UNITED STATES OF AMERICA
In the Matter of
GEOFFREY A. NEWMAN,
ORDER APPROVING PLAN
On October 27, 1999, the Commission published notice of the Division of Enforcement's proposed Plan for the Administration and Distribution of Disgorgement Fund (the "Plan") in this proceeding. The Plan proposed that $131,219 in net commissions disgorged by the Respondent pursuant to the Commission's Order dated September 2, 1999 be distributed pro rata among the six former customers whom the Commission found that the Respondent defrauded while working as a registered representative at J.B. Hanauer & Co. ("Hanauer") between 1992 and 1995.1
The Commission received three comments in response to the publication of the Division's proposed Plan; two objections to the Plan and one comment in support of the Plan.
Hanauer and a representative of one of the former customers objected to the Plan on the ground that it did not take into account prior settlements and an arbitration award paid by Hanauer to certain of the customers. Hanauer proposed that "the `fair and reasonable' approach is for the Plan to be reconfigured to reduce the payout to those who have already received compensation equal to, or in excess of, the Plan's net commission figure."
One of the six former customers wrote in support of the Plan and against Hanauer's comments. This customer wrote that the arbitration award that he received did not fully compensate him for his losses as a result of the Respondent's misconduct.
In order to evaluate the comments received, the Division of Enforcement obtained follow-up submissions from Hanauer, and reviewed statements of claim, submissions, and other materials filed in connection with relevant National Association of Securities Dealers arbitration proceedings. The steps which the Division followed and the Division's complete analysis are set forth in the Division's Memorandum to the File in this proceeding, dated January 23, 2001, which is available for public inspection.
Upon consideration of the comments received and the Division of Enforcement's analysis, the Commission finds that the Division's proposed Plan is fair and reasonable, and should be approved. See SEC v. Wang, 944 F.2d 80, 84 (2d Cir. 1991)(Court will approve plan if "fair and reasonable"); SEC v. Certain Unknown Purchasers, 817 F.2d 1018, 1020 (2d Cir. 1987)(the Commission has broad discretion in approving disgorgement distribution plans as a function of its equitable powers in remedying violations of the securities laws); SEC v. Levine, 881 F.2d 1165, 1182 (2d Cir. 1988) (this broad discretion "include[s] the flexibility to decide that certain groups of claimants would receive payments and others would not"). The reasons for this finding are as set forth in the Division's file memorandum, and are summarized as follows:
First, there is no direct record evidence that Hanauer's payments to the former customers comprised a return of any of the Respondent's net commissions. Nor does the record suggest any clear methodology that can be clearly and equitably applied for imputing to the payments some amount of return of commissions.
Similar problems affect other possible approaches to distribution of the available funds. A pro rata distribution offers at least as much overall equity as other possible approaches. A pro rata distribution also does not negatively affect investors who timely pursued their private claims.
NOW, THEREFORE, IT IS HEREBY ORDERED, pursuant to Rules 610 and 613 of the Commission's Rules of Practice, [17 C.F.R. §§ 201.610, 201.613], that the Division's proposed Plan for the Administration and Distribution of Disgorgement Fund is approved; and
IT IS FURTHER ORDERED that Brian A. Ochs, Assistant Director, in the Division Enforcement, be appointed Administrator of the Proposed Plan; and
IT IS FURTHER ORDERED that the Office of the Comptroller shall make the following distribution amounts2 no later than the earlier of (i) 30 days after the expiration of the time for appealing this Order, or (ii) in the event this Order is appealed, 30 days after the final resolution of the appeal:
|Morris and Helen Abolafia||$57,554.21|
|Jean Jacobson||$ 2,394.29|
|Edward A. Miller Trust||$31,211.94|
|Miriam A. Ross||$10,900.11|
|Jeffrey A. Woloson||$16,787.12|
By the Commission.
Jonathan G. Katz
1 See Securities Act Release No. 7731, Exchange Act Release No. 41825 (Sept. 2, 1999).
2 Amounts reflected in this Order are at slight variance with amounts set forth in the Plan due to certain computational errors in the Plan as published.http://www.sec.gov/litigation/admin/33-7942.htm
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