SECURITIES ACT OF 1933
Release No. 8202 / March 13, 2003
SECURITIES EXCHANGE ACT OF 1934
Release No. 47498 / March 13, 2003
ADMINISTRATIVE PROCEEDING
File No. 3-10765
In the Matter of
J.W. BARCLAY & CO., INC. Respondents. |
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ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934 AS TO MICHAEL J. WILLS |
I.
On April 24, 2002, the Securities and Exchange Commission ("Commission") instituted public administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Respondent Michael J. Wills ("Wills" or "Respondent") and others. Wills has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept.
II.
Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, Respondent consents to the entry of this Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 as to Michael J. Wills ("Order"), as set forth below.
III.
On the basis of this Order and Respondent's Offer, the Commission finds1 that:
Respondent
1. During the time period from in or about June 1997 through in or about December 1998, Michael J. Wills ("Wills"), age 38, was the vice president and senior sales manager of J.W. Barclay & Co., Inc. ("Barclay"). Wills owns 30% of Barclay. He holds a Series 24 license and is a registered representative.
Other Respondents
2. Barclay, a broker-dealer registered with the Commission in December 1988, is headquartered in New Jersey and was a member of the National Association of Securities Dealers, Inc. ("NASD"). Barclay is a privately-held corporation and is principally owned by respondents John A. Bruno and Wills.
3. John A. Bruno ("Bruno"), age 39, is the controlling owner, president and executive officer of Barclay. Bruno owns 68% of Barclay. Bruno holds a Series 24 license and is a registered representative.
4. Edgar B. Alacan ("Alacan"), age 30, has been a registered representative since September 1990, and was associated with Barclay from April 1996 to September 2000.
5. Emmanuel P. "Dexter" Cube ("Cube"), age 31, has been a registered representative since January 1994, and was associated with Barclay from September 1994 through December 2000. Cube owns 2% of Barclay.
6. Mayer Dallal ("Dallal"), age 29, has been a registered representative since October 1993, and was associated with Barclay from June 1997 to October 1998.
7. Danoo Noor, Sr. ("Noor"), age 31, has been a registered representative since November 1992. Noor was associated with Barclay from June 1997 to January 1999.
8. Emanuele A. "Manny" Scarso ("Scarso"), age 29, has been a registered representative since October 1991. Scarso was associated with Barclay between April 1996 and January 1998.
9. Michael B. Scott ("Scott") has been a registered representative since June 1994. Scott was associated with Barclay between January 1997 and March 1998.
The RRs Defrauded Numerous Customers
10. During the time period from in or about June 1997 through in or about December 1998, Alacan, Cube, Dallal, Noor, Scarso and Scott (together, the "RRs") engaged in the following conduct in the accounts of their customers:
a. Alacan, Cube, Dallal, Scarso and Scott made unauthorized purchases and sales of securities including unauthorized purchases of securities on margin in the accounts of at least 11 customers. These respondents purchased or sold stock without first obtaining their customers' approval, and on some occasions purchased stock in greater amounts than approved, or purchased stock on margin without first obtaining their customers' consent to trading on margin.
b. Alacan, Cube, Dallal, Noor and Scott churned the accounts of at least 12 customers. They controlled the customers' accounts, and traded excessively in the customers' accounts in light of the customers' investment objectives. The accounts which these respondents churned had turnover ratios ranging from approximately 6.48 to approximately 61.31, and break-even ratios ranging from approximately 14.42% to approximately 433.96%.
c. Noor and Scott made materially misleading statements or omissions to at least two customers by, among other things, promising specific amounts of profit within a short timeframe or by providing false information about the securities they were selling to their customers.
d. Alacan, Cube, Dallal, Noor, Scarso and Scott made unsuitable purchases and sales of securities including unsuitable purchases of stock on margin in the accounts of at least 13 customers. They did so either by recommending purchases or sales of securities that were not suitable for the customers in light of the customers' ages, investment experience, financial status, risk tolerance and investment objectives, or, by conducting transactions on margin without ascertaining the customers' understanding of the risks associated with the use of margin, among other things.
e. Alacan, Cube, Scarso and Scott failed to execute sell orders or follow other instructions from at least four customers, by, among other things, failing to sell a stock upon a customer's request, or failing to complete a transfer of a customer's account to a different broker-dealer.
11. Based on the foregoing, the RRs willfully violated Section 17(a) of the Securities Act in that they, in the offer or sale of securities, by use of the means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: employed devices, schemes or artifices to defraud; obtained money or property by means of untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstance under which they were made, not misleading; or engaged in transactions, practices or courses of business which would or did operate as a fraud or deceit upon purchasers or prospective purchasers of such securities. As part of their fraudulent conduct, the RRs engaged in the activities described in paragraphs 10(a)-(e) above.
12. Based on the foregoing, the RRs also willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder in that they, in connection with the purchase or sale of securities, by use of the means or instrumentalities of interstate commerce or by use of the mails or of the facilities of any national securities exchange, directly or indirectly: employed devices, schemes or artifices to defraud; made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or engaged in acts, practices or courses of business which would or did operate as a fraud or a deceit upon any person. As part of their fraudulent conduct, the RRs engaged in the activities described in paragraphs 10(a)-(e) above.
Wills Failed Reasonably to Supervise
13. Wills acted as a supervisor at Barclay, and certain of the RRs were subject to his supervision.
14. Wills caused Barclay to institute an inadequate supervisory system by failing to hire enough supervisors for the number of registered representatives associated with Barclay, and by failing to establish adequate procedures designed to detect and prevent sales practice violations and securities fraud resulting from those violations.
15. Wills also ignored or failed to recognize red flags regarding the registered representatives' misconduct, including but not limited to scores of customer complaints, the recommendations of Barclay's compliance director to discipline and/or fire certain RRs and to improve the firm's supervisory procedures, and examination reports and letters from the NASD concerning Barclay's supervisory personnel and procedures.
16. Based on the foregoing, Wills failed reasonably to supervise pursuant to Section 15(b)(6) of the Exchange Act and within the meaning of Section 15(b)(4)(E) of the Exchange Act in that he failed reasonably to supervise, with a view to detecting and/or preventing violations of the provisions of the federal securities laws, other persons who violated the federal securities laws while subject to his supervision. As part of his failure reasonably to supervise the RRs, Wills engaged in the activities described in paragraphs 13 through 15 above.
Undertakings
Respondent has undertaken to:
Provide the Commission, within thirty (30) days after the end of the twelve (12) month suspension period described below, an affidavit that he has complied fully with the sanctions described in Section IV. below.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Respondent's Offer.
ACCORDINGLY, IT IS HEREBY ORDERED:
A. Pursuant to Section 15(b)(6) of the Exchange Act, Respondent be, and hereby is, barred from association in a supervisory capacity with any broker or dealer.
B. Pursuant to Section 15(b)(6) of the Exchange Act, Respondent be, and hereby is, suspended from association with any broker or dealer for a period of twelve (12) months, effective on the second Monday following the entry of this Order.
C. Respondent shall, within 30 days of the entry of this Order, pay a civil money penalty in the amount of $17,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Michael J. Wills as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Kathryn A. Pyszka, Esq., Senior Trial Counsel, Securities and Exchange Commission, Midwest Regional Office, 175 West Jackson Boulevard, 9th Floor, Chicago, Illinois, 60604.
D. Respondent shall comply with the undertakings enumerated in Section III. above.
By the Commission.
Jonathan G. Katz
Secretary
Footnotes
1 The findings herein are made pursuant to Respondent's Offer and are not binding on any other person or entity in this or any other proceeding.