This is a photo of the National Register of Historic Places listing with reference number 7000063
Saturday, December 24, 2011
JOINT INTERNATIONAL MEETNG TO DISCUSS REGULATION OF OVER-THE-COUNTER DERIVATIVES MARKETS
SEC COMMISSIONER SPEAKS AT SECURITIES LAW DEVELOPMENTS CONFERENCE
The following excerpt is from the SEC website:
Remarks Before the ICI 2011 Securities Law Developments Conference
by
Eileen Rominger
Director, Division of Investment Management
December 13, 2011
Omni Shoreham Hotel
2500 Calvert Street, NW
Washington, DC
Thank you, Karrie, for that kind introduction. And good morning to everyone here today. I am very happy to be speaking at this Securities Law Developments conference, before an impressive audience of mutual fund lawyers and other professionals.
I am glad that I am speaking to you today, and not several years ago when this conference used to be called the “Procedures” conference. I was an executive in New York for many years. On Wall Street, if someone invited you to a meeting where a large number of lawyers would discuss “Procedures” … well it probably was not a good thing.
And I should interject my own procedure here, by telling you that my remarks this morning are my own, and do not necessarily represent the views of the Commission, individual Commissioners, or the staff of the Commission.1
When I first thought about coming to the Commission, I was in the process of retiring from a Wall Street asset management firm. At that time, I was asked many questions:
Why come to the Commission?
Why leave a nice life in the Northeast and move to Washington?
Why take on the burdens of another high-stress job?
And those were just the questions from my husband.
In the end, of course, I decided to come to Washington. My greatest hope is that my decades of experience – as a securities analyst, a portfolio manager, and a manager of portfolio managers – can be useful for the important work of the Commission.
After spending decades on Wall Street, I am glad to have made the transition from industry to government regulator. And as recent events have highlighted, I believe it is important for the government to employ – literally to employ – a real-world understanding of business practices, and an appreciation of the problems that businesses try to solve every day.
I do not see my job at the Commission as an opportunity to take off the black hat and put on a white hat. The business of finance is just that, a business. At its best, this business performs an essential function in our society. It provides investment opportunities for investors. It serves a role in allocating capital to the businesses that comprise the U.S. economy.
And whether our perspective is conducting business or regulating business, it is important to remember that it all comes down to this – the assets that the professionals manage are “other people’s money.”
The investment of client assets in mutual funds is not an exciting game, nor is it a mathematical exercise. It is the assumption of responsibility for the savings of real people. It can represent:
The ability to pay for health care – or not,
The ability to fund a child’s education – or not, and
The ability to retire when needed – or not.
Just as you are highly aware of this, so are we as we do our work at the SEC.
< This Past Year >
During my time at the Commission this year I have enjoyed the fast pace and the very interesting work. The achievements of the Division and the Commission have been remarkable, and I am honored to have been able to contribute during this historic time.
More than 90 provisions in the Dodd-Frank Act require SEC rulemaking. The Commission already has proposed or adopted rules for over three-quarters of them.
Of these rulemakings, the Division of Investment Management has participated in 13, and almost half of those the Commission has already adopted.
The Commission and staff have finished 12 of the more than 20 studies and reports that the Dodd-Frank Act requires.
The Division has participated in 4 of these studies, and 3 of them are completed.
The Division also is working on many other projects and initiatives that are not related to the Dodd-Frank Act. I look forward to helping the Commission face the issues raised by these matters, and the many others that lie ahead. One of the underlying issues, of course, is how to improve what we do.
< Improvements in Gathering and Using Data >
As we enter 2012, I am particularly interested in improving the way that we on the Commission staff incorporate empirical data into the regulatory process. We have an opportunity to utilize empirical data more extensively across the range of our activities. I think this would enhance the quality of the work we do for the Commission.
For example:
Our rulemaking recommendations would continue to benefit from ongoing feedback and understanding of the key elements of the cost structures of investment advisers.
Our consideration of exemptive applications would likely benefit from continuing improvements in our analysis of the performance of certain products already in the market.
And our approach to disclosure would likely benefit from continuing our ongoing study of how investors actually use the materials provided, and how they make their investment decisions.
An area in which we have made great progress in utilizing data is in the collection and analysis of money market fund data — more on that in a moment.
When I worked as a securities analyst and portfolio manager, we spent most of our time analyzing financial data and other information to arrive at our decisions. For the most part, the data was readily available on EDGAR, the SEC database.
As regulators, we face far greater challenges in data analysis. Some relevant data can be difficult or very costly to obtain. Once we have obtained the data, we need to further develop our ability to effectively analyze the information so that we can derive useful insight from it. Then, we need to apply that insight in a world in which regulations must apply to all, even though business models and their related cost structures definitely are not homogenous. Further, the industry is in a constant state of change due to product innovation, global capital market trends, and an ever-shifting competitive landscape. And so drawing conclusions from any dataset requires judgment as much as quantitative expertise.
The SEC staff is actively engaged in efforts to enhance the gathering and utilization of data:
These efforts are evident in the increasing use of analytics by the Compliance Inspections and Examinations Office to prioritize its activities based on quantitative risk assessments.
They are evident in Enforcement’s use of the analysis of outlier investment performance to identify potential problem areas.
And they are evident in the investor testing activities in which Investment Management and the Office of Investor Education and Advocacy are engaged.
These efforts are also evident in the Commission’s recent request for comments on the development of a plan for retrospective review of existing significant regulations. An important part of that request relates to the existence of relevant data that the Commission should consider in selecting and prioritizing rules for review and in reviewing the rules themselves. The request for comments also asks how the Commission should assess such data in these processes.
Moving to a more information-driven process will only succeed if we can work together on this. We rely on the information you provide in comment letters. Thank you very much for the work that you and your staff devote to those letters — I know they are time-consuming. To the extent that you can illustrate and support your comments with data and specific information, anecdotal or other, it will be even more helpful in advancing our goal.
I also appreciate your efforts to offer constructive solutions to the issues raised by the Commission.
I assure you that we give a great deal of focus and attention to the substantive responses we receive.
The agency is also continuing to invest in Information Technology resources across most divisions. We are in the planning stages for significant improvements in the technology infrastructure for the Investment Management Division. We already benefit from the collection of data about investment advisers through the IARD system. We also look forward to receiving and compiling data about private funds through IARD in the future. And in the coming year, the Division will invest in staff who have relevant experience in data and financial analytics.
< Money Market Funds >
The SEC’s oversight of money market funds is a good example of our continued focus on improving information collection and utilization. As a result of the first phase of money market reform approved by the Commission in February 2010, we have been receiving detailed holdings data for each of the past 12 months. This data is submitted via form N-MFP and is extensively analyzed and considered by the SEC staff.
In the last year, the Commission has received filings from over 650 money market funds each month, or about 8000 filings altogether. Each month, these funds report about 70,000 different positions in all their portfolios. We are using the data to monitor characteristics and trends of holdings, and to identify areas that raise questions. This data will also help us better assist other regulators with systemic risk monitoring responsibilities, such as Treasury and the Federal Reserve.
Lastly, this data is increasingly used as a point of reference during examinations. As our IM staff participates in exams of money market funds, we will occasionally ask questions about holdings and trends. This is helpful in gaining a general sense of the portfolio decision-making process. If you are part of one of these discussions, I encourage you to avoid reading too much into these high level questions, as it is not our intention to convey a specific point of view on these individual securities.
< Target Date Funds >
The Commission staff is gathering information not only about financial institutions and professionals. We are also looking at the types of information that investors believe are most useful when they choose their investments. For example, the Commission staff is currently conducting investor testing as part of its rulemaking efforts on target date retirement funds.
Target date fund assets as of October are about $360 billion. The new cash flow that target date funds netted last year was over 10 times what it was 10 years ago. One recent survey showed that 70% of U.S. employers who responded use target date funds as the default investment in their defined contribution plans. The increasing significance of target date funds in 401(k) retirement plans – together with the market losses suffered in 2008 – gave rise to concerns about those funds.
Last year, the Commission proposed rule changes to address concerns regarding target date fund names and information presented in target date fund marketing materials. To date, target date fund disclosures have been tested on about 1,000 investors. After we analyze the testing data and consider public comments on the proposed rule, the Division will evaluate whether to recommend that the Commission adopt rule changes to address target date funds.
Before I close, let me briefly mention a few other recent initiatives.
Recently, the Commission issued a concept release on the use of derivatives by funds. Although the use of derivatives by funds is not new, it has increased exponentially in recent years. Also, funds are now using complex derivatives that did not exist when the Commission provided guidance to funds many years ago.
I am especially interested in information regarding how funds use derivatives consistent with the leverage limitations in the Investment Company Act. Thank you for your responses, and we look forward to continuing the dialogue in this important area.
We need to ensure that our regulatory protections keep up with the increasing complexity of these instruments and the ways that funds use them. This is the right time to step back and to consider whether any changes in Commission rules or guidance may be needed.
Other Regulatory Notices
The Commission also has issued an advance notice of proposed rulemaking regarding a rule that provides certain issuers of asset-backed securities with conditional exclusions from the definition of investment companies under the 1940 Act. And it has issued a concept release on real estate investment trusts that invest in mortgages.
We expect to gather data and consider all the comments, in determining whether to recommend that the Commission take further action.
During this next year, I look forward to working with you on the matters I have described this morning, and on the other projects that the Division has undertaken to accomplish.
I also look forward to reviewing the information that you provide to the Commission through comment letters and other input. The information you provide can help us improve our work on the matters that lie at the heart of the Commission’s mission – investor protection and capital formation. It is important to remember that, at the end of the day, the Commission serves these important purposes, but it also serves people. It serves investors, and it serves the American economy. Every day, the headlines in the newspapers remind me of the importance of our work.
In that regard, I hope you are looking forward to this year as much as I am.
Thank you.
1 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author’s colleagues upon the staff of the Commission."
Remarks Before the ICI 2011 Securities Law Developments Conference
by
Eileen Rominger
Director, Division of Investment Management
December 13, 2011
Omni Shoreham Hotel
2500 Calvert Street, NW
Washington, DC
Thank you, Karrie, for that kind introduction. And good morning to everyone here today. I am very happy to be speaking at this Securities Law Developments conference, before an impressive audience of mutual fund lawyers and other professionals.
I am glad that I am speaking to you today, and not several years ago when this conference used to be called the “Procedures” conference. I was an executive in New York for many years. On Wall Street, if someone invited you to a meeting where a large number of lawyers would discuss “Procedures” … well it probably was not a good thing.
And I should interject my own procedure here, by telling you that my remarks this morning are my own, and do not necessarily represent the views of the Commission, individual Commissioners, or the staff of the Commission.1
When I first thought about coming to the Commission, I was in the process of retiring from a Wall Street asset management firm. At that time, I was asked many questions:
Why come to the Commission?
Why leave a nice life in the Northeast and move to Washington?
Why take on the burdens of another high-stress job?
And those were just the questions from my husband.
In the end, of course, I decided to come to Washington. My greatest hope is that my decades of experience – as a securities analyst, a portfolio manager, and a manager of portfolio managers – can be useful for the important work of the Commission.
After spending decades on Wall Street, I am glad to have made the transition from industry to government regulator. And as recent events have highlighted, I believe it is important for the government to employ – literally to employ – a real-world understanding of business practices, and an appreciation of the problems that businesses try to solve every day.
I do not see my job at the Commission as an opportunity to take off the black hat and put on a white hat. The business of finance is just that, a business. At its best, this business performs an essential function in our society. It provides investment opportunities for investors. It serves a role in allocating capital to the businesses that comprise the U.S. economy.
And whether our perspective is conducting business or regulating business, it is important to remember that it all comes down to this – the assets that the professionals manage are “other people’s money.”
The investment of client assets in mutual funds is not an exciting game, nor is it a mathematical exercise. It is the assumption of responsibility for the savings of real people. It can represent:
The ability to pay for health care – or not,
The ability to fund a child’s education – or not, and
The ability to retire when needed – or not.
Just as you are highly aware of this, so are we as we do our work at the SEC.
< This Past Year >
During my time at the Commission this year I have enjoyed the fast pace and the very interesting work. The achievements of the Division and the Commission have been remarkable, and I am honored to have been able to contribute during this historic time.
More than 90 provisions in the Dodd-Frank Act require SEC rulemaking. The Commission already has proposed or adopted rules for over three-quarters of them.
Of these rulemakings, the Division of Investment Management has participated in 13, and almost half of those the Commission has already adopted.
The Commission and staff have finished 12 of the more than 20 studies and reports that the Dodd-Frank Act requires.
The Division has participated in 4 of these studies, and 3 of them are completed.
The Division also is working on many other projects and initiatives that are not related to the Dodd-Frank Act. I look forward to helping the Commission face the issues raised by these matters, and the many others that lie ahead. One of the underlying issues, of course, is how to improve what we do.
< Improvements in Gathering and Using Data >
As we enter 2012, I am particularly interested in improving the way that we on the Commission staff incorporate empirical data into the regulatory process. We have an opportunity to utilize empirical data more extensively across the range of our activities. I think this would enhance the quality of the work we do for the Commission.
For example:
Our rulemaking recommendations would continue to benefit from ongoing feedback and understanding of the key elements of the cost structures of investment advisers.
Our consideration of exemptive applications would likely benefit from continuing improvements in our analysis of the performance of certain products already in the market.
And our approach to disclosure would likely benefit from continuing our ongoing study of how investors actually use the materials provided, and how they make their investment decisions.
An area in which we have made great progress in utilizing data is in the collection and analysis of money market fund data — more on that in a moment.
When I worked as a securities analyst and portfolio manager, we spent most of our time analyzing financial data and other information to arrive at our decisions. For the most part, the data was readily available on EDGAR, the SEC database.
As regulators, we face far greater challenges in data analysis. Some relevant data can be difficult or very costly to obtain. Once we have obtained the data, we need to further develop our ability to effectively analyze the information so that we can derive useful insight from it. Then, we need to apply that insight in a world in which regulations must apply to all, even though business models and their related cost structures definitely are not homogenous. Further, the industry is in a constant state of change due to product innovation, global capital market trends, and an ever-shifting competitive landscape. And so drawing conclusions from any dataset requires judgment as much as quantitative expertise.
The SEC staff is actively engaged in efforts to enhance the gathering and utilization of data:
These efforts are evident in the increasing use of analytics by the Compliance Inspections and Examinations Office to prioritize its activities based on quantitative risk assessments.
They are evident in Enforcement’s use of the analysis of outlier investment performance to identify potential problem areas.
And they are evident in the investor testing activities in which Investment Management and the Office of Investor Education and Advocacy are engaged.
These efforts are also evident in the Commission’s recent request for comments on the development of a plan for retrospective review of existing significant regulations. An important part of that request relates to the existence of relevant data that the Commission should consider in selecting and prioritizing rules for review and in reviewing the rules themselves. The request for comments also asks how the Commission should assess such data in these processes.
Moving to a more information-driven process will only succeed if we can work together on this. We rely on the information you provide in comment letters. Thank you very much for the work that you and your staff devote to those letters — I know they are time-consuming. To the extent that you can illustrate and support your comments with data and specific information, anecdotal or other, it will be even more helpful in advancing our goal.
I also appreciate your efforts to offer constructive solutions to the issues raised by the Commission.
I assure you that we give a great deal of focus and attention to the substantive responses we receive.
The agency is also continuing to invest in Information Technology resources across most divisions. We are in the planning stages for significant improvements in the technology infrastructure for the Investment Management Division. We already benefit from the collection of data about investment advisers through the IARD system. We also look forward to receiving and compiling data about private funds through IARD in the future. And in the coming year, the Division will invest in staff who have relevant experience in data and financial analytics.
< Money Market Funds >
The SEC’s oversight of money market funds is a good example of our continued focus on improving information collection and utilization. As a result of the first phase of money market reform approved by the Commission in February 2010, we have been receiving detailed holdings data for each of the past 12 months. This data is submitted via form N-MFP and is extensively analyzed and considered by the SEC staff.
In the last year, the Commission has received filings from over 650 money market funds each month, or about 8000 filings altogether. Each month, these funds report about 70,000 different positions in all their portfolios. We are using the data to monitor characteristics and trends of holdings, and to identify areas that raise questions. This data will also help us better assist other regulators with systemic risk monitoring responsibilities, such as Treasury and the Federal Reserve.
Lastly, this data is increasingly used as a point of reference during examinations. As our IM staff participates in exams of money market funds, we will occasionally ask questions about holdings and trends. This is helpful in gaining a general sense of the portfolio decision-making process. If you are part of one of these discussions, I encourage you to avoid reading too much into these high level questions, as it is not our intention to convey a specific point of view on these individual securities.
< Target Date Funds >
The Commission staff is gathering information not only about financial institutions and professionals. We are also looking at the types of information that investors believe are most useful when they choose their investments. For example, the Commission staff is currently conducting investor testing as part of its rulemaking efforts on target date retirement funds.
Target date fund assets as of October are about $360 billion. The new cash flow that target date funds netted last year was over 10 times what it was 10 years ago. One recent survey showed that 70% of U.S. employers who responded use target date funds as the default investment in their defined contribution plans. The increasing significance of target date funds in 401(k) retirement plans – together with the market losses suffered in 2008 – gave rise to concerns about those funds.
Last year, the Commission proposed rule changes to address concerns regarding target date fund names and information presented in target date fund marketing materials. To date, target date fund disclosures have been tested on about 1,000 investors. After we analyze the testing data and consider public comments on the proposed rule, the Division will evaluate whether to recommend that the Commission adopt rule changes to address target date funds.
Before I close, let me briefly mention a few other recent initiatives.
Recently, the Commission issued a concept release on the use of derivatives by funds. Although the use of derivatives by funds is not new, it has increased exponentially in recent years. Also, funds are now using complex derivatives that did not exist when the Commission provided guidance to funds many years ago.
I am especially interested in information regarding how funds use derivatives consistent with the leverage limitations in the Investment Company Act. Thank you for your responses, and we look forward to continuing the dialogue in this important area.
We need to ensure that our regulatory protections keep up with the increasing complexity of these instruments and the ways that funds use them. This is the right time to step back and to consider whether any changes in Commission rules or guidance may be needed.
Other Regulatory Notices
The Commission also has issued an advance notice of proposed rulemaking regarding a rule that provides certain issuers of asset-backed securities with conditional exclusions from the definition of investment companies under the 1940 Act. And it has issued a concept release on real estate investment trusts that invest in mortgages.
We expect to gather data and consider all the comments, in determining whether to recommend that the Commission take further action.
During this next year, I look forward to working with you on the matters I have described this morning, and on the other projects that the Division has undertaken to accomplish.
I also look forward to reviewing the information that you provide to the Commission through comment letters and other input. The information you provide can help us improve our work on the matters that lie at the heart of the Commission’s mission – investor protection and capital formation. It is important to remember that, at the end of the day, the Commission serves these important purposes, but it also serves people. It serves investors, and it serves the American economy. Every day, the headlines in the newspapers remind me of the importance of our work.
In that regard, I hope you are looking forward to this year as much as I am.
Thank you.
1 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author’s colleagues upon the staff of the Commission."
Thursday, December 22, 2011
SEC EXCLUDES IN CALCULATING INDIVIDUAL NET WORTH FOR SOME UNREGISTERED SECURITIES INVESTORS
The following excerpt is from the SEC website:
“Washington, D.C., December 21, 2011 — The Securities and Exchange Commission has amended its rules to exclude the value of a person’s home from net worth calculations used to determine whether an individual may invest in certain unregistered securities offerings. The changes were made to conform the SEC’s definition of an “accredited investor” to the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under the amended rule, the value of an individual’s primary residence will not count as an asset when calculating net worth to determine “accredited investor” status. The amendments also clarify the treatment of borrowing secured by a primary residence for purposes of the net worth calculation. Under certain circumstances, they also permit individuals who qualified as accredited investors under the pre-Dodd-Frank Act definition of net worth to use that prior net worth standard for certain follow-on investments.
SEC rules permit certain private and limited offerings to be made without registration, and without requiring specified disclosures, if sales are made only to “accredited investors.” One way individuals may qualify as “accredited investors” is by having a net worth, alone or together with their spouse, of at least $1 million. The Dodd-Frank Act requires that the value of a person’s primary residence be excluded from the net worth calculation used to determine the person’s “accredited investor” status.
Under the amended net worth calculation, indebtedness secured by the person’s primary residence, up to the estimated fair market value of the primary residence, is not treated as a liability, unless the borrowing occurs in the 60 days preceding the purchase of securities in the exempt offering and is not in connection with the acquisition of the primary residence. In such cases, the debt secured by the primary residence must be treated as a liability in the net worth calculation. This is intended to prevent manipulation of the net worth standard, by eliminating the ability of individuals to artificially inflate net worth under the new definition by borrowing against home equity shortly before participating in an exempt securities offering. In addition, any indebtedness secured by a person’s primary residence in excess of the property’s estimated fair market value is treated as a liability under the new definition.
The amended net worth standard will take effect 60 days after publication in the Federal Register. Beginning in 2014, and every four years thereafter, the Dodd-Frank Act requires the Commission to review the “accredited investor” definition in its entirety and to engage in further rulemaking to the extent it deems appropriate.
SEC has now proposed or adopted more than three-quarters of the rules that the Dodd-Frank Act required the agency to write.”

“Washington, D.C., December 21, 2011 — The Securities and Exchange Commission has amended its rules to exclude the value of a person’s home from net worth calculations used to determine whether an individual may invest in certain unregistered securities offerings. The changes were made to conform the SEC’s definition of an “accredited investor” to the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under the amended rule, the value of an individual’s primary residence will not count as an asset when calculating net worth to determine “accredited investor” status. The amendments also clarify the treatment of borrowing secured by a primary residence for purposes of the net worth calculation. Under certain circumstances, they also permit individuals who qualified as accredited investors under the pre-Dodd-Frank Act definition of net worth to use that prior net worth standard for certain follow-on investments.
SEC rules permit certain private and limited offerings to be made without registration, and without requiring specified disclosures, if sales are made only to “accredited investors.” One way individuals may qualify as “accredited investors” is by having a net worth, alone or together with their spouse, of at least $1 million. The Dodd-Frank Act requires that the value of a person’s primary residence be excluded from the net worth calculation used to determine the person’s “accredited investor” status.
Under the amended net worth calculation, indebtedness secured by the person’s primary residence, up to the estimated fair market value of the primary residence, is not treated as a liability, unless the borrowing occurs in the 60 days preceding the purchase of securities in the exempt offering and is not in connection with the acquisition of the primary residence. In such cases, the debt secured by the primary residence must be treated as a liability in the net worth calculation. This is intended to prevent manipulation of the net worth standard, by eliminating the ability of individuals to artificially inflate net worth under the new definition by borrowing against home equity shortly before participating in an exempt securities offering. In addition, any indebtedness secured by a person’s primary residence in excess of the property’s estimated fair market value is treated as a liability under the new definition.
The amended net worth standard will take effect 60 days after publication in the Federal Register. Beginning in 2014, and every four years thereafter, the Dodd-Frank Act requires the Commission to review the “accredited investor” definition in its entirety and to engage in further rulemaking to the extent it deems appropriate.
SEC has now proposed or adopted more than three-quarters of the rules that the Dodd-Frank Act required the agency to write.”

13 CHARGED BY SEC IN ALLEGED PUMP AND DUMP STOCK PROGRAM
The following excerpt is from the SEC website:
“The Securities and Exchange Commission announced charges today against Daniel “Rudy” Ruettiger and twelve other individuals who participated in a pump-and-dump scheme involving the stock of Rudy Nutrition, a now defunct Nevada corporation. The SEC's complaint, filed in the United States District Court for the District of Nevada, alleges that Rudy Ruettiger, who is known for having inspired the motion picture “Rudy,” founded Rudy Nutrition to compete with Gatorade in the sports drink market. The SEC alleges that while Rudy Nutrition produced and sold modest amounts of a sports drink called “Rudy,” with the tagline “Dream Big! Never Quit!,” the company primarily served as a vehicle for a pump-and-dump scheme in 2008. As alleged in the complaint, participants in this scheme made false and misleading statements in company press releases, SEC filings, and promotional materials, and engaged in manipulative trading to artificially inflate the price of Rudy Nutrition stock, while selling unregistered shares to investors. The complaint alleges that the scheme generated more than $11 million in illicit profits.
The SEC’s complaint names thirteen defendants and includes the following allegations:
Daniel “Rudy” Ruettiger, a resident of Las Vegas, Nevada, was the CEO of Rudy Nutrition. Ruettiger made false statements in SEC filings and authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Rocco “Rocky” Brandonisio, a resident of Las Vegas, Nevada, was the President of Rudy Nutrition. Brandonisio made false statements in an SEC filing and authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Stephen DeCesare, a resident of Las Vegas, Nevada, is a stock promoter. DeCesare was the primary organizer of the scheme. He recruited other defendants to manipulate the price of Rudy Nutrition stock, and directed the issuance of false company press releases.
Pawel P. Dynkowski, a citizen of Poland, is a stock promoter. Dynkowski manipulated the price of Rudy Nutrition stock using wash sales, matched orders, and other trading coordinated with the issuance of false company press releases.
Kevin S. Kaplan, a resident of Las Vegas, Nevada, was the Chief Financial Officer of Rudy Nutrition. Kaplan authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Gregg R. Mulholland, a resident of Huntington Beach, California, is a stock promoter. As part of the scheme, Mulholland made false statements about the company in mailers sent to two million domestic households, and controlled nominee accounts that sold shares in the scheme.
Mehmet Mustafoglu, a resident of Beverly Hills, California, was a consultant to Rudy Nutrition. Mustafoglu sold unregistered shares of Rudy Nutrition during the scheme.
Joseph A. Padilla, a resident of San Marcos, California, is a stock promoter and a former registered representative at the broker-dealer Scottsdale Capital Advisors LLC. Padilla sold unregistered shares of Rudy Nutrition during the scheme.
Angelo R. Panetta, a resident of Montebello, California, is a stock promoter. Panetta made false statements about Rudy Nutrition on an Internet radio show and in an Internet chat room, and sold unregistered shares of the company during the scheme.
Kevin J. Quinn, a resident of Santa Monica, California, is a business consultant and a disbarred attorney. Quinn arranged for the company to issue unregistered shares to nominee accounts used to sell shares during the scheme.
Andrea M. Ritchie, a resident of San Marcos, California, is a former registered representative at the broker-dealer Scottsdale Capital Advisors LLC. Ritchie sold shares of Rudy Nutrition for other defendants without conducting a reasonable inquiry as to the registration status of the shares.
Chad P. Smanjak, a citizen of the Republic of South Africa, is a stock promoter. Smanjak directed Dynkowski’s manipulative trading, and controlled a series of Panamanian companies that sold shares during the scheme.
Gary J. Yocom, a resident of Altamonte Springs, Florida, is a former registered representative at Thomas Anthony & Associates, Inc., a now defunct broker-dealer. Yocom sold shares of Rudy Nutrition for other defendants without conducting a reasonable inquiry as to the registration status of the shares.
As a result of the conduct described in the complaint, the Commission alleges that Ruettiger, Brandonisio, DeCesare, Dynkowski, Kaplan, Panetta, Quinn, and Smanjak violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5; that Mulholland violated Sections 5(a), 5(c), 17(a), and 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; and that Padilla, Ritchie, Mustafoglu and Yocom violated Sections 5(a) and 5(c) of the Securities Act. The Commission’s complaint seeks against each defendant permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties, and, as to certain defendants, orders barring them from participating in penny stock offerings and/or serving as officers and directors of public companies.
Without admitting or denying the allegations in the complaint, nine of the defendants – Ruettiger, Brandonisio, DeCesare, Kaplan, Mustafoglu, Padilla, Panetta, Quinn, and Yocom – have agreed to final judgments, which are subject to Court approval:
Ruettiger has consented to a final judgment that orders disgorgement of $185,750, prejudgment interest of $11,366, and a civil penalty of $185,750, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5;
Brandonisio has consented to a final judgment that orders a civil penalty of $50,000, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
DeCesare has consented to a final judgment that orders disgorgement of $1,341,366 and prejudgment interest of $108,744, bars him participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Kaplan has consented to a final judgment that orders a civil penalty of $25,000, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company for a period of five years, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Mustafoglu has consented to a final judgment that orders disgorgement of $363,603, prejudgment interest of $31,765, and a civil penalty of $40,000, bars him from participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act.
Padilla has consented to a final judgment that orders disgorgement of $197,427, prejudgment interest of $18,128, and a civil penalty of $100,000, bars him from participating in the offering of any penny stock for a period of three years, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act. Additionally, in related administrative proceedings, Padilla has consented to a Commission Order barring him from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
Panetta has consented to a final judgment that orders disgorgement of $175,000 and prejudgment interest of $21,692, bars him participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Quinn has consented to a final judgment that orders disgorgement of $197,286 and prejudgment interest of $17,755, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Yocom has consented to a final judgment that orders disgorgement of $166,250 and prejudgment interest of $20,608, bars him from participating in the offering of any penny stock for a period of three years, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act. Additionally, in related administrative proceedings, Yocom has consented to a Commission Order barring him from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
In addition, two defendants – Mulholland and Ritchie – have agreed to bifurcated judgments which are subject to Court approval:
Mulholland has consented to a judgment that bars him from participating in the future offering of any penny stock, permanently enjoins him from violating Sections 5(a), 5(c), 17(a), and 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5, and provides that upon subsequent motion the Court will determine issues relating to monetary relief.
Ritchie has consented to a judgment that bars her from participating in the offering of any penny stock for a period of three years, permanently enjoins her from violating Sections 5(a) and 5(c) of the Securities Act, and provides that upon subsequent motion the Court will determine issues relating to monetary relief. In related administrative proceedings, Ritchie has also consented to a Commission Order barring her from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
The SEC thanks the following agencies for their cooperation and assistance in connection with this matter: the U.S. Attorney’s Office for the Central District of California; the U.S. Attorney’s Office for the District of Delaware; United States Immigration and Customs Enforcement, Department of Homeland Security, Homeland Security Investigations; and the Department of the Treasury, Internal Revenue Service, Criminal Investigation.”
“The Securities and Exchange Commission announced charges today against Daniel “Rudy” Ruettiger and twelve other individuals who participated in a pump-and-dump scheme involving the stock of Rudy Nutrition, a now defunct Nevada corporation. The SEC's complaint, filed in the United States District Court for the District of Nevada, alleges that Rudy Ruettiger, who is known for having inspired the motion picture “Rudy,” founded Rudy Nutrition to compete with Gatorade in the sports drink market. The SEC alleges that while Rudy Nutrition produced and sold modest amounts of a sports drink called “Rudy,” with the tagline “Dream Big! Never Quit!,” the company primarily served as a vehicle for a pump-and-dump scheme in 2008. As alleged in the complaint, participants in this scheme made false and misleading statements in company press releases, SEC filings, and promotional materials, and engaged in manipulative trading to artificially inflate the price of Rudy Nutrition stock, while selling unregistered shares to investors. The complaint alleges that the scheme generated more than $11 million in illicit profits.
The SEC’s complaint names thirteen defendants and includes the following allegations:
Daniel “Rudy” Ruettiger, a resident of Las Vegas, Nevada, was the CEO of Rudy Nutrition. Ruettiger made false statements in SEC filings and authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Rocco “Rocky” Brandonisio, a resident of Las Vegas, Nevada, was the President of Rudy Nutrition. Brandonisio made false statements in an SEC filing and authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Stephen DeCesare, a resident of Las Vegas, Nevada, is a stock promoter. DeCesare was the primary organizer of the scheme. He recruited other defendants to manipulate the price of Rudy Nutrition stock, and directed the issuance of false company press releases.
Pawel P. Dynkowski, a citizen of Poland, is a stock promoter. Dynkowski manipulated the price of Rudy Nutrition stock using wash sales, matched orders, and other trading coordinated with the issuance of false company press releases.
Kevin S. Kaplan, a resident of Las Vegas, Nevada, was the Chief Financial Officer of Rudy Nutrition. Kaplan authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Gregg R. Mulholland, a resident of Huntington Beach, California, is a stock promoter. As part of the scheme, Mulholland made false statements about the company in mailers sent to two million domestic households, and controlled nominee accounts that sold shares in the scheme.
Mehmet Mustafoglu, a resident of Beverly Hills, California, was a consultant to Rudy Nutrition. Mustafoglu sold unregistered shares of Rudy Nutrition during the scheme.
Joseph A. Padilla, a resident of San Marcos, California, is a stock promoter and a former registered representative at the broker-dealer Scottsdale Capital Advisors LLC. Padilla sold unregistered shares of Rudy Nutrition during the scheme.
Angelo R. Panetta, a resident of Montebello, California, is a stock promoter. Panetta made false statements about Rudy Nutrition on an Internet radio show and in an Internet chat room, and sold unregistered shares of the company during the scheme.
Kevin J. Quinn, a resident of Santa Monica, California, is a business consultant and a disbarred attorney. Quinn arranged for the company to issue unregistered shares to nominee accounts used to sell shares during the scheme.
Andrea M. Ritchie, a resident of San Marcos, California, is a former registered representative at the broker-dealer Scottsdale Capital Advisors LLC. Ritchie sold shares of Rudy Nutrition for other defendants without conducting a reasonable inquiry as to the registration status of the shares.
Chad P. Smanjak, a citizen of the Republic of South Africa, is a stock promoter. Smanjak directed Dynkowski’s manipulative trading, and controlled a series of Panamanian companies that sold shares during the scheme.
Gary J. Yocom, a resident of Altamonte Springs, Florida, is a former registered representative at Thomas Anthony & Associates, Inc., a now defunct broker-dealer. Yocom sold shares of Rudy Nutrition for other defendants without conducting a reasonable inquiry as to the registration status of the shares.
As a result of the conduct described in the complaint, the Commission alleges that Ruettiger, Brandonisio, DeCesare, Dynkowski, Kaplan, Panetta, Quinn, and Smanjak violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5; that Mulholland violated Sections 5(a), 5(c), 17(a), and 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; and that Padilla, Ritchie, Mustafoglu and Yocom violated Sections 5(a) and 5(c) of the Securities Act. The Commission’s complaint seeks against each defendant permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties, and, as to certain defendants, orders barring them from participating in penny stock offerings and/or serving as officers and directors of public companies.
Without admitting or denying the allegations in the complaint, nine of the defendants – Ruettiger, Brandonisio, DeCesare, Kaplan, Mustafoglu, Padilla, Panetta, Quinn, and Yocom – have agreed to final judgments, which are subject to Court approval:
Ruettiger has consented to a final judgment that orders disgorgement of $185,750, prejudgment interest of $11,366, and a civil penalty of $185,750, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5;
Brandonisio has consented to a final judgment that orders a civil penalty of $50,000, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
DeCesare has consented to a final judgment that orders disgorgement of $1,341,366 and prejudgment interest of $108,744, bars him participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Kaplan has consented to a final judgment that orders a civil penalty of $25,000, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company for a period of five years, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Mustafoglu has consented to a final judgment that orders disgorgement of $363,603, prejudgment interest of $31,765, and a civil penalty of $40,000, bars him from participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act.
Padilla has consented to a final judgment that orders disgorgement of $197,427, prejudgment interest of $18,128, and a civil penalty of $100,000, bars him from participating in the offering of any penny stock for a period of three years, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act. Additionally, in related administrative proceedings, Padilla has consented to a Commission Order barring him from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
Panetta has consented to a final judgment that orders disgorgement of $175,000 and prejudgment interest of $21,692, bars him participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Quinn has consented to a final judgment that orders disgorgement of $197,286 and prejudgment interest of $17,755, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.
Yocom has consented to a final judgment that orders disgorgement of $166,250 and prejudgment interest of $20,608, bars him from participating in the offering of any penny stock for a period of three years, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act. Additionally, in related administrative proceedings, Yocom has consented to a Commission Order barring him from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
In addition, two defendants – Mulholland and Ritchie – have agreed to bifurcated judgments which are subject to Court approval:
Mulholland has consented to a judgment that bars him from participating in the future offering of any penny stock, permanently enjoins him from violating Sections 5(a), 5(c), 17(a), and 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5, and provides that upon subsequent motion the Court will determine issues relating to monetary relief.
Ritchie has consented to a judgment that bars her from participating in the offering of any penny stock for a period of three years, permanently enjoins her from violating Sections 5(a) and 5(c) of the Securities Act, and provides that upon subsequent motion the Court will determine issues relating to monetary relief. In related administrative proceedings, Ritchie has also consented to a Commission Order barring her from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
The SEC thanks the following agencies for their cooperation and assistance in connection with this matter: the U.S. Attorney’s Office for the Central District of California; the U.S. Attorney’s Office for the District of Delaware; United States Immigration and Customs Enforcement, Department of Homeland Security, Homeland Security Investigations; and the Department of the Treasury, Internal Revenue Service, Criminal Investigation.”
Wednesday, December 21, 2011
AON CORPORATION SETTLES BRIBERY CHARGES WITH SEC AND JUSTICE
The following excerpt is from the SEC website:
December 20, 2011
The Securities and Exchange Commission today filed a settled enforcement action in the U.S. District Court for the District of Columbia against Aon Corporation (Aon), an Illinois-based global provider of risk management services, insurance and reinsurance brokerage, alleging violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA). Aon will pay a total of approximately $14.5 million in disgorgement and prejudgment interest to the SEC. In a related action, Aon will pay a $1.764 million criminal fine to the U.S. Department of Justice (DOJ).
The Commission’s complaint alleges that Aon’s subsidiaries made over $3.6 million in improper payments to various parties between 1983 and 2007 as a means of obtaining or retaining insurance business in those countries. The complaint alleges that some of the improper payments were made directly or indirectly to foreign government officials who could award business directly to Aon subsidiaries, who were in position to influence others who could award business to Aon subsidiaries, or who could otherwise provide favorable business treatment for the company’s interests. The complaint alleges that these payments were not accurately reflected in Aon’s books and records, and that Aon failed to maintain an adequate internal control system reasonably designed to detect and prevent the improper payments.
According to the Commission’s complaint, the improper payments made by Aon’s subsidiaries fall into two general categories: (i) training, travel, and entertainment provided to employees of foreign government-owned clients and third parties; and (ii) payments made to third-party facilitators. Aon subsidiaries made these payments in various countries around the world, including Costa Rica, Egypt, Vietnam, Indonesia, United Arab Emirates, Myanmar, and Bangladesh. The complaint alleges that Aon realized over $11.4 million in profits from these improper payments.
Without admitting or denying the allegations in the Commission’s complaint, Aon consented to the entry of a final judgment permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and ordering the company to pay disgorgement of $11,416,814 in profits, together with prejudgment interest thereon of $3,128,206, for a total of $14,545,020. Aon’s proposed settlement offer has been submitted to the court for its consideration. In a related criminal proceeding, DOJ announced today that Aon has entered into a non-prosecution agreement under which the company will pay a $1.764 million criminal fine for the misconduct. Aon cooperated with the Commission’s and DOJ’s investigations and implemented remedial measures during the course of the investigations.
The Commission acknowledges the assistance of the Fraud Section of DOJ’s Criminal Division, the Federal Bureau of Investigation, and the Financial Services Authority of the U.K. in this matter."
December 20, 2011
The Securities and Exchange Commission today filed a settled enforcement action in the U.S. District Court for the District of Columbia against Aon Corporation (Aon), an Illinois-based global provider of risk management services, insurance and reinsurance brokerage, alleging violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA). Aon will pay a total of approximately $14.5 million in disgorgement and prejudgment interest to the SEC. In a related action, Aon will pay a $1.764 million criminal fine to the U.S. Department of Justice (DOJ).
The Commission’s complaint alleges that Aon’s subsidiaries made over $3.6 million in improper payments to various parties between 1983 and 2007 as a means of obtaining or retaining insurance business in those countries. The complaint alleges that some of the improper payments were made directly or indirectly to foreign government officials who could award business directly to Aon subsidiaries, who were in position to influence others who could award business to Aon subsidiaries, or who could otherwise provide favorable business treatment for the company’s interests. The complaint alleges that these payments were not accurately reflected in Aon’s books and records, and that Aon failed to maintain an adequate internal control system reasonably designed to detect and prevent the improper payments.
According to the Commission’s complaint, the improper payments made by Aon’s subsidiaries fall into two general categories: (i) training, travel, and entertainment provided to employees of foreign government-owned clients and third parties; and (ii) payments made to third-party facilitators. Aon subsidiaries made these payments in various countries around the world, including Costa Rica, Egypt, Vietnam, Indonesia, United Arab Emirates, Myanmar, and Bangladesh. The complaint alleges that Aon realized over $11.4 million in profits from these improper payments.
Without admitting or denying the allegations in the Commission’s complaint, Aon consented to the entry of a final judgment permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and ordering the company to pay disgorgement of $11,416,814 in profits, together with prejudgment interest thereon of $3,128,206, for a total of $14,545,020. Aon’s proposed settlement offer has been submitted to the court for its consideration. In a related criminal proceeding, DOJ announced today that Aon has entered into a non-prosecution agreement under which the company will pay a $1.764 million criminal fine for the misconduct. Aon cooperated with the Commission’s and DOJ’s investigations and implemented remedial measures during the course of the investigations.
The Commission acknowledges the assistance of the Fraud Section of DOJ’s Criminal Division, the Federal Bureau of Investigation, and the Financial Services Authority of the U.K. in this matter."
SEC ANNOUNCES OCC HOLDINGS CASE HAS BEEN RESOLVED
The following excerpt is from the SEC website:
"The Securities and Exchange Commission announced today that on November 30, 2011, the Honorable J. Paul Oetken of the United States District Court for the Southern District of New York entered consent judgments against the remaining defendants, Ahmed Awan and Yakov Koppel, in a case arising out of alleged fraudulent offerings of securities of OCC Holdings, Ltd, a/k/a OnCallContractors.com (“OCC Holdings”) and several other issuers. Without admitting or denying the allegations of the Commission’s complaint, Awan and Koppel, both of Brooklyn, New York, consented to the entry of judgment that permanently enjoins Awan and Koppel from future violations of 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 judgment further orders that Awan pay $655.41 in disgorgement plus prejudgment interest and a $10,000 civil penalty and that Koppel pay $850.53 in disgorgement plus prejudgment interest and a $10,000 civil penalty, and bars Koppel from participating in the offering of any penny stock.
In a related SEC administrative proceeding, Awan consented to the entry of an SEC order permanently barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock. In another related SEC administrative proceeding, Koppel consented to the entry of an SEC order permanently barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or national recognized statistical rating organization.
According the Commission’s complaint, filed on February 11, 2004, beginning in December 2001, Awan, Koppel, Khurram Tanwir, Alan Labineri, and Joseph Favata, along with three entity defendants, fraudulently raised more than $2 million from investors through three offerings: (1) the sale of purported private placement shares of OCC Holdings; (2) the sale of promissory notes issued by MB Holdings and other entities; and (3) the purported sale of restricted shares of an unrelated, privately owned company. The offerings were orchestrated by, and/or for the benefit of, Tanwir and/or Labineri, who had allegedly been conducting fraudulent offerings together since at least 1999. In conducting the offerings, the defendants allegedly made false and misleading promises of imminent initial public offerings (“IPOs”) and/or substantial increases in the stock price; falsely represented that the promissory notes were guaranteed and risk-free; misappropriated and used investor funds for personal expenses; and failed to disclose their disciplinary history.
In March and April, 2004, the Commission obtained emergency relief, including temporary restraining orders, orders freezing the assets of almost all of the defendants and relief defendants, and expedited discovery.
On December 3, 2008, following the granting of the Commission’s motion for summary judgment, final judgments were entered against Tanwir and Labineri in which they were permanently enjoined from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, barred from participating in the offering of any penny stock and ordered, respectively, to pay $4,660,641.87 in disgorgement plus prejudgment interest and $3,432,739 in civil penalty (Tanwir) and $2,751,710.69 in disgorgement plus prejudgment interest and $2,026,739 in civil penalty (Labineri).
On February 20, 2009, the Commission obtained default judgments against defendants OCC Holdings, MB Holdings, and Equity Services Associates and relief defendants, Off World Strategic Holdings and MB Holdings USA Division A, Inc., in which the defendants were permanently enjoined from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and MB Holdings and Equity Services Associates were permanently barred from participating in the offering of any penny stock. In addition, OCC Holdings was ordered to pay $1,716,270.94 in disgorgement plus prejudgment interest and $1,252,652 in civil penalty, MB Holdings was ordered to pay $1,926,374.56 in disgorgement plus prejudgment interest and $1,406,000 in civil penalty, and Equity Services Associates was ordered to pay $1,060,584.26 in disgorgement plus prejudgment interest and $774,087 in civil penalty. Furthermore, relief defendants, Off World Strategic Holdings and MB Holdings USA Division A were respectively ordered to pay $592,958.91 and $137,010.99 in disgorgement plus prejudgment interest.
On November 22, 2011, the Commission voluntarily dismissed all claims against defendant Favata."
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