UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
The Securities and Exchange Commission ("Commission") deems it appropriate, in the public interest and for the protection of investors that public administrative proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") against Sunpoint Securities, Inc. ("Sunpoint").
In anticipation of the institution of these proceedings, Robert G. Richardson, Trustee ("the Trustee") for the liquidation of Sunpoint Securities, Inc. ("Sunpoint"), pursuant to the Securities Investor Protection Act, has submitted an Offer of Settlement ("Offer") to the Commission, 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 in which the Commission is a party, and without admitting or denying the findings, except those contained in paragraphs II.A. and II.B., and the jurisdiction of the Commission over it and the subject matter of these proceedings, Sunpoint consents to the issuance of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions, and to the entry of the findings set forth below.
On the basis of this Order and the Offer submitted by the Trustee, on behalf of Sunpoint, the Commission finds that:
A. Sunpoint Securities, Inc., until November 19, 1999, was a publicly traded, full service, self-clearing broker-dealer headquartered in Longview, Texas, with over 100 registered representatives nationally, which has been registered with the Commission since 1989 (File No. 1-15133) and is a member of the National Association of Securities Dealers ("NASD"). Sunpoint is currently in liquidation and subject to the control of the Trustee, appointed pursuant to the Securities Investor Protection Act.
B. On April 26, 2001, a Final Judgment was entered by consent against Sunpoint, in the United States District Court for the Eastern District of Texas (Tyler Division). Sunpoint was permanently enjoined from violations of Sections 17(a) of the Securities Act of 1933 and Sections 10(b), 15(c)(1), 15(c)(3), 17(a) and 17(e) of the Exchange Act and Rules 10b-5, 15c1-2, 15c3-1, 17a-3 and 17a-5 thereunder. SEC v. Sunpoint Securities, Inc., et al., Civil Action No. 6:99CV667.
C. The Commission's Complaint ("Complaint") against Sunpoint, its Chief Financial Officer ("CFO") and its Chief Executive Officer ("CEO") alleged, among other things, that from approximately December 1997 through November 19, 1999, they engaged in a securities fraud scheme by diverting approximately $25 million of customer funds.
D. The Complaint further alleged that in December 1997, when Sunpoint's auditors discovered that the firm was operating with a net capital deficiency, Sunpoint's CEO 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 Sunpoint's CEO, Sunpoint's CFO began instructing 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 its CEO. 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, Sunpoint 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.
E. According to the Complaint, as a result of this scheme to divert customer funds, between December 1997 and November 19, 1999, Sunpoint, aided and abetted by its CEO and CFO, 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.
In view of the foregoing, the Commission deems it appropriate, in the public interest and for the protection of investors to impose the sanctions that are set forth in the Offer submitted by the Trustee, on behalf of Sunpoint.
Accordingly, IT IS ORDERED that Sunpoint's registration with the Commission as a broker-dealer is hereby revoked.
By the Commission.