SEC in Action: Finds Nomura Holdings Not Ineligible Issuer Even with Judgment, Will Consider Redrafted Shareholder Proposal Regarding Exelon, & Puts Out Regulation M, Rule 105 Violation Sanctions

The Securities and Exchange Commission’s Division of Corporation Finance has given relief to Nomura Holdings, Inc. over an entry in the final judgment issued against its subsidiary Instinet, LLC last month. The staff said that Nomura made a good cause showing under 1933 Securities Act Rule 405(2), and now the SEC says it won’t consider the company an ineligible issuer even with the entry of that final judgment.

The SEC opened up an administrative proceeding action against Instinet, accusing it of purposely abetting and aiding and violating sections of the Investment Advisers Act. The claims involved purported soft dollar payments.

J.S. Oliver Capital Management, L.P., an Instinet customer, had asked for the payments for expenses it did not tell clients about. The Commission says that Instinet made the payments per JS Oliver’s request, even though there were red flags indicating that the requests for payment approval were improper. The Nomura subsidiary turned in a settlement offer that led to a cease-and-desist order against the brokerage firm, & the regulator accepted the settlement offer.

Responding to a no-action request from Exelon Corp. to leave out from the latter’s proxy materials a shareholder proposal for a pay ratio cap for certain named executives, this SEC division said the proposal would be excluded unless it is redrafted (or a request is made to the board of directors). SEC staff did not agree with Exelon that the proposal, which concentrates on senior executive compensation-related policies, was misleading, false, or pertained to mere ordinary business.

Canadian-registered portfolio management firm Qube Investment Management Inc. turned in the proposal, asking that the compensation committee or the board restrict how much each named Exelon executive officer could make to no more than 100 times the median annual total paid to all company employees. Qube said that at least one Exelon executive is making 200 times the pay of the average American worker.

Exelon argued that the proposal would properly limit the power of tis board to decide compensation, and under Pennsylvania law this subject was not appropriate for action by shareholders.

SEC staff agreed that there was some ground’s for Exelon’s argument about the proposal not being appropriate subject for shareholder action or that it could cause the company to violate state law. That said, staff noted that the defect could be fixed if it was reframed as a request or a recommendation.

In other SEC news, the Commission has just issued final rules to make clear the roles of its ethics counsel and general counsel. The regulator’s general counsel is to advise staff lawyers about professional duties arising from their official duties, as well as probe allegations of professional misbehavior. As for its ethic’s counsel, the SEC said its job did not include looking into allegations about professional misconduct or making referrals to the authorities. The rules and accompanying modification/clarifications will go into effect once they appear in the Federal Register.

Also, the SEC has sanctioned Axius Holdings, LLC. for violating Regulation M’s Rule 105. The Commission claims that Axius took part in 13 offerings that the rule covers between June 2008 and March 2010 and then went on to short the stock of the companies during the restricted periods.

As a result of these alleged trading activities, Axius and its owner Henry Robertelli purportedly made profits of about $31,000. Now, the two of them must pay disgorgement in that approximate amount, plus prejudgment interest and a monetary payment.

The SSEK Partners Group is a securities fraud law firm that represents institutional investors and high net worth individuals in recovering their money.

Read the SEC Order Regarding Nomura (PDF)

Letter from the SEC’s Division of Corporation Finance Over Qube, Exelon, Shareholder Proposal (PDF)

Responsibilities of the General Counsel, SEC (PDF)

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