SEC News Digest, 08-16-1976
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/t- - Is~7~C ne\ft{~~A9igest (SEC Docket, Vol. 10, No.9 - September 28) September 16, 1976 --------------------~S~20~~76~------------- RULES AND RELATED MATTERS u.s. e~cuRI J iES AND COMMENT PERIOD EXTENDED ON PROPOSED RULE llAcl-l EXCHANOE COMMISSION The SEC has extended the period for public comment until November 1, 1976, on proposed Rule llAcl-l governing dissemination of quotation information with respect to securi- ties as to which last sale information is reported in the consolidated transaction reporting system. Persons wishing to make written submissions should refer to File No. S7-648 and should file six copies thereof with George A. Fitzsimmons, Secretary, Securities and Exchange Commission, 500 North Capitol Street, Washington, D.C. 20549. (Re!. 34-12796) DECISIONS IN ADMINISTRATIVE PROCEEDINGS NASD ACTION AGAINST STIX & CO. INC. MODIFIED The Commission has stayed for 30 days sanctions imposed by the NASD on Stix & Co. Inc., a St. Louis broker-dealer firm. The NASD had suspended the firm from membership because of its failure either to honor an arbitration award or to request a court to set it aside. The Commission noted that this was the first case in which it had interpreted the NASD's arbitration code, and that Stix's failure to take court action was based on the advice of counsel. It accordingly gave Stix a 3~-day grace period in which it can either pay the award or seek to have it vacated. If the award is paid, the Commission will set aside the sanctions imposed by the NASD. If court action is taken, the sanc- tions will be further stayed and the Commission will reserve jurisdiction to take the remedial action, if any, that it deems appropriate in light of the outcome of the judicial proceedings. If Stix neither pays nor goes to court during the 90-day grace period, it will be sus- pended from NASD membership for 30 days with the proviso that the suspension will ter- minate sooner if it makes payment. (ReI . 34-12760) COURT ENFORCEMENT ACTIONS COMPLAINT NAMES FRANK J. KIRBY, OTHERS The Denver Regional Office announced that on September 3 a complaint was filed in Federal Court in Omaha seeking to enjoin Frank J. Kirby of Omaha, Roger J. Kretz of Rogers, Nebraska, and John T. Smith of Schuyler, Nebraska from violating certain registration and antifraud provisions of the securities laws. The complaint alleges that the defendants violated the securities laws in the offer and sale of non-producing working interests in the Moye lease, Converse County, Wyoming and Lane lease, Morrill County, Nebraska. (SEC v. Frank J. Kirby, et al., D. Nebraska, Civil Action No. 76-0339). (LR-7558) STEPHEN J. BURNS PLACED ON PROBATION The Chicago Regional Office announced that on September 7 Stephen J. Burns of st. Louis County, Missouri, was placed on probation for a period of five years. This sentence arose out of his plea of guilty to a count of an indictment which alleged that in May of 1974, Burns had submitted a false financial statement to the Commission on behalf of Investment Securities Corporation, a broker-dealer firm now in SIPC liquidation. (U.S. v. Stephen J. Burns, E.D. Mo. #76-169 CR (4)). (LR-7559) - COMPLAINT NAMES CANDYWYNE CORPORATION, OTHERS The Atlanta Regional Office and the Miami Branch Office filed a complaint for injunc- tive relief in the U.S. District court for the Middle District of Florida against Candywyne Corporation, National Automotive Industries, Inc., (NAI), James Dorman, Ron Fisher and Ian Morgan each of St. Petersburg, Florida, Leonard Levin of Clearwater, Florid~, and Richard Santilli of Schenectady, New York charging violations and aiding and abetting violations of the registration and antifraud provisions of the securities laws. The Commission's complaint alleged that the defendants Candywyne, NAI, Dorman, Levin and Santilli made material misrepresentations and omissions of material facts in Regulation A offering circulars and notifications filed with Commission and dissemi- nated to the public. The Commission's complaint also alleged that the defendants Candywyne, Santilli, Fisher and Morgan made misrepresentations and omissions of material facts in shareholder letters and research bulletins with respect to the cor- porate activities, operations and financial worth of Candywyne. Without admitting or denying the allegations, Candywyne and Fisher have consented to the entry of permanent injunction. (SEC v. Candywyne Corporation, et al., M.D. Fla. 76-711T-H). (LR-7560) COMPLAINT NAMES INDEPENDENCE DRILLING CORPORATION, OTHERS The Fort Worth Regional Office announced that on September 10 a civil injunctive com- plaint was filed in Federal District Court at San Antonio, Texas, against Independence Drilling Corporation, Continental Pacific Corporation, Walter Wilson Carter, Jr. and Conrad Robert Temp, all of San Antonio, Texas; Diversified Monetary Systems, Inc., and Economic Control Corporation, both of San Francisco, California; Richard Daniel Freeman of Walmut Creek, California; and Alvin Leonard Bawks, doing business as Universal Management, Sherman Oaks, California. The suit seeks to enjoin the defendants from violations of the registration and antifraud provisions of the securities laws in the offer and sale of investment contracts in the form of working interests in oil and gas leases located in San Patricio, Webb, Medina, Duval, Calhoun, Nueces, Shackleford, Starr, Aransas, Jim Hogg and Jim Wells Counties, Texas, issued by Independence Drilling Corporation, Continental Pacific Corporation, Diversified Monetary Systems, Inc., and Economic Control Corporation. (SEC v. Independence Drilling Corporation, et al., W.D. Tex., SA 76-CA 268). (LR-7561) DUDLEY "DIGGER" MORGAN CONVICTED The New York Regional Office announced that on August 27 Dudley "Digger" Morgan was convicted in the U.S. District Court for the Southern District of New York of twelve counts of mail fraud and two counts of securities fraud. Morgan, a Tulsa, Oklahoma stockbroker, was one of five defendants named in a thirty-six count indictment returned on June 25, 1975. Two other defendants, Frank J. Dell'Aglio, Jr. and K. Cyrus Melikian each entered pleas of guilty to one count of securities fraud prior to trial. The Government is presently seeking to extradite a fourth defendant, Victor Danenza from France. The remaining defendant, Michael Brodsky, died prior to the trial. (U.S. v. Victor Danenza, et al., S.D.N.Y.). (LR-7563) INVESTMENT COMPANY ACT RELEASES CHESTNUT STREET EXCHANGE FUND A notice has been issued giving interested persons until October 8 to request a hear- ing on an application of Chestnut Street Exchange Fund (Fund), a California limited partnership, which is a registered open-end diversified investment company, and the Sandridge Corporation (Sandridge), Fund's non-managing general partner, for an order pursuant to Section 6(c) of the Act for exemption from Sections 2(a) (3), 2(a) (19), l8(f) and 22(e) of the Act, so that Fund may operate as a registered investment com- pany while organized as a limited partnership; and for an order pursuant to Section l7(b) of the Act for an exemption from Section l7(a) so that Sandridge may contribute securities to the Fund in exchange for shares of the Fund. (ReI. IC-9438 - Sept. 14) CARDINAL CORPORATE INCOME TRUST A notice has been issued giving interested persons until September 30 to request hear- ing on an application of Cardinal Corporate Income Trust, Series 101 (and Subsequent Series) (Trust), a registered unit investment trust, and its sponsor, The Ohio Company, for an order exempting the Trust from the initial net worth requirements of Section l4(a) and from the limitations on the distributions of capital gains contained in Rule 19b-l, and exempting the secondary market operations of the sponsor from the pricing requirements of Rule 22c-1. (ReI. IC-9439 - Sept. 14) 2 NEWS DIGEST, September 16, 1976 - INVESTORS DIVERSIFIED SERVICES An order has been issued on an application of Investors Diversified Services, Inc. (IDS), IDS Life Insurance Company and the investment companies in the IDS complex, permitting the investment advisers and principal underwriters for such companies to continue to serve under existing contracts with such companies until new investment advisory agreements and underwriting agreements between such companies and their existing investment advisers and principal underwriters are approved by the shareholders or boards of directors of such companies, as the case may be. (ReI. IC-9440 - Sept. 14) THE ADAMS EXPRESS COMPANY A notice has been issued giving interested persons until October 8 to request a hear- ing on an application of The Adams Express Company. (Rel. IC-9443 - Sept. 15) TRINWALL CASH RESERVE An order has been issued declaring that John K. Lundberg (Lundberg) shall not be deemed an "interested person" of Trinwall Cash Reserve, Inc. within the meaning of Section 2 (a)(19) of the Act. (Rel. IC-9442 - Sept. 15) HOLDING COMPANY ACT RELEASES INDIANA & MICHIGAN ELECTRIC COMPANY A supplemental order has been issued authorizing Indiana & Michigan Electric Company (I&M), subsidiary of American Electric Power Company, Inc., to increase the total lines of credit available to I&M from four previously named banks by $900,000. (ReI. 35-19680 - Sept. 15) NEW ENGLAND ELECTRIC SYSTEM A notice has been issued glvlng interested persons until October 12 to request a hear- ing on a proposal of New England Electric System (NEES), to make a $20 million capital contribution to New England Power Company (NEPCO), a subsidiary of NEES, such contri- bution being applied towards the payment of a like amount of NEPCO's short-term debt. (ReI. 35-19681 - Sept. 15) EASTERN UTILITIES ASSOCIATES A notice has been issued giving interested persons until October 12 to request a hear- ing on a proposal of Eastern Utilities Associates and its subsidiaries, that one sub- sidary sell to a second subsidiary securities of the system generating company and that the second SUbsidiary assume a bank loan obligation and first mortgage bond obli- gation in connection with the sale.