COURT REFUSES APPROVAL OF SEC SETTLEMENT WITH CITIGROU

The following excerpt is from the SEC website: November 28, 2011 Public Statement by SEC Staff: by Robert Khuzami Director, Division of Enforcement U.S. Securities and Exchange Commission Washington, D.C. “While we respect the court's ruling, we believe that the proposed $285 million settlement was fair, adequate, reasonable, in the public interest, and reasonably reflects the scope of relief that would be obtained after a successful trial. The court's criticism that the settlement does not require an 'admission' to wrongful conduct disregards the fact that obtaining disgorgement, monetary penalties, and mandatory business reforms may significantly outweigh the absence of an admission when that relief is obtained promptly and without the risks, delay, and resources required at trial. It also ignores decades of established practice throughout federal agencies and decisions of the federal courts. Refusing an otherwise advantageous settlement solely because of the absence of an admission also would divert resources away from the investigation of other frauds and the recovery of losses suffered by other investors not before the court. The settlement provisions cited by the court have been included in settlements repeatedly approved for good reason by federal courts across the country — including district courts in New York in cases involving similar misconduct. We also believe that the complaint fully and accurately sets forth the facts that support our claims in this case as well as the basis for the proposed settlement. These are not 'mere' allegations, but the reasoned conclusions of the federal agency responsible for the enforcement of the securities laws after a thorough and careful investigation of the facts. Finally, although the court questions the amount of relief obtained, it overlooks the fact that securities law generally limits the disgorgement amount the SEC can recover to Citigroup's ill-gotten gains, plus a penalty in an amount up to a defendant's gain. It was for this reason that we sought to recover close to $300 million — all of which we intended to deliver to harmed investors. The SEC does not currently have statutory authority to recover investor losses. We will continue to review the court's ruling and take those steps that best serve the interests of investors.”

MAN MAKES OVER $1.2 MILLION IN ALLEGED UNREGISTERED SECURITES BUT, SEC SEEKS DISGORGEMENT

The following excerpt is from the SEC website: November 23, 2011 “The Securities and Exchange Commission filed a civil injunctive action against Myron Weiner, relating to his unregistered sale of shares of Spongetech Delivery Systems, Inc. (“Spongetech”) in 2009. In its complaint, the Commission alleges that Weiner purchased the shares from a Spongetech affiliate at a discounted price of 5 cents, and then sold the shares into the public market less than three months later for 20 cents, for a profit of $1,215,057. The Commission’s complaint alleges that Weiner’s sales were not registered with the Commission, and no exemption from the registration requirements of the federal securities laws applied. The Commission’s complaint seeks a final judgment: (1) enjoining Weiner from violating Section 5 of the Securities Act of 1933 (registration provisions); (2) requiring the payment of disgorgement of $1,215,057, plus prejudgment interest of $80,135; (3) requiring payment of a civil penalty of $50,000; and (5) barring Weiner for one year from participating in the offering of any penny stock. The U.S. Attorney’s Office for the Eastern District of New York filed a related forfeiture action. The Commission wishes to thank the U.S. Attorney’s Office, the Federal Bureau of Investigation and the Internal Revenue Service for their assistance in connection with this matter.”

FINAL JUDGEMENT ENTERED AGAINST FORMER CEO OF CHINA VOICE HOLDING CORP.

The following excerpt is from the SEC website: “On November 22, 2011, the Securities and Exchange Commission announced that the Honorable Reed O’Connor, United States District Judge for the Northern District of Texas, entered a Final Judgment against William F. Burbank, IV, the former Chief Executive Officer and President of China Voice Holding Corp. to settle charges that he made false and misleading statements and material omissions regarding China Voice and selectively disclosed material, non-public information regarding the company. Without admitting or denying the allegations in the SEC’s complaint, Burbank agreed to entry of a Final Judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder and from aiding and abetting violations of Section 13(a) of the Exchange Act and Regulation FD thereunder. The Final Judgment, entered on November 21, also orders Burbank to pay $60,333 in disgorgement and prejudgment interest and a civil penalty of $60,000. In addition, Burbank is barred from ten years from serving as an officer or director of a public company and from participating in an offering of a penny stock. The Commission filed an emergency action on April 28, 2011, alleging that China Voice’s co-founder and former Chief Financial Officer, David Ronald Allen, with the assistance of Alex Dowlatshahi and Christopher Mills, and numerous related entities, launched what became a Ponzi scheme that sought to raise at least $8.6 million from investors across the country. The Commission alleged that, contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen, Dowlatshahi, and Mills; and to make payments to Allen-affiliated business, including China Voice. The Commission’s complaint alleged that Burbank also received ill-gotten gains from this Ponzi scheme. The SEC’s complaint further charged Burbank and Allen for a series of fraudulent statements about China Voice’s financial condition and business prospects and with selectively disclosing material, non-public information regarding the company to certain shareholders. In addition, the SEC charged China Voice shareholders Ilya Drapkin and Gerald Patera with financing stock promotion campaigns regarding China Voice, including a blast fax campaign conducted by Robert Wilson. The Commission’s case is still pending against remaining defendants China Voice, Allen, Wilson, and various of their related entities.”

UNREGISTERED SECURITIES FRAUD NETS GOVERNMENT MILLIONS FROM FINES AND DISGOGEMENTS

The following is an excerpt from the SEC web site: November 15, 2011 “The Securities and Exchange Commission announced today that on November 8, 2011, the U.S. District Court for the Northern District of Texas ruled that Timothy Page, of Malibu, California, and his company Testre LP are liable for violating the registration provisions of the federal securities laws. The Court ordered Page to pay $2.49 million in disgorgement and $400,284 in prejudgment interest. The Court also ordered three relief defendants - Reagan Rowland and Rodney Rowland, of Los Angeles, California, and John Coutris, of Irving, Texas - to pay back their ill-gotten gains. The Commission's complaint alleged that Page and Testre violated the registration provisions of the federal securities laws when they engaged in an unregistered public offering of ConnectAJet.com, Inc., a reverse-merger company that claimed it would "revolutionize the aviation industry" by creating a real-time, online booking system for private jet travel. The Commission alleged that Page and his collaborators purchased tens of millions of shares directly from ConnectAJet.com, Inc. for pennies per share, under a purported registration exemption under the Securities Exchange Act of 1933, Regulation D, Rule 504. The Commission alleged that Page then touted the stock to investors through a national marketing campaign and dumped his shares into the public market when no registration statement was filed or in effect. The Court ruled that Page and Testre violated Section 5 of the Securities Act of 1933. In addition to the monetary relief granted by the Court, the Commission continues to seek the following additional relief against Page and Testre: civil penalties, penny stock bars, and injunctions from future violations of Section 5 of the Securities Act of 1933. Reagan Rowland and Rodney Rowland were ordered to pay $138,219 and John Coutris was ordered to pay $281,840 in ill-gotten gains they received from Ryan Reynolds, one of Page's collaborators. The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.”

FORMER BROKER PLEADS GUILTY TO OBSTRUCTION OF JUSTICE

The following excerpt is from the SEC website: November 21, 2011 “The Securities and Exchange Commission ("Commission") announces that on November 8, 2011, Robert Carlsson (“Carlsson”), a former broker, pled guilty to obstruction of justice in connection with his false representations to the SEC during two separate examinations of Carlsson's broker-dealer in 2006 and 2007 by examination staff of the Commission’s Chicago Regional Office. The Commission previously announced that on September 8, 2010, the United States Attorney's Office for the Northern District of Illinois obtained a 21-count indictment of Brian Hollnagel, BCI Aircraft Leasing Inc., and five others involved in BCI's fraudulent scheme and obstruction of the Commission's attempts to discover and investigate that very scheme. U.S. v. Brian Hollnagel et al., Criminal Action No. 1:10-cr-0195 (N.D. Ill.) (St. Eve., J.). In that indictment, among various other violations, Hollnagel, BCI, and Carlsson, who raised money from investors for BCI's operations, were accused of obstruction of justice in connection with false representations to the SEC during the 2006 and 2007 examinations of Carlsson's broker-dealer, 21 Capital Group. In particular, Hollnagel, BCI, and Carlsson were accused of concealing Carlsson's fund raising activities for BCI from the Commission’s Chicago examination staff. According to the plea agreement, Carlsson faces an advisory Sentencing Guidelines range of 10 to 16 months’ imprisonment. Carlsson has agreed to fully and truthfully cooperate with the United States Attorney's Office for the Northern District of Illinois in connection with the September 8, 2010 indictment of Hollnagel, BCI, and others. Previously, on August 13, 2007, the Commission filed a civil injunctive complaint alleging that Defendants Hollnagel and BCI, from approximately 1998 through 2007, raised at least $82 million from approximately 120 investors as part of a fraudulent scheme in which the Defendants commingled investor funds, used investor funds to pay other investors, and failed to use investor funds as represented. The Complaint alleged that, as a result of their conduct, Defendants Hollnagel and BCI violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission’s action was stayed in 2010 pending the criminal proceedings referenced above.”

ICI 2011 CLOSED-END FUND CONFERENCE REMARKS BY EILEEN ROMINGER

The following excerpt is from the SEC website: Eileen Rominger Director, Division of Investment Management November 17, 2011 “Good afternoon, and thank you for inviting me to speak here today. Let me make the usual disclosure that my remarks represent my own views and not necessarily the views of the Commission, the individual Commissioners or my colleagues on the SEC staff. We have just listened to the panel on “How Closed-End Funds Fit in Today’s Markets.” I am reminded that the last time that an SEC Division of Investment Management Director spoke about closed-end funds at this conference was in October 2007. A panel on the same topic back then probably would have sounded somewhat different. 2007 was in many ways a peak year for closed-end funds -- their assets were about four times what they are today; they issued more than three times worth of new shares in 2007 than they did last year; and 2007 saw the biggest-ever closed-end fund IPO of $5 billion dollars.2 Year 2008 was not kind to the closed-end fund industry. During the financial crisis, the average closed-end fund discount to NAV hit record levels -- it was estimated to be more than 15%, with 443 closed-end funds trading at double-digit discounts.3 Yet perhaps the financial crisis will be remembered by the closed-end fund industry primarily as the event that, for the first time in history, froze the market for auction-rate preferred shares, or ARPs, one of the funds’ key sources of leverage. Three years after the financial crisis, it is not uncommon to read that closed-end funds still are “suffering a bad rap,” that they “lack fans,” that investors are “shying away” from their IPOs, or that their investors are still “spooked.”4 And then there are the various reminders that the ever-growing ETFs and ETNs are muscling in on some of the closed-end funds’ traditional investment territory. It is probably fair to say that in 2011, closed-end funds are still looking to regain their footing in the post-financial crisis investment environment. Some significant strides have been made -- I was glad to find out that, as of the end of September of this year, over 77% percent of ARPs that were outstanding when the markets froze in 2008, have been redeemed as funds found other comparable sources of financing or decided to de-leverage.5 Overall, these are challenging times for investors. Stresses on the global economic order have led to sharp market volatility increases, accompanied by redemptions from equity mutual funds. During periods of stress -- more than ever -- I believe that it is important that funds do all they can to maintain high standards. Only by doing so will they continue to earn and retain the confidence of investors. One area in which standards should be held high is that of informing and educating investors. For example, leverage is often a difficult issue for investors to understand and put in the right perspective. And not only for investors. For closed-end funds themselves, some leverage, such as bank debt or issuing preferred stock, may be straightforward to quantify and explain. Other leverage, such as tender option bonds or reverse repos, may be more complex and variable. In the last few years, as many closed-end funds may have shifted from using ARPs to other forms of leverage, including derivatives, they may be facing new challenges in giving their investors an understandable picture of their leverage profiles. If leverage materially affected a fund’s performance during its fiscal year, I believe the fund should discuss this factor in its annual report. About a year ago, my Division staff sent a letter to the ICI providing its most recent observations about derivatives-related disclosures by investment companies in registration statements and shareholder reports.6 The letter noted, for example, that some funds that appear to have significant derivatives exposure in their financial statements, have limited or no discussion in their annual reports of the effect of those derivatives on the funds’ performance. Even apart from the regulatory requirements, leaving investors in the dark about the role that leverage plays in the management and performance of their portfolios cannot be good for the closed-end fund business. An investor reading a fund’s annual report should not have to dig through the footnotes in the financial statements to understand the material impact that derivatives -- or leverage generally -- may have had on the fund’s performance. Unfortunately, some closed-end fund investors are still in that position today. At the other end of the spectrum, many closed-end funds do an excellent job of communicating to their investors on this topic. These funds’ annual reports speak pointedly and clearly about the role of leverage in their performance. They manage to convey to investors what is important about their funds’ often complex leverage strategies in a simplified but focused and accurate manner. I believe that these investors are well served. The complexities of how best to inform and educate investors about leverage in general, and derivatives in particular, are well known to us at the Commission. My Division is beginning to analyze the comments that have come in on the Concept Release on derivatives, which the Commission issued at the end of August.7 The Concept Release did not speak in detail about disclosure issues, but it did devote significant attention to the treatment of derivatives under the leverage, portfolio diversification and concentration requirements. These are all issues that go to providing investors a complete and accurate picture of their fund. The Concept Release also broadly invited comments on any derivatives-related issues that commenters felt were relevant to the use of derivatives by funds. We welcome and appreciate your views about derivatives-related issues from the closed-end fund community’s point of view. As the markets work through this challenging period, I hope that the closed-end fund industry as a whole makes the commitment and re-doubles efforts to provide investors with appropriate disclosure about leverage and derivatives. Take a fresh look at your funds’ shareholder reports and websites, because these are the places where your investors, as a practical matter, look for information about their funds. Efforts spent on these channels of communication will not only benefit your investors, but will be good for business, too. Speaking of what is perceived as “good for business,” a Morningstar article recently observed that “many closed-end funds live and die by their distributions.”8 In today’s environment of historically low interest rates, many closed-end funds are finding managed distribution policies to be magnets for yield-seeking investors. Couple that with the low cost of leverage, and many closed-end funds may be tempted to further increase the size of their funds’ distributions. Last year, for example, there were 566 announced distribution increases, compared to 187 distribution reductions, and the average change in distribution was an increase of 6.6%.9 Of course, managed distribution policies have been around for as long as closed-end funds themselves, with mixed results and some historical lessons. The 2007 speech to this audience by my predecessor in the Division, cautioned about several issues: the importance of timely disclosure to investors regarding the sources of fund distributions; making clear to investors the extent of a fund’s ability to sustain its current distributions; the need for monitoring of distribution rates by fund managers and directors; and the appropriateness of continuing with a distribution policy.10 It was a timely caution. The market events of 2008 -- combined with the effects of the tax rules -- led a number of closed-end funds to reduce their distribution rates or discontinue their managed distribution policies altogether. These developments made real the need for good disclosure and investor understanding of managed distributions. As we once again face a market under stress in 2011, and as investors seek refuge in yield, it is critically important to conduct business in a way that does not undermine the protection of investors. A growing segment of our population is approaching retirement and seeking yield-generating investments. It would be great if we could agree to raise the bar for informing and educating investors. And of course we all know that a few “bad apples” can tarnish an entire industry. When certain closed-end funds appear to have distribution rates that are significantly higher than their portfolios’ average annual total returns,11 it suggests an unsustainable posture that may end badly for shareholders. We should all worry when Morningstar observes that closed-end funds with high distribution rates -- particularly those that provide the least information about the sustainability of their distributions -- tend to trade at the highest premiums and are “market successes.”12 I think we would all agree that there is no “market success” when it concerns poorly informed investors on the issue of closed-end fund distributions. One cannot help but remember that closed-end funds have known their share of market “bubbles.” In fact, closed-end funds as we know them today arose out of the ashes of the infamous 1929 closed-end funds bubble. It was a time of spectacular growth for leveraged closed-end funds and premiums that reached the sky. In 1929, the premiums averaged 50%, and the hottest new closed-end fund issues sometimes traded at 200% of NAV.13 It was also a time marked by a lack of transparency that bordered on secrecy. After the great crash of 1929, one of the key ways in which closed-end funds sought to resurrect the industry was through a coordinated effort toward greater transparency to inform and educate the investing public about themselves. And the focus of that effort was not on pages and pages of “boilerplate,” but on actually getting across to an investor what sort of thing he or she would be getting when buying a closed-end fund. That real effort at transparency -- and the substantive regulation in the form of the Investment Company Act -- is what enables us to be here today to discuss the state of the closed-end fund industry in the year 2011. And yet, we are still talking about transparency and distribution policies. Reputation is far more easily lost than regained, so I encourage all to disclose clearly and completely, and to set distribution policies that will manage, and meet, investor expectations appropriately over the long-term. I’m happy to have had the chance to speak with you today. Thank you for your time.”