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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
BEFORE THE
SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act of 1934
Release No. 50578 / October 21, 2004

Administrative Proceeding
File No. 3-11438


In the Matter of

Daniel E. Emmenegger

Respondent.


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ORDER MAKING FINDINGS, IMPOSING REMEDIAL SANCTIONS, AND IMPOSING A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 15(b)(6) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934

I.

On March 23, 2004, the Securities and Exchange Commission ("Commission") entered an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") (“Initial Order”) against respondent Daniel E. Emmenegger (“Emmenegger”).

II.

Emmenegger has submitted an Offer of Settlement of Daniel E. Emmenegger (“Offer”) to these administrative proceedings, which the Commission has determined to accept. Solely for the purposes of these proceedings, and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings set forth herein, except as to personal and subject matter jurisdiction, which are admitted, Emmenegger consents to the entry of the Order Making Findings, Imposing Remedial Sanctions, and Imposing a Cease-and-Desist Order Pursuant to Sections 15(b)(6) and 21C of the Securities Exchange Act of 1934, as set forth below.

III.

Based on this Order and Emmenegger’s Offer, the Commission finds that:

A. Emmenegger, age 26, resides in Brooklyn, New York. From July 2001 to March 2004, Emmenegger was a registered representative associated with Susquehanna Investment Group (“Susquehanna”).

B. From at least July 2002 to March 2004, Emmenegger defrauded Susquehanna by filling options contracts orders he placed through an undisclosed personal brokerage account for options he was the clerk for, at prices well below the market price. Emmenegger established two personal Internet brokerage accounts in June 2002, which he failed to disclose to Susquehanna in contravention of Susquehanna’s requirements. Since at least July 2002, Emmenegger, using these personal brokerage accounts, placed limit buy orders for options contracts for which he was the trading assistant on the AMEX floor, at prices well below the market price. These orders would go unfilled during the regular course of the trading day since no seller would accept Emmenegger’s below-market prices. At or near the close of the trading day, Emmenegger manually filled his personal buy orders from Susquehanna’s proprietary account at the below-market prices. Emmenegger did not report the trades to the tape as required by AMEX rules. By filling his personal buy orders from Susquehanna’s proprietary account at prices well below the prevailing market price, Emmenegger caused losses in Susquehanna’s proprietary account. Thereafter, Emmenegger sold the options contracts through his personal brokerage accounts back to Susquehanna at market prices in riskless transactions, and profited from the spread between the artificially low purchase prices he obtained and the market sale prices.

C. On April 16, 2004, Emmenegger pled guilty to (a) one count of securities fraud in violation of Title 15, United States Code, Sections 78j(b) and 78ff, Title 17, Code of Federal Regulations, Section 240.10b-5, and Title 18, United States Code, Section 2; and (b) four counts of wire fraud in violation of Title 18, United States Code, Sections 1342 and 1343, before the United States District Court for the Southern District of New York, in United States v. Daniel Emmenegger, Crim. Information No. 04-Cr-334. On August 4, 2004, Emmenegger was sentenced to a prison term of 33 months and ordered to make restitution in the amount of $301,092. United States v. Emmenegger, 04-Cr-334 (S.D.N.Y. Aug. 4, 2004).

D. The counts of the criminal information to which Emmenegger pled guilty charged Emmenegger with engaging in the same fraudulent trading scheme as that alleged in this Order, and described in Section III.B. above.

E. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit a person, in connection with the purchase or sale of any security, from employing any device, scheme or artifice to defraud, making false or misleading statements, or engaging in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person. By engaging in the conduct alleged in the Order, and described in Section III.B. above, Emmenegger engaged in a scheme to defraud Susquehanna of its proprietary trading profits in connection with the purchase and sale of the options contracts. See Competitive Assoc., Inc. v. Laventhol, Krekstein, Horwath & Horwath, 516 F.2d 811, 814 (2d Cir. 1975) (“Fraudulent devices, practices, schemes, artifices and course of business are also interdicted by the securities laws.”)

F. Emmenegger willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

IV.

Based on the foregoing, the Commission deems it appropriate in the public interest to impose the sanctions specified in Emmenegger’s Offer, and

ACCORDINGLY, IT IS HEREBY ORDERED that:

1. Pursuant to Section 21C of the Exchange Act, Emmenegger cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

2. Pursuant to Section 15(b)(6) of the Exchange Act, Emmenegger be, and hereby is, barred from association with any broker or dealer.

Any reapplication for association by Emmenegger will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against Emmenegger, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order.

By the Commission.

Jonathan G. Katz
Secretary

 

http://www.sec.gov/litigation/admin/34-50578.htm


Modified: 10/21/2004