UNITED STATES OF AMERICA
In the Matter of
H. J. MEYERS & CO., INC.,
ORDER MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS
AND ISSUING A CEASE-AND-DESIST
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"), William Masucci ("Masucci") 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 Masucci admits, Masucci 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 Masucci, the Commission finds2 that:
A. Masucci, age 39, is a resident of Pittsford, New York. In June 1996, Masucci was the National Sales Manager of H.J. Meyers & Co., Inc. ("H.J. Meyers").
The Borealis IPO
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, acting through Masucci and others, manipulated the price of Borealis stock by:
1. effecting 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. raising 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. dominating and controlling the market for the Borealis shares by:
i. executing 77% of the total trading volume in Borealis while acting as a market maker and retail seller of Borealis common shares;
ii. executing substantially more trading volume than any other broker-dealer;
iii. using high pressure tactics to sell the Borealis IPO shares and to create pent-up demand for the aftermarket shares; and
c. controlling and substantially reducing the floating supply of Borealis shares by:
i. orchestrating the allocation of IPO shares, several weeks before trading opened and before indications of customer interest for shares were received, in a manner designed to ensure that the vast majority of shares would not be traded in the immediate aftermarket;
ii. discouraging customer from selling back their IPO shares while simultaneously selling customers additional shares in the aftermarket;
iii. reducing the floating supply of Borealis shares by controlling 75% of the floating supply of Borealis stock; and
iv. refusing to accept sales tickets and selectively enforcing a policy that required most of its registered representatives to forfeit their commissions.
E. From at least on or about June 24, 1996 through June 28, 1996, Masucci 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, Masucci 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) 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. Masucci shall pay disgorgement in the amount of $9,494 and prejudgment interest in the amount of $4,361.
C. Masucci shall pay a civil penalty of $60,000.
D. Masucci shall within 30 days of the entry of this Order pay the amounts set forth in the two preceding paragraphs and the 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 Masucci 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.
Jonathan G. Katz
1 The Order Instituting Proceedings in this matter was issued on February 7, 2000.
2 The findings herein are made pursuant to Respondent Masucci's offer of settlement and are not binding on any other persons or entities in this or any other proceeding.