Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, February 1, 2007


If NASDAQ's bid to acquire the London Stock Exchange fails, it will likely to continue to hold on to its 29% stake in LSE, says NASDAQ CEO Greifeld.  NASDAQ will likely pursue tie-ins with other exchanges.  See WSJ, Nasdaq to Keep LSE Stake, Seek Other Deals.

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

TSE in the News Again

The Tokyo Stock Exchange is in talks about forming an alliance with Chicago Mercantile Exchange, a day after the announcement of its alliance with NYSE, reports the WSJ.  Tokyo Stock Exchange Discusses Possible Alliance with Chicago Merc.

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Vornado-Blackstone Battle over EOP

Vornado is expected to increase its bid for Equity Office Properties in the competition with Blackstone, in what promises to be the largest LBO in the US.  See Vornado to Raise EOP Bid
In Latest Shot at Blackstone.

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Secret Payment Disclosed in Milberg Weiss Firm

A plea agreement filed in federal district court in California says that a Milberg Weiss partner made a secret payment of $175,000 to former opthamalogist Steven Cooperman to serve as lead plaintiff in a class action.  The filing does not directly link the payment to Mel Weiss or William Lerach.  The firm's spokesperson said the allegation were not credible and old news.  See NY Times, New Blow to a Law Firm Under Inquiry.

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Bush on Exec Compensation, SOX

President Bush told a Wall. St. audience that corporations should link executive pay packages more closely with performance because otherwise investor's trust in the markets could be impacted.  He said he disapproved of federal mandating corporate governance practices, but approved of the SEC's new disclosure rules on executive compensation:  "I appreciate the fact that the S.E.C. has issued new rules to ensure that there is transparency when it comes to executive pay packages.  The print ought to be big and understandable.”  The New York Times reports that the ortherwise friendly audience was silent during these remarks.  See Bush Tells Wall St. to Rethink Pay Practices.  For the WSJ's take on the President's speech, which focuses on his criticsm of SOX 404, see Bush Gives Hope to Foes Of Sarbanes-Oxley Law. 

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

SEC Hedge Fund Investigation Still under Investigation

Senators Arlen Specter and Charles Grassley continue to express their displeasure over the SEC's investigation into hedge fund, Pequot Capital Management  and say that an interim report reporting their findings will be released today.  The SEC inquiry was triggered by fired SEC lawyer Gary Aguirre's charge that he was called off his investigation because of the hedge fund's connections with Wall St. executive John Mack.  See NY Times, 2 Senators Renew Attacks on S.E.C. Hedge Fund Investigation

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Enron Officer's Conviction Vacated

The Texas federal district court threw out the jury verdict against Kevin Howard, former Broadbrand financial officer at Enron, based on the Fifth Circuit's ruling in another Enron case that an empoyee's services in furtherance of corporate malfeasance could not be the basis of a theft of honest services conviction.  See NY Times, Judge Throws Out a Conviction in Enron Case .

February 1, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 31, 2007

Investment Adviser Consents to Prime Bank Fraud

The SEC announced today that, on January 29, 2007, the U.S. District Court for the Northern District of Illinois entered a Final Judgment in the Commission's civil action against Directors Financial Group, Ltd. ("DFG"), an Illinois investment adviser formerly registered with the Commission, and Sharon E. Vaughn, DFG's owner and operator. In addition to relief previously ordered, the Court's Final Judgment requires Vaughn to pay a $200,000 civil penalty. Vaughn consented to the Final Judgment without admitting or denying the allegations of the Complaint.

The Commission filed its Complaint on March 2, 2006, alleging that Vaughn and DFG defrauded their private hedge fund clients in Directors Performance Fund, L.L.C. (the "Fund"). According to the Complaint, Vaughn and DFG, among other things (1) invested the Fund's assets in a fraudulent Prime Bank trading scheme (the "Trading Program") contrary to the Fund's disclosed trading strategy, (2) failed to investigate the Trading Program or its promoters, (3) entered into an undisclosed profit sharing agreement that ceded 25% of the Fund's purported profits to one of the Trading Program's promoters, (4) gave control of the Fund's assets to the Trading Program's promoters in violation of the terms of the Fund's prospectus, and (5) tried to cover up their fraud by withholding documents from — and providing fake documents to — the Commission's exam staff.  See SEC v. Sharon E. Vaughn and Directors Financial Group, Ltd., Case No. 06-C-1135 (N.D. Ill.)

January 31, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

Market-Timing Allegations Against CIBC Reps


   On  January  31,  the   Commission   issued   an   Order   Instituting Administrative Proceedings  against Michael Sassano, Dogan Baruh, Robert Okin and R.  Scott  Abry, alleging that Sassano  and Baruh, former registered representatives with CIBC World Markets Corp. and Fahnestock & Co., Inc.,  collaborated  with  numerous  hedge  fund customers to deceptively market time mutual funds through a variety of deceptive practices. Mutual funds, for  example,  repeatedly  detected Sassano's, Baruh's, and their customers' fraudulent  conduct  from  at least 1999 until September 2003, and sent World Markets and Fahnestock numerous letters and emails  complaining  about  this  abusive  market timing. In response to the mutual funds' efforts to  stop  the  market timing, Sassano and Baruh used numerous strategies to help their hedge fund customers deceive the mutual funds. Okin, the  Head  of CIBC's Private Client Services, and Abry, Sassano's and Baruh's branch manager, supervised Sassano and  Baruh  and  knew  of,  and  assisted, Sassano and Baruh's deceptive market timing practices.

   The Division of Enforcement seeks  cease-and-desist orders, disgorgement, civil penalties, prejudgment interest,  and  all    other remedial sanctions  that  are  appropriate  and  in  the  public    interest. (Rels. 33-8778; 34-55208; IA-2587;  IC-27692;  File  No.  3-12554).


January 31, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

Former General Counsel of Comverse Consents to Sanctions in Rule 102(e) Proceeding

William Sorin, former General Counsel of Comverse Technologies, consented to sanctions under Rule 102(e) in connection with the backdating stock options scandal involving that company and Kobi Alexander.  This follows the entry of a consent injunction in federal district court enjoining Sorin from future violations of federal securities laws.  The Commission's  complaint  alleges,  among
other things, that  beginning  no  later  than  1991,  and  continuing    through 2001, Sorin engaged in a  fraudulent  scheme  with  Comverse's   former Chairman and Chief Executive Officer, and from  at  least  1998   with Comverse's former Chief Financial Officer, to grant  undisclosed, in-the-money options to themselves and  others,  by  backdating  stock  option grants to coincide with historically low annual  and  quarterly   closing  prices  for  Comverse's  stock.  Among  other   things,   the   Commission's Complaint alleges that Sorin created company records that falsely indicated that Comverse's compensation committee had  approved   a grant of stock options on a date when, in reality, no such corporate   action took place. The complaint also alleges that Sorin created false   company records  that  facilitated  a  similar  backdating  scheme  at Ulticom,  Inc.,  another  public  company  that  is  a  majority-owned   subsidiary of Comverse.

January 31, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

Speech by NASD Vice Chair

In a speech before the Securities Traders Association, Doug Shulman, Vice Chair of NASD, addressed a number of issues, including the following:  the merger of the NYSE and NASD regulatory arms, the effect of technology and product convergence on the markets, and Regulation NMS.

January 31, 2007 in Other Regulatory Action | Permalink | Comments (0) | TrackBack (0)

NYSE-TSE Alliance Announced

The NYSE and Tokyo Stock Exchange agreed to an alliance that could ultimately lead to cross-listings of securities, in NYSE's latest move toward globalization.  See WSJ, Tokyo Exchange, NYSE Agree to Form an Alliance.  For more details, see the NYSE press release.

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Altria Announces Spinoff of Kraft

As expected, Altria announced that it would split up Altria and Kraft Foods.  The transaction will take place by the end of March, and Altria shareholders will get .7 share of Kraft for every Altria share they own.  WSJ, Altria Board Approves Spinoff Of Company's Kraft Foods Unit.

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Banks' Buybacks of Shares on the Increase

Banks turn to share buybacks as regulation makes it increasingly difficult to lend money.  See WSJ, Capital Idea:Banks Turn To Buybacks.

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

In Defense of Private Equity

Is there a backlash against private equity funds?  Yes, says a WSJ columnist, citing Clear Channel Communications, and it is not deserved.  The question is why can't public company managers produce the same profits for their shareholders that the private firms do?  See WSJ, Private Equity's Successes Stir Up A Backlash That May Be Misdirected.

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Investing Club in Trouble with Investors

BetterInvesting, a NFP umbrella group of investment clubs, once riding high, is facing dissension from many of its mostly senior volunteers, who question its high expenses and governance practices.  Meanwhile, it is trying to recruit new investors, particularly teenagers, and has received a grant to teach investing to high schoolers. See WSJ, Peeved Members Of Investing Clubs Turn on Leaders.

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Icahn's Interested in Motorola

Carl Icahn is at it again.  He announced yesterday that he is seeking a seat on the board of directors of Motorola.  He has only a 1.4% interest in the company, whose stock prices has been in a decline for some months.  Last year, Icahn threatened Time-Warner  with a proxy contest before backing down.  See NY Times, Icahn Seeks Board Seat at Motorola. The story also makes page one of the WSCJ, Icahn Bid Adds To Woes Dogging Motorola's CEO.

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Investors Love Tobacco

The New York Times features Altria's proposed spinoff of Kraft Foods, in an article discussing investors' positive reactions about the spinoff and the tobacco industry.  Altria's a cash cow -- although regulation of smoking increases, people still smoke and apparently will pay any price for cigarettes.  See Tobacco’s Stigma Aside, Wall Street Finds a Lot to Like .

January 31, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 30, 2007

PIPE Offering Fraud Action Settled


The Commission's complaint alleged that, during 2001, Pollet traded in the
   securities of ten public companies after receiving  confidential  non-
   public information that these entities were either engaged in, or were
   contemplating engaging in, "PIPE" financings. A "PIPE"  is  a  private
   investment in public equity. Specifically, the complaint alleged  that
   Pollet routinely sold short the publicly traded securities of the PIPE
   issuers prior to the close of the PIPE transaction in order to lock in
   gains for SG Cowen's proprietary account.

January 30, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

NYSE, TSE Alliance Expected

The Tokyo Stock Exchange is "very close" to an agreement on an alliance with the NYSE, according to TSE's chief executive.  John Thain, head of NYSE, predicts that this should eventually led to uniform regulation of cross-border transactions.  WSJ, NYSE, Tokyo Stock Exchange Are 'Very Close' to an Alliance.

January 30, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)