UNITED STATES OF AMERICA
SECURITIES ACT OF 1933
SECURITIES EXCHANGE ACT OF 1934
In this public administrative proceeding ordered 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"), Michael Vanechanos ("Vanechanos") submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept.1 Solely for the purpose of this proceeding 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 for the Commission's jurisdiction with respect to the matters set forth in this Order and those facts which are set forth in paragraph II.A. below, which Vanechanos admits, Vanechanos consents to the entry of this Order.
On the basis of this Order, the Order Instituting Proceedings in this matter and the Offer submitted by Vanechanos, the Commission finds2 that:
A. Vanechanos, age 38, is a resident of Holmdel, New Jersey. In June, 1996, Vanechanos was head trader of H.J. Meyers & Co., Inc. ("H.J. Meyers"). From June 24, 1996 through June 28, 1996, Vanechanos traded Borealis Technology Corporation ("Borealis") stock.
B. H.J. Meyers was a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act since at least 1995. On June 24, 1996, H.J. Meyers underwrote the initial public offering ("IPO") of Borealis.
C. On or about June 24, 1996, H.J. Meyers sold approximately 1.9 million, or 80%, of the Borealis IPO shares to its retail customers at the price of $5.00 per share. The remaining 20%, approximately 400,000 shares, of the Borealis IPO was sold by 21 other broker-dealers.
Manipulation of the Price of Borealis
D. During the period June 24, 1996 through June 28, 1996 (the "manipulative period"), H.J. Meyers, through Vanechanos:
1. effected a series of transactions in which it purchased a total of approximately 913,305 Borealis shares and sold approximately 1,048,253 Borealis shares;
2. raised the price of Borealis from the IPO price of $5.00 per share to approximately $8.49 by:
a. exercising price leadership by leading or sharing the inside bid for Borealis throughout the vast majority of the manipulative period;
b. executing 77% of the total trading volume in Borealis while acting as a market maker and retail seller of Borealis common shares;
c. executing substantially more trading volume than any other broker-dealer;
d. reducing the floating supply of Borealis shares by controlling 75% of the floating supply of Borealis stock.
Excessive, Undisclosed Markups
E. During the period June 24, 1996 through June 25, 1996, H.J. Meyers, through Vanechanos, fraudulently sold Borealis shares to its customers for total profits of $305,000 and $71,000, respectively, by charging undisclosed, excessive markups. Specifically, H.J. Meyers:
1. acted as a market maker and retail seller of Borealis;
2. dominated and controlled the market for Borealis shares;
3. based markups on inside interdealer ask prices rather than on H.J. Meyers's contemporaneous cost;
4. failed to disclose to customers the size of the markups it was charging on the Borealis shares.
F. From at least on or about June 24, 1996 through June 28, 1996, Vanechanos willfully violated Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5, thereunder, and willfully aided and abetted H.J. Meyers's willful violations of Section 15(c)(1) of the Exchange Act and Rules 15c1-2, and 15c1-8 thereunder.
In view of the foregoing, the Commission finds that it is appropriate in the public interest and for the protection of investors to 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, Vanechanos is hereby ordered to cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act, Section 10(b) and of the Exchange Act and Rule 10b-5 thereunder and causing any violation and any future violation of Section 15(c)(1) of the Exchange Act and Rules 15c1-2, and 15c1-8 thereunder.
B. Vanechanos be, and hereby is, barred from association with any broker-dealer, with the right to reapply for association after five years to the appropriate self-regulatory organization, or if there is none, to the Commission.
C. Vanechanos shall pay the $100,000 civil penalty plus post judgment interest, in the total amount of $2,358.48 as follows:
1. Vanechanos shall pay $40,000 by no later than fourteen days after the issuance of this Order;
2. Vanechanos thereafter shall make four payments of $15,589.62 each by May 1, 2001, August 1, 2001, November 1, 2001, and February 1, 2002;
3. Each 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, Operations Center, 6432 General Green Way, Alexandria, Virginia, 22312-0003; and (C) submitted under the cover letter that identifies Vanechanos 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 Joy M. Boddie, Esquire, Special Counsel, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661.
By the Commission.
1 The Order Instituting Proceedings in this matter was issued on February 7, 2000.
2 The findings herein are made pursuant to Respondent Vanechanos's offer of settlement and are not binding on any other persons or entities in this or any other proceeding.