UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
ADMINISTRATIVE PROCEEDINGS INSTITUTED AGAINST FORMER CHIEF EXECUTIVE OFFICER OF LONGVIEW, TEXAS BROKER-DEALER
The Securities and Exchange Commission today instituted public administrative proceedings alleging that Van R. Lewis, III, a registered representative and principal and former CEO of Sunpoint Securities, Inc. ("Sunpoint"), a registered broker-dealer in Longview, Texas, spearheaded a scheme to divert more than $25 million of money market funds held on behalf of the firm's customers.
The Commission's order instituting proceedings alleges that Lewis was permanently enjoined, in a related civil matter (SEC v. Sunpoint Securities, Inc., et al., Civil No. 6:99CV667, U.S. District Court, Eastern District of Texas, Tyler Division), from further violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 15(c)(1), 15(c)(3), 17(a) and 17(e) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 15c1-2, 15c3-1, 17a-3 and 17a-5 thereunder.
According to the Complaint in the related civil matter, in December 1997, when Sunpoint's auditors discovered that the firm was operating with a net capital deficiency, Lewis attempted to cover this deficiency by diverting approximately $1.7 million of customer funds from its omnibus money market. Beginning in approximately December 1997, acting pursuant to a directive from Lewis, Sunpoint's chief financial officer began directing a subordinate to adjust the amount of money transferred between Sunpoint's omnibus money market and settlement accounts. Most of these monies were periodically diverted to bank accounts controlled by Sunpoint and/or Lewis. The net result of these adjustments was to lower substantially the balance in the omnibus money market account so that by the end of October 1999, it had only $12 million of customer monies-when it should have held approximately $37 million for customers. Sunpoint never disclosed these misappropriations of customer monies and instead misrepresented to its customers on their monthly customer account statements the true value of money market funds it held on their behalf.
The Complaint further alleged that as a result of this scheme to divert customer funds, between December 1997 and November 19, 1999, Sunpoint, aided and abetted by Lewis, misrepresented its net capital position in filings with regulators, maintained insufficient net capital and customer reserves and failed to accurately maintain its books and records
A hearing will be scheduled to take evidence on the staff's allegations and to afford Lewis an opportunity to present any defenses thereto. The purpose of the hearing is to determine whether the allegations are true, and whether any remedial action should be ordered.