ALLEGED INSIDER TRADING USING NONPUBLIC INFORMATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION,
SEC Charges Eric Martin, former Vice President of Investor Relations of Carter’s Inc. with Insider Trading
On August 23, 2012, the Securities and Exchange Commission filed a civil injunctive action against Eric Martin, a 42 year old resident of Roswell, Georgia. The Commission alleges that Martin, who served from 2003 through March 2009 as the Director and, later, Vice President of Investor Relations for Carter’s Inc., repeatedly traded Carter’s shares during blackout periods while in possession of material, nonpublic information regarding the company’s financial results. According to the complaint, Martin obtained Carter’s preliminary financial results while preparing Carter’s senior management for Carter’s quarterly earnings calls, and then bought or sold Carter’s stock depending on whether the preliminary information here received was positive or negative. As the result of his illegal trading, Martin realized profits and avoided losses in excess of $170,000.

The Commission’s complaint, filed in the United States District Court for the Northern District of Georgia, charges Martin with violating the antifraud provisions of the federal securities laws during at least 8 quarters between January 2007 and April 2009 in advance of the company’s quarterly earnings releases. The Commission seeks a permanent injunction, disgorgement with prejudgment interest and civil monetary penalties Act against Defendant Martin and seeks disgorgement with prejudgment interest from his wife, Relief Defendant Robin Martin, for trading Martin did through her accounts.

CFTC CHARGES INDIVIDUAL AND COMPANY WITH RUNNING FRAUDULENT ALLOCATION SCHEME

FROM: U.S. COMMODITY AND EXCHANGE COMMISSION

CFTC Charges Illinois Resident Donald A. Newell and his Company, Quiddity, LLC, with Running a Fraudulent Allocation Scheme, Making Material False Statements to the CFTC, and Recordkeeping Violations

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today filed a federal civil enforcement action charging defendants Donald A. Newell of Glenview, Ill., and his Chicago-based company, Quiddity, LLC, with engaging in a scheme that fraudulently allocated commodity futures and options trades to benefit a corporate proprietary account, at the expense of customer accounts managed and traded by Quiddity. Newell owns and controls Quiddity and is a registered Associated Person of Quiddity, which is a registered Commodity Pool Operator and Commodity Trading Advisor.

The CFTC complaint, filed in the U.S. District Court for the Northern District of Illinois, alleges that since at least October 15, 2008, and continuing through at least March 19, 2009, Newell’s fraudulent scheme to allocate profitable trades to his corporate proprietary account resulted in a net profit of over $1.1 million for the proprietary account to the detriment of Quiddity’s customers. The complaint also alleges that Newell and Quiddity failed to keep required records and that Newell made material false statements to the CFTC during investigative testimony in September and October of 2011.

Specifically, the complaint alleges that Quiddity, through Newell, entered orders for trades with Futures Commission Merchants without providing the specific account numbers to which the executed trades were to be allocated. Defendants allegedly waited to see whether the trades were profitable or if the market had moved favorably to an open position before allocating the trades. During the period, 85 percent of the trades that defendants allegedly allocated to their proprietary account post-execution were profitable. Newell falsely testified to the CFTC that he provided account numbers when placing orders, according to the complaint.

The defendants also allegedly failed to retain records sufficient to demonstrate that allocations of trades were fair and equitable, and to permit the reconstruction of the handling of the order from the time of placement by the account manager to the allocation to individual accounts, as required by CFTC regulations.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of federal commodities laws.

The CFTC appreciates the assistance of the National Futures Association.

CFTC Division of Enforcement staff members responsible for this case are Boaz Green, Brandon Tasco, Melanie Bates, Beth Meyer, Susan B. Padove, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.

NEW SEC RULES ON RESOURCE EXTRACTION PAYMENT DISCLOSURE

FROM:  U.S. DEPARTMENT OF LABOR
FACT SHEET
Disclosing Payments by Issuers Engaged in Resource Extraction
Background
In 2010, Congress passed the Dodd-Frank Act, which directs the Commission to issue rules requiring the disclosure of certain payments made to the federal government or foreign governments by resource extraction issuers – companies engaged in the development of oil, natural gas, or minerals.

In particular, Section 1504 of the Act amends the Securities Exchange Act of 1934 by adding a new section, Section 13(q).

The Rules

Who Must Disclose:

The new rules require a resource extraction issuer to disclose payments made to governments if:

• The issuer is required to file an annual report with the SEC.
• The issuer engages in the commercial development of oil, natural gas, or minerals.

The new disclosure requirements apply to domestic and foreign issuers and to smaller reporting companies that meet the definition of resource extraction issuer.

In addition, the issuer is required to disclose payments made by a subsidiary or another entity controlled by the issuer. A resource extraction issuer needs to make a factual determination as to whether it has control of an entity based on a consideration of all relevant facts and circumstances.

What Must Be Disclosed:

Under the new rules, a resource extraction issuer is required to disclose certain payments made to a foreign government (including subnational governments) or the U.S. government.

Resource extraction issuers need to disclose payments that are:

• Made to further the commercial development of oil, natural gas, or minerals.
• “not de minimis”
• Within the types of payments specified in the rules.

The rules define commercial development of oil, natural gas, or minerals to include exploration, extraction, processing, and export, or the acquisition of a license for any such activity. The rules define “not de minimis” to mean any payment (whether a single payment or a series of related payments) that equals or exceeds $100,000 during the most recent fiscal year.

The types of payments related to commercial development activities that need to be disclosed include:

• Taxes
• Royalties
• Fees (including license fees)
• Production Entitlements
• Bonuses
• Dividends
• Infrastructure Improvements

The new requirements clarify the types of taxes, fees, bonuses, and dividends that are required to be disclosed. These types of payments generally are consistent with the types of payments that the Extractive Industries Transparency Initiative suggests should be disclosed. Congress specifically referenced the EITI in defining “payment” in the law.

The rules require a resource extraction issuer to provide the following information about payments made to further the commercial development of oil, natural gas, or minerals:

• Type and total amount of payments made for each project.
• Type and total amount of payments made to each government.
• Total amounts of the payments, by category.
• Currency used to make the payments.
• Financial period in which the payments were made.
• Business segment of the resource extraction issuer that made the payments.
• The government that received the payments, and the country in which the government is located.
• The project of the resource extraction issuer to which the payments relate.

The new rules leave the term “project” undefined to provide resource extraction issuers flexibility in applying the term to different business contexts. However, the rule release provides some guidance on the Commission’s view of what a project would be.

How It Must Be Disclosed:

The new rules require a resource extraction issuer to disclose the information annually by filing a new form with the SEC (Form SD). The information must be included in an exhibit and electronically tagged using the eXtensible Business Reporting Language (XBRL) format.

When It Must Be Disclosed:

A resource extraction issuer would be required to file the form on the SEC public database EDGAR no later than 150 days after the end of its fiscal year.

A resource extraction issuer would be required to comply with the new rules for fiscal years ending after Sept. 30, 2013. For the first report, most resource extraction issuers may provide a partial report disclosing only those payments made after Sept. 30, 2013.

Statement of SEC Chairman Mary L. Schapiro on Money Market Fund Reform

Statement of SEC Chairman Mary L. Schapiro on Money Market Fund Reform

ALLEGED ILLEGAL SALE OF STOCK SHARES IN THE PUBLIC MARKET

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

　

Washington, D.C., Aug. 22, 2012 – The Securities and Exchange Commission today charged a New York-based firm and its owner with conducting a penny stock scheme in which they bought billions of stock shares from small companies and illegally resold those shares in the public market.

　

The SEC alleges that Edward Bronson and E-Lionheart Associates LLC reaped more than $10 million in unlawful profits from selling shares they bought at deep discounts from approximately 100 penny stock companies. On average, Bronson and E-Lionheart were able to generate sales proceeds that were approximately double the price at which they had acquired the shares. No registration statement was filed or in effect for any of the securities that Bronson and E-Lionheart resold to the investing public, and no valid exemption from the registration requirements of the federal securities laws was available.

　

"By violating the registration provisions of the securities laws and dumping billions of unregistered shares into the over-the-counter market, Bronson deprived investors of important information about the companies in which they were investing," said Andrew M. Calamari, Acting Director of the SEC’s New York Regional Office.

　

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Bronson lives in Ossining, N.Y. E-Lionheart, which also does business under the name Fairhills Capital, is located in White Plains. Acting at Bronson’s direction, E-Lionheart personnel systematically "cold called" penny stock companies quoted on the OTC Link to ask if they were interested in obtaining capital. If the company was interested, E-Lionheart personnel would offer to buy stock in the company at a rate that was deeply discounted from the trading price of the company’s stock at that time. Typically, Bronson and E-Lionheart immediately began reselling the shares to the investing public through a broker within days of receiving the shares from the company.

　

Bronson and E-Lionheart purported to rely on an exemption from registration under Rule 504(b)(1)(iii) of Regulation D, which exempts transactions that are in compliance with certain types of state law exemptions. However, no such state law exemptions were applicable to these transactions. Bronson and E-Lionheart claimed to rely on a Delaware state law registration exemption, but the transactions in fact had little or no connection to the state of Delaware. The particular Delaware state law exemption claimed by Bronson and E-Lionheart is not an exemption that meets the specific requirements of Rule 504(b)(1)(iii). As a result, investors purchasing these shares did not have access to all of the information that a registration statement would have provided, including in many instances important information concerning the issuance of millions of new shares by the company to Bronson and E-Lionheart.

　

The SEC’s complaint charges E-Lionheart and Bronson with violations of the registration provisions of the federal securities laws, and seeks disgorgement of more than $10 million in ill-gotten gains, penalties. The SEC also seeks penny stock bars against E-Lionheart and Bronson. The complaint also names another entity owned and controlled by Bronson – Fairhills Capital Inc. – as a relief defendant for the purpose of recovering the illegal proceeds it received.

　

The SEC’s investigation was conducted in the SEC’s New York Regional Office by Senior Attorney William Edwards and Assistant Regional Director Wendy B. Tepperman. The SEC’s litigation will be led by Senior Trial Counsel Kevin McGrath.

Requiring Disclosure to Increase Transparency Regarding the Sourcing of Conflict Minerals

Requiring Disclosure to Increase Transparency Regarding the Sourcing of Conflict Minerals