U.S. Securities & Exchange Commission
SEC Seal
Home Previous Page
U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933
Release No. 8489 / September 15, 2004

SECURITIES EXCHANGE ACT OF 1934
Release No. 50388 / September 15, 2004

ADMINISTRATIVE PROCEEDING
File No. 3-11665


In the Matter of

TAGLICH BROTHERS, INC. AND RICHARD C. OH,

Respondent.


:
:
:
:
:
:
:
:
:
:
ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934

I.

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 pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Taglich Brothers, Inc. ("Taglich Brothers") and Richard C. Oh ("Oh") (collectively, the "Respondents").

II.

In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the "Offers") 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 findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, Respondents consent to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Section 15(b) of the Securities Exchange Act of 1934 ("Order"), as set forth below.

III.

On the basis of this Order and Respondents' Offers, the Commission finds that:

1. Taglich Brothers has been registered with the Commission since September 16, 1991. Taglich Brothers is a full service brokerage firm providing such services as research, investment banking, and individual investor and corporate services. The firm specializes in the microcap segment of the market for publicly traded securities and has offices in Huntington and New York, New York.

2. Since 1995, Oh has been the Director of the Legal and Compliance Department and since 1998, the Chief Financial Officer of Taglich Brothers. In November 2002, Oh also became the acting Director of the Research Department. Since 1995, Oh has been a registered representative and maintained Series 4, 7, 24, and 63 licenses.

3. Since at least January 2000, Taglich Brothers has issued and posted research reports on its website--www.taglichbrothers.com. These research reports contained, among other things, ratings of and target prices for the stock of the issuers Taglich Brothers covered (the "Covered Issuers"), detailed descriptions of the Covered Issuers' business operations and earnings projections. Taglich Brothers issued initial reports of each Covered Issuer, quarterly updates and news updates.

4. Taglich has employed over the past few years at most ten employees in its Research Department, of which approximately half were analysts who wrote the reports. This Department currently covers approximately 50 microcap companies, including those focused on technology and pharmaceutical products.

5. Since at least January 2000, Taglich Brothers has entered into "Web Service Agreements" with the Covered Issuers. Pursuant to these agreements, some of the Covered Issuers paid Taglich Brothers a non-refundable retainer of up to $5,000, and all of the Covered Issuers paid Taglich Brothers between $1,000 and $2,000 a month in exchange for Taglich Brothers writing and posting its research of the Covered Issuers on Taglich Brothers' website. In these agreements, Taglich Brothers also has agreed to "use its best efforts to disseminate such research to potential investors, including sending periodic e-mail or similar mediums of such research or potential news to all the individual and institutional investors and prospective investors that subscribe to Taglich Brothers' website database."

6. From at least January 2000 to October 2001, with minor exceptions, Taglich Brothers' research reports appearing on its website contained the same disclaimer stating, among other things, that: "the company [may or] does pay Taglich Brothers, Inc. a monthly fee for maintenance of our Web site." Until at least October 2001, Taglich Brothers did not disclose in its research reports that the fee paid by the Covered Issuers was for the research services provided by Taglich Brothers.

7. Oh has been responsible for ensuring that the disclaimers in Taglich Brothers' research reports contained accurate descriptions of Taglich Brothers' relationships with the Covered Issuers. He has also been responsible for ensuring that the disclaimers in Taglich Brothers' research reports complied with the federal securities laws.

8. In October 2001, Oh revised the disclaimer in Taglich Brothers' research reports to state that: "[t]he company pays Taglich Brothers, Inc. a monthly fee for the creation and dissemination of research reports." Taglich Brothers did not disclose in its research reports the amount of compensation Taglich Brothers received from the Covered Issuers for the publication and circulation of its research reports, until November 2003.

9. As a result of the conduct described above, Taglich Brothers and Oh willfully1 violated Section 17(b) of the Securities Act which prohibits the publication or circulation of any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions and cease-and-desist order specified in the Offers submitted by Taglich Brothers and Oh.

Accordingly, it is hereby ORDERED that:

A. Taglich Brothers and Oh are censured.

B. Pursuant to Section 8A of the Securities Act, Taglich Brothers and Oh shall cease and desist from committing or causing any violations and any future violations of Section 17(b) of the Securities Act.

C. Pursuant to Section 21B of the Exchange Act, Taglich Brothers shall, within 30 days of the entry of this Order, pay a civil money penalty in the amount of $50,000 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 Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Taglich Brothers 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 Arthur Gabinet, District Administrator, Philadelphia District Office, U.S. Securities and Exchange Commission, Mellon Independence Center, 701 Market Street, Suite 2000, Philadelphia, PA 19106.

D. Pursuant to Section 21B of the Exchange Act, Oh shall, within 30 days of the entry of this Order, pay a civil money penalty in the amount of $25,000 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 Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Oh 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 Arthur Gabinet, District Administrator, Philadelphia District Office, U.S. Securities and Exchange Commission, Mellon Independence Center, 701 Market Street, Suite 2000, Philadelphia, PA 19106.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes

 

http://www.sec.gov/litigation/admin/33-8489.htm


Modified: 09/15/2004