UNITED STATES OF AMERICA
In the Matter of
DOUGLAS C. BRANDON, ESQ.
|ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDINGS AND IMPOSING TEMPORARY SUSPENSION PURSUANT TO RULE 102(e)(3) OF THE COMMISSION'S RULES OF PRACTICE|
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest to issue an order temporarily suspending Douglas C. Brandon, Esq. ("Brandon") pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.1
The Commission makes the following findings:
A. Brandon is an attorney residing in Lexington, Kentucky and licensed to practice law in the State of Kentucky. From March 1997 through November 1999 Brandon acted as a trustee for Credit Bancorp, Ltd. ("Credit Bancorp"), served as Credit Bancorp's legal counsel and performed other services for Credit Bancorp.
B. On June 30, 1997, Credit Bancorp & Co., a subsidiary of Credit Bancorp, filed an application on Form BD with the Commission seeking to register as a broker-dealer. Brandon, the registrant's Secretary, prepared and filed the application which described the business of Credit Bancorp as investment banking and lending. The application became effective on August 1, 1997. On May 4, 1998, Brandon filed a Form BDW on behalf of Credit Bancorp & Co. requesting the withdrawal of the registration. The withdrawal from registration became effective on July 3, 1998.
C. On November 17, 1999, the Commission brought an action in federal district court against Brandon and others alleging that Brandon violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. SEC v. Credit Bancorp, Ltd., Credit Bancorp, Inc., Richard Jonathan Blech, Thomas Michael Rittweger and Douglas C. Brandon, U.S. District Court for the Southern District of New York, No. 99 CIV. 11395 RWS.
D. The Commission's complaint alleged that from at least March 1997 through November 17, 1999, Credit Bancorp operated an investment program in which investors placed cash or securities in a "credit facility program" with the expectation of receiving a risk-free return of four to six percent a year on the value of the assets placed in the program. Invested assets were to be transferred to Brandon, acting as trustee. The trustee was to have legal title to the assets, with the investor retaining beneficial ownership at all times. Investors were also told that the invested assets would not be sold, pledged, assigned, margined, encumbered or hypothecated without the investor's authorization.
E. On August 16, 2001, the Commission filed a motion for summary judgment against Brandon. On March 26, 2002, the Court issued an order granting the Commission's motion in which the Court made findings that Brandon had violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
F. The Court found, among other things, that in his capacity as trustee Brandon made the following representations to investors in the Credit Bancorp program: (1) the securities would be placed in custodial accounts, (2) Brandon would be the sole signatory on the accounts, (3) Brandon had the power to return securities invested in the program, (4) the securities would not be disposed of without the investors' permission, and (5) Brandon was representing the investors' best interests. The Court found that none of these representations was true.
G. The Court also found that in his capacity as legal counsel to Credit Bancorp Brandon provided legal opinions regarding, among other matters, removing restrictive legends from stock certificates and the applicability of various provisions of the federal securities laws to the Credit Bancorp program. The Court found Brandon provided these and other legal opinions both orally and in writing to Credit Bancorp and investors in the Credit Bancorp investment program.
H. The Court found that through this and other conduct Brandon violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by " . . . making material misstatements, with the requisite scienter, about Credit Bancorp's trust and credit facility agreement in connection with the purchase or sale of securities."
Based on the foregoing, the Commission finds that Brandon has been found by a court of competent jurisdiction to have violated provisions of the federal securities laws within the meaning of Rule 102(e)(3)(i) of the Commission's Rules of Practice. In view of this finding, the Commission deems it appropriate in the public interest that Brandon be temporarily suspended from appearing or practicing before the Commission.
Accordingly, IT IS HEREBY ORDERED THAT Brandon be, and hereby is, temporarily suspended from appearing or practicing before the Commission.
IT IS FURTHER ORDERED that Brandon may within thirty days after service of this Order file a petition with the Commission to lift the temporary suspension. If no petition is received by the Commission within thirty days after service of the Order, the suspension shall become permanent pursuant to Rule 102(e)(3)(ii).
If a petition is received within thirty days after service of this Order, the Commission shall, within 30 days after the filing of the petition, either lift the temporary suspension, or set the matter down for hearing at a time and place to be designated by the Commission, or both. If a hearing is ordered, following the hearing, the Commission may lift the suspension, censure the petitioner, or disqualify the petitioner from appearing or practicing before the Commission for a period of time or permanently pursuant to Rule 102(e)(3)(iii).
This Order shall be served upon Brandon personally or by certified mail at his last known address.
By the Commission
Jonathan J. Katz
|1|| Rule 102(e)(3) of the Commission's Rules of Practice (17 C.F.R. §201.102(e)(3)) provides in pertinent part that:
(i) The Commission, with due regard to the public interest and without preliminary hearing, may, by order, temporarily suspend from appearing or practicing before it any . . . attorney . . . who has been by name: . . .
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