SPONSORING
AN EVENT? If you are the sponsor of a seminar
or educational event that relates to securities law, or the regulation of
the markets, post the information here at the Securities
Law Events Calendar. Access to the calendar is free, the posting is
free, and your target audience, attorneys, brokers and investors, are here.
NEW
AND IMPROVED SECURITIES LAW FORUMS! Every day
the discussions continue in the Securities Law Forums, where attorneys,
investors, brokers, journalists and others with an interest in the markets,
and the laws surrounding the markets, discuss hot topics of the day. View
the active topic list, or go directly
to the forums.
Welcome
Beam
& Astarita, LLC represents
all participants in the financial markets in arbitration, litigation
and regulatory matters, and continues to provide commentary and analysis
for SECLaw.com. Visit their
site on the web. A list of articles and commentary from the firm
is also available.
Supreme Court
Might Side With Investors on Fees After years of the court system siding with the mutual fund industry on the discrepancy between retail and
institutional mutual fund fees, the case that the Supreme Court will hear this fall might be a watershed one for investors.
Regulation, Not Growth, Is Top Concern for RIAs Market turmoil nearly always generates more regulation for the most heavily regulated
industry in the nation. Now investment advisors have become the focus, and it is causing problems for the industry.
SEC Charges Massachusetts-Based Money
Manager in Multi-Million Dollar Ponzi Scheme The Securities and Exchange Commission today charged a money manager who lives in Wayland,
Mass., for conducting a multi-million dollar Ponzi scheme in which he promised investors lofty returns as high as 20 percent but instead often stole their
money for his personal use
SEC Proposes Rule Amendments to Strengthen
Regulatory Framework for Money Market Funds The Securities and Exchange Commission today voted unanimously to propose rule
amendments designed to significantly strengthen the regulatory framework for money market funds to increase their resilience to economic stresses and
reduce the risks of runs on the funds.
SEC Charges Madoff Solicitors and Feeder With
Fraud The Securities and Exchange Commission today charged a New York-based broker-dealer and four individuals with securities fraud,
alleging that they collectively raised billions of dollars from investors for Bernard L. Madoff's Ponzi scheme.
FINRA Requests Comment on
Proposed Consolidated FINRA Rule Governing Investment Company Securities As part of the process to develop a new consolidated rulebook
(the Consolidated FINRA Rulebook), FINRA is requesting comment on a proposed FINRA rule regarding the distribution and sale of investment company
securities. The proposal is based on NASD Rule 2830, subject to certain changes, including proposed new requirements regarding disclosure of cash
compensation.
SEC Charges Former Quest Executives With
Fraudulently Concealing Millions of Dollars of Self-Dealing The Securities and Exchange Commission today charged two Oklahoma City
residents with securities fraud and other violations for a scheme in which they misappropriated to themselves millions of dollars from Quest Resource
Corporation, Quest Energy Partners, L.P. and their affiliates while they were executives at the company.
SEC Approval and Effective Date
for New Consolidated FINRA Rules Following the consolidation of NASD and the member regulation, enforcement and arbitration functions of
NYSE Regulation into FINRA, FINRA established a process to develop a new consolidated rulebook (Consolidated FINRA Rulebook), which FINRA has
discussed in previous Information Notices. FINRA is proposing new consolidated rules in phases for approval by the SEC as part of the Consolidated
FINRA Rulebook. In April and May 2009, the SEC approved eight new consolidated FINRA Rules, which will take effect on August 17, 2009.
Information for Investors in the Reserve Primary
Fund The Securities and Exchange Commission today posted information on its Web site for investors in the Reserve Primary Fund, which "broke
the buck" last September when its net asset value fell below $1 per share. Since then, the fund has withheld a significant amount of money from investors
pending the outcome of numerous lawsuits filed against the fund, its trustees, and other officers and directors of Reserve entities.
SEC Obtains Asset Freeze to Halt Nationwide
Prime Bank Scheme The Securities and Exchange Commission has obtained an emergency court order and asset freeze to shut down a
fraudulent prime bank scheme that promised massive returns to investors nationwide and then offered a range of administrative excuses when investors
had not received any payments.
SEC Approves Amendments to
NASD Rule 2821 Governing Purchases and Exchanges of Deferred Variable Annuities On April 15, 2009, the SEC approved amendments to
NASD Rule 2821 governing purchases and exchanges of deferred variable annuities. Among other things, the amendments:
-limit the rule's application to recommended transactions;
-change the triggering event that begins the principal review period; and
-clarify various other issues through new supplementary material to the rule.
The rule text is set forth in Attachment A and is effective February 8, 2010.
FINRA Reminds Firms of Sales
Practice Obligations Relating to Leveraged and Inverse Exchange-Traded Funds Exchange-traded funds (ETFs) that offer leverage or that are
designed to perform inversely to the index or benchmark they track—or both—are growing in number and popularity. While such products may be useful in
some sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily
basis. Due to the effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective. Therefore,
inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session,
particularly in volatile markets.
SEC and ASC Charge Alabama Broker-Dealer for
Rampant Churning and Extensive Supervisory Violations The Securities and Exchange Commission and the Alabama Securities Commission
(ASC) have charged a Birmingham, Ala.-based broker-dealer in connection with rampant churning of customer accounts, widespread supervisory failures,
and other securities violations that resulted in significant harm to clients and substantial profit to the firm. Also charged by the SEC and ASC were several of
the firm's senior officers and registered representatives. Churning is a fraudulent practice that occurs when a broker engages in excessive trading without
regard to the customer's investment objectives for the purpose of generating commissions and other revenue.
SEC Charges New York-Based Investment
Adviser for Stealing Client Funds The Securities and Exchange Commission today charged an investment adviser who lives in Armonk, N.Y., for
orchestrating a scheme in which he stole more than $6 million in investor funds for his own personal use, in some instances victimizing clients who were
terminally ill or mentally impaired.
SEC Charges Operators of $80 Million Ponzi
Scheme Targeting Korean-Americans The Securities and Exchange Commission today charged two California men and two companies they
control for conducting an $80 million Ponzi scheme that targeted Korean-American investors with false promises of extraordinarily high returns from foreign
currency (forex) trading.
SEC Charges Former Countrywide Executives
With Fraud The Securities and Exchange Commission today charged former Countrywide Financial CEO Angelo Mozilo and two other former
executives with securities fraud for deliberately misleading investors about the significant credit risks being taken in efforts to build and maintain the
company's market share. Mozilo was additionally charged with insider trading for selling his Countrywide stock based on non-public information for nearly
$140 million in profits.
SEC Finalizes ARS Settlements With Bank of
America, RBC, and Deutsche Bank The SEC announced finalized settlements with Bank of America, RBC Capital Markets, and Deutsche Bank to
resolve SEC charges that the firms misled investors regarding the liquidity risks associated with auction rate securities (ARS) that they underwrote,
marketed, or sold.
SEC Approves Rule Establishing
an Interim Pilot Program on Margin Requirements for Transactions in Credit Default Swaps The SEC has approved new FINRA Rule 4240, which
establishes an interim pilot program (the Interim Pilot Program) with respect to margin requirements for certain transactions in credit default swaps (CDS)
and addresses related risk monitoring procedures and guidelines. The Interim Pilot Program's requirements extend to any transactions in CDS executed
by a member (regardless of the type of account in which the transaction is booked), including those in which the offsetting matching hedging transactions
are effected by the member in CDS contracts that are cleared through the central counterparty clearing services of the Chicago Mercantile Exchange (CME).
The Interim Pilot Program expires on September 25, 2009.
SEC Announces Creation of Investor Advisory
Committee Securities and Exchange Commission Chairman Mary Schapiro today announced the formation of an Investor Advisory Committee to
give investors a greater voice in the Commission's work. SEC Commissioner Luis A. Aguilar will serve as the Commission's primary sponsor of the
Committee.
Big Name Boutiques Flex Their Muscles Wirehouses are tossing brokers out on their ears as consolidation moves forward.
While those brokers continue to arbitrate with the firms, the boutiques are looking for new talent. A good fit? On Wall Street asks the question - do they want
you?
FINRA Requests Comment on
Proposed FINRA Rule Addressing the Origination and Circulation of Rumors As part of the process of developing a new, consolidated rulebook
(the Consolidated FINRA Rulebook), FINRA is requesting comment on proposed FINRA Rule 2030 relating to the origination and circulation of rumors.
FINRA initially sought comment on the proposed rule, which is based on FINRA Rule 6140 and Incorporated NYSE Rule 435(5), in Regulatory Notice 08-68.
In response to the comments received, FINRA is proposing substantial changes to proposed FINRA Rule 2030. The proposed changes include
amendments to the general prohibition in Rule 2030 and the proposed reporting requirement, as well as adopting Supplementary Material to Rule 2030
that will address exceptions for certain communications, the definition of the term "rumor," additional rules of which member firms should be aware, and a
firm's obligation to adopt written policies and procedures concerning rumors. FINRA is requesting comment on the proposed revisions to Rule 2030.
SEC Charges 10 Brokers with Fraud for
Disguising Risks of Investing in Mortgage-Backed Securities The SEC charged 10 brokers with fraud for falsely marketing investments in
derivatives of mortgage-backed securities as safe and suitable for retirees and others with conservative investment goals. The SEC alleges that the
brokers enriched themselves with millions of dollars in commissions and salaries while the investors suffered millions of dollars in losses.
SEC Halts Foreign Exchange Offering Fraud by
College Professor and Houston-Based Lawyer The Securities and Exchange Commission has obtained an emergency court order to freeze the
assets of Texas A&M finance professor Robert D. Watson, who resigned from that position last month, as well as Houston lawyer and certified public
accountant Daniel J. Petroski and two firms. They are charged with defrauding U.S. investors by using forged bank records to make it appear they were
earning spectacular returns in foreign exchange trading.
SEC, DOL Accepting Requests to Participate in
Joint Hearing Examining Target Date Funds The Securities and Exchange Commission and the Department of Labor announced today that they
are accepting requests to participate in a joint hearing on June 18 examining target date funds. Target date funds and other similar investment options are
investment products that allocate their investments among various asset classes and automatically shift that allocation to more conservative investments
as a "target" date approaches. This shift in asset allocation, often referred to as a fund’s "glide path," may differ significantly among funds with the same
target date.
SEC Obtains Asset Freeze Of Wisconsin-Based
Investment Adviser Charged in Kickback Scheme The Securities and Exchange Commission has obtained an emergency court order to freeze the
assets of an Appleton, Wisc.-based investment adviser charged with engaging in a kickback scheme and other fraudulent conduct involving six
unregistered investment pools it managed.
SEC Charges Florida Trader for Issuing Fake
Press Release to Manipulate Stock Price The Securities and Exchange Commission today charged a trader from Fort Myers, Fla., with fraud for
writing and disseminating a fake press release that, when reported in the media, caused a company's stock price to soar and allowed him to reap
thousands of dollars in illicit profits.
SEC Charges Eight Participants in Penny Stock
Manipulation Ring The Securities and Exchange Commission has charged eight participants in a penny stock manipulation ring that allegedly
pumped the market prices of at least four stocks and generated more than $6.2 million in illicit profits when they dumped shares on the market.
Securities Industry/Regulatory
Council on Continuing Education Issues Firm Element Advisory Update This Notice advises firms of the second-quarter 2009 Securities
Industry/Regulatory Council on Continuing Education Firm Element Advisory, which identifies regulatory and sales practice topics that firms should
consider in their Firm Element training plans. Topics updated or added since the prior Advisory are indicated in the document as such.
SEC Announces $843 Million Fair Fund
Distribution to Harmed AIG Investors The Securities and Exchange Commission today announced that a federal court has approved the
distribution of more than $843 million to harmed investors in the American International Group, Inc. from a Fair Fund that the SEC established after the
company’s settlement of an SEC enforcement action for accounting fraud.
SEC to Hold Public Seminar on New Interactive
Data Reporting Requirements The Securities and Exchange Commission will conduct a public seminar on June 10 from noon to 3 p.m. ET to
help companies and preparers comply with new rules that require financial reports to be filed using interactive data (XBRL).
SEC Charges Monster Worldwide Inc. for
Backdating Scheme The SEC charged employment search provider Monster Worldwide, Inc. for its multi-year scheme to secretly backdate stock
options granted to thousands of Monster officers, directors and employees. Monster agreed to pay a $2.5 million penalty to settle the SEC's charges that the
company defrauded investors by granting backdated, undisclosed "in-the-money" stock options while failing to record required non-cash charges for
option-related compensation expenses.
SEC Announces First Distribution From $267
Million Bear Stearns Fair Fund The SEC announced the start of a $267 million Fair Fund distribution to mutual funds and mutual fund
shareholders who were harmed by late trading and market timing that occurred through Bear Stearns, which was charged by the SEC in a 2006
enforcement action.
SEC Approval of Proposed
Changes to Forms U4 and U5 and FINRA Rule 8312 (FINRA BrokerCheck Disclosure) The SEC recently approved amendments to Forms U4 and
U5 as well as FINRA Rule 8312 (FINRA BrokerCheck® Disclosure). The amendments, among other things, make significant changes to disclosure
questions on the Forms, including the addition of questions about certain regulatory actions. The new regulatory action questions will enable FINRA and
other regulators to identify more readily persons subject to a particular category of statutory disqualification under the federal securities laws and the FINRA
By-Laws.
SEC, DOL to Hold Joint Hearing Examining Target
Date Funds The SEC and the U.S. Department of Labor will hold a joint one-day hearing on June 18 to explore issues relating to target date or
lifecycle funds and other similar investment options.
Michael Lauer to Pay More Than $62 Million in
Hedge Fund Fraud Case The SEC announced that Michael Lauer, the head of two Connecticut-based hedge fund advisors, has been ordered to
pay more than $62 million within 15 days as a result of being found liable on SEC fraud charges last fall.
SEC Charges Investment Adviser for Proxy Voting
Rule Violations The SEC charged West Palm Beach, Fla.-based INTECH Investment Management LLC and its former chief operating officer David
E. Hurley for violating the SEC's proxy voting rule for investment advisers by not sufficiently describing its proxy voting policies and procedures and failing to
address a material potential conflict of interest.
Introduction
to Securities Arbitration - The ultimate primer on securities
arbitration, authored by Mark J. Astarita, Esq., a New York securities
attorney who has represented parties to securities arbitrations in virtually
every major city for 20 years. An excellent introduction to the process.
More
Links
to these stories and all new additions, are contained in the current
issue of the Securities Law Letter. Stop
jumping from Web site to Web site to keep up with the developments in
the securities law, we've done it for you, and present it in the Securities
Law Letter.
The securities
law listserve is available to all interested parties, and discussions
of all topics relating to the law of the financial markets are welcome
and encouraged. Once you subscribe, messages from the list will come to
your email box for reading and comment. To subscribe to the list, browse
to http://lists.washlaw.edu/mailman/listinfo/securitieslaw-l
and enter your email address.To post a message to the list, send
the message to: securitieslaw-l@lists.washlaw.edu.
![[Web Crawler]](graphics/webcrawl.gif)
