Clyde Wayne Gregory

Securities Act of 1933
Release No. 8038 / November 28, 2001

Securities Exchange Act of 1934
Release No. 45111 / November 28, 2001

Investment Advisers Act of 1940
Release No. 1999 / November 28, 2001

Administrative Proceeding
File No. 3-10252

I.

On July 18, 2000, the Securities and Exchange Commission ("Commission") instituted public administrative and cease-and-desist proceedings against Clyde Wayne Gregory ("Gregory" or "Respondent"), pursuant to Section 8A of the Securities Act of 1933 (the "Securities Act"), Sections 15(b)(6), 19(h), and 21C of the Securities Exchange Act of 1934 (the "Exchange Act"), and Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 (the "Advisers Act").

Following the institution of those administrative and cease-and-desist proceedings, Gregory has submitted an Offer of Settlement (the "Offer") that the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, Gregory consents to the entry of this Order Making Findings, Imposing Remedial Sanctions, and Imposing Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b)(6), 19(h), and 21C of the Securities Exchange Act of 1934, and Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 (the "Order"), without admitting or denying the findings set forth herein, except as to the jurisdiction of the Commission over him and the subject matter of these proceedings and except for paragraphs II.1 and II.2 below, and the entry of the conviction set forth in paragraph II.9 below, which Gregory admits:

The Commission has determined that it is appropriate and in the public interest to accept Gregory's Offer and accordingly is issuing this Order.

II.

FINDINGS OF FACT

On the basis of this Order and the Offer, the Commission makes the following findings:

1. Gregory, age 40, resided in Madison, Alabama. At all times relevant to this proceeding, Gregory was a registered representative associated with a broker-dealer registered with the Commission and based in Birmingham, Alabama (the "Broker-Dealer").

2. At all times relevant to this proceeding, Gregory also acted as an investment adviser, outside of the scope of his association with the Broker-Dealer.

3. Gregory conducted most if not all of his advisory business through InsNet, Inc. ("InsNet"), an Alabama company controlled by Gregory, and through the sole proprietorship name "BankNET." Gregory, individually and through InsNet and BankNET, engaged in the business, for compensation, of advising others as to the advisability of investing in, purchasing, or selling securities. Neither Gregory, InsNet, nor BankNET has been registered with the Commission.

4. From at least 1995 until at least his arrest in December of 1997, Gregory engaged in fraudulent conduct that violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. Among other things, Gregory willfully misappropriated client funds, misrepresented and omitted material facts to clients, engaged in transactions that created material conflicts of interest with his clients, forged securities certificates, and delivered false account statements and other documents to clients.

5. In or about May of 1995, Gregory and a Tennessee resident incorporated and co-owned McDowell Enterprises, Inc. a/k/a One Corp., a Tennessee corporation ("McDowell Enterprises"), for the purpose of buying home alarm companies. In 1995 and 1996, without the prior knowledge or consent of the co-owner, Gregory apparently induced at least three clients to give him funds purportedly to invest in a security to be issued by McDowell Enterprises that was denominated Commercial Loan Paper ("Paper"). During that period, Gregory owned a substantial interest in McDowell Enterprises, which he failed to adequately and fully disclose to all investors. In addition, Gregory misappropriated some or all of the funds that were supposed to have been invested in the McDowell Enterprises Paper, and he gave at least some investors false agreements and certificates evidencing the purported investment.

6. In particular, Gregory made misrepresentations and omissions of material fact to three clients on or about September 6, 1995, March 28, 1996, and July 25, 1995, respectively, for the purpose of inducing them allegedly to invest their funds in McDowell Enterprises Paper. These clients purportedly invested a total of at least $290,000 in McDowell Enterprises Paper based on Gregory's investment advice. As to one or more of these clients:

(a) Gregory willfully misappropriated the clients' investment funds;

(b) Gregory willfully failed to disclose that his investment advice created a conflict of interest with his clients;

(c) Gregory willfully misrepresented to his clients the investment risks and returns of McDowell Enterprises Paper, including misrepresenting to one client that McDowell Enterprises was required by law to maintain a reserve account with the amount invested, and misrepresenting to another client that her funds invested in McDowell Enterprises would be readily available for withdrawal;

(d) Gregory willfully delivered false or misleading documents to his clients, including (i) the delivery of a false purchase agreement evidencing the alleged investment to at least two of the clients; (ii) the delivery of a false McDowell Enterprises certificate to at least two of the clients, specifying a false account number and the forged signature of the President of McDowell Enterprises; (iii) the delivery of false documents to at least two of the clients using printed forms of the Broker-Dealer with which Gregory was associated, which Gregory failed to disclose to the Broker-Dealer, and, (iv) the delivery of false account statements to at least two of the clients; and,

(e) Gregory willfully and repeatedly lulled his clients into believing that their investments would be repaid, including by giving clients reimbursement checks for their investments that were returned for insufficient funds.

7. Gregory made willful misrepresentations and omissions of material fact to clients for the purpose of fraudulently inducing them to invest in mutual fund securities. For example, in 1997, Gregory fraudulently induced three clients to invest over $220,000 of their funds in mutual funds based on Gregory's investment advice to them. Gregory misappropriated the clients' funds. Gregory also gave his clients mutual fund applications that he failed to forward to the mutual fund or the Broker-Dealer, and he delivered false account statements to his clients, which showed that the clients owned mutual fund investments when in fact they did not.

8. In July of 1998, a Madison County, Alabama grand jury named Gregory in a ninety-two count indictment in the case of State of Alabama v. Clyde Wayne Gregory, Case No. CC98-1376BEW (the "Indictment"), charging Gregory with state securities violations and the theft of over $4 million in securities and insurance investments.

9. On or about June 14, 1999, Gregory signed a Plea Agreement, and pled guilty pro se at a hearing before the circuit court of Madison County, Alabama ("Alabama Court"), to thirty-five counts of the Indictment -- thirty counts of theft of property in the first degree and five counts of state securities fraud involving misrepresentations of material fact. On or about that same date, the Alabama Court entered a judgment of conviction against Gregory, in State of Alabama v. Clyde Wayne Gregory, Case No. CC98-1376BEW.

10. The thirty counts of theft to which Gregory pled guilty involved over $4 million in securities and insurance investments and approximately thirty clients. The five counts of state securities fraud to which Gregory pled guilty involved over $350,000, and charged that Gregory willfully and unlawfully made misrepresentations of material fact in connection with the offer, purchase, or sale of a security in violation of Alabama securities laws. Three of these five securities fraud counts charged that Gregory willfully made untrue statements of material fact to three investors on or about September 6, 1995, March 28, 1996, and July 25, 1995, respectively, by misrepresenting to them that he would invest their funds in McDowell Enterprises Paper. The other two securities fraud counts charged that Gregory willfully made untrue statements of material fact to two couples on or about February 25, 1997 and September 25, 1997, respectively, by misrepresenting to them that he would invest their money in mutual funds.

11. On July 30, 1999, the Alabama Court sentenced Gregory to thirty years in jail, twenty years for theft and ten years for securities fraud, with sentences to run consecutively.

12. From at least 1995 to at least December of 1997, Gregory willfully violated Section 17(a)(1) of the Securities Act in that he, in the offer or sale of securities, directly or indirectly, by the use of the means or instruments of transportation or communication in interstate commerce, or by the use of the mails, employed devices, schemes, or artifices to defraud, as more particularly described in Paragraphs 4 through 7 above.

13. From at least 1995 to at least December of 1997, Gregory willfully violated Sections 17(a)(2) and 17(a)(3) of the Securities Act in that he, in the offer or sale of securities, directly or indirectly, by the use of the means or instruments of transportation or communication in interstate commerce, or by the use of the mails, (a) obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (b) engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon the purchaser, as more particularly described in Paragraphs 4 through 7 above.

14. From at least 1995 to at least December of 1997, Gregory willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in that he, in connection with the purchase or sale of securities, directly or indirectly, by use of the means or instrumentalities of interstate commerce or by the use of the mails: (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon any person, as more particularly described in Paragraphs 4 through 7 above.

15. From at least 1995 to at least December of 1997, Gregory willfully violated Sections 206(1) and 206(2) of the Advisers Act in that he, while acting as an investment adviser, by the use of the mails or the means or instrumentalities of interstate commerce, directly or indirectly: (a) employed devices, schemes or artifices to defraud clients or prospective clients; and (b) engaged in transactions, practices or courses of business which operated as a fraud or deceit upon clients or prospective clients, as more particularly described in Paragraphs 4 through 7 above.

16. Gregory committed or caused the violations of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act, by reason of the conduct more particularly described in Paragraphs 4 through 7 above.

III.

ORDERS

In view of the foregoing, the Commission deems it appropriate and in the public interest and for the protection of investors to accept Gregory's Offer and to impose the sanctions and other relief specified in the Offer.¹ Accordingly it is hereby:

1. ORDERED that Gregory be barred from association with any broker, dealer, or investment adviser; and,

2. ORDERED, pursuant to Section 8A of the Securities Act, Section 21C of the Exchange Act, and Section 203(k) of the Advisers Act, that Gregory 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 Sections 206(1) and 206(2) of the Advisers Act.

By the Commission.

Jonathan G. Katz
Secretary

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