UNITED STATES OF AMERICA
In the Matter of
ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Respondent Henry Weingarten, pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act").
In anticipation of the institution of these proceedings, Weingarten has submitted an Offer of Settlement, which the Commission has determined to accept. Solely for the purposes 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 contained herein, except that Respondent admits that a Final Judgment of Permanent Injunction and Other Relief as to Henry Weingarten has been entered against him as set forth in Paragraph III.D., and that the Commission has jurisdiction over him and over the subject matter of these proceedings, Weingarten consents to the entry of this Order Instituting Proceedings Pursuant to Section 203(f) of the Investment Advisors Act of 1940, Making Findings and Imposing Remedial Sanctions ("Order"). The Commission has determined that it is appropriate to accept Weingarten's Offer of Settlement and accordingly is issuing this Order.
Based on the foregoing, the Commission finds that1:
A. Respondent Henry Weingarten, age 54, resides in New York City. During the relevant time, he was an investment adviser and a self-described "financial astrologer." He currently is registered as an investment adviser with the state of New York. Weingarten owns and operates the Astrologers Fund Inc., and its Internet stock picking website, Afund.com. Weingarten is an Investment Adviser under Section 202(a)(11) of the Advisers Act, because he engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities for compensation. During the relevant time, Weingarten served as an investment adviser to clients who followed his "financial astrology" formula for investing. In January 2000, Weingarten managed between $2 and $3 million for seven clients. Weingarten had full discretion to execute trades for five clients, and he made recommendations for two custodial clients.
B. Carib Securities, Ltd. ("Carib") is a Turks & Caicos Islands-based entity, which is in the business of stock promotion. Edward A. Durante operated Carib, using the alias Ed Simmons. In 1999, Carib contracted to raise U.N. Dollars Corporation's stock price and daily trading volume.
C. U.N. Dollars Corp. ("UNDR") is located in Jacksonville, Florida, and during the relevant time period was a non-reporting publicly-traded company quoted on the OTC Bulletin Board. UNDR was removed from the OTC Bulletin Board in March 2000 following a trading suspension.
D. On October 11, 2001, the Commission filed a complaint against Weingarten and others, styled Securities and Exchange Commission v. U.N. Dollars Corp., et al., Case No. 01-CV-9059 (S.D.N.Y.). On February 1, 2002, Weingarten consented to the entry of a Final Judgment of Permanent Injunction and Other Relief as to Henry Weingarten ("Final Judgment"), without admitting or denying the allegations in the complaint, except as to jurisdiction, which he admitted. On March 5, 2002, the United States District Court for the Southern District of New York entered the Final Judgment, which (1) permanently enjoined Weingarten from violating Section 17(b) of the Securities Act of 1933 ("Securities Act") and Sections 206(1) and 206(2) of the Advisers Act, and (2) ordered him to pay a $15,000 civil penalty pursuant to Section 20(d) of the Securities Act and Section 209(e) of the Advisers Act.
E. The Commission's complaint in SEC v. U.N. Dollars Corp., et al. alleges, among other things, that in December 1999, Weingarten was approached by Carib, through its principal, Edward A. Durante, to provide services to UNDR. On or about January 12, 2000, Weingarten signed a contract that called for him to provide "financial astrological services" to U.N. Dollars Corp. and to include a banner advertisement for UNDR on the Astrologers Fund Internet website, Afund.com, in return for 250,000 "free trading" shares of U.N. Dollars Corp. On the same day, Weingarten received 250,000 shares of UNDR common stock in his personal brokerage account by electronic transfer from an account controlled by Durante. On or about January 17, 2000, Weingarten profiled UNDR in his "Astrologers Fund" subscriber newsletter, "Wall Street Next Week," under the headline "Will UNDR become a new age JP Morgan?" Weingarten wrote that he was continuing his due diligence, but established a $1.00 target price for the stock. On the previous trading day, January 14, 2000, UNDR closed at $0.08. The newsletter was e-mailed or faxed to approximately 200 paying subscribers. A few days later, the newsletter's content was available for free on the Afund.com website. On or about February 25, 2000, when UNDR was trading near $1.00, Weingarten raised his 2001 target price prediction for UNDR to $4.00. The $4.00 price target was listed on a page of the Afund.com website, titled "Astrologers Fund, Inc. Afund 2000 Client Emerging Growth Portfolio." According to the complaint, although Weingarten disclosed on his website that UNDR was a client, he never disclosed the receipt of the UNDR shares or the amount of compensation he received to promote UNDR.
F. The Commission's complaint further alleges that during 2000, Weingarten was an investment adviser who managed investment accounts for seven clients. During January and February 2000, after he received the 250,000 UNDR shares, Weingarten purchased between 22,000 and 50,000 U.N. Dollars shares in each account under his management. He invested approximately $75,000 of client funds in UNDR, and purchased 253,000 shares in their accounts. According to the complaint, although Weingarten disclosed on his website that UNDR was a client, he never disclosed his conflict of interest to the beneficial owners of the accounts he managed, and he did not disclose that he was paid 250,000 shares of UNDR stock.
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement submitted by Weingarten and accordingly, pursuant to Section 203(f) of the Advisers Act,
IT IS HEREBY ORDERED that:
A. Weingarten be and hereby is censured; and
B. Weingarten shall comply with the following undertakings:
(1) Weingarten shall mail a copy of this Order, together with a cover letter, in a form acceptable to the staff of the Commission, to each of his existing investment advisory clients by certified mail, return receipt requested, within 30 days from the effective date of this Order;
(2) From the effective date of this Order until the expiration of 12 months, Weingarten shall provide a copy of this Order to all prospective investment advisory clients not less than 48 hours prior to entering into any written or oral investment advisory contract; and
(3) In connection with parts (1) and (2) above, within 30 days from the date of this Order, Weingarten shall execute and deliver to Scott W. Friestad, Assistant Director, Division of Enforcement, U.S. Securities and Exchange Commission, 450 Fifth St., N.W., Washington, D.C. 20549-0708, an affidavit that he has provided this Order to his existing clients in accordance with this Order's terms. Within 13 months from the date of this Order, Weingarten shall execute and deliver to Scott W. Friestad an affidavit that he has provided this Order to his prospective investment advisory clients in accordance with this Order's terms.
By the Commission.
Jonathan G. Katz
|1||The findings herein are made pursuant to Weingarten's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.|
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