclosures that each had previously made in their Schedule 13D filings.

According to the SEC’s orders, some of the respondents also failed to timely report their ownership of securities in the company that was the subject of a going private transaction.  In addition, six respondents only disclosed their transactions in company securities months or years after the fact, not within two businesses days, as required for these disclosures by insiders.

The SEC today issued the following orders:

Berjaya Lottery Management (H.K.) Ltd.

According to the SEC’s order instituting a settled administrative proceeding, Berjaya Lottery Management (H.K.) Ltd., a Hong Kong corporation, waited eight months to disclose it had taken steps to effectuate a going private transaction for International Lottery & Totalizator Systems Inc.  Berjaya’s failure to promptly amend its disclosure violated Section 13(d)(2) of the Exchange Act and Rule 13d-2(a).  Berjaya was ordered pay a civil money penalty in the amount of $75,000.

The Ciabattoni Living Trust; SMP Investments I, LLC; Anthony J. Ciabattoni; Jane G. Ciabattoni; William A. Houlihan; and Brian Potiker

According to SEC orders instituting a settled administrative proceeding against The Ciabattoni Living Trust and Anthony and Jane Ciabattoni, the Trust and the Ciabattonis waited more than five months to amend their Schedule 13D disclosure after taking steps to effectuate a going private transaction for First Physicians Capital Group, Inc.  The Trust and the Ciabattonis failed to promptly amend their disclosure, in violation of Section 13(d)(2) of the Exchange Act and Rule 13d-2(a).  The order also found that the Trust and the Ciabattonis violated Section 16(a) by failing to report material transactions in First Physicians Capital Group shares until months or years later.  The Ciabattoni Living Trust and the Ciabattonis were ordered to pay a civil money penalty in the amount of $75,000.

In separate SEC orders, the SEC found that SMP Investments I, LLC, and Brian Potiker waited approximately three months to update their Schedule 13D disclosure after taking steps to effectuate a going private transaction for First Physicians Capital Group.  SMP and Potiker’s failure to promptly amend their disclosures violated Section 13(d)(2) of the Exchange Act and Rule 13d-2(a).  The order also found that SMP and Potiker violated Section 16(a) by failing to report material transactions in First Physicians Capital Group shares until months or years later.  SMP and Potiker were ordered to pay a civil money penalty in the amount of $63,750.

According to the SEC’s order instituting settled administrative proceedings against William Houlihan, the SEC found that Houlihan waited approximately five months before amending his previous Schedule 13D after taking a series of steps to effectuate a going private transaction for First Physicians Capital Group.  Houlihan’s failure to promptly amend his disclosure violated Section 13(d)(2) of the Exchange Act and Rule 13d-2(a).  The order also found that Houlihan violated Section 16(a) by waiting more than five months to report a material transaction in First Physicians Capital Group shares. Houlihan was ordered to pay a civil money penalty in the amount of $15,000.

Shuipan Lin

According to the SEC’s order instituting a settled administrative proceeding, Shuipan Lin, the Chairman and CEO of China-based Exceed Company Ltd., failed to timely amend his Schedule 13D report after taking steps to effectuate a going private transaction for Exceed.  In addition, the order finds that Lin did not file his initial Schedule 13D report until May 2011 even though his filing obligation began in October 2009 when he owned approximately 20% of Exceed’s ordinary shares.  Finally, the order finds that Lin failed to amend his Schedule 13D to report a subsequent acquisition of Exceed’s shares.  Lin was ordered to pay a civil money penalty in the amount of $30,000.

The SEC’s investigations were conducted by Sharan K.S. Custer and Allen A. Flood and supervised by Anita B. Bandy and Conway T. Dodge.  The Enforcement Division staff worked in close collaboration with Michele Anderson, Nicholas Panos, Christina Chalk, and Mellissa Duru in the Division of Corporation Finance’s Office of Mergers and Acquisitions.

Understanding Disqualifications, Exemptions and Waivers Under the Federal Securities Laws

Understanding Disqualifications, Exemptions and Waivers Under the Federal Securities Laws

SEC ANNOUNCES DEFAULT JUDGEMENT AGAINST LAWYER FOR FORGING ATTORNEY OPINION LETTERS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23217 / March 11, 2015

Securities and Exchange Commission v. Guy M. Jean-Pierre, a/k/a Marcelo Dominguez de Guerra, Civil Action No. 12-cv-8886

Default Judgment Entered Against Securities Lawyer for Forging Attorney Opinion Letters for Microcap Stocks

The Securities and Exchange Commission announced today that a default judgment including nearly $1.5 million in disgorgement, prejudgment interest and civil penalty was entered on March 10, 2015 by the U.S. District Court for the Southern District of New York against Guy M. Jean-Pierre (Jean-Pierre) a/k/a Marcelo Dominguez de Guerra, a securities lawyer. Jean-Pierre engaged in a fraudulent scheme to issue forged attorney opinion letters that facilitated the transfer of restricted microcap shares on Pink OTC Markets Inc. (now named OTC Markets Group Inc.), after Pink Sheets had banned him from issuing such letters. Pink Sheets is a financial marketplace trading platform that provides price and liquidity information for nearly 10,000 securities. Jean-Pierre sought to evade the Pink Sheet ban by writing letters using his niece's identity and falsifying her signature without her knowledge or consent. In addition to ordering permanent injunctions from violating antifraud statutes and rule, Jean-Pierre was ordered to disgorge $62,000, along with prejudgment interest of $7,580.43, and pay a penalty of $1,425,000 for a total of $1,494,580.43 and is subject to a lifetime bar from participating in the offering of any penny stock pursuant to Section 20(g) of the Securities Act.

On December 6, 2012, the Commission filed a civil injunctive action in the United States District Court for the Southern District of New York charging Jean-Pierre for issuing fraudulent attorney opinion letters that resulted in more than 70 million shares of microcap stock becoming available for unrestricted trading by investors.

On March 10, 2015, United States District Judge Lorna Schofield issued default judgment against Jean-Pierre adopting the opinion of Magistrate Judge Henry B. Pitman. With the entry of the default judgments, the Commission was granted full relief sought in its Complaint.

The Commission's investigation was conducted by Megan R. Genet and Steven G. Rawlings of the Commission's New York Regional Office. The Commission's litigation effort was led by Todd Brody and Megan R. Genet.