UNITED STATES OF AMERICA
|In the Matter of
|ORDER MAKING FINDINGS,
IMPOSING REMEDIAL SANCTIONS
AND IMPOSING A CEASE-AND-
By an order issued June 30, 1999, the Securities and Exchange Commission ("Commission") instituted a public administrative proceeding pursuant to Section 8A of the Securities Act of 1933 (the "Securities Act") and Sections 15(b)(6) and 21C of the Securities Exchange Act of 1934 (the "Exchange Act') against Berryl Septimus and Suzanne Pelosi ("Pelosi").
After the institution of these proceedings, Pelosi submitted an Offer of Settlement ("Offer") to the Commission, 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 in which the Commission is a party, and without admitting or denying the findings contained in this Order except admitting the Commission's jurisdiction over her and the subject matter of this proceeding, Pelosi consents to the issuance of this Order Making Findings, Imposing Remedial Sanctions and Imposing a Cease-and-Desist ("Order") and to the entry of the findings and the imposition of the remedial sanctions set forth below.
On the basis of this Order and Pelosi's Offer, the Commission makes the following findings1:
A. Pelosi, age 48, was at all relevant times employed by, and associated with, a currently defunct broker-dealer (the "Broker-Dealer"), formerly registered with the Commission, as the Broker-Dealer's Chief Executive Officer and Principal's (the "Principal") secretary from October 1, 1987 to September, 1994.
B. The Principal of the Broker-Dealer orchestrated a manipulative scheme designed to increase and/or stabilize the prices of a number of the biotechnology securities that the Broker-Dealer took public and in which it made a market. These securities included BioSepra, Inc. ("BioSepra") common stock, Intelligent Surgical Lasers, Inc. ("Intelligent Surgical") Class A warrants, HemaSure, Inc. ("HemaSure") common stock, Ariad Pharmaceuticals, Inc. ("Ariad") units, Ecogen, Inc. ("Ecogen") common stock and MicroProbe Corporation ("MicroProbe") common stock and warrants (the "biotechnology stocks"). For instance, from July through September 1994, the Principal knowingly executed hundreds of transactions in biotechnology stocks. The Principal routinely sold biotechnology stocks from the Broker-Dealer's inventory accounts to brokerage accounts the Principal controlled that were in the names of other individuals and entities. These controlled accounts would then sell the biotechnology stocks back to the brokerage firm or to other accounts controlled by the Principal. Additionally, the Principal engaged in other practices such as wash sales and matched orders in the biotechnology stocks. The Principal also engaged in unauthorized trading in customer accounts. These trades created the appearance of active trading in the biotechnology stocks. Additionally, through this trading, the Principal was also able to reduce the Broker-Dealer's inventory position in the biotechnology stocks, yet still artificially withhold from the market the supply of the biotechnology stocks.
C. From approximately March 1994 to September 1994, the Broker-Dealer violated, and Pelosi willfully aided and abetted and caused violations of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder in that the Broker-Dealer failed to accurately make and keep for prescribed periods such records, furnish such copies thereof, and make, disseminate and file such reports as the Commission by rule, has prescribed as necessary and appropriate in the public interest and for the protection of investors. In order to make the manipulative and unauthorized trades described in Paragraph III.B., the Principal needed to have the signatures of certain account holders forged. The Principal instructed Pelosi to forge the names of these account holders, and Pelosi complied with these orders. For example:
1. In May 1994, Pelosi forged the signature of a Broker-Dealer account holder onto a margin agreement and a document that guaranteed the Broker-Dealer's clearing firm against any loss the clearing firm might incur in extending credit to the Broker-Dealer's account holder.
2. In July 1994, Pelosi forged the signatures of at least three additional Broker-Dealer account holders onto margin agreements and documents that guaranteed the Broker-Dealer's clearing firm against any loss the clearing firm might incur in extending credit to the Broker-Dealer's account holders.
3. On August 22, 1994, Pelosi forged the signature of an account holder to a letter authorizing Citibank to wire $500,000 out of an account in the name of Beis Avraham to the Armor Pension account without the account holder's authorization. This transfer of funds was done in order to effect the manipulative trades of BioSepra common stock described in paragraph III.B above.
D. As described in paragraphs III.A. through III.C. above, Pelosi willfully aided and abetted and caused violations of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder.
E. It is in the public interest to impose sanctions and a civil money penalty of $5,000 against Pelosi.
In view of the foregoing, it is in the public interest to impose the sanctions specified in the Offer.
Accordingly, IT IS HEREBY ORDERED that:
A. Pelosi cease and desist, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, from causing any violation and any future violation of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder;
B. Pelosi shall, within 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: (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 a cover letter that identifies Suzanne Pelosi 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 Kay Lackey, Assistant Regional Director, Division of Enforcement, Securities and Exchange Commission, Northeast Regional Office, 7 World Trade Center, 13th Floor, New York, NY, 10048; and
C. Pelosi be, and hereby is, barred from association with any broker or dealer.
By the Commission.
|1||The findings herein are made pursuant to Pelosi's Offer and are not binding on any other person or entity in this or any other proceeding.|
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