UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 42172 / November 23, 1999
File No. 3-9854
In the Matter of :
: ORDER MAKING FINDINGS
RODGER EVANS REES, : AND IMPOSING REMEDIAL
In connection with a public administrative proceeding previously instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act"), Rodger Evans Rees has submitted an Offer of Settlement ("Offer") which the Commission has determined is in the public interest to accept. See Order Instituting Administrative Proceeding, File No. 3-9854 (March 23, 1999). Rees hereby withdraws his April 14, 1999 Answer and Defenses of Respondent Rodger E. Rees to Order Instituting Public Proceedings. Prior to a hearing pursuant to the Commission's Rules of Practice [17 C.F.R. §§ 201.1 et seq.], and without admitting or denying the matters set forth in the Order Instituting Administrative Proceeding, or the findings contained in this Order Making Findings and Imposing Remedial Sanctions ("Order"), except as to jurisdiction, which is admitted, Rees consents to the entry of this Order.
On the basis of the Offer and the Order Instituting Administrative Proceeding, the Commission finds1:
1. Rodger Evans Rees ("Rees"), age 44, resides in Atlanta, Georgia. From approximately November 1986 until May 1995, Rees was the president of Buckhead Financial Corporation, a broker-dealer registered with the Commission pursuant to Section 15 of the Exchange Act.
1. Buckhead Financial Corporation ("Buckhead") was a broker-dealer registered with the Commission pursuant to Section 15 of the Exchange Act. Its headquarters were in Atlanta, Georgia.
2. Daniel F. Dugan ("Dugan") was a registered representative at Buckhead's office in Greenville, South Carolina.
3. John von der Lieth, III ("Von der Lieth") was a registered representative at Buckhead's Greenville, South Carolina office.
C. REES FAILED REASONABLY TO SUPERVISE VON DER LIETH AND DUGAN
In January 1994 John von der Lieth, a Buckhead registered representative, learned that Marcorp, Inc., an obscure company whose stock was traded on the OTC Bulletin Board, purported to own exclusive world-wide licensing rights to a low-voltage electron beam technology. Von der Lieth began recommending and selling Marcorp to his customers at Buckhead. Marcorp's common stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act, and traded on the OTC Bulletin Board.
Douglas G. McCaskey controlled Marcorp. During 1994, McCaskey owned or controlled two accounts at Buckhead, which he used to trade Marcorp stock. Von der Lieth knew, or was reckless in not knowing, that McCaskey was "cross trading" Marcorp stock. After McCaskey failed to make timely payment for several trades in one account, Buckhead's clearing broker partially liquidated and restricted the account. Shortly thereafter, Von der Lieth opened an account in the name of Marlin Investments, which traded exclusively in Marcorp securities. Von der Lieth knew, or was reckless in not knowing, that McCaskey controlled the Marlin Investments account. Thus, Von der Lieth knew, or was reckless in not knowing, that McCaskey's trading violated the federal securities laws.
Another Buckhead registered representative, Daniel F. Dugan, also recommended and sold Marcorp stock to Buckhead customers. Marcorp compensated both Von der Lieth and Dugan for recommending and selling Marcorp stock. Von der Lieth and Dugan did not disclose the compensation to their customers, to Rees, or to Buckhead. Von der Lieth knew that McCaskey controlled Marcorp, and knew that Marcorp had not disclosed McCaskey's control of Marcorp in its public filings with the Commission. Von der Lieth recommended Marcorp to his customers without informing them that McCaskey was Marcorp's largest stockholder and a control person, that he was engaged in "cross trading," and that he had purchased and failed to pay for substantial amounts of Marcorp stock.
By their conduct, as described herein, Von der Lieth and Dugan willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. At the time of the violations, Von der Lieth and Dugan were subject to Rees' supervision within the meaning of Section 15(b)(4)(E) of the Exchange Act. Rees:
1. failed to establish and implement an adequate supervisory system for Buckhead's registered representatives, who operated as independent contractors of the firm;
2. failed to establish and implement a procedure for Buckhead setting forth adequate criteria for when, and under what circumstances, a registered representative could recommend equity securities;
3. failed to review the transactions of Von der Lieth's and Dugan's customers in Marcorp securities despite the existence of procedures requiring such a review;
4. failed adequately to review and approve new account documentation for Von der Lieth's and Dugan's customers despite the existence of procedures requiring such action;
5. failed to make adequate inquiries of Von der Lieth and Dugan concerning the significant trading activity by their customers in the securities of Marcorp; and
6. failed to make adequate inquiry of Von der Lieth concerning the opening of a McCaskey-related new account at Buckhead, the Marlin Investments account, after learning that Buckhead's clearing broker had partially liquidated and restricted another account that McCaskey controlled at Buckhead.
1. In 1994, Rees, Von der Lieth, and Dugan were associated with Buckhead Financial Corporation, a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act.
2. John von der Lieth and Daniel F. Dugan willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder.
3. At the time of their violations, Von der Lieth and Dugan were subject to Rees' supervision, as president of Buckhead, within the meaning of Section 15(b)(4)(E) of the Exchange Act.
4. During the period from January 1994 through October 1994, Rees failed reasonably to supervise Von der Lieth and Dugan within the meaning of Section 15(b)(4)(E) of the Exchange Act, with a view to preventing violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept Rees' Offer and impose the sanctions specified therein.
ACCORDINGLY, IT IS HEREBY ORDERED that:
A. Rees be, and hereby is, suspended from association with any broker or dealer for a period of two months, effective on the second Monday following the entry of this Order;
B. Rees be, and hereby is, suspended from association in a supervisory capacity with any broker or dealer for a period of ten months immediately following the period of his suspension from association;
C. Rees pay a civil monetary penalty in the amount of $10,000, pursuant to Section 21B(a)(4) of the Exchange Act, to the United States Department of Treasury within ten (10) days of the entry of the Order. Such payment shall be: (i) made by certified check or bank cashier's check; (ii) made payable to the Securities and Exchange Commission; (iii) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (iv) submitted under cover letter which identifies Rees as a respondent in this proceeding and the file number of this proceeding. A copy of the cover letter and check shall be sent to Jerry A. Isenberg, Assistant Director, Division of Enforcement, U.S. Securities and Exchange Commission, 450 5th Street, NW, Washington, D.C. 20549-0707; and
D. Rees provide to the Commission, within three days after the end of the ten-month suspension period described above, an affidavit that he has complied fully with the sanctions described in paragraphs III.A, III.B, and III.C of this Order.
By the Commission.
Jonathan G. Katz
1 The findings in this Order are made pursuant to Rees's Offer and are not binding on any other person or entity in this or any other proceeding.