UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 8083 / April 10, 2002
SECURITIES EXCHANGE ACT OF 1934
Release No. 45723 / April 10, 2002
File No. 3-10752
In the Matter of
South West Trading
| ORDER INSTITUTING PUBLIC ADMINISTRATIVE AND
CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, IMPOSING
REMEDIAL SANCTIONS AND
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Respondents Darrell Flanders ("Flanders") and South West Trading Diversities, Inc. ("South West") (jointly "Respondents"), pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act").
In anticipation of the institution of these proceedings, Respondents have submitted an Offer of Settlement ("Offer"), 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 to which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except that they admit the findings contained in paragraphs II.A. and II.B. and the jurisdiction of the Commission over them and the subject matter of these proceedings, Respondents consent to the issuance of this Order Instituting Public Administrative and Cease-and-Desist Proceedings, Making Findings, Imposing Remedial Sanctions and Imposing Cease-and-Desist Order ("Order"), and the entry of findings and the imposition of the sanctions set forth below.
On the basis of this Order and the Offer submitted by Respondents, the Commission finds that:1
- Respondent South West, an Arizona corporation with its principal place of business in Phoenix, Arizona, has never been registered with the Commission as a broker or dealer, and has never been associated with a registered broker or dealer.
- Respondent Flanders, 47, of Phoenix, Arizona, has never been registered with the Commission as a broker or dealer, and has never been associated with a registered broker or dealer. Since approximately 1997, Flanders has continuously been the president and sole owner of South West.
- Starting in October 2000, and continuing at least through the end of December 2000, Flanders and South West engaged in the business of effecting transactions in securities for the accounts of others, by offering for sale to prospective investors certain securities in the form of promissory notes. Big Country AGS, Inc. d/b/a AGS, Inc. ("AGS"), a Texas corporation based in Sweetwater, Texas, issued the promissory notes, and promised South West and Flanders a transaction-based commission for sales of the notes. The notes purported to bear interest at the rate of 5% per month, and to be payable in full within 30 days of written demand for payment.
- Flanders instructed an independent contractor for South West to offer the AGS promissory notes for sale to customers and prospective customers of South West, and agreed to pay the independent contractor a transaction-based commission for sales of the notes. Pursuant to Flanders' instructions, South West's independent contractor caused prospective investors to receive offering materials stating that AGS would use the funds it received from the sale of promissory notes to purchase gold bullion in the Republic of Ghana, export the gold to the United Kingdom, and sell it there at a substantial profit.
- South West's independent contractor offered the AGS promissory notes for sale to prospective investors through the mails, and through means and instruments of communication in interstate commerce. South West's independent contractor caused offering memoranda and other materials to be mailed to prospective investors, and also used telephonic communications to offer AGS promissory notes to prospective investors and recommend that they purchase the notes.
- South West's independent contractor offered the AGS promissory notes for sale to more than fifty prospective investors residing in multiple states. Seven of those offerees paid a total of $440,000 for AGS promissory notes.
- The promissory notes issued by AGS were not registered with the Commission; no registration statement had been filed with the Commission; and the notes were not exempt from registration.
- Based on the above-described conduct, South West and Flanders willfully violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act.
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept Respondents' Offer of Settlement and to impose the remedial sanctions which are set forth in the Offer.
Accordingly, IT IS HEREBY ORDERED, that:
- Flanders and South West be, and hereby are, barred from association with any broker or dealer, with the right to apply for association after eighteen months to the appropriate self-regulatory organization, or if there is none, to the Commission.
- Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Flanders and South West shall cease and desist from committing or causing any violation and any future violation of Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act.
- Flanders shall, within ninety (90) days of the entry of this Order, pay a civil money penalty in the amount of $15,000 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 cover letter that identifies Flanders 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 Harold F. Degenhardt, District Administrator, Securities and Exchange Commission, Fort Worth District Office, 801 Cherry Street, 19th Floor, Fort Worth, Texas 76102.
By the Commission.
Jonathan G. Katz
|1 || The findings herein are made pursuant to Respondents' Offer and are not binding on any other person or entity in this or any other proceeding.|