SEC Filing Search

FOR IMMEDIATE RELEASE
2012-25

Washington, D.C., Feb. 6, 2012 — The Securities and Exchange Commission today charged London-based medical device company Smith & Nephew PLC with violating the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business.

Smith & Nephew PLC and its U.S. subsidiary Smith & Nephew Inc. agreed to pay more than $22 million in agreements with the SEC and U.S. Department of Justice. The charges stem from the SEC’s and DOJ’s ongoing proactive global investigation of bribery of publicly-employed physicians by medical device companies.

The SEC’s complaint against Smith & Nephew PLC alleges that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.

“Smith & Nephew’s subsidiaries chose a path of corruption rather than fair and honest competition,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior.”

According to the SEC’s complaint against Smith & Nephew PLC filed in federal court in Washington D.C., U.S. subsidiary Smith & Nephew Inc. and German subsidiary Smith & Nephew Orthopaedics GmbH has sold orthopedic products in Greece since the 1970s through the Greek distributor. Greece has a national health care system in which most Greek hospitals are publicly-owned and operated, and doctors who work at those publicly-owned hospitals are government employees and “foreign officials” as defined in the FCPA.

The SEC alleges that the misconduct began in 1997, when Smith & Nephew’s subsidiaries developed a scheme to make payments to three shell entities in the United Kingdom controlled by the distributor. Those funds were used by the distributor to pay bribes to the Greek doctors on behalf of the Smith & Nephew subsidiaries. Smith & Nephew failed to act on numerous red flags of bribery as employees at the company and its subsidiaries became aware of the payments. In one e-mail exchange between employees at the U.S. subsidiary and the distributor concerning whether to reduce the distributor’s commissions, the distributor stated, “… In case it is not clear to you, please understand that I am paying cash incentives right after each surgery…” Smith & Nephew Inc. determined not to reduce the commissions.

Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Its subsidiary Smith & Nephew Inc. agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the Department of Justice. Smith & Nephew PLC consented without admitting or denying the SEC’s allegations, to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering it to retain an independent compliance monitor for a period of 18 months to review its FCPA compliance program.

The SEC’s investigation was conducted by Tracy L. Price of the Enforcement Division’s FCPA Unit along with Brent S. Mitchell and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice Fraud Section and the Federal Bureau of Investigation. The SEC’s investigation into the medical device industry is continuing.

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For more information about this enforcement action, contact:

Kara Novaco Brockmeyer
Chief, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4767

Tracy L. Price
Assistant Director, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4490

FOR IMMEDIATE RELEASE
2012-24

Washington, D.C., Feb. 3, 2012 ? The Securities and Exchange Commission today announced that it has named Jeanette M. Franzel to be a member of the Public Company Accounting Oversight Board (PCAOB). Ms. Franzel, currently a Managing Director of the U.S. Government Accountability Office (GAO) with over 20 years of public service, will replace Daniel L. Goelzer, one of the founding members and a former interim Chairman of the five-member Board.

The Sarbanes-Oxley Act of 2002 created the PCAOB to provide independent oversight of audits of public companies and broker-dealers. The Board is responsible for setting audit standards and for registering, inspecting, and disciplining public accounting firms. The SEC oversees the PCAOB and appoints its members.

?Jeanette?s commitment to the public trust and America?s investors is demonstrated by her life-long public service and her constant dedication to increasing accountability, audit quality and audit standards,? said SEC Chairman Mary L. Schapiro. ?She has extensive hands-on experience leading financial audits and deep expertise in audit quality control which will serve the PCAOB well as it continues to execute a rigorous standard-setting, inspections, and enforcement agenda.?

?I would like to thank Dan Goelzer for nearly a decade of service at the PCAOB and for continuing to serve while the search for a new member of the Board was underway,? Chairman Schapiro added. ?I wish him the very best in his future endeavors.?

SEC Chief Accountant James L. Kroeker said, ?We look forward to working with Jeanette on the PCAOB?s important statutory mission of overseeing the auditors of public companies and SEC-registered broker-dealers. Her qualifications as a nationally and internationally recognized expert in auditing standards will benefit the PCAOB as it works to protect the interests of investors and strengthen audit quality.?

Ms. Franzel currently leads all aspects of GAO?s financial audit oversight of the U.S. federal government. She heads a team of approximately 250 staff that focuses on financial and performance audits, proper use of federal funds, internal control, financial systems, and federal audit and financial management policy. Ms. Franzel is a Certified Public Accountant (CPA), Certified Internal Auditor (CIA), Certified Management Accountant (CMA), and Certified Government Financial Manager (CGFM). She received her bachelor?s degree from the College of St. Teresa and holds an M.B.A. from George Mason University.

?I am honored to continue serving the public interest in my new role as a member of the PCAOB. I look forward to advancing the agenda to strengthen investor protection through high quality audits of public companies and broker-dealers,? said Ms. Franzel.

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FOR IMMEDIATE RELEASE
2012-23

Washington, D.C., Feb 1, 2012 ? The Securities and Exchange Commission today charged four former veteran investment bankers and traders at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

The SEC alleges that Credit Suisse?s former global head of structured credit trading Kareem Serageldin and former head of hedge trading David Higgs along with two mortgage bond traders deliberately ignored specific market information showing a sharp decline in the price of subprime bonds under the control of their group. They instead priced them in a way that allowed Credit Suisse to achieve fictional profits. Serageldin and Higgs periodically directed the traders to change the bond prices in order to hit daily and monthly profit targets, cover up losses in other trading books, and send a message to senior management about their group?s profitability. The SEC alleges that the mispricing scheme was driven in part by these investment bankers? desire for lavish year-end bonuses and, in the case of Serageldin, a promotion into the senior-most echelon of Credit Suisse?s investment banking unit.

?The stunning scale of the illegal mismarking in this case was surpassed only by the greed of the senior bankers behind the scheme,? said Robert Khuzami, Director of the SEC?s Division of Enforcement. ?At precisely the moment investors and market participants were urgently seeking accurate information about financial institutions? exposure to the subprime market, the senior bankers falsely and selfishly inflated the value of more than $3 billion in asset-backed securities in order to protect their bonuses and, in one case, protect a highly coveted promotion.?

According to the SEC?s complaint filed in U.S. District Court for the Southern District of New York, Serageldin oversaw a significant portion of Credit Suisse?s structured products and mortgage-related businesses. The traders reported to Higgs and Serageldin. As the subprime credit crisis accelerated in late 2007 and 2008, Serageldin frequently communicated to Higgs the specific profit & loss (P&L) outcome he wanted. Higgs in turn directed the traders to mark the book in a manner that would achieve the desired P&L. However, under the relevant accounting principles and Credit Suisse policy, the group was required to record the prices of these bonds to accurately reflect their fair value. Proper pricing would have reflected that Credit Suisse was incurring significant losses as the subprime market collapsed.

The SEC alleges that the scheme reached its peak at the end of 2007, when the group recorded falsely overstated year-end prices for the subprime bonds. Just days later in a recorded call, Serageldin and Higgs acknowledged that the year-end prices were too high and expressed a concern that risk personnel at Credit Suisse would ?spot? their mispricing. Despite acknowledging that the subprime bonds were mispriced, Serageldin approved his group?s year-end results without making any effort to correct the prices. When the mispricing was eventually detected in February 2008, Credit Suisse disclosed $2.65 billion in additional subprime-related losses related to the investment bankers? misconduct.

The SEC?s complaint alleges that Serageldin, Higgs, and the traders Faisal Siddiqui and Salmaan Siddiqui violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted pursuant to Section 20(e) of the Exchange Act violations of Sections 10(b) and 13(a) and 13(b)(2) of the Exchange Act and Rules 10b-5 12b-20 and 13a-16 thereunder.

Under the SEC?s Statement on the Relationship of Cooperation to Agency Enforcement Decisions (Seaboard Report) and the Enforcement Division?s Cooperation Initiative, entities can benefit from acting swiftly to detect, report, and remediate misconduct and cooperate robustly with the SEC?s investigation. The SEC?s decision not to charge Credit Suisse was influenced by several factors, including the isolated nature of the wrongdoing and Credit Suisse?s immediate self-reporting to the SEC and other law enforcement agencies as well as prompt public disclosure of corrected financial results. Credit Suisse voluntarily terminated the four investment bankers and implemented enhanced internal controls to prevent a recurrence of the misconduct. Credit Suisse also cooperated vigorously with the SEC?s investigation of this matter, providing SEC enforcement officials with timely access to evidence and witnesses. The SEC?s investigation also was assisted by cooperation provided by Higgs, Faisal Siddiqui, and Salmaan Siddiqui.

The SEC?s investigation was conducted by Staff Accountant Kenneth Gottlieb, Senior Counsel Kristine Zaleskas, Senior Specialized Examiner Michael Fioribello, Assistant Regional Director Michael Paley, and Assistant Regional Director Michael Osnato, Jr. in the SEC?s New York Regional Office. Senior Trial Counsel Howard Fischer will lead the SEC?s litigation efforts.

The SEC thanks the U.S. Attorney?s Office for the Southern District of New York, Federal Bureau of Investigation, and United Kingdom Financial Services Authority for their assistance in this matter.

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For more information about this enforcement action, contact:

Andrew M. Calamari
Associate Regional Director, SEC?s New York Regional Office
(212) 336-0042

Michael J. Osnato, Jr.
Assistant Regional Director, SEC?s New York Regional Office
(212) 336-0156

FOR IMMEDIATE RELEASE
2012-22

Washington, D.C., Jan. 31, 2012 ? The Securities and Exchange Commission today charged two brothers living in Chicago and New York with naked short selling for failing to locate and deliver shares involved in short sales to broker-dealers.

Short sellers sell borrowed shares in hopes of profiting from declining prices. While short selling is legal, SEC rules require short sellers to locate shares to borrow before selling them short, and they must deliver the borrowed securities by a specified date. Market makers are excepted from the locate requirement when selling short in connection with bona-fide market making activities in the security for which the exception is claimed. Naked short selling occurs without having borrowed the securities to make delivery.

According to the SEC?s order instituting administrative proceedings against Jeffrey A. Wolfson and Robert A. Wolfson, they generated more than $17 million in ill-gotten gains from naked short selling transactions involving such stocks as Chipotle Mexican Grill Inc., Fairfax Financial Holdings Ltd., Novastar Financial Inc., and NYSE Group. As Jeffrey Wolfson stated in a recorded telephone conversation, ?What I sell them is not guaranteed, it never gets delivered, it?s funny paper.?

The SEC?s Division of Enforcement alleges that Jeffrey Wolfson engaged in illegal naked short sales while working as a broker-dealer himself and later as the principal trader at a Chicago-based broker-dealer that is no longer in business. He also taught his brother and others how to do it. Robert Wolfson conducted illegal naked short sales while trading through an account at New York-based broker-dealer Golden Anchor Trading II LLC, which also has been charged in the SEC?s enforcement action. The firm has changed its name to Barabino Trading LLC.

?By engaging in naked short selling, the Wolfsons had a major advantage over competitors who complied with the law and incurred the costs associated with actually borrowing the securities,? said George S. Canellos, Director of the SEC?s New York Regional Office. ?The SEC is committed to recovering substantial ill-gotten proceeds made by traders who seek to circumvent important short selling regulations.?

According to the SEC?s order, the Wolfsons engaged in two types of transactions from July 2006 to July 2007 in violation of Regulation SHO. The first type of transaction ? a ?reverse conversion? or ?reversal? ? involves selling stock short and simultaneously selling a put option and buying a call option on the stock. The Wolfsons did not locate the stock before the sale, nor did they deliver the shares when sold or make a bona fide purchase of the stock when required to close out their resulting fail-to-deliver position. They were not entitled to the market maker exception to Regulation SHO because the short sales were not made in connection with bona-fide market making activities.

The SEC's order states that the second type of transaction was a stock and option combination that created the illusion that the party subject to a close-out obligation had satisfied that obligation by buying the same kind and quantity of securities it had sold short. However, the stock was always sold back either the next day or within several days, and the Wolfsons knew or had reason to know that the shares ostensibly purchased in these sham transactions would never be delivered because they were purchased from another naked short seller who did not have the stock either. The Wolfsons entered into a significant number of these sham "reset" transactions with each other and also took the other side of the "reset" trades done by each other as well those done by other market participants.

The SEC's Division of Enforcement alleges that by engaging in the misconduct described in the order, Jeffrey Wolfson willfully violated and willfully aided and abetted and caused BMR's violations of Rule 203(b)(1) of Regulation SHO, and willfully violated and willfully aided and abetted and caused others' violations of Rule 203(b)(3) of Regulation SHO. It further alleges that Golden Anchor willfully violated, and Robert Wolfson willfully aided and abetted and caused Golden Anchor's violations of Rules 203(b)(1) and 203(b)(3) of Regulation SHO. The administrative proceedings will determine what relief, if any, is in the public interest against Jeffrey Wolfson, Robert Wolfson and Golden Anchor, including disgorgement of ill-gotten gains, prejudgment interest, financial penalties, a censure or a suspension or bar from association with any broker-dealer.

The SEC?s investigation was conducted by Steven Rawlings, Peter Altenbach, Daniel Marcus and Layla Mayer and the litigation effort will be led by Kevin McGrath. They work in the New York Regional Office. The SEC?s investigation into violations of Regulation SHO is continuing.

The SEC acknowledges the assistance of the Chicago Board Options Exchange and the Financial Industry Regulatory Authority in this matter.

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For more information about this enforcement action, contact:

Andrew M. Calamari
Associate Director, SEC?s New York Regional Office
(212) 336-0042

Steven G. Rawlings
Assistant Director, SEC?s New York Regional Office
(212) 336-0149

FOR IMMEDIATE RELEASE
2012-21

Washington, D.C., Jan. 30, 2012 ? The Securities and Exchange Commission today charged four former senior executives and accountants at the British subsidiary of an Indiana-based manufacturer of medical devices and aerospace products for their roles in an accounting fraud that was so pervasive that it distorted the financial statements of the parent company.

The SEC also reached settlements with the company?s former CEO and current CFO, who were not involved or aware of the scheme at the subsidiary, to recover bonus compensation and stock profits they received while the fraud was occurring and inflating company profits.

The SEC alleges that vice president for European operations Richard J. Senior, finance director Matthew Bell, controller Lynne Norman, and management accountant Shaun P. Whiteley orchestrated and carried out the fraud at Thornton Precision Components (TPC), which is the Sheffield, England-based subsidiary of NYSE-listed Symmetry Medical Inc. The accounting scheme involved the systematic understatement of expenses and overstatement of assets and revenues at TPC, and materially distorted Symmetry?s financial statements for a three-year period.

The four executives and accountants, as well as Symmetry in a separate administrative proceeding, agreed to settle the SEC?s charges, and the subsidiary?s two outside auditors formerly of Ernest & Young LLP UK agreed to suspensions for their deficient audits.

?The accounting fraud orchestrated by TPC executives had a ripple effect right up to the financials of the parent company. Symmetry shareholders were investing their money ? and Symmetry and TPC executives were collecting their bonuses ? based in part on inflated numbers,? said Stephen Cohen, Associate Director of the SEC?s Division of Enforcement. ?We also found significant failures by two outside auditors, which helped this fraud to continue undetected. Accountants who practice before the SEC, including those who audit foreign subsidiaries of U.S. registrants, need to make sure their audits conform to U.S. auditing standards or they won?t be allowed to practice before the SEC.?

According to the SEC?s complaint filed in federal court in South Bend, Ind., Symmetry?s annual financial statements for 2005 and 2006 as well as other reporting periods were materially misstated as a result of misconduct in the reporting of TPC?s financials. Senior, Bell and Norman made false certifications as to the accuracy of the financial information reported to Symmetry by TPC, and lied to TPC?s outside auditors. Meanwhile, Senior and Bell each received bonuses and sold Symmetry stock at prices they knew or recklessly disregarded were fraudulently inflated by the accounting fraud taking place at TPC.

In a separate complaint also filed in the same federal court, the SEC is seeking reimbursement for bonuses and other incentive-based and equity-based compensation received by Symmetry?s former CEO Brian S. Moore under Section 304 of the Sarbanes-Oxley Act. Under the settlement, subject to court approval, Moore agreed to reimburse $450,000 to Symmetry.

The SEC also instituted separate settled administrative proceedings against Symmetry and its CFO Fred L. Hite. The SEC finds that Hite failed to provide an internal audit status report concerning TPC to Symmetry?s Audit Committee in July 2006. Although the internal audit status report had not uncovered the fraud at TPC, it did raise the potential for deeper problems there. Hite also failed to reimburse Symmetry for bonuses, other compensation, and Symmetry stock-sale proceeds he received while the fraud occurred at the subsidiary (as required by SOX Section 304). Hite agreed to pay a $25,000 penalty and reimburse $185,000 to Symmetry. For its part, Symmetry agreed to a cease-and-desist order against future financial reporting, books-and-records and internal controls violations.

The SEC separately instituted and settled administrative proceedings against two associate chartered accountants in the United Kingdom ? Christopher J. Kelly and Margaret Hebb n?e Whyte ? who were the former audit partner and audit manager on Ernest & Young LLP UK?s audits of TPC for its 2004 to 2006 fiscal years (in the case of Kelly) and its 2005 and 2006 fiscal years (in the case of Hebb). The SEC?s order finds that Kelly and Hebb engaged in improper professional conduct by, among other things, failing to properly audit TPC?s accounts receivable balances and inventory. The order suspends both Kelly and Hebb from appearing or practicing before the SEC as accountants, with the opportunity to seek reinstatement after two years.

The SEC acknowledges the assistance of the United Kingdom?s Financial Services Authority in this matter.

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For more information about this enforcement action, contact:

Stephen L. Cohen
Associate Director, SEC?s Division of Enforcement
202-551-4472

FOR IMMEDIATE RELEASE
2012-20

Washington, D.C., Jan. 27, 2012 — The Securities and Exchange Commission announced today that Noelle Maloney will serve as interim Inspector General for the agency following the departure of Inspector General H. David Kotz to join a private investigative services firm. Mr. Kotz’s last day at the Commission was Friday, Jan. 27.

Ms. Maloney will head the SEC’s Office of Inspector General (OIG) while the Commission searches for a permanent head. The 2010 Dodd-Frank Act requires the Inspector General to report to all SEC Commissioners, so SEC Chairman Mary Schapiro has directed the staff to work with the Commissioners to create a consensus process that will involve all the Commissioners in the hiring.

Ms. Maloney has been Deputy Inspector General at the agency since July 2008. In that role, she oversees the OIG’s Office of Investigations and the OIG’s Office of Audits, which conducts independent audits and evaluations of SEC programs and operations. Ms. Maloney also is responsible for supervising the OIG’s administrative, financial, and personnel matters, information systems management, strategic planning, and policy development.

Ms. Maloney joined the SEC in January 2005 as a Senior Counsel in the Office of the General Counsel of the SEC. In that capacity, Ms. Maloney served as an agency subject matter expert on issues of privacy and information sharing.

Before coming to the SEC, Ms. Maloney was the Director of Policy and Public Information for the Peace Corps, where she supervised the audit and evaluation of agency policy, operating plans, and programs, and the drafting of new policy. She also served as the agency’s Freedom of Information and Privacy Act Officer. Ms. Maloney began her federal career at the National Institutes of Health, where she worked in offices of administration and management as well as legislative and intergovernmental affairs.

Ms. Maloney received her bachelor’s degree in English from the College of New Jersey, and her law degree from Rutgers School of Law-Camden, where she graduated with awards for her pro bono work and brief writing. Before moving to Washington, D.C., to begin her federal career, Ms. Maloney clerked for the Honorable Donald A. Smith, Jr., Presiding Civil Judge of the New Jersey Superior Court, and was an associate at the law firm of Sterns & Weinroth, PC.

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FOR IMMEDIATE RELEASE
2012-19

Washington, D.C., Jan. 26, 2012 — The Securities and Exchange Commission announced today that its Advisory Committee on Small and Emerging Companies will meet on Wednesday, February 1, beginning at 10 a.m. EST.

The meeting will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public, with seating on a first-come, first-served basis. It also will be webcast live on the SEC’s website, www.sec.gov, and archived for later viewing.

The committee will discuss potential recommendations to the Commission on issues relevant to small and emerging companies and hear presentations on the report of the IPO Task Force, “Rebuilding the IPO On-Ramp,” which was presented to the U.S. Department of the Treasury in October 2011.

The Advisory Committee was formed last year to provide a formal mechanism for the SEC to receive advice and recommendations on privately held small businesses and publicly traded companies with a market capitalization less than $250 million. More information about the committee and its members is available at http://www.sec.gov/info/smallbus/acsec.shtml.

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Agenda

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FOR IMMEDIATE RELEASE
2012-18

Washington, D.C., Jan. 26, 2012 ? The Securities and Exchange Commission today charged a Fort Lauderdale-based firm and its founder with conducting a fraudulent boiler room scheme in which they hyped stock in two thinly-traded penny stock companies while behind the scenes they sold the same stock themselves for illegal profits.

The SEC alleges that First Resource Group LLC and its principal David H. Stern employed telemarketers who fraudulently solicited brokers to purchase stock in TrinityCare Senior Living Inc. and Cytta Corporation. While recommending the securities in these two microcap companies, Stern sold First Resource?s shares of TrinityCare and Cytta stock unbeknownst to investors who were purchasing them ? a practice known as scalping. As Stern was selling the stocks, he also purchased small amounts in order to create the false appearance of legitimate trading activity and induce investors to purchase shares in both companies.

?First Resource and Stern used a telephone sales boiler room to make inflated claims and defraud investors while simultaneously manipulating the price of the stocks and making profits for themselves,? said Eric I. Bustillo, Director of the SEC?s Miami Regional Office. ?The SEC will continue to aggressively pursue perpetrators of microcap stock fraud schemes that hound potential investors to buy stock.?

Since the beginning of fiscal year 2011, the SEC has filed more than 50 enforcement actions for misconduct related to microcap stocks, and issued 63 orders suspending the trading of suspicious microcap issuers. Microcap stocks are issued by the smallest of companies and tend to be low priced and trade in low volumes. Many microcap companies do not file financial reports with the SEC, so investing in microcap stocks entails many risks. The SEC has published a microcap stock guide for investors and an Investor Alert about avoiding microcap fraud perpetrated through social media.

According to the SEC?s complaint filed against Stern and First Resource in U.S. District Court for the Southern District of Florida, they violated federal securities laws by acting as unregistered broker-dealers. Stern hired and trained First Resource?s salespeople and gave them information about TrinityCare to prepare sales scripts and pitch the stock to potential investors. Stern reviewed the draft scripts, made edits, and approved the scripts before the salespeople were allowed to use them.

The SEC alleges that Stern gave the salespeople a list of potential investors to cold call and pitch the stocks. First Resource?s salespeople falsely claimed TrinityCare stock ?is going to be $5-7 in 6-12 months? and the company ?is going to be a half-a-billion dollar company in five years or roughly a $40 stock.? Stern also disseminated a research report on Cytta to investors and falsely touted: ?Sales projections for 2010-2014 should exceed $500 million with a pre-tax net of over $400 million.?

The SEC?s complaint alleges that First Resource Group and Stern violated Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and financial penalties as well as a penny stock bar against Stern.

The SEC?s investigation was conducted by Jorge L. Riera under the supervision of Elisha L. Frank in the SEC?s Miami Regional Office in coordination with an examination of First Resource conducted by Anson Kwong, Michael J. Nakis, George Franceschini, and Nicholas A. Monaco of the SEC?s Miami office. Edward D. McCutcheon will lead the SEC?s litigation efforts.

The SEC?s investigation is continuing.

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For more information about this enforcement action, contact:

Eric I. Bustillo, Regional Director
Glenn S. Gordon, Associate Regional Director
Elisha L. Frank, Assistant Regional Director
Edward D. McCutcheon, Senior Trial Counsel
SEC Miami Regional Office
(305) 982-6300

FOR IMMEDIATE RELEASE
2012-17

Washington, D.C., Jan. 26, 2012 ? The Securities and Exchange Commission today charged a trader in Latvia for conducting a widespread online account intrusion scheme in which he manipulated the prices of more than 100 NYSE and Nasdaq securities and caused more than $2 million in harm to customers of U.S. brokerage firms.

The SEC also instituted related administrative proceedings today against four electronic trading firms and eight executives charged with enabling the trader?s scheme by allowing him anonymous and unfiltered access to the U.S. markets.

According to the SEC?s complaint filed in federal court in San Francisco, Igors Nagaicevs broke into online brokerage accounts of customers at large U.S. broker-dealers and drove stock prices up or down by making unauthorized purchases or sales in the hijacked accounts. This occurred on more than 150 occasions over the course of 14 months. Nagaicevs ? using the direct, anonymous market access provided to him by various unregistered firms ? traded those same securities at artificial prices and reaped more than $850,000 in illegal profits.

?Nagaicevs engaged in a brazen and systematic securities fraud, repeatedly raiding brokerage accounts and causing massive damages to innocent investors and their brokerage firms,? said Marc J. Fagel, Director of the SEC?s San Francisco Regional Office.

According to the SEC?s orders instituting administrative proceedings against the four electronic trading firms, they allowed Nagaicevs to trade through their electronic platforms without first registering as brokers. Each of the trading firms provided him online access to trade directly in the U.S. markets through an account held in the firm?s name. These firms gave Nagaicevs a gateway to the U.S. securities markets while circumventing the protections of the federal securities laws, including requirements for brokers to maintain and follow adequate procedures to gather information about customers and their trading.

?These firms provided unfettered access to trade in the U.S. securities markets on an essentially anonymous basis,? said Daniel M. Hawke, Chief of the SEC?s Market Abuse Unit. ?By failing to register as brokers, the firms and principals in this case exposed U.S. markets to real harm by evading crucial safeguards of the federal securities laws. We will not allow firms like these to fly under the radar and become safe havens for market abuse.?

The electronic trading firms and individuals named in the SEC?s administrative proceedings are:

• Alchemy Ventures, Inc. of San Mateo, Calif.
  • Mark H. Rogers, the firm?s president, who lives in San Carlos, Calif.
  • Steven D. Hotovec, the firm?s vice president, who lives in Redwood City, Calif.
• KM Capital Management, LLC of Philadelphia
  • Joshua A. Klein, the firm?s founder and co-owner, who lives in Philadelphia.
  • Yisroel M. Wachs, the firm?s co-owner, who lives in Philadelphia.
• Zanshin Enterprises, LLC of Boise, Idaho
  • Frank K. McDonald, managing member of the firm, who lives in Boise.
  • Richard V. Rizzo, an associate of the firm, who lives in Oceanside, N.Y.
• Mercury Capital of La Jolla, CA
  • Lisa R. Hyatt, the firm?s president, who lives in Escondido, Calif.
  • Douglas G. Frederick, an associate of the firm, who lives in Brighton, Mich.

Mercury Capital, Hyatt, and Rizzo each agreed to a settlement in which they consented to SEC orders finding that they committed or aided and abetted and caused broker registration violations. Hyatt and Rizzo each agreed to pay a $35,000 penalty.

The SEC?s administrative action will determine whether the non-settling trading firms and principals violated the broker registration provision of the federal securities laws, or whether the non-settling principals aided and abetted and caused the firms? violations, and what sanctions, if any, are appropriate as a result. The SEC?s complaint alleges that Nagaicevs violated the antifraud provisions of the federal securities laws and seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties.

The SEC?s Market Abuse Unit, headed by chief Daniel M. Hawke and deputy chief Sanjay Wadhwa, conducted the investigation in this matter jointly with the agency?s San Francisco Regional Office under the leadership of Director Marc J. Fagel and Associate Director Michael S. Dicke. Jina L. Choi and Steven D. Buchholz ? members of the Market Abuse Unit in San Francisco ? together with Alice Jensen of the San Francisco Regional Office conducted the agency?s investigation, which is ongoing. The SEC?s litigation effort will be led by Lloyd A. Farnham and John S. Yun of the San Francisco Regional Office.

The SEC thanks the Financial Industry Regulatory Authority (FINRA), Cyprus Securities Commission, and Latvia Financial and Capital Market Commission for their assistance.

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For more information about this enforcement action, contact:

Daniel M. Hawke
Chief, Market Abuse Unit, SEC?s Division of Enforcement
(215) 597-3191

Sanjay Wadhwa
Deputy Chief, Market Abuse Unit, SEC?s Division of Enforcement
(212) 336-0181

Jina L. Choi
Assistant Director, Market Abuse Unit and SEC?s San Francisco Regional Office
(415) 705-2500

FOR IMMEDIATE RELEASE
2012-16

Washington, D.C., Jan. 23, 2012 — The Securities and Exchange Commission today announced that Diamondback Capital Management LLC has agreed to pay more than $9 million to settle insider-trading charges brought by the Commission on Jan. 18. The proposed settlement is subject to the approval of Judge Paul G. Gardephe of the U.S. District Court for the Southern District of New York. As part of the proposed settlement, the Stamford, Conn.-based hedge fund adviser also has submitted a statement of facts to the SEC and federal prosecutors, and entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York.

Under the proposed settlement, Diamondback will give up more than $6 million of allegedly ill-gotten gains and pay a $3 million civil penalty. In addition, Diamondback consented to a judgment that permanently enjoins it from future violations of federal anti-fraud laws. The proposed settlement would resolve charges of insider trading by Diamondback in shares of Dell Inc. and Nvidia Corp. in 2008 and 2009.

“We are pleased to have reached a prompt resolution of the charges against Diamondback,” said George S. Canellos, Director of the SEC’s New York Regional Office. “If approved by the court, we believe that the proposed settlement appropriately sanctions the misconduct while giving due credit to Diamondback for its substantial assistance in the government’s investigation and the pending actions against former employees and their co-defendants.”

Last week, the SEC filed insider-trading charges against Diamondback, a second hedge fund advisory firm, and seven individuals, including a former Diamondback analyst and former Diamondback portfolio manager. In reaching the proposed settlement announced today, the SEC considered the substantial cooperation that Diamondback provided, including conducting extensive interviews of staff, reviewing voluminous communications, analyzing complex trading patterns to determine suspicious trading activity, and presenting the results of its internal investigation to federal investigators.

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For more information about this enforcement action, contact:

George Canellos
Director, SEC’s New York Regional Office
212-336-1020
Sanjay Wadhwa
Associate Director, SEC’s New York Regional Office and Deputy Chief, Market Abuse Unit 
212-336-0181
David Rosenfeld
Associate Director, SEC’s New York Regional Office
212-336-0153
Joseph G. Sansone
Assistant Director, SEC’s New York Regional Office and Market Abuse Unit
212-336-0517

FOR IMMEDIATE RELEASE
2012-15

Washington, D.C., January 20, 2012 — The Securities and Exchange Commission today announced that on February 21, 2012 the fees rates applicable to most securities transactions will decrease from $19.20 per million dollars to $18.00 per million dollars. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction.

The Commission determined these new rates in accordance with Section 31 of the Securities Exchange Act of 1934 (“Exchange Act”). Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment. These adjustments do not affect the amount of funding available to the Commission. A copy of the Commission’s order, including the calculation methodology, is available at http://www.sec.gov/rules/other/2012/34-66202.pdf.

Please note that the fee rates for fiscal year 2012 previously announced on May 2, 2011 never became effective. As stated in that announcement, those fee rates would never become effective if, as was the case, a regular appropriation to the Commission for fiscal year 2012 was not enacted by October 1, 2011. Instead, the Commission is now issuing revised fee rates in accordance with the amendments to Section 31 of the Exchange Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Office of Interpretation and Guidance in the Commission’s Division of Trading and Markets is available for questions on Section 31 at (202) 551-5777, or by e-mail at tradingandmarkets@sec.gov.

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