UNITED STATES OF AMERICA
In the Matter of
JEFFREY R. PATTERSON and TERRANCE TURMAN, INC.
|ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933, SECTIONS 15(b) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940 AS TO JEFFREY R. PATTERSON|
The Securities and Exchange Commission ("Commission") instituted public administrative and cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Jeffrey R. Patterson ("Respondent") on November 14, 2002.
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 findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, Respondent consents to the entry of this Order Making Findings and
Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 as to Jeffrey R. Patterson ("Order"), as set forth below.
On the basis of this Order and Respondent's Offer, the Commission finds that:
A. Respondent sold securities issued by Robert L. Bentley ("Bentley") of Paoli, Pennsylvania. Bentley held himself out to his customers, most of whom were financial institutions, as a broker of bank-issued, federally-insured certificates of deposit ("CDs"). Bentley in fact bought CDs with customer funds. However, Bentley's customers did not acquire a direct ownership interest in these CDs. Instead, beginning at least in 1996, Bentley issued to the customers separate instruments, which were securities in the form of notes or investment contracts. These securities promised to pay interest rates and had maturity dates that varied from those terms in the underlying CDs. In many instances, Bentley bought long-term CDs and issued shorter-term securities to his customers. Consequently, buyers of Bentley's securities depended upon Bentley, rather than the bank that issued the underlying CD, for the return of their principal.
B. Bentley Financial Services, Inc. ("BFS") was the selling arm of Bentley's operation and the employer of Respondent.
C. From 1993 until August 1998 and from March 2001 until October 2001, BFS was a branch office of Traders & Dealers, Inc. ("TDI"), a Denver broker-dealer formerly registered with the Commission. From July 1998 until August 2000, BFS was a branch office of Southeastern Securities, Inc. ("Southeastern"), a Miami broker-dealer registered with the Commission. However, Respondent did not sell Bentley's securities through TDI, Southeastern or any other registered broker-dealer.
D. BFS was registered as an investment adviser with the State of Pennsylvania from October 1987 through December 2001.
E. Respondent, age 47, lives in Glenmoore, Pennsylvania. He worked for Bentley from 1993 until October 2001. He was an associated person of TDI and Southeastern during the times BFS was a branch office of those firms. From at least 1996 until October 2001, Respondent sold Bentley's securities.
F. Respondent represented to customers that BFS was a CD broker and that the customers would be buying bank-issued, federally-insured CDs.
G. What customers had bought in fact was a security issued by Bentley. Respondent knew or should have known that the maturities of the CDs bought by Bentley with customer funds were frequently longer than those of the instruments he was selling to customers. Respondent also knew or should have known that, from time to time, Bentley paid interest rates on the instruments he issued that were higher than the rates paid by the CDs he bought with customer funds. However, Respondent did not disclose these facts to customers when he sold Bentley's securities.
H. Customers were led to believe that their transactions were being made through a registered broker-dealer, TDI. A sales brochure provided to and used by Respondent to solicit new customers prominently stated "Securities offered through TDI, Inc. a member of NASD [and] SIPC." This brochure further stated that "Every investment advisor at Bentley Financial Services is a registered representative of TDI, Inc., and as such has Series 7 and Series 63 financial licenses. These licenses are held under NASD and SEC regulations." Although these statements in the brochure were literally true, they created the mis-impression that Respondent's customers were making transactions through a registered broker-dealer.
I. As a result of the conduct described above, Respondent willfully violated Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.
J. Respondent has submitted a sworn Statement of Financial Condition dated March 18, 2003, and other evidence and has asserted his inability to pay disgorgement plus prejudgment interest or a civil penalty beyond the amount of disgorgement Respondent is ordered to pay below.
K. Respondent undertakes to provide to the Commission, within 15 days after the disgorgement payment described below in paragraph III. L, an affidavit that he has complied fully with the undertakings set forth below.
L. Respondent further undertakes, within 30 days of the entry of this Order, to: 1) liquidate retirement plans controlled by him or denominated in his name, directly or indirectly, and 2) pay the proceeds from the liquidation of the after tax and penalty proceeds of the retirement plans to the receiver in a related civil case (SEC v. Robert L. Bentley, et al., E.D. Pa. Civil Action 01-CV-5366). 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 David H.
Marion, Receiver; (C) hand-delivered or mailed to David H. Marion, Receiver c/o Frank A. Mayer, III, Esquire, Montgomery, McCracken, Walker & Rhoads, LLP, 123 South Broad Street, Philadelphia, PA 19109-1030; and (D) submitted under cover letter that identifies Jeffrey R. Patterson as a Respondent in these proceedings and the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Robert Fusfeld, Chief Trial Counsel, Securities and Exchange Commission, Central Regional Office, 1801 California Street, Suite 1500, Denver, Colorado, 80202.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Respondent's Offer.
Accordingly, it is hereby ORDERED:
A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that Respondent cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.
B. Pursuant to Section 15(b)(6) of the Exchange Act, that Respondent be, and hereby is, barred from association with any broker or dealer provided that he may reapply for association after one year in a non-supervisory and non-proprietary capacity to the appropriate self-regulatory organization, or if there is none, to the Commission.
C. Pursuant to Section 203(f) of the Advisers Act, that Respondent be, and hereby is, barred from association with any investment adviser provided that he may reapply for association after one year in a non-supervisory and non-proprietary capacity to the appropriate self-regulatory organization, or if there is none, to the Commission.
D. That Respondent shall pay disgorgement of $838,814 plus prejudgment interest, but payment of all but the amount described in paragraph III. L. is waived, and penalties are not imposed, based upon Respondent's sworn representations in his Statement of Financial Condition dated March 18, 2003, and other documents submitted to the Commission.
E. The Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent provided accurate and complete financial information at the time such representations were made; and (2) seek an order directing payment of disgorgement, pre-judgment interest and the maximum civil penalty allowable under the law. No other issue shall be considered in connection with this petition other than whether the financial information provided by Respondent was fraudulent,
misleading, inaccurate, or incomplete in any material respect. Respondent may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of disgorgement, interest and penalties should not be ordered; (3) contest the amount of disgorgement, interest and penalties to be ordered; or (4) assert any defense to liability or remedy, including, but not limited to, any statute of limitations defense.
F. Respondent shall comply with the undertakings enumerated in Section III. K. and III. L. above.
By the Commission.
Jonathan G. Katz
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