UNITED STATES OF AMERICA
|In the Matter of
Kevin H. Kading,
|ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTIONS 15(b)(4) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be instituted pursuant to Sections 15(b)(4) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondents Kevin H. Kading, Kading Companies, S.A. ("Kading Co."), Joning Corp. f/k/a Global Stock Exchange Corp. ("Global"), and John O. Jones, Jr. (together "Respondents").
In anticipation of the institution of these administrative proceedings, Respondents have submitted a joint Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings herein, except for those findings contained in paragraphs II. A. and B. below and the jurisdiction of the Commission over them and over the subject matter of these proceedings, which are admitted, Respondents have consented to the entry of the findings and the imposition of the remedial sanctions and cease-and-desist order as set forth below.
On the basis of this Order and the Offer submitted by each Respondent, the Commission makes the following findings:
A. Kevin H. Kading, age 42, of Staten Island, New York, is president of Kading Co. Kading directed and oversaw all activities of Respondents. Kading was associated with six different broker-dealers from August 1988, until his suspension in March 1996. In 1996, NASD Regulation, Inc. ("NASDR") charged Kading and a broker-dealer for which he was principal with failing to comply with: (1) a restriction agreement regarding the solicitation of customer funds, inventory limitations, and the requirement of a qualified financial and operations principal; (2) the penny stock rules; (3) net capital requirements; and (4) supervisory requirements. Kading and Wellington entered into a consent with NASDR in which they jointly were censured and fined $40,000 and Kading was suspended for two years from associating as a principal or acting as an officer, director or shareholder of any broker-dealer.
B. Kading Companies S.A., is a corporation formed in the British Virgin Islands with its principal place of business in Staten Island, New York. Kading serves as president and majority shareholder of Kading Co.
C. Joning Corp. f/k/a Global Stock Exchange Corp. is a corporation formed in Draper, Utah, by Kading and Jones. Kading Co. owns approximately 55 percent of Joning Corp. Joning was formed to handle the reverse merger business, merger and acquisition transactions, and to create websites to generate potential leads for both sides of those transactions. Joning operated the mergers-r-us.com, kcsa.net, prg.com, and globalstockexchange.net websites which served to market Respondents' services and provided a point of contact for parties interested in the purchase or sale of public shells.
D. John O. Jones, Jr., age 54, of Draper, Utah, is president of Joning and designed and maintained Respondent's websites. Jones holds a twenty to thirty percent share in Joning and a nine percent share in Kading Co.
E. Kading Co. managed all of Respondents' activities including the introduction of parties, negotiation of reverse mergers with public shells, and oversight of the marketing efforts of Joning. Joning, through the work of Jones, created and maintained websites for use by the Respondents under the domain names of mergers-r-us.com, kcsa.net, and globalstockexchange.net to solicit public shell buyers and sellers. The websites solicited business by stating that Respondents were in contact with owners of inactive public corporations as well as owners of private companies who were seeking to enter the public market. The websites provided contact information for interested parties and collected vital information from public shells and private businesses through an on-line questionnaire. Contacts received through the website led to Respondents introducing parties to reverse mergers with public shells and Respondents receiving compensation for acting as an intermediary in those transactions.
F. Between March and November 1999, Respondents brokered the sale of four shell companies, receiving a total of $94,000 and 30,000 shares of stock in compensation for their services. Prospective sellers and buyers of shell companies were solicited through various websites. In each instance, sellers of shell companies entered into a "Finder's Fee Agreement" with Respondents. Respondents then gathered information about the shell companies and created blind corporate profiles to show to potential buyers of the shell companies. Once a match was made, Respondents acted as intermediary in the sale. As outlined in the agreement, Respondents acted as the lead consultant participating in the introduction of the parties, and provided services including review of due diligence documentation and negotiation of the terms of the merger.
G. Section 15(a) of the Exchange Act requires that any person or entity engaged in the interstate business of effecting securities transactions for the account of others must register with the Commission as a broker or dealer or, if a natural person, be associated with an entity that is registered with the Commission as a broker or dealer. By virtue of the conduct described above, the Respondents willfully violated Section 15(a) of the Exchange Act.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Respondents and to impose the sanctions specified therein.
Accordingly, IT IS ORDERED that:
A. Pursuant to Section 15(b)(4) of the Exchange Act, the Respondents be censured;
B. Pursuant to Section 21C of the Exchange Act, Respondents cease and desist from committing or causing any violation or future violation of Section 15(a) of the Exchange Act;
C. Pursuant to Section 21B and Section 15(b)(4) of the Exchange Act, within thirty (30) days of the entry of this Order, Kading, Kading Co., Joning, and Jones shall together pay a civil money penalty in the amount of $10,000 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered or mailed to the Office of the Comptroller, U.S. Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (4) submitted under cover letter which identifies Kading, Kading Co., Joning, and Jones as the Respondents in this proceeding, the file number of the proceeding, a copy of which cover letter and money order or check shall be sent to Donald M. Hoerl, Associate Regional Director, Securities and Exchange Commission, Central Regional Office, 1801 California Street, Suite 4800, Denver, Colorado 80202.
By the Commission.
Jonathan G. Katz
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