UNITED STATES OF AMERICA
|In the Matter of
Douglas J. Hopwood,,
|ORDER INSTITUTING PUBLIC
MAKING FINDINGS, IMPOSING
REMEDIAL SANCTIONS AND
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest and for the protection of investors that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Respondent Douglas J. Hopwood ("Respondent" or "Hopwood") pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act").
In anticipation of the institution of these proceedings, Hopwood has 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 contained herein, except that he admits the findings contained in paragraphs II.A and II.G and the jurisdiction of the Commission over him and the subject matter of these proceedings, Hopwood consents to the issuance of this Order Instituting Public Administrative and Cease-and-Desist Proceedings, Making Findings, Imposing Remedial Sanctions and Imposing Cease-and-Desist Order, and the entry of findings and the imposition of the sanctions set forth below.
On the basis of this Order and the Offer submitted by Respondent, the Commission finds that:
A. Respondent Douglas J. Hopwood, 39, formerly of Pittsburgh, Pennsylvania, was employed by Addison Securities, Inc. ("Addison") as a registered representative from May 1991 through October 1996. At all relevant times, Addison was a broker-dealer registered with the Commission (File No. 8-28164).
B. Between May 1994 and October 1996, Hopwood raised approximately $448,900 from 10 investors, seven of whom were Addison customers. Hopwood claimed to investors that he would "manage" their money through Omni Financial Group ("Omni"), the assumed name under which Hopwood conducted business from his Addison office. Hopwood claimed he would safely invest the investor funds through Addison in the securities of various reputable NYSE and NASDAQ companies. At Hopwood's direction, the investors gave him personal checks payable to Omni and at times liquidated investments in their Addison account in order to invest with Omni.
C. Instead of investing funds as represented, Hopwood deposited the funds in an Omni bank account that he controlled. Over time, he either spent these funds, or used them to make "Ponzi-like" disbursements of approximately $124,200 to various investors. He transferred the remaining funds to his personal Addison brokerage account and made numerous unprofitable options trades, ultimately losing $324,000 of investor funds.
D. To hide his scheme and lull his investors, Hopwood sent them fictitious account statements and other documents on Addison letterhead. These fictitious account statements falsely reflected profitable purchases and sales of specific, mainstream securities, together with substantial growth in account balances.
E. Hopwood's scheme came to a halt in 1997, after he began having difficulty meeting requests for withdrawals. In April 1998, Hopwood finally sent his customers a letter in which he acknowledged he had misappropriated their funds.
F. Based on the above-described conduct, Hopwood willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
G. Hopwood pled guilty to multiple counts of forgery and theft in a criminal action brought by the State of Pennsylvania based on the conduct described herein. Commonwealth of Pennsylvania v. Douglas J. Hopwood, CR 513-98 (Allegheny County). In November 1999, Hopwood was sentenced to serve 4-8 years in the penitentiary, followed by 21 years probation, and to pay restitution of $687,862.
Based on the foregoing, the Commission deems it appropriate in the public interest and for the protection of investors to accept Hopwood's Offer of Settlement and to impose the remedial sanctions which are set forth in the Offer.
Accordingly IT IS HEREBY ORDERED, that:
A. Effective immediately, Hopwood be, and hereby is, barred from association with any broker or dealer.
B. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Hopwood shall cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
By the Commission
Jonathan G. Katz
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