UNITED STATES OF AMERICA
|In the Matter of
PAUL A. BARRIOS,
|ORDER INSTITUTING PUBLIC
FINDINGS AND IMPOSING
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative and cease-and-desist proceeding pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 21C, 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") be instituted against respondent Paul A. Barrios ("Barrios").
In anticipation of the institution of this administrative and cease-and-desist proceeding, Barrios has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except that Barrios admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, Barrios consents to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceeding, Making Findings and Imposing Sanctions ("Order").
Accordingly, IT IS ORDERED that a proceeding pursuant to Section 8A of the Securities Act and Sections 15(b), 19(h) and 21C of the Exchange Act be, and hereby is, instituted.
On the basis of this Order and Barrios' Offer, the Commission finds that:1
Barrios, age 38, resides in Mission Viejo, California. From December 1995 to at least March 1998, Barrios managed the salespeople at Face to Face Financial Inc., dba FTF Financial Corp. ("FTF"), and Barrios was FTF's lead salesman. During the relevant period, from September 1995 to December 1995, Barrios was a registered representative with a registered broker-dealer. In addition, beginning in December 1997, Barrios was seeking to become a registered representative with a registered broker-dealer.
1. From December 1995 to March 1998, FTF conducted four unregistered preferred stock offerings, raising over $4.3 million from approximately 400 investors nationwide. FTF's salespeople solicited potential investors nationwide by, among other things, cold-calling people whose names appeared on lead lists. Barrios supervised FTF's salespeople. In addition, Barrios personally offered and sold stock in each of FTF's four offerings and was FTF's lead salesman, selling over $1 million of FTF's stock, almost a quarter of the $4.3 million raised by FTF. FTF compensated Barrios for managing FTF's salespeople and for his stock sales.
2. During FTF's offerings, Barrios made misrepresentations in his oral solicitations of investors. Specifically, Barrios misrepresented that FTF had a large purchase order for video conferencing computers to be shipped to a prominent international governing body. In addition, Barrios misrepresented that FTF had a 30 page multi-point conferencing contract with a well-known communications corporation. Barrios also misrepresented that FTF's video conferencing computers were going in train stations.
C. LEGAL ANALYSIS
1. Sections 5(a) and 5(c) of the Securities Act prohibit the offer or sale of securities unless the securities are registered with the Commission or are exempt from registration. Barrios, by managing FTF's salespeople and by personally offering and selling FTF's stock, directly or indirectly, through the use of the means or instruments of transportation or communication in interstate commerce or the mails, offered to sell or sold securities, or, directly or indirectly, carried or caused such securities to be carried through the mails or in interstate commerce, for the purpose of sale or for delivery after sale. No registration statement has been filed with the Commission or has been in effect with respect to these securities, and the securities are not exempt from registration. By reason of the foregoing, Barrios willfully violated Sections 5(a) and 5(c) of the Securities Act.
2. Section 15(a) of the Exchange Act requires an individual or entity that effects securities transactions to be registered with the Commission as a broker-dealer or associated with a registered broker-dealer, subject to certain exemptions from registration. Barrios, by selling the securities offered by FTF, directly or indirectly, made use of the mails and other means or instrumentalities of interstate commerce to effect transactions in securities, without being registered as a broker or dealer pursuant to Section 15(b) of the Exchange Act, or associated with a registered broker-dealer. By reason of the foregoing, Barrios willfully violated Section 15(a) of the Exchange Act.
3. Section 17(a) of the Securities Act prohibits fraud "in the offer or sale of any securities," and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit fraud "in connection with the purchase or sale of any security." Barrios, by misrepresenting that FTF had a large purchase order for video conferencing computers, by misrepresenting that FTF had a contract with a well-known communications corporation, and by misrepresenting that FTF's video conferencing computers were going in train stations, employed a device, scheme or artifice to defraud, made untrue statements of material fact, or omitted to state material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading. By reason of the foregoing, Barrios willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Barrios and impose the sanctions specified in the Offer.
Accordingly, IT IS HEREBY ORDERED that:
A. pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Barrios cease and desist from committing or causing any violation and any future violation of Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder; and
B. Barrios be, and hereby is, suspended from association with any broker or dealer for a period of twelve months, effective on the second Monday following the entry of this Order; and
C. Barrios shall provide to the Commission within 10 days after the end of the twelve month suspension period described above, an affidavit that he has complied fully with the sanctions described in Paragraph B above.
By the Commission.
Jonathan G. Katz
|1||The findings herein are made pursuant to Barrios' Offer and are not binding on any other person or entity in this or any other proceeding.|
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