UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute public administrative proceedings against Richard A. Preisig, Jr. ("Preisig") pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act").
In anticipation of the institution of these administrative proceedings, Preisig has submitted an Offer of Settlement ("Offer"), which the Commission has determined is in the public interest to accept. Solely for the purpose of this proceeding, and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, Preisig, without admitting or denying the findings set forth herein, except as to the Commission's jurisdiction over him and over the subject matter of this proceeding, which is admitted, consents to the issuance of this Order Instituting Proceedings Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions and to the entry of the findings and the imposition of the remedial sanctions as set forth below.
Accordingly, IT IS ORDERED that said proceedings be, and hereby are, instituted.
Based on this Order and Preisig's Offer, the Commission finds the following1:
A. Preisig, age 30, resides in New York City. From approximately June 1995 through August 1996, Preisig was a registered representative associated with the Melville, NY branch office of Investors Associates, Inc. ("Investors Associates"); upon leaving the Melville office in or about August 1996, Preisig continued to be associated with Investors Associates until approximately June 1997.
C. From September 1995 through August 1996, Preisig participated in public offerings of Interiors, Inc., Compare Generiks, Inc., Perry's Majestic Beer, Inc. and other securities (collectively, the "House Stocks"), many of which were penny stocks within the meaning of Section 3(a)(51) of the Exchange Act and Rule 3a51-1 thereunder.
D. During his tenure at Investors Associates, Preisig became a "floor manager" at the Melville office, despite not having obtained the proper industry license. In that role, Preisig reported directly to the co-owners of the Melville branch, trained other brokers, wrote scripts for other registered representatives to follow with regard to the House Stocks, and provided general motivation for other registered representatives to sell the House Stocks in a boiler-room environment.
E. As the effective date for each House Stock offering approached, Preisig illegally pre-sold the offering by soliciting orders for the securities in advance of the effective date of the offering. Preisig consistently failed to disclose material negative information concerning the issuer of each House Stock. Preisig used, and trained other registered representatives to use, an assortment of fraudulent and abusive sales practices to obtain orders for the House Stocks, including the use of scripts that he wrote which made baseless price predictions for each stock. In creating the scripts, Preisig conducted no independent research, never reviewed the issuer's financial statements or otherwise attempted to verify the outrageous claims contained in the scripts.
F. As part of his pre-selling efforts for each House Stock offering, Preisig typically required his customers to commit to purchasing a large number of shares in the aftermarket in exchange for the opportunity to purchase a small allocation of shares in the offering. The prices for the aftermarket shares, however, were pre-determined by others at Investors Associates, not by a legitimate market. Once each offering was completed, Preisig continued to aggressively and fraudulently sell House Stock to his clients, including to clients that had participated in the offering, a practice known as "upticking."
G. When Preisig's clients called him to place a sell order for a House Stock, Preisig used various means to dissuade or obstruct his clients from selling those shares, including making fraudulent misrepresentations about the prospects and value of the issuer. If a particular client insisted on selling shares of a House Stock, Preisig would process the sell order if he had a matching purchase order from another client for the same House Stock. The two transactions were then effected by Investors Associates through a "crossed trade." In so doing, Preisig prevented shares of the House Stock from "leaking out" into the open market and thereby depressing the manipulated price.
Based on the foregoing, the Commission finds that Preisig willfully violated Sections 5(a) and 17(a) of the Securities Act of 1933, 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 the Offer submitted by Preisig and accordingly,
IT IS HEREBY ORDERED, effective immediately, that Richard A. Preisig, Jr. be, and hereby is, barred from association with any broker or dealer; and
IT IS HEREBY ORDERED, effective immediately, that Richard A. Preisig, Jr. be, and hereby is, barred from participating in any offering of penny stock, including: acting as a promoter, finder, consultant, agent, or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock; or inducing or attempting to induce the purchase or sale of any penny stock.
By the Commission.
1 The facts, findings, and conclusions herein are made pursuant to Preisig's Offer of Settlement and are not binding on any other person or entity named as a respondent or defendant in this or any other proceeding.