UNITED STATES OF AMERICA
|In the Matter of
Jerry C. Berman,
|ORDER MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS
In connection with public administrative and cease-and-desist proceedings previously instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b)(6), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondent Jerry C. Berman ("Berman") has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. See Order Instituting Administrative and Cease-and-Desist Proceedings, File No. 3-10092 (November 4, 1999). Berman hereby withdraws his Answer, dated December 2, 1999. Prior to a hearing pursuant to the Commission's Rules of Practice [17 C.F.R. §§ 201.1 et seq.], and without admitting or denying the findings contained in this Order except as to jurisdiction, which is admitted, Berman consents to the entry of this Order.
On the basis of this Order and the Respondent's Offer, the Commission makes the following findings:1
This matter involves violations by Jerry C. Berman of Section 5 of the Securities Act and Section 15(a)(1) of the Exchange Act. From October 1994 through the end of 1995, Stratcomm Media Ltd. ("Stratcomm") and Corporate Relations Group, Inc. ("CRG") conducted an unregistered, non-exempt distribution of Stratcomm common stock. Acting on behalf of those entities, Berman solicited United States residents to buy Stratcomm stock. Stratcomm and CRG paid Berman commissions based upon the sales of common stock he generated. Berman thereby acted as a broker but he failed to register as such with the Commission. He also violated the registration provisions of the Securities Act by selling unregistered Stratcomm stock to the public.
Jerry C. Berman was a consultant to Stratcomm and CRG from early 1994 through the end of 1995. Berman, during all relevant times, was not registered with the Commission as a broker.
C. Other Relevant Entities
1. Stratcomm Media Ltd. is a Vancouver, British Columbia company with principal offices in Winter Park, Florida, and the parent company of CRG and several other subsidiaries. Stratcomm has never registered with the Commission as a broker or dealer. Stratcomm's common stock traded on the NASD OTC Bulletin Board until October 5, 1994, when trading was halted. On July 26, 1998, Stratcomm's common stock resumed trading on the Bulletin Board.
2. Corporate Relations Group, Inc. is a public relations firm located in Winter Park, Florida and a wholly-owned subsidiary of Stratcomm. CRG has never registered with the Commission as a broker or dealer. During the relevant time, CRG provided public relations services for its clients through various financial publications and through its sales personnel, whose primary function was to interest brokers in soliciting their clients to purchase the stocks CRG was promoting.
Stratcomm and CRG engaged in an unregistered distribution of Stratcomm common stock from the fall of 1994 through the end of 1995, selling more than 1,000,000 shares of common stock and collecting proceeds of approximately $1,000,000. The companies, through Respondent and other sales personnel, solicited U.S. residents to purchase Stratcomm stock. Stratcomm and CRG paid Berman commissions based upon the sales of common stock he generated. Berman was neither a registered broker-dealer nor associated with a registered broker-dealer.
To sell the stock, Berman directly solicited potential investors, who, in turn, sent their money directly to Stratcomm. Stratcomm did not file a registration statement with respect to the securities it sold to the public.
Respondent Berman sold more than 310,000 shares of Stratcomm common stock to roughly three dozen people and collected commissions of $50,304.40.
Sections 5(a) and (c) of the Securities Act prohibit any person from directly or indirectly offering to sell or selling securities unless a registration statement is in effect or has been filed as to the securities, or an exemption from registration is available. Scienter is not required to establish a violation of Section 5. Stokes v. Lokken, 644 F.2d 779, 784 (8th Cir. 1981). A "seller" under Section 5 includes the owner of the securities being sold and anyone who personally solicits purchases from investors or offers from prospective buyers.
Respondent willfully violated, and committed or caused violations of, Section 5 of the Securities Act by directly or indirectly offering to sell or selling securities of Stratcomm when no registration statement was in effect or had been filed as to the securities, and no exemption from registration was available.
Section 15(a)(1) of the Exchange Act essentially makes it illegal for a "broker" to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security unless such broker is registered with the Commission. Section 3(a)(4) of the Exchange Act defines "broker" as "any person engaged in the business of effecting transactions in securities for the account of others, but does not include a bank." A person may be found to be acting as a broker if he participates in securities transactions "at key points in the chain of distribution." Massachusetts Financial Services, Inc. v. Securities Investor Protection Corp., 411 F. Supp. 411, 415 (D. Mass.), aff'd, 545 F.2d 754 (1st Cir. 1976), cert. denied, 431 U.S. 904 (1977). Among the activities that indicate a person may be a broker are: solicitation of investors to purchase securities; involvement in negotiations between the issuer and the investor; and receipt of transaction-related compensation. See, e.g., SEC v. Hansen, [1984 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 91,426 (S.D.N.Y. 1984).
During the relevant time, Berman actively solicited investors, was involved in negotiations between the issuer and investors, and received commissions for sales of Stratcomm stock.
Respondent willfully violated, and committed or caused violations of, Section 15(a)(1) of the Exchange Act by effecting transactions in, or inducing or attempting to induce the purchase or sale of, Stratcomm common stock as a broker without having been registered with the Commission as such.
F. Disgorgement and Civil Penalty
Respondent has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement plus prejudgment interest and a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Respondent and has determined that Respondent does not have the financial ability to pay disgorgement of $50,304.40 plus prejudgment interest and a civil penalty.
Based on the foregoing, the Commission deems it appropriate in the public interest and for the protection of investors to accept the Respondent's Offer and to impose the remedial relief specified in the Offer.
Accordingly, IT IS ORDERED, pursuant to Section 8A of the Securities Act, that Respondent Jerry C. Berman cease and desist from committing or causing any violation, and any future violation, of Section 5 of the Securities Act.
Accordingly, IT IS ORDERED, pursuant to Section 21C of the Exchange Act, that Respondent Jerry C. Berman cease and desist from committing or causing any violation, and any future violation, of Section 15(a)(1) of the Exchange Act.
IT IS FURTHER ORDERED that the Division of Enforcement may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent Jerry C. Berman 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 Respondent's offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Respondent 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. Respondent 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
|1||The findings herein are made pursuant to the Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.|
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