Mark Cahn Named SEC General Counsel

Source- http://www.sec.gov/news/press/2011/2011-39.htm

Washington, D.C., Feb. 4, 2011 — The Securities and Exchange Commission today announced that Mark D. Cahn has been promoted to General Counsel in the SEC's Office of the General Counsel. He will assume his new role when David M. Becker steps down from the position later this month.

Since March 2009, Mr. Cahn has served as Deputy General Counsel for Litigation and Adjudication, and has counseled the Commission on a wide variety of litigation, appellate and enforcement matters and played a key role in regulatory initiatives.

"Over the past two years, Mark has shown a tremendous grasp of securities law as well as incredible judgment on a range of issues," said SEC Chairman Mary L. Schapiro. "He is well-positioned to help the agency evolve and keep pace with the ever-changing markets."

Mr. Cahn said, "It has been a particular honor to work alongside David and the talented and dedicated staff of the General Counsel's office these past two years. It is a privilege to work at the SEC, and I look forward to continuing to serve a Chairman and a Commission so committed to protecting investors."

From 1988 until joining the SEC staff, Mr. Cahn, 49, worked at the law firm of WilmerHale LLP, where he was a partner in the firm's Securities Litigation and Enforcement Practice. Prior to joining WilmerHale, Mr. Cahn clerked for the Honorable John J. Gibbons, U.S. Court of Appeals for the Third Circuit, and for the Honorable Herbert J. Stern, U.S. District Court for the District of New Jersey. He earned his JD in 1986 from Yale Law School, and his BA, summa cum laude, from Tufts University in 1983.

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Former Principal and Chief Operating Officer of WexTrust Capital Joseph Shereshevsky, Pleads Guilty in Manhattan Federal Court to Investment Fraud Scheme

Source- http://newyork.fbi.gov/dojpressrel/pressrel11/nyfo020311.htm

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that JOSEPH SHERESHEVSKY, a principal and chief operating officer of private equity firm WexTrust Capital, LLC ("WexTrust Capital"), pled guilty today in Manhattan federal court to three felony counts arising out of his employment at WexTrust Capital. SHERESHEVSKY pled guilty before U.S. District Judge DENNY CHIN.

Manhattan U.S. Attorney PREET BHARARA said: "Today, Joseph Shereshevsky accepted responsibility for cheating hundreds of victims out of millions of dollars by repeatedly lying to them about what their money was being used for, and then covering up those lies with more lies. Today's guilty plea represents another step in our ongoing effort to combat investment fraud and Ponzi schemes, and to return hard-earned money to the victims of these devastating financial crimes."

According to the indictment and other documents previously filed in Manhattan federal court and statements made at the plea proceeding:

From 2003 to 2008, WexTrust Capital was a globally diversified private equity company specializing in investments in real estate and specialty finance opportunities. WexTrust Capital was headquartered in Chicago, Illinois, and had offices in Norfolk, Virginia; New York, New York; and elsewhere. WexTrust Capital was affiliated with several companies of a similar name, including WexTrust Securities, LLC, a broker-dealer registered with the United States Securities and Exchange Commission ("SEC").

Beginning in at least 2003, SHERESHEVSKY and others raised money from investors pursuant to private placement offerings and then used material amounts of that money for other purposes, and did not disclose their diversion of funds to investors. For example, in one instance, SHERESHEVSKY and others raised approximately $9.2 million in investor funds by representing that the funds would be used to purchase and operate seven commercial properties that were leased to the United States General Services Administration ("GSA"). According to the GSA private placement memorandum issued to investors by WexTrust Capital, the $9.2 million raised from investors, together with a mortgage of approximately $21 million, would be used to purchase the seven GSA properties and cover related acquisition expenses. The seven GSA properties, however, were never purchased. Instead, virtually all of the funds raised from investors to purchase the properties were diverted by SHERESHEVSKY and others to be used for other purposes, but investors were never informed that the funds were used for any purpose other than to purchase and operate the seven GSA properties. SHERESHEVSKY and others later agreed to make up a story to tell the GSA investors regarding what happened to their investment.

SHERESHEVSKY, 54, of Norfolk, Virginia, pled guilty to conspiracy, securities fraud, and mail fraud charges. The conspiracy count carries a maximum sentence of five years in prison, and the securities fraud and mail fraud counts each carry a maximum sentence of 20 years. SHERESHEVSKY faces a maximum fine of $250,000, or twice the gross gain or loss from the offense on the conspiracy and mail fraud counts, and a maximum fine of $5 million on the securities fraud count. SHERESHEVSKY also faces mandatory restitution to the victims of his crimes.

SHERESHEVSKY is scheduled to be sentenced by Judge CHIN on May 13, 2011, at 10:00 a.m.

Mr. BHARARA praised the work of the Federal Bureau of Investigation. He also thanked the SEC for its assistance in the investigation of this case.

This case was brought in coordination with President BARACK OBAMA's Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a co-chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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New York Broker Gregg M. Berger Indicted for Alleged Role in International Stock Fraud Scheme Spam E-Mails Promoting Stocks Used to Artificially Inflate Prices; Scheme Generated $30 Million for Co-Conspirators

Source- http://detroit.fbi.gov/dojpressrel/pressrel11/de020111.htm

WASHINGTON—An indictment unsealed today in Detroit charges stock broker Gregg M. Berger, of New York, for his role in a wide-ranging fraud scheme to illegally "pump-and-dump" thinly traded Chinese and Israeli stocks, announced Assistant Attorney General Lanny A. Breuer and U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade.

The single count superseding indictment returned in the Eastern District of Michigan alleges that Berger, 47, conspired with Alan Ralsky, Francis Tribble, How Wai John Hui, Scott Bradley, and others to carry out a sophisticated stock fraud scheme from January 2005 through December 2007. The indictment alleges that during the course of the scheme, Berger caused the sale of approximately 30 million shares of stock, generating approximately $30 million for his co-conspirators and more than $600,000 in commissions for himself. Ralsky, Tribble, Hui and Bradley have all been previously convicted and sentenced for their roles in the case.

"Pump-and-dump schemes undermine the integrity of our stock markets," said Assistant Attorney General Breuer. "When stock brokers exploit their trusted positions to enrich themselves at the expense of innocent investors, as Mr. Berger is charged with doing here, we will pursue them vigorously."

"Investor fraud schemes like this one prey on small investors and are motivated by greed," said U.S. Attorney McQuade. "Financial fraud is an important priority so that we can protect victims and the integrity of our financial systems."

The charges arose after a multi-year investigation led by agents from the FBI, with assistance from the U.S. Postal Inspection Service and the Internal Revenue Service, which revealed a sophisticated and extensive pump-and dump operation in which the defendants sent spam e-mails to manipulate thinly traded stocks. After the e-mail recipients bought the stock being promoted, thereby driving up the share price, Berger and his coconspirators profited by selling their existing shares at the newly inflated prices.

According to the indictment, Berger's role was to act as the stock broker for the conspiracy. Berger allegedly established brokerage accounts for trading the stocks that were illegally promoted, arranged for shares of the stocks to be transferred into the brokerage accounts, executed stock trades at the direction of co-conspirator Tribble rather than the direction of the named account holders and transferred funds from the trading of the stocks to bank accounts controlled by the conspirators. Berger also allegedly routinely provided confidential account information, including trade amounts, prices, cash balances and wire transfer details to Tribble, Bradley and others involved in the scheme who were not entitled to such information, all without authorization from the named account holders.

The stocks artificially inflated and then sold by Berger and his co-conspirators included China World Trade Corporation, Pingchuan Pharmaceutical Inc., China Digital Media Corporation, World Wide Biotech and Pharmaceutical Co., China Mobility Solutions, and m-Wise.

The indictment charges Berger with one count of conspiracy to commit securities fraud and wire fraud. It also seeks forfeiture of criminal proceeds. If convicted, Berger faces a maximum penalty of 25 years in prison, and a $250,000 fine. Berger is scheduled to be arraigned on Feb. 8, 2011, in U.S. District Court in Detroit.

An indictment is merely an allegation, and a defendant is presumed innocent unless proven guilty in a court of law.

In a related action, the U.S. Securities and Exchange Commission (SEC) today filed civil fraud charges against Berger as well as seven other individuals and three companies involved in the scheme. The SEC seeks permanent injunctions, disgorgement and civil penalties, and a penny stock bar against Berger for violations of the antifraud and registration provisions of the securities laws.

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SEC Releases Money Market Fund Portfolio and "Shadow NAV" Information to the Public

Source- http://www.sec.gov/news/press/2011/2011-32.htm

Washington, D.C., Jan. 31, 2011 — The Securities and Exchange Commission today announced that investors can for the first time access detailed information that money market funds file with the Commission — including information about a fund's investments and the market-based price of its portfolio known as its "shadow NAV" (net asset value) or mark-to-market valuation.

The information is available on the SEC's website and will be updated monthly.

As part of its overhaul of money market fund regulation, the Commission last year adopted a rule requiring money market funds to file information about their holdings and portfolio valuations.

"While the Commission uses this information in its real-time oversight of money market funds, we also believe that public disclosure can provide investors and market analysts with useful insight for their evaluation of these funds," said SEC Chairman Mary L. Schapiro.

Funds began filing the information on the SEC's new Form N-MFP in December. Under the rule, the SEC will release the information with a 60-day delay. The rule also requires money market funds to post more current but less detailed portfolio information on their own websites within five business days after the end of the month.

The information on the SEC website is available through the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The information can be retrieved in several ways, including by typing in the fund's name or ticker symbol or by reviewing recent Form N-MFP filings.

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Securities Broker Gregory J. Buchholz Sentenced to Four Years in Federal Prison for Embezzling $1.7 Million from Clients

Source- http://newhaven.fbi.gov/dojpressrel/pressrel11/nh013111b.htm

David B. Fein, United States Attorney for the District of Connecticut, announced that GREGORY J. BUCHHOLZ, 46, of Bridgewater, was sentenced today by United States District Judge Janet C. Hall in Bridgeport to 48 months of imprisonment, followed by three years of supervised release, for embezzling approximately $1.7 million from clients of his financial services business.

“For nearly a decade, this defendant raided the investment accounts of his clients, several of whom are retirees,” stated U.S. Attorney Fein. “I want to recognize the diligent efforts of the FBI and Connecticut State Police, who jointly investigated this matter. The Connecticut Securities, Commodities and Investor Fraud Task Force is committed to investigating and prosecuting corrupt securities brokers and investment advisors, and seeking justice for victims of financial crimes.”

According to court documents and statements made in court, BUCHHOLZ, a registered securities broker working as an independent contractor operating a branch office of Raymond James Financial Services, Inc. in Southbury, engaged in a long-running scheme to defraud a number of his clients, some of whom were retirees, by embezzling funds from their investment accounts. As part of the scheme, BUCHHOLZ liquidated investments his clients maintained in various securities, principally variable annuities and mutual funds, and deposited the proceeds of the sales of those securities into his personal bank accounts.

In executing the scheme, which began in approximately 2001, BUCHHOLZ caused checks to be drawn in the name of the victim clients and caused those checks to be sent directly either to his office or to the clients. In the instances where the checks were sent directly to the clients, BUCHHOLZ convinced his clients to turn the checks over to him, falsely indicating that the proceeds would be invested in their investment accounts. At times, BUCHHOLZ forged his clients’ signatures on documents and checks, and further misrepresented that he had authorization from his clients, when he redeemed the securities.

In order to conceal his fraudulent activity, BUCHHOLZ also made statements that were designed to lull his victims into not questioning their account balances.

Through this scheme, BUCHHOLZ stole approximately $1.7 million from at least 10 of his clients.

On November 12, 2010, BUCHHOLZ waived his right to indictment and pleaded guilty to one count of wire fraud.

BUCHHOLZ was terminated from Raymond James Financial Services and he no longer is licensed to act as a securities broker.

Raymond James Financial Services cooperated with the investigation and agreed to reimburse BUCHHOLZ’ victims for their losses. To date, the victims have been repaid the vast majority of the losses they sustained, and BUCHHOLZ will be ordered to pay full restitution to Raymond James.

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Maxwell Technologies Inc. Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $8 Million Criminal Penalty

Source- http://www.justice.gov/opa/pr/2011/January/11-crm-129.html

WASHINGTON – Maxwell Technologies Inc., a publicly-traded manufacturer of energy-storage and power-delivery products based in San Diego, has agreed to pay an $8 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for bribing Chinese government officials to secure sales of Maxwell’s products to state-owned manufacturers of electric-utility infrastructure in several Chinese provinces. The resolution was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Laura Duffy for the Southern District of California.

The department filed a deferred prosecution agreement and a criminal information against Maxwell in U.S. District Court for the Southern District of California today. The two-count information charges Maxwell with one count of violating the FCPA’s anti-bribery provisions and one count of violating the FCPA’s books-and-records provisions.

According to court documents, Maxwell’s wholly-owned Swiss subsidiary, Maxwell S.A., engaged a Chinese agent to sell Maxwell’s products in China. From at least July 2002 through May 2009, Maxwell S.A. paid more than $2.5 million to its Chinese agent to secure contracts with Chinese customers, including contracts for the sale of Maxwell’s high-voltage capacitor products to state-owned manufacturers of electrical-utility infrastructure. The agent in turn used Maxwell S.A.’s money to bribe officials at the state-owned entities in connection with the sales contracts. Maxwell S.A. paid its Chinese agent approximately $165,000 in 2002 and increased the payments to the agent to $1.1 million in 2008. In its books and records, Maxwell mischaracterized the bribes as sales-commission expenses. According to court documents, Maxwell’s U.S. management discovered the bribery scheme in late 2002.

Under the terms of the agreement, the department agreed to defer prosecution of Maxwell for three years. Maxwell agreed, among other things, to implement an enhanced compliance program and internal controls capable of preventing and detecting FCPA violations, to report periodically to the department concerning Maxwell’s compliance efforts, and to cooperate with the department in ongoing investigations. If Maxwell abides by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the term of the agreement expires. The agreement also acknowledges Maxwell’s voluntary disclosure of the FCPA violations to the Department of Justice and U.S. Securities and Exchange Commission (SEC).

Maxwell also reached a settlement of a related civil complaint filed by the SEC charging Maxwell with violating the FCPA’s anti-bribery, books and records, internal controls and disclosure provisions. As part of that settlement, Maxwell agreed to pay $5.654 million in disgorgement of profits and nearly $700,000 in prejudgment interest relating to those violations.

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Former Executive of New Peoples Bank (NPB) Gary A. Lawson, Pleads Guilty to Insider Trading

Source- http://richmond.fbi.gov/dojpressrel/pressrel11/ri012711.htm

ABINGDON, VA—A former executive of the New Peoples Bank (NPB) pled guilty today to charges related to a conspiracy to commit insider trading and money laundering offenses during his tenure as senior vice president and regional director of the financial institution.

Gary A. Lawson, 58, of Lebanon, Va., waived his right to be indicted and pled guilty this afternoon to an Information charging him with one count of conspiracy to defraud the United States and one count of money laundering.

“When people invest their hard earned money, they rely upon those who control that money to act in good faith,” United States Attorney Timothy J. Heaphy said today. “Instead of protecting the assets of the customers of New People’s Bank (NPB), Mr. Lawson looked out for himself. He withheld information about the value of NPB stock and funneled transactions of that stock to his friends and family. For his brazen and repeated acts of greed, he has been held accountable. ”

NPB bank was formed on October 29, 1998 and shortly thereafter Lawson joined the group in an executive position. Under the bank’s leadership, NPB provided training to his bank officers and board members regarding insider trading. Officers, directors and employees were prohibited from trading in the company’s stock while in possession of material, non-public information about NPB. In addition, the bank would announce blackout periods during which officers and board members, as well as friends and family members, were prohibited from trading.

Today in U.S. District Court, Lawson admitted that he, and others, engaged in insider trading in order to enrich themselves. Specifically, on July 10, 2008, a bank customer contacted an NPB branch manager in West Virginia to express his interest in acquiring 500,000 shares of stock. The customer said he was willing to pay $12 per share for a total investment of $6,000,000. The branch manager contacted the Abingdon, Virginia branch of NPB and Lawson was notified of the customer’s proposal.

Lawson admitted that over the next month or so, he, and others, used this insider information to aid and assist family members and friends in obtaining $12 per share for their shares of NPB stock. The NPB board of directors was never advised of the proposed acquisition of a large block of NPB stock.

In order to facilitate the scheme, Lawson, and co-defendant Kenneth Hart, directed a not named co-conspirator to open a checking account under the name F.D. Owens, Jr. Investment Account. Three deposits were made into that account totaling $6,600,000. The source of these funds were cashiers checks remitted by the bank customer and for the purpose of purchasing NPB stock. Checks were then written out of the F.D. Owens account to pay friends and family members of the defendant for their sold stock.

At sentencing, the defendant faces a maximum penalty of five years in prison on the conspiracy charge and a potential maximum sentence of 20 years in prison on the money laundering charge.

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SEC Charges Connecticut-Based Hedge Fund Manager Francisco Illarramendi, for Fraudulent Misuse of Investor Assets

Source- http://www.sec.gov/news/press/2011/2011-30.htm

Washington, D.C., Jan. 28, 2011 — The Securities and Exchange Commission today obtained a court order freezing the assets of a Stamford, Conn.-based investment adviser and its principal, Francisco Illarramendi, charging that they misappropriated at least $53 million in investor funds and used the money for self-dealing transactions.

The SEC alleges that Illarramendi defrauded investors in the several hedge funds he managed by improperly transferring their money into bank accounts that he personally controlled. He then invested the money for his own benefit or for the benefit of the entities that he controlled, rather than for the benefit of the hedge fund investors.

“Illarramendi treated his clients’ money like it was his own, diverting millions of dollars that did not belong to him,” said David P. Bergers, Director of the SEC’s Boston Regional Office. “He abused his position of trust with his clients and breached his responsibilities as an investment adviser.”

According to the SEC's complaint filed in U.S. District Court for the District of Connecticut on January 14, Illarramendi is the majority owner of the Michael Kenwood Group LLC — a holding company for, among other entities, investment adviser Michael Kenwood Capital Management LLC. Through this adviser entity, Illarramendi manages several hedge funds, including one that contains up to $540 million in assets. The SEC’s complaint alleges that Illarramendi took at least $53 million in investor money out of this hedge fund without the knowledge or consent of the hedge fund’s investors

The SEC sought an asset freeze and other emergency relief because it alleged that Illarramendi was imminently planning to make additional investments using investor funds without the knowledge or consent of the investors. Since the filing of the complaint, the Honorable Janet Bond Arterton, U.S. District Judge for the District of Connecticut, has held a series of hearings pertaining to the SEC’s request for an emergency relief against Illarramendi and Michael Kenwood Capital Management. Judge Arterton then entered an order freezing the assets of the defendants.

The SEC's complaint charges Illarramendi and Michael Kenwood Capital Management, LLC, with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also names the following Illarramendi-controlled entities as relief defendants, alleging that they received investor funds to which they have no right: Michael Kenwood Asset Management LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP. In addition to preliminary emergency relief, the SEC’s complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties from the defendants, and disgorgement plus prejudgment interest from the relief defendants.

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SEC Institutes Proceedings Against California Attorney David M. Tamman for Falsifying Documents for Production to SEC Staff

Source- http://www.sec.gov/news/press/2011/2011-29.htm

Washington, D.C., Jan. 28, 2011 — The Securities and Exchange Commission today instituted administrative proceedings against a California-based attorney for engaging in improper professional conduct during an SEC examination.

The SEC’s Office of the General Counsel alleges that David M. Tamman — in the course of an SEC examination of his client NewPoint Securities LLC in April and May 2009 — altered private placement memoranda (PPMs) purportedly used in the offer and sale of securities issued by NewPoint Financial Services. The original PPMs purportedly provided to investors stated that the funds raised in the offerings would be used primarily for real estate related investments. In fact, the vast majority of money raised in the offerings was misappropriated by NewPoint’s principal John Farahi.

The SEC’s Office of the General Counsel alleges that Tamman — a member of the California Bar and a partner at a large international law firm — added language to the PPMs to make it appear that it was disclosed to investors that much of the money raised by NewPoint would be loaned to Farahi. The PPMs were then produced to the SEC’s examination and enforcement staff. According to the Office of the General Counsel, Tamman knew that the language he added to the documents was not included in the PPMs actually provided to investors.

Through his conduct, the SEC’s Office of the General Counsel alleges that Tamman engaged in unethical and improper professional conduct in violation of Rule 102(e) of the SEC’s Rules of Practice. An administrative hearing will be scheduled to determine whether the Office of the General Counsel’s allegations are true, to provide Tamman an opportunity to establish any defenses to the allegations, and to determine what sanctions, if any, are appropriate and in the public interest, including the denial, temporarily or permanently, of the privilege of appearing or practicing before the Commission pursuant to Rule 102(e).

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Former Stock Broker Michael Wooton, Charged with Stealing Over $900,000

Source- http://neworleans.fbi.gov/dojpressrel/pressrel11/no012811a.htm

New Orleans, LA - Michael Wooton, 45, a resident of Metairie, Louisiana, was charged in a one-count bill of information with mail fraud, announced U.S. Attorney Jim Letten.

According to the bill of information, beginning in 2006, WOOTON, a stock broker with Western International Securities, devised a scheme whereby he falsely represented to his clients that he would invest their money in bonds returning between 15 and 20% per year. It is alleged that instead of investing their money as promised, WOOTON either invested the money in high risk options or simply stole the money. In order to conceal the thefts, he created fraudulent monthly statements which were mailed to his clients. According to the bill, the total loss to the victims was approximately $913,773.00.

If convicted, WOOTON faces a possible maximum term of twenty (20) years’ imprisonment, a $250,000 fine and three (3) years’ supervised release.

U. S. Attorney Letten reiterated that a bill of information is merely a charge and that the guilt of the defendant must be proven beyond a reasonable doubt.

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SEC Publishes Staff Study on Investor Access to Information About Investment Professionals

Source- http://www.sec.gov/news/press/2011/2011-28.htm

Washington, D.C., Jan. 27, 2011 — The Securities and Exchange Commission today announced that it has published a staff study recommending steps to help investors better access information about investment professionals.

The recommendations of the study, which was required by Section 919B of the Dodd-Frank Wall Street Reform and Consumer Protection Act, must be implemented within 18 months after the study's completion.

Investors must currently search two separate databases for information about broker-dealers and investment advisers. The primary recommendation of the study is to enable investors to simultaneously search both databases using either FINRA's BrokerCheck website or the Investment Adviser Public Disclosure (IAPD) website and receive unified search results.

Other recommendations from the study include:

Expanding the search functions of BrokerCheck and IAPD to permit searches for broker-dealers, investment advisers, registered representatives, and investment adviser representatives, based on ZIP code or other indicator of location.
Enhancing BrokerCheck and IAPD by adding educational content, such as links and definitional material.

The study states that "the Commission and its staff have long maintained that investors should examine relevant registration information before choosing a broker-dealer or investment adviser. Information pertaining to a broker-dealer or investment adviser's federal or state registration, such as information about its associated persons, including licensing and other qualification data, disciplinary and employment history, contact information, and customer complaints, can help investors make better-educated decisions in selecting a broker-dealer or investment adviser, as well as better protect themselves against fraud."

According to the study, "a significant amount of registration data is publicly available" through the two databases. The study noted, "State securities regulators also act as an important source of registration information about broker-dealers, certain investment advisers, and their associated persons."

The study also recommended that "subsequent to the eighteen-month implementation period, Commission staff and FINRA continue to analyze, including through investor testing, the feasibility and advisability of expanding BrokerCheck to include information currently available in CRD (the Central Registration Depository), as well as the method and format of publishing that information; and that Commission staff continue to evaluate expanding IAPD content and the method and format of publishing that content, including through investor testing. Potential modifications could include adding summary data for advisory firms on IAPD, hyperlinks between CRD numbers and SEC file numbers containing information related to a particular CRD number, and additional links to content available elsewhere on BrokerCheck or IAPD."

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Cathy H. Ahn Named Deputy in SEC's Office of the Secretary

Source- http://www.sec.gov/news/press/2011/2011-26.htm

Washington, D.C., Jan. 25, 2011 — The Securities and Exchange Commission today announced the selection of Cathy H. Ahn to serve as the agency's Deputy Secretary in its Office of the Secretary.

Ms. Ahn currently is a senior special counsel in the Legal Policy Group within the SEC's Office of the General Counsel. She advises the General Counsel and Commission on legal issues related to SEC actions, particularly investment management regulatory actions and legislative activities. In recent months, she has been a member of the SEC's legislative response team working with Congress, other financial regulators, and other SEC staff on the passage and implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Ms. Ahn will begin her new role next week.

The SEC's Office of the Secretary is responsible for scheduling and recording of Commission meetings, administering of the "seriatim" process by which the Commission takes action without convening a meeting, maintaining records of Commission actions and enforcement proceedings. The office also administers the duty-officer process, and provides advice to the Commission and staff on questions of practice and procedure.

"Cathy works very effectively with others and is well-known at the Commission for her keen legal judgment and efficient work ethic," said SEC Secretary Elizabeth M. Murphy. "Cathy's deep understanding of the SEC's organization and procedures will help ensure that the Commission's work runs smoothly."

Ms. Ahn said, "I'm pleased to join my new colleagues in the SEC's Office of the Secretary and make the most of this opportunity to serve the public by ensuring the efficiency of Commission practices and procedures."

Ms. Ahn, 36, joined the SEC staff in February 2004 and served as a senior counsel in the Office of the General Counsel. She served as counsel to former SEC Commissioner Roel Campos from July 2005 to August 2007.

Ms. Ahn replaces Florence Harmon, who recently became Deputy Director of the SEC's Office of Public Affairs.

Prior to joining the SEC staff, Ms. Ahn was an attorney in the Investment Management Group at Wilmer Cutler Pickering Hale and Dorr LLP, where she advised investment advisers, investment companies, broker-dealers and other financial institutions on regulatory compliance with federal and state securities laws and the rules of self-regulatory institutions.

Ms. Ahn holds a JD (cum laude) from Harvard Law School, and an AB from Harvard University (Phi Beta Kappa), where she graduated summa cum laude. She is a member of the Massachusetts and District of Columbia Bars.

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SEC Charges Merrill Lynch, Pierce, Fenner & Smith Incorporated for Misusing Customer Order Information and Charging Undisclosed Trading Fees

Source- http://www.sec.gov/news/press/2011/2011-22.htm

Washington, D.C., Jan. 25, 2011 — The Securities and Exchange Commission today charged Merrill Lynch, Pierce, Fenner & Smith Incorporated with securities fraud for misusing customer order information to place proprietary trades for the firm and for charging customers undisclosed trading fees.

To settle the SEC's charges, Merrill has agreed to pay a $10 million penalty and consent to a cease-and-desist order.

"Investors have the right to expect that their brokers won't misuse their order information," said Scott W. Friestad, Associate Director in the SEC's Division of Enforcement. "The conduct here was clearly inappropriate. Merrill's proprietary traders had improper access to information about the firm's customer orders, and misused it to place trades on the firm's behalf."

The SEC's order found that Merrill operated a proprietary trading desk between 2003 and 2005 that was known as the Equity Strategy Desk (ESD), which traded securities solely for the firm's own benefit and had no role in executing customer orders. The ESD was located on Merrill's main equity trading floor in New York City, where traders on Merrill's market making desk received and executed customer orders. While Merrill represented to customers that their order information would be maintained on a strict need-to-know basis, the firm's ESD traders obtained information about institutional customer orders from traders on the market making desk. They then used it to place trades on Merrill's behalf after executing the customers' trades. In doing so, Merrill misused this information and acted contrary to its representations to customers.

The SEC's order also found that, between 2002 and 2007, Merrill had agreements with certain institutional and high net worth customers that Merrill would only charge a commission equivalent for executing riskless principal trades. However, in some instances, Merrill also charged customers undisclosed mark-ups and mark-downs by filling customer orders at prices less favorable to the customer than the prices at which Merrill purchased or sold the securities in the market.

"Charging these undisclosed mark-ups and mark-downs was improper and contrary to Merrill's agreements with its customers," said Robert B. Kaplan, Co-Chief of the SEC's Asset Management Unit. "Brokers must act honestly and transparently when charging fees to their customers. There is no place in our markets for charging investors undisclosed trading fees."

Without admitting or denying the SEC's findings, Merrill consented to the entry of a Commission order that censures Merrill, requires it to cease-and-desist from committing or causing any violations and any future violations of Sections 15(c)(1)(A), 15(g), and 17(a) of the Securities Exchange Act of 1934 and Rule 17a-3(a)(6) thereunder, and orders it to pay a penalty of $10 million.

In determining to accept Merrill's offer, the Commission considered certain remedial actions undertaken by Merrill after it was acquired by Bank of America.

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Former President of New York Financial Company (“NYFC”) Robert J. Sucarato Pleads Guilty in $1.6 Million Investment Fraud

Source- http://philadelphia.fbi.gov/dojpressrel/pressrel11/ph012411.htm

CAMDEN, NJ—The former owner and president of New York Financial Company (“NYFC”) entered a guilty plea today in connection with a $1.6 million investment fraud scheme, U.S. Attorney Paul J. Fishman announced.

Robert J. Sucarato, 41, of Holmdel, N.J., pleaded guilty to an Information charging him with one count of wire fraud before U.S. District Judge Renée Marie Bumb in Camden federal court.

According to documents filed in this case and statements made in Camden federal court:

Sucarato’s NYFC was purportedly a capital management and financial consulting firm with offices in New York City and Chicago. Sucarato admitted he had established a “virtual office” in New York which allowed him to claim a prestigious mailing address. The office space, conference rooms, and receptionists were shared with many other companies for a nominal rent.

In furtherance of the fraud, Sucarato misrepresented that NYFC was registered as an investment advisor and portfolio manager; misrepresented his educational and professional background; falsely listed certain individuals as officers and managers of NYFC who were not; and otherwise created the false impression that NYFC was a successful, well-established and “leading capital management and financial consulting firm,” “with offices in New York and Chicago,” with superior management and a staff of “over 20 experienced traders.”

Sucarato established two hedge funds—the NYFC Strategic Fund and the NYFC Diversified Strategic Fund (the “Funds”)—which purportedly invested in a variety of security instruments, including commodities futures contracts and options on commodity futures.

Sucarato admitted that he solicited individuals to invest in the Funds in person and through his website, www.nyfc.net, falsely claiming that he had managed the Funds since 1993, with over $7.2 billion in assets under management. He also claimed the Funds had outperformed the market, achieving a ten-year compounded return exceeding 1800%. Additionally, Sucarato created a false audit report, purportedly prepared by a major accounting firm, which falsely indicated that NYFC had a net worth of approximately $798 million.

Victims of the scheme were often provided with quarterly account statements in order to maintain their confidence in their investment. Sucarato admitted that these statements falsely reported to the investors that their investments were growing in value due to Sucarato’s profitable trading.

In soliciting, accepting, and receiving money from individuals to invest in the Funds, Sucarato acted as a “commodity pool operator” and was therefore required to be registered with the Commodity Futures Trading Commission (“CFTC”). Neither Sucarato nor NYFC were registered with the CFTC.

In all, investors provided Sucarato with more than $1.6 million. He deposited victims’ investments in bank accounts he controlled, and then transferred the victims’ money between those bank accounts so that he could use the money for personal expenses. Sucarato spent the investors’ money at various retail establishments, including Macy’s, Vermont Teddy Bear, and L.L. Bean.

The charge to which Sucarato pleaded guilty carries a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gross loss to victims, whichever is greater. Sentencing is scheduled for May 2, 2011.

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Manhattan U.S. Attorney Announces Guilty Plea of Danielle Chiesi to Insider Trading Charges

Source- http://newyork.fbi.gov/dojpressrel/pressrel11/nyfo011911.htm

The United States Attorney for the Southern District of New York, announced that DANIELLE CHIESI pled guilty today to three counts of conspiracy to commit securities fraud arising from an insider trading scheme. During the course of the conspiracies to which CHIESI pled guilty, the hedge fund where she worked gained profits of at least $1.7 million from trades based on material non-public information that she received from others who misappropriated it. CHIESI pled guilty before U.S. District Judge RICHARD J. HOLWELL.

Manhattan U.S. Attorney PREET BHARARA said: "Today, Danielle Chiesi admitted to exploiting her access to valuable, non-public information to reap $1.7 million in illegal gains. By sharing and conspiring to trade on inside information, Chiesi compromised the companies she sold out and distorted the market for their stocks. Today's plea should send yet another strong message that we have zero tolerance for privileged professionals who game the system and who think the rules apply only to everyone else. We will continue working with the FBI, and alongside the U.S. Securities and Exchange Commission, to pursue cases against those who commit insider trading and compromise the integrity of our financial markets."

According to the Indictment, a Complaint previously filed in this case, and statements made during today’s guilty plea proceeding:

DANIELLE CHIESI was an employee of New Castle Funds, LLC ("New Castle"), formerly the equity hedge fund group of Bear Stearns Asset Management, Inc.; RAJ RAJARATNAM was the Managing Member of Galleon Management, LLC ("Galleon"); MARK KURLAND was a top executive at New Castle; ROBERT MOFFAT was Senior Vice President and Group Executive at International Business Machines Corporation ("IBM"). CHIESI, KURLAND, and allegedly RAJARATNAM and others repeatedly shared and traded on material, nonpublic information given as tips by insiders such as MOFFAT at public companies and hedge funds—including information concerning Advanced Micro Devices ("AMD"), IBM, and Sun Microsystems.

CHIESI, 45, pled guilty to three counts of conspiracy to commit securities fraud. Each count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.

CHIESI is scheduled to be sentenced by Judge HOLWELL on May 13, 2011, at 2:00 p.m.

MOFFAT and KURLAND have both previously pled guilty and been sentenced. Charges against RAJARATNAM remain pending and are merely accusations. He is presumed innocent unless and until proven guilty.

Mr. BHARARA praised the investigative work of the Federal Bureau of Investigation. He thanked the U.S. Securities and Exchange Commission for its assistance in this matter.

This case was brought in coordination with President BARACK OBAMA's Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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SEC Names Eileen Rominger as Director of Division of Investment Management

Source- http://www.sec.gov/news/press/2011/2011-14.htm

Washington, D.C., Jan. 18, 2011 — The Securities and Exchange Commission today announced that Eileen Rominger has been named its Director of Investment Management. She will begin her work at the agency in February.

The Division of Investment Management protects investors and promotes capital formation through oversight and regulation of the nation’s multi-trillion dollar investment management industry. Ms. Rominger comes to the SEC from the asset management industry, where she worked for the past 11 years at Goldman Sachs Asset Management and most recently served as the firm’s global chief investment officer. She previously worked for 18 years at Oppenheimer Capital, where she was a portfolio manager, managing director, and a member of the Executive Committee.

Ms. Rominger is replacing Andrew J. “Buddy” Donohue, who left the agency in November.

“Eileen brings the agency a lifetime of experience in the asset management industry and a record of strong leadership,” said SEC Chairman Mary L. Schapiro. “She understands the importance of the nation’s investment management industry to the well-being of investors everywhere.”

Ms. Rominger’s experience spans nearly 30 years as a portfolio manager serving investors and accountable to mutual fund boards of directors, and as a leader of portfolio management teams.

“The investor protection mission of the SEC has never been more important,” said Ms. Rominger. “Retirement and other important financial needs loom large for millions of Americans, even as investment choices increase in number and complexity. I’m honored to have the opportunity to lead the Investment Management Division and its talented staff as they drive their critical agenda of transparency and integrity in the industry.”

Working within Goldman Sachs’s asset management unit, Ms. Rominger served as chief investment officer overseeing portfolio management teams in eight countries including fixed income, fundamental equity, and quantitative investment strategies. She also was a portfolio manager for fundamental equity portfolios. Ms. Rominger served as head of the investment committee for the Goldman Sachs Foundation, and was a member of the management committee and risk committee of the firm’s Investment Management Division.

At Oppenheimer Capital, Ms. Rominger managed equity portfolios and was a member of the firm’s management team.

Ms. Rominger, 56, received a BA in English from Fairfield University and an MBA in Finance from the Wharton School of Business at the University of Pennsylvania.

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Former Chicago Hedge Fund Manager James Brandolino, Allegedly Swindled More Than $3.5 Million from 48 Victims in Investment Fraud Scheme

Source- http://chicago.fbi.gov/dojpressrel/pressrel11/cg011811.htm

CHICAGO—A former Chicago hedge fund manager was taken into federal custody today after he turned himself in for allegedly engaging in an investment fraud scheme in which he swindled more than $3.5 million from approximately 48 victims who invested in funds he purported to operate. The defendant, James Brandolino, was charged with mail fraud in a criminal complaint filed in U.S. District Court, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

Brandolino, 42, of Joliet and formerly of Chicago, obtained about $4.7 million from 48 high net worth investors since 2003 for purported managed futures trading accounts and a commodity pool investment. He provided about $1.1 million in investor redemptions and allegedly lost roughly half of the total invested funds through trading and misused most of the remaining funds for his own benefit. Most of the misappropriated funds were spent, with his only remaining assets consisting of a luxury automobile, a watch and an interest in an unbuilt condominium in Greece on which he put down 80,000 Euros, or more than $107,000.

Brandolino appeared this afternoon before U.S. Magistrate Judge Michael Mason and asked to remain in federal custody.

According to the charges, Brandolino has held various National Futures Association registrations in the commodities brokerage business, with exchange floor trading privileges at the Chicago Board of Trade, now part of the CME Group. He has also been a principal of several commodities trading businesses, including Brandolino Investment Group, Lloyd Lewis Capital, Inc., Falcon Trading Group, Inc., and Falcon Capital Partners LLC.

Since 2003, Brandolino allegedly told investors that their funds, minus a commission, would be used to trade futures contracts, and always told them that the trading was profitable, even though often it was not. Despite trading losses and misusing the funds, as recently as October 2010, he falsely represented in a statement to all investors that their total equity was approximately $7.5 million, the complaint alleges.

Between 2003 and 2007, Brandolino allegedly accepted approximately $1.5 million from roughly 20 investors and routinely generated false statements showing steady returns even though by mid-2007 he had lost most of the money through trading and misused most of the remaining funds for himself. In mid-2007, he started a commodity pool known as Falcon Stock Index LP, without disclosing that he had previously defrauded investors. Until this fund closed in July 2008, Brandolino allegedly traded equity index futures and earned actual net returns of about 15.5 percent, but he did not tell any of his investors that he had stopped trading in mid-2008 and failed to return their money, according to the charges.

The government is being represented by Assistant U.S. Attorney Samuel B. Cole.

The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.

Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, however, the court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.

A complaint contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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