PR: </td> <td nowrap>DATE</td> <td>TITLE</td></tr> --> <tr valign=top> <td nowrap>
he...@sec.gov
FOR IMMEDIATE RELEASE 2001-129
SEC CHARGES SIX INDIVIDUALS WITH SPOOFING
Washington, DC, November 5, 2001 -- The SEC filed four
cases today against six individuals who engaged in a
fraudulent trading practice known as spoofing. Spoofing
occurs when a person trading in the stock markets uses a
displayed limit order to manipulate prices, typically in The
Nasdaq Stock Market, and thereby obtains an improper trading
advantage.
The specific actions filed by the Commission today
include complaints and settlements involving Israel Shenker;
Joseph Blackwell, Timothy Blackwell, Bradford Blackwell; and
Leonid Shpilsky in three separate cases. All these
individuals agreed, without admitting or denying the
Commissions allegations, to cease and desist or be
permanently enjoined from violating the Section 17(a) of the
Securities Act of 1933 and Section 10(b) of the Securities
Exchange Act of 1934. Collectively, these individuals will
pay $43,860.63 in disgorgement, prejudgment interest and
civil penalties. The civil action against Shpilsky also
names two other individuals as relief defendants, who will
pay a total of $13,430 in disgorgement and prejudgment
interest.
The Commission also filed a complaint against
Alexander Pomper alleging that he engaged in a manipulative
spoofing strategy designed to obtain fraudulent price
improvements in Nasdaq stocks. The complaint seeks an order
permanently enjoining Pomper from future violations of the
above-referenced antifraud provisions, and seeks
disgorgement, prejudgment interest and a civil penalty.
Spoofing misuses rules that protect investors, and it
defrauds market makers. These cases today make clear that
the Commission will take strong action against spoofing,
even in cases involving relatively small profits. Were
spoofing to become widespread, it could reduce liquidity for
bona fide investors, said Thomas C. Newkirk, Associate
Director in the Commissions Division of Enforcement.
The assistance of the National Association of
Securities Dealers (NASD) in these matters is acknowledged.
To date, the Commission has brought six actions against
spoofing and the NASD has brought seven actions against
spoofing.
Background
Stock prices on Nasdaq are quoted in the form of bid
and offer prices. The bid price is a proposal to purchase
at a specified price, and the offer price is a proposal to
sell at a specified price. The highest bid and lowest offer
prices quoted Nasdaq are displayed publicly as the National
Best Bid and Offer or NBBO. Market-making firms on Nasdaq
regard the NBBO as an important indicator of the prices they
should provide to their customers, and often guarantee
customers that their orders will be given the NBBO prices,
at a minimum, for smaller orders. In other words, a
customer seeking to sell stock will receive at least the bid
price shown in the NBBO and a customer seeking to buy will
pay not more than the offer price shown in the NBBO.
The SECs Limit Order Display Rule generally requires
that market makers display customer limit orders of 100
shares or more. if the price of the limit order is better
than the previously displayed NBBO. A customer limit order
with a superior price changes the NBBO when displayed, by
either raising the bid side or lowering the offer side of
the NBBO.
A trader engaged in spoofing typically places a limit
order for the purchase or sale of a thinly-traded Nasdaq
security that is for a better price than the then-current
NBBO. This generally results in the limit order being
publicly displayed, which changes the NBBO by improving
prices on one side of the market. The trader proceeds by
immediately obtaining execution through other market making
firms of one or more other orders on the opposite side of
the market at the improved price, and then endeavors to
cancel the initial limit order.
For example, the Commissions complaint against
Alexander Pomper alleges that Pomper placed a limit order to
buy 300 shares of Gumtech International (GUMM) at $11.375
per share when the best bid side of the NBBO was $11.0625
per share and the best offer side was $11.4375 per share.
Due to the Limit Order Display Rule, Pompers $11.375 per
share buy order became the new best bid price. Pomper then
placed an order to sell 2000 shares of GUMM at $11.375 per
share through another market making firm. Pomper obtained
immediate execution at $11.375 per share (rather than
$11.0625 per share) because the other market maker honored
the $11.375 best bid price created by Pompers buy order.
After Pomper obtained his price improvement of $.3125 per
share, or $625.00, he canceled his order to buy at $11.375.
Pompers conduct was deceptive because he improved the NBBO
with a limit order he did not actually want filled.
By engaging in these manipulative practices, spoofers
cause market makers to buy or sell stock at prices that were
created by a deception. Spoofing undermines the integrity
of the prices quoted by the market makers by inserting into
the NBBO prices that do not reflect bona fide proposals to
trade. It improperly injures market makers, and violates
the federal securities laws.
# # #
he...@sec.gov
FOR IMMEDIATE RELEASE 2001-131
Securities and Exchange Commission Statement
On Treasury Long Bond Situation
Washington, DC, November 6, 2001 The Securities and
Exchange Commission today issued the following statement:
Following a referral from the Department of the
Treasury, we have initiated an investigation into the
circumstances surrounding the announcement of the Treasurys
decision to end its 30-year bond offerings. Enforcement
Division Director Stephen Cutler added: In keeping with
our responsibilities to ensure the integrity of the nations
securities markets, we will vigorously pursue this matter.
During the course of this investigation, we will decline to
comment further.
# # #
he...@sec.gov
FOR IMMEDIATE RELEASE 2001-133
SEC ISSUES CONCEPT RELEASE ON ACTIVELY MANAGED
EXCHANGE-TRADED FUNDS
Washington, DC, November 7, 2001 The Securities and
Exchange Commission today issued a concept release seeking
public comment on actively managed exchange-traded funds.
Among other issues, the release requests comment on the
potential structure and operation of actively managed
exchange-traded funds, the benefits and uses of such
products, and potential regulatory issues.
Citing the goal of protecting investors without
stifling innovation, the Commission also asked the SEC staff
to explore the feasibility of a pilot program that would
permit the introduction of actively managed ETFs.
An exchange-traded fund, or ETF, is a registered
investment company that is listed on a national securities
exchange and trades at market prices in the secondary
market. All existing ETFs seek to track the performance of
various domestic and foreign equity market indices by
replicating or sampling the securities of those indices.
An actively managed ETF would not seek to track the
return of a particular index by replicating or sampling
index securities. Instead, the investment adviser to an
actively managed ETF could select securities consistent with
the investment objectives and policies of the ETF without
reference to the composition of an index. This type of ETF
does not currently exist.
The public will have sixty days to comment on the
concept release. However, the Commission directed the staff
to continue to work with applicants who have pending
applications to introduce new exchange traded products,
including exchange traded products with actively managed
portfolios, during this period.
# # #
he...@sec.gov
FOR IMMEDIATE RELEASE 2001-134
PROPOSED AMENDMENTS TO RULE 17a-8 ON
MERGERS OF AFFILIATED INVESTMENT COMPANIES
Washington, DC, November 8, 2001 The Securities and
Exchange
Commission today issued proposed amendments to Rule 17a-8 under
the
Investment Company Act of 1940. Rule 17a-8 allows affiliated
investment companies (funds) to merge without obtaining a specific
exemptive order from the Commission. The proposed amendments are
designed to permit fund mergers that are consistent with the
protection of fund investors, but without the expense and delay of
obtaining individual exemptive orders.
Expansion of the Rules Scope. Rule 17a-8 currently permits
affiliated funds to merge only if they are affiliated by
reason of having common advisers, officers, or directors. If
adopted, the amendments would permit all affiliated funds to
merge without first obtaining an exemptive order. This
change
would accommodate growing numbers of mergers that currently
do
not fit within Rule 17a-8, and that therefore need to proceed
under what have become routine Commission orders.
Board Findings. Consistent with the current rule, the
amended
rule would, if adopted, rely heavily on the scrutiny of fund
directors, including independent directors, to determine
whether the merger is in the best interests of the fund and
its shareholders. The proposed amendments would specify
several factors that the directors must consider, if
relevant,
in approving the merger. The factors include consideration
of
fund expenses, allocation of merger costs, compatibility of
assets, and effects on investors taxes.
Mergers with Bank Trust Funds. If adopted, the rule
amendments would, for the first time, permit funds to merge
with affiliated bank common or collective trust funds without
seeking an exemptive order.
Shareholder Voting. If adopted, the proposed amendments
would, as a condition to the exemption, require: (1)
shareholders of any fund that would not survive the merger to
vote on the merger, and (2) subject to certain exceptions,
large shareholders of a fund holding a vote on the merger who
are advisers, underwriters, or large shareholders of other
funds participating in the merger to vote their shares in
proportion to the securities voted by other shareholders.
This condition is designed to prevent affiliated persons from
influencing the terms of the merger to the detriment of
smaller shareholders.
The Commission requests comments on the proposed amendments,
including relevant data on costs and benefits of the amendments or
any alternatives to the amendments. Comments on the proposed
amendments to rule 17a-8 must be submitted to the Commission by
January 18, 2002.
# # #
he...@sec.gov
FOR IMMEDIATE RELEASE 2001-135
SEC GRANTS EXTENSION OF TIME ON NASDAQS
EXCHANGE REGISTRATION APPLICATION
Washington, DC, November 14, 2001 The Securities and
Exchange Commission today announced that it has granted The
Nasdaq Stock Markets request for an extension of time for
the Commission to act on Nasdaqs application to register as
a stock exchange, which was due to expire on November 14,
2001. Nasdaq requested an additional indefinite period of
time in order to address the issues raised by the staff and
in the 46 comment letters received to date. Annette L.
Nazareth, Director of the Division of Market Regulation,
stated: Substantial progress has been made on the Nasdaq
application. We are working closely with Nasdaq and hope
to resolve the outstanding issues as expeditiously as
possible.
# # #