Source: https://www.sec.gov/news/digest/2013/dig101113.htm
Timestamp: 2019-04-21 20:35:33+00:00

Document:
The Securities and Exchange Commission (Commission) announced the appointment of Daniel Murdock as a deputy chief accountant in the agency's Office of the Chief Accountant.
Mr. Murdock assumed his new role this week as head of the office’s accounting group. The group advises the Commission on accounting and auditing matters and works closely with private sector accounting bodies such as the Financial Accounting Standards Board. Public companies, auditors, and other divisions and offices within the SEC regularly consult with the accounting group on the application of accounting standards and financial disclosure requirements.
The accounting group is one of three in the Office of the Chief Accountant. Mr. Murdock fills a vacancy created when Paul Beswick was promoted to chief accountant. The other two deputy chief accountants, Brian Croteau and Julie Erhardt, head the professional practice group and the international group respectively.
Before joining the SEC staff, Mr. Murdock served as an industry professional practice director for Deloitte & Touche LLP. At Deloitte, Mr. Murdock was responsible for the financial statement audits of several large companies and served in its national office, where he consulted with clients on technical accounting issues.
The Commission today announced that on October 2, 2013, The Honorable Paul G. Gardephe of the United States District Court for the Southern District of New York, entered an Order approving a Final Distribution Plan for the Fair Fund established in SEC v. Hochfeld et al., 12-CV-8202. In this enforcement action, filed in November 2012, the SEC charged Berton M. Hochfeld and his entity Hochfeld Capital Management, L.L.C. with securities fraud for misappropriating assets and making material misstatements to investors in the Heppelwhite Fund, L.P., a now defunct hedge fund. The Court previously entered judgments against Hochfeld and HCM which ordered, among other relief, injunctions, an asset freeze, and disgorgement of ill-gotten gains and civil penalties in amounts to be determined.
To distribute funds to defrauded investors, the SEC requested that the Court create a Fair Fund, which the Court approved on July 31, 2013. The Court appointed Nancy Chase Burton, a Supervisory Assistant Chief Litigation Counsel at the SEC, as Plan Administrator. To date, the SEC has collected approximately $6.2 million for the Fair Fund. Pursuant to the Final Distribution Plan, thirty-five former Heppelwhite investors will receive this month initial payments from the Fair Fund representing approximately 70% of each investor’s prior capital balance in the Heppelwhite Fund. The Final Distribution Plan also provides for a second round of payments to investors that the Fair Fund will make after the SEC has collected additional funds, including proceeds from the sale of Hochfeld’s personal assets. [SEC v. Hochfeld, et al., 12-CV-8202 (S.D.N.Y.)] (Rel. LR-22843).
On October 10, 2013, the Commission charged Michael R. Enea of Menomonee Falls, Wisconsin with violations of the federal securities laws for conducting fraudulent, unregistered offerings of securities and misappropriating investor funds to pay his personal expenses.
The Commission’s complaint alleged that, from July 2006 through May 2013, Enea operated a Ponzi scheme through the fraudulent and unregistered offer and sale of securities to 18 investors totaling approximately $2.1 million. Enea represented to the investors that he would combine his funds with funds contributed by each investor and use the money to invest in a “credit card portfolio.” Credit card portfolios, according to Enea, consisted of a group of retail merchants who pay fees to a third party credit card processor each time one of the merchants’ customers makes a credit card transaction. Enea told investors that by investing in credit card portfolios the investor would receive monthly or quarterly payments. The payments to investors were purportedly generated by the payment of the transaction fees by the merchants to the credit card processors. In reality, Enea never purchased any credit card portfolios and instead used approximately $1.35 million of the investors’ funds to make the monthly or quarterly payments to prior investors. Enea used the remaining approximately $760,000 he raised from investors to pay his personal and business expenses. Enea never told investors that he used their funds to make payments to previous investors or to pay his personal and business expenses. The complaint also alleged that Enea acted as an unregistered broker.
As a result of his conduct, the Commission’s complaint charged Enea with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The initial decision of an administrative law judge with respect to Stefan H. Benger has become final. The initial decision barred Benger from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. The law judge found that on January 15, 2013, a federal district court entered a judgment by consent that permanently enjoined Benger from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. He was also permanently enjoined from violating the registration provisions of Section 15(a) of the Exchange Act and from participating in an offering of penny stock. He was further ordered to pay a civil penalty of $250,000 and to disgorge $422,004.10 in ill-gotten gains plus prejudgment interest of $26,869.79.
SEC v. Benger, No. 1:09-cv-00676 (N.D. Ill. Jan. 15, 2013).
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions against Burton Douglas Morriss based upon the entry of a permanent injunction entered against him in the United States District Court for the Eastern District of Missouri, in the civil action entitled Securities and Exchange Commission v. Burton Douglas Morriss, et. al., Case Number 4:12-CV-80.
The Order finds that on August 13, 2013, a judgment was entered by consent against Morriss, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default as to First Sun South Corp. (Default Order) in Anasazi Capital Corp., Admin. Proc. File No. 3-15439. The Order Instituting Proceedings alleged that First Sun South Corp. repeatedly failed to file timely periodic reports while its securities were registered with the Securities and Exchange Commission. The Default Order finds this allegation to be true and revokes the registration of each class of First Sun South Corp.’s registered securities, pursuant to Section 12(j) of the Securities Exchange Act of 1934.
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Jonathan Fraiman.
The Order finds that Fraiman, a resident of San Diego, California, was employed as a Marketing and Investment Relations Executive at Envit Capital LLC and Envit Capital Multi-Strategy Mixed Investment Fund I LP from January 2008 through June 2009. During this time, he was also the Director and Chief Compliance Officer of Envit Capital Private Wealth Management, LLC, an unregistered investment adviser. The Order also finds that the Commission filed fraud charges against Fraiman in an action titled Securities and Exchange Commission v. Edward M. Laborio et al., Civil Action Number 1:12-cv-11489-MBB, in the United States District Court for the District of Massachusetts.
The Order finds that the Commission’s complaint alleges that Fraiman and others raised up to $5.7 million from approximately 150 investors nationwide and overseas through five fraudulent and unregistered securities offerings involving a group of related entities (the Envit Companies). The complaint alleges that Fraiman made multiple misrepresentations and misleading statements about the Envit Companies’ businesses, revenues, financial projections, uses of investor funds, and historical returns generated by a purported hedge fund that in reality never conducted any business. The complaint also alleges that Fraiman induced the purchase of securities without being registered in accordance with Section 15 of the Securities Exchange Act of 1934 (Exchange Act).
The Order finds that on October 8, 2013, the court entered a final judgment by consent against Fraiman, permanently enjoining him from future violations of Section 17(a)(2) of the Securities Act of 1933; Sections 10(b) and 15(a)(1) of the Exchange Act and Rule 10b-5(b) thereunder; and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Fraiman was also barred from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock.
In the Matter of James C. Mulholland, Jr.
The Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions against James C. Mulholland, Jr. The Order finds that on October 4, 2013, a judgment was entered by consent against Mulholland, permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder in the civil action Securities and Exchange Commission v. James C. Mulholland, Jr. and Thomas S. Mulholland, Civil Action No. 12-cv-14663, filed in the United States District Court for the Eastern District of Michigan.
In the Order, the SEC finds that the SEC's complaint, filed on October 22, 2012, alleged that from January 2009 through January 2010, James C. Mulholland, Jr, along with his brother Thomas S. Mulholland, offered and sold approximately $2 million of demand notes to approximately 75 investors to fund the Mulhollands’ failing real estate business, which involved buying, maintaining, and renting residential real estate in Michigan. The Mulhollands told these investors that their real estate business was profitable, they would earn 7% per year on their investment, the returns would be generated by profits of the real estate business, and that the investors could get their money back upon 30 days’ written notice. The SEC also alleged that the Mulhollands acted as unregistered broker-dealers in connection with the offer and sale of the demand notes. The SEC’s complaint further alleges that the Mulhollands lied to investors about their financial condition and never told investors that they were experiencing financial hardship, that they were having difficulty meeting financial obligations critical to the real estate operation, or that they were contemplating filing for bankruptcy.
The Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions against Thomas S. Mulholland. The Order finds that on October 4, 2013, a judgment was entered by consent against Mulholland, permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder in the civil action Securities and Exchange Commission v. James C. Mulholland, Jr. and Thomas S. Mulholland, Civil Action No. 12-cv-14663, filed in the United States District Court for the Eastern District of Michigan.
In the Order, the SEC finds that the SEC's complaint, filed on October 22, 2012, alleged that from January 2009 through January 2010, Thomas S. Mulholland, along with his brother James C. Mulholland, Jr., offered and sold approximately $2 million of demand notes to approximately 75 investors to fund the Mulhollands’ failing real estate business, which involved buying, maintaining, and renting residential real estate in Michigan. The Mulhollands told these investors that their real estate business was profitable, they would earn 7% per year on their investment, the returns would be generated by profits of the real estate business, and that the investors could get their money back upon 30 days’ written notice. The SEC also alleged that the Mulhollands acted as unregistered broker-dealers in connection with the offer and sale of the demand notes. The SEC’s complaint further alleges that the Mulhollands lied to investors about their financial condition and never told investors that they were experiencing financial hardship, that they were having difficulty meeting financial obligations critical to the real estate operation, or that they were contemplating filing for bankruptcy.
The Financial Industry Regulatory Authority, Inc. filed a proposed rule change (SR-FINRA-2013-042) pursuant to Section 19(b)(1) of the Securities Exchange to require alternative trading systems to report volume information to FINRA and use unique market participant identifiers.
6.01 ABS Informational and Computational Material.
6.02 Change of Servicer or Trustee.
6.03 Change in Credit Enhancement or Other External Support.
6.04 Failure to Make a Required Distribution.
6.05 Securities Act Updating Disclosure.

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