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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Act of 1933

Release No. 7530 / April 29, 1998

Securities Exchange Act of 1934

Release No. 39929 / April 29, 1998

Administrative Proceeding

File No. 3-9591

In the Matter of

BARRY D. TULL, AND
PAUL E. PINHOLSTER
ORDER INSTITUTING PROCEEDDINGS, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS, AND CIVIL PENALTIES AND CEASE AND DISIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted against: Schneider Securities, Inc. ("Schneider") pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934 ("Exchange Act"); Barry D. Tull ("Tull") pursuant to Section 15(b)(6) of the Exchange Act; and, Paul E. Pinholster ("Pinholster") pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b)(6) and 21C of the Exchange Act (referred to collectively as "Respondents").

In anticipation of these proceedings, Respondents have each submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. 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 Commission's findings herein, except that Respondents admit the Commission's jurisdiction over them and the subject matter of these proceedings and the findings contained in paragraphs II. A. through D. below, Respondents consent to the entry of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions, Civil Penalties and Cease and Desist Order ("Order").

II.

On the basis of this Order and the Respondents' Offers, the Commission finds that 1 :

RESPONDENTS

A.Schneider, a broker-dealer registered with the Commission since May 1985, is headquartered in Denver and during all times relevant to this proceeding had approximately sixteen branch offices located nationwide.

B.Tull resides in Englewood, Colorado. He was Schneider's compliance director during the relevant time period, January 1992 through in or about May 1993. Additionally, Tull had responsibility for supervising the sales activities of Schneider’s southeast Denver, Colorado branch office.

C.Pinholster presently resides in Tucson, Arizona. He was associated with Schneider as a registered representative from June 1991 to October 1993 and was the putative branch manager of Schneider's southeast Denver branch office in 1992 and 1993.

RELATED ENTITY

D.Technigen Corporation ("Technigen") is a publicly-held Canadian corporation based in Vancouver, British Columbia. During the relevant time period, Technigen developed and manufactured golf-related products. The common stock of Technigen traded on NASDAQ until mid-1997. Schneider made a market in Technigen stock during the relevant time period.

SUMMARY

E. From around January 1992 through around May 1993, the securities of Technigen were offered for sale to the public in an unregistered distribution and the price of the securities was manipulated. Pinholster facilitated the distribution and manipulation of Technigen stock in his capacity as a registered representative and branch manager of Schneider's southeast Denver, Colorado branch office. Based on these activities, Pinholster and another representative associated with Schneider who owned the Schneider branch office in southeast Denver (hereafter referred to as "RR") violated or caused violations of the registration provisions of the Securities Act and antifraud provisions of the Exchange Act. Schneider and Tull failed reasonably to supervise Pinholster and the RR with a view to preventing their violations.

FACTS

F. Between January 1992 and February 1993, Technigen issued a total of 6,047,500 common shares, which were illegally transferred to entities controlled by the RR. The RR deposited a portion of the Technigen shares in an account at Schneider (the "Account"). Pinholster was the nominal registered representative on the Account, although the RR directed all trading in the Account.

G. As the result of an aggressive retail sales campaign based on leads furnished through an entity in which the RR had an ownership interest, during the period from March 1992 through September 1992 Schneider sold 2,079,850 Technigen shares to 490 retail customers. The Account supplied 93 percent of the Technigen stock for Schneider's retail sales. The RR also effectively controlled Schneider's inventory account with regard to trading in Technigen stock. Although the firm required that the inventory of Technigen stock be "flat" at the end of each month, the RR determined the source and disposition of Technigen shares for Schneider, set retail and wholesale prices, and established inventory levels throughout each month.

H. In late July 1992, Tull became concerned about Schneider's trading in Technigen and asked the RR to explain in writing his relationship to the Account. The RR falsely responded in writing that he had no relationship with the Account. Additionally, Tull mandated that 20 percent of Schneider's trades in Technigen be inter-dealer transactions and that Schneider's retail ask price be marked-up from the inter-dealer prices by no more than 5 percent. The RR provided the requisite inter-dealer trading, and thereby made it appear that the firm's 20 percent requirement was being complied with, by causing Schneider to engage in matched trading of Technigen shares with another broker-dealer involved in the manipulative scheme. Also, the RR directed the other broker-dealer to funnel Technigen stock to Schneider from another company controlled by the RR, thus supplying additional stock for Schneider's retail sales effort.

I. Despite numerous continuing apparent improprieties in Schneider's trading of Technigen stock, Tull never took further steps to determine whether the RR was associated with the Account or whether Schneider's inter-dealer and retail trading of Technigen was legitimate. Moreover, although they were aware that the RR had been the subject of a state disciplinary action, they did not impose additional supervision or control over the RR.

J. The RR left Schneider's Denver office in February 1993. From approximately February 1993 through May 6, 1993, when the Commission suspended trading in Technigen stock for ten days, Pinholster directed Schneider's trading in Technigen. As part of these activities, to cover Schneider's short position in Technigen stock, Pinholster contacted broker-dealers with which the RR had arrangements to supply Technigen shares to Schneider. Pinholster also continued engaging in matched inter-dealer trading to create the appearance of a legitimate market for Technigen securities.

VIOLATIONS

K. During the period from about January 1992 through about May 1993, the RR violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that he, directly and indirectly, in connection with the purchase or sale of the securities of Technigen, and by use of the means and instrumentalities of interstate commerce and the mails, employed devices, schemes or artifices to defraud, made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and engaged in acts, practices or courses of business which would and did operate as a fraud or deceit upon purchasers of the securities of Technigen. As part of and in furtherance of this violative conduct, the RR manipulated the market for the securities of Technigen through:

1. prearranged trading among controlled brokerage accounts;

2. prearranged trading with other broker-dealers to supply stock for Schneider's retail sales effort; and

3. prearranged matched trading between Schneider and another broker-dealer to create the appearance of a legitimate market for the securities.

L. During the period from about January 1992 through about May 1993, Pinholster willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that he, directly and indirectly, in connection with the purchase or sale of the securities of Technigen, and by use of the means and instrumentalities of interstate commerce and the mails, employed devices, schemes or artifices to defraud, made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and engaged in acts, practices or courses of business which would and did operate as a fraud or deceit upon purchasers of the securities of Technigen. As part of and in furtherance of this violative conduct, Pinholster manipulated the market for the securities of Technigen in that he:

1. was on notice of improper trading in the account controlled by the RR but nevertheless permitted his name to be used as the registered representative assigned to the account;

2. engaged in prearranged trading with other broker-dealers to supply stock for Schneider's retail sales effort; and

3. engaged in prearranged matched trading between Schneider and another broker-dealer to create the appearance of a legitimate market for the securities.

M. During the period from about January 1992 through about May 1993, the RR and Pinholster, with respect to the securities of Technigen, violated Section 10(b) of the Exchange Act and Rule 10b-6 thereunder in that each, as an underwriter or prospective underwriter in a distribution of securities, or as the issuer or other person on whose behalf such a distribution is being made, or as a broker, dealer or other person who has agreed to participate or is participating in such a distribution, or as an "affiliated purchaser," directly or indirectly, by use of the means and instrumentalities of interstate commerce and the mails, either alone or with one or more other persons, bid for or purchased for any account in which he had a beneficial interest, a security which was the subject of such a distribution, or a security of the same class and series, or any right to purchase any such security, or attempted to induce any person to purchase any such security or right, before completing his participation in such distribution. 2

N. During the period from about January 1992 through about May 1993, the RR, acting as an underwriter within the meaning of Section 2(a)(11) of the Securities Act, violated Sections 5(a) and (c) of the Securities Act in that he, directly and indirectly, by use of means or instruments of transportation or communication in interstate commerce and the mails, offered to sell, sold and delivered after sale securities of Technigen to the public when no registration statement was filed or in effect pursuant to the Securities Act with respect to these public distributions of securities.

O. During the period from about January 1992 through about May 1993, Pinholster, due to an act or omission which he knew or should have known would contribute to the violation, caused violations of Sections 5(a) and (c) of the Securities Act with respect to the above-described public distribution of Technigen securities.

P. Tull, and Schneider through Tull, failed reasonably to supervise the RR and Pinholster with a view to preventing their violations of Sections 5(a) and (c) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 10b-6.

CIVIL PENALTIES

Q. Pinholster has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Pinholster and has determined that he does not have the financial ability to pay a civil penalty.

III.

ORDER

In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offers submitted by Respondents and impose the cease and desist order, remedial sanctions and money penalties agreed to therein. Accordingly, IT IS HEREBY ORDERED that:

A. Schneider is censured.

B. Schneider shall, within ten (10) days of the entry of this Order, pay a civil money penalty in the amount of $75,000 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (4) submitted under cover letter that identifies Schneider as a respondent in these proceedings and the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Daniel F. Shea, Regional Director, Securities and Exchange Commission, 1801 California Street, Suite 4800, Denver, CO 80202;

C. Tull be, and hereby is, suspended from association with any broker or dealer for a period of three (3) months, effective on the second Monday following entry of this Order;

D. Tull be, and hereby is, suspended from association in a supervisory or proprietary capacity with any broker or dealer for a period of nine (9) months immediately following the period of his suspension from association;

E. Tull shall, within ten (10) days of the entry of this Order, pay a civil money penalty in the amount of $5,000 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (4) submitted under cover letter that identifies Tull as a respondent in these proceedings and the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Daniel F. Shea, Regional Director, Securities and Exchange Commission, 1801 California Street, Suite 4800, Denver, CO 80202;

F. Pinholster cease and desist from committing or causing any violation, or any future violation, of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Rule 101 of Regulation M of the Exchange Act, and from causing any violation, or any future violation, of Sections 5(a) and (c) of the Securities Act;

G. Pinholster be, and hereby is, barred from association with any broker, dealer, investment adviser, investment company or municipal securities dealer; and

H. The Division of Enforcement may, at any time following entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Pinholster provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Pinholster's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Pinholster was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of civil penalty to be imposed and whether any additional remedies should be imposed. Pinholster may not, by way of defense to

any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.

By the Commission.

Jonathan G. Katz
Secretary


Footnotes

1 The findings herein are made pursuant to Respondents' Offers and are not binding on any other person or entity in this or any other proceeding.
2 On December 18, 1996, the Commission adopted a comprehensive revision of Rules 10b-6, 10b-7, 10b-8 and 10b-21, which became effective on March 4, 1997. Among other things, these amendments deemed Rules 101 and 102 under Regulation M as successor rules to Rule 10b-6. Accordingly, this Order orders Pinholster to cease and desist from violating Rule 101 of Regulation M.

http://www.sec.gov/litigation/admin/3-9591.htm


Modified:04/29/1998