UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 39133 / September 25, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9438 : ORDER INSTITUTING PROCEEDINGS In the Matter of : PURSUANT TO SECTIONS : 15(b) AND 19(h) OF THE : SECURITIES EXCHANGE ACT OF EDWARD CHRISTIAN FARNI, : 1934, MAKING FINDINGS AND : IMPOSING REMEDIAL SANCTIONS Respondent. : : : I. The Commission deems it appropriate and in the public interest that public administrative proceedings be instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") against Edward Christian Farni ("Farni"). In anticipation of the institution of these administrative proceedings, Farni has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings herein, except for those set forth in Section III A, III B and III C below, which Farni admits, he consents to the entry of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions. II. Accordingly, it is ordered that proceedings pursuant to Sections 15(b) and 19(h) of the Exchange Act be, and hereby are, instituted. III. On the basis of this Order and the Respondent's Offer of Settlement, the Commission makes the following findings: <(1)> A. The Commission has personal jurisdiction over Farni and subject matter jurisdiction over this matter. B. From 1988 to or about February 1994, Farni was a registered representative of a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act. Additionally, Farni was licensed and acted as a principal of such broker-dealer. C. On May 2, 1996, the Commission filed a lawsuit against Farni and others captioned Securities and Exchange Commission v. Steven McMichael, et al., Case No. 3-96-405, in the United States District Court for the District of Minnesota. On September 8, 1997, the court entered a permanent injunction against Farni, with his consent and without admitting or denying the allegations contained in the complaint, except as to jurisdiction, which he admitted, enjoining him from violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission's complaint alleged the conduct described below. D. The Commission's complaint alleged that from in and around 1989 until June 1991, several individuals engaged in an elaborate fraudulent scheme involving the common stock of Angeion Corporation ("Angeion"). The purpose of the scheme was to create the appearance of active trading in the stock of Angeion and thus create the impression on the investing public of a demand for the stock. This was done by engaging in manipulative devices including matched orders, wash trades and stock parking. <(2)> Further, as the scheme began to unravel in May 1991, certain individuals <(1)> The findings herein are made pursuant to Respondent Farni's Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. <(2)> A matched order is the entering of a sell (or buy) order knowing that a corresponding buy (or sell) order of substantially the same size, at substantially the same time and at substantially the same price either has been or will be entered. A wash trade is a securities transaction which involves no change in the beneficial ownership of the security. Parking is the sale of securities subject to an agreement or understanding that the securities will be repurchased by the seller at a later time and at a price which leaves the economic risk on the seller. ======END OF PAGE 2====== engaged in free-riding. <(3)> The manipulative activities stopped when the manipulators could no longer pay for their purchases of Angeion stock or satisfy their margin calls. After the manipulative activities ceased, the stock price of Angeion fell from a high of $10 3/8 in March 1991, to a low of $2 3/4 on July 3, 1991. E. Specifically, the Commission's complaint alleged that as part of his conduct, Farni arranged through his customers' accounts four matched orders involving 290,000 shares of Angeion stock valued at approximately $1.6 million. Further, the complaint alleged that Farni arranged one wash trade for a customer involving 35,000 shares of Angeion. Finally, it was alleged that in order to relieve his broker-dealer's large inventory position in Angeion, Farni arranged for 377,000 shares of his broker- dealer's excess Angeion shares to be parked in customer accounts. IV. In view of the foregoing, it is in the public interest to impose the sanction specified in the Offer of Settlement. Accordingly, IT IS HEREBY ORDERED, effective immediately that: A. Farni be barred from association in a supervisory and proprietary capacity with any broker, dealer, investment company, investment adviser, investment company or municipal securities dealer; and B. Farni be barred from associating with any broker, dealer, investment company, investment adviser, investment company or municipal securities dealer, with the right to reapply for association after three years in a non-supervisory and non-proprietary capacity to the appropriate self-regulatory organization, or if there is none, to the Commission. By the Commission. Jonathan G. Katz Secretary <(3)> Free riding is the practice whereby a stock is purchased without sufficient funds available to pay for it, the stock is sold prior to settlement date, and the proceeds of the sale are used to pay for the original purchase. ======END OF PAGE 3======