UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16631 / July 19, 2000
U.S. Securities and Exchange Commission v. JWGenesis Financial, Inc., United States District Court for the District of Columbia, Civil Action No. 00-1706
In connection with a cease-and-desist order issued by the Commission today in a settled proceeding against JWGenesis Financial, Inc, formerly known as JW Charles Financial Services, Inc. ("JW Charles"), the Commission filed a related action for civil penalties against JW Charles in the United States District Court for the District of Columbia. In settlement of that matter, JW Charles has consented to the entry of a final judgment ordering it to pay a civil penalty of $20,000.
In the cease-and desist order, In the Matter of JW Charles Financial, Inc. [34-43053], the Commission found that JW Charles violated Section 13(d) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 13d-1 and 13d-2, by failing to file a Schedule 13D upon the acquisition of more than five percent of the outstanding shares of The Americas Growth Fund, a closed-end business development company ("AGRO"), and by failing to file timely amendments to a Schedule 13D it did file as its holdings of AGRO common stock increased to over 25 percent.
In its cease-and-desist order, the Commission found, and in its Complaint the Commission alleges, the following:
In 1994, JW Charles was the principal underwriter of the initial public offering of AGRO common stock. From the onset of aftermarket trading, JW Charles's broker-dealer subsidiary, JW Charles Clearing Corp. ("JWCC"), was the principal market-maker for the stock. Until December 1996, JWCC held a position in AGRO stock consistent with typical market making practice, ending each day with no AGRO stock, or a small long or short position.
In December 1996, JW Charles, through JWCC, acquired a position in AGRO shares far in excess of any it had obtained previously. While at the end of November 1996, JWCC owned 450 shares of AGRO common stock, by the end of December, it owned 167,125 AGRO shares, 13.2% of the total outstanding. These shares were obtained through JWCC consistently maintaining the high bid for AGRO.
On January 10, 1997, JWCC, holding 171,525 AGRO shares (13.56% of the amount outstanding) beneficially owned by JW Charles, filed a Schedule 13G with the Commission. JW Charles violated Section 13(d) of the Exchange Act, and Rule 13d-1 thereunder, by not filing a timely Schedule 13D upon its acquisition, in December 1996, of over five percent of the outstanding shares of common stock of AGRO. Although JWCC filed a Schedule 13G in January 1997, it was ineligible to do so, as the AGRO shares it had accumulated on JW Charles's behalf were not acquired in the "ordinary course of [its] business" as required by Rule 13d-1(b)(1)(i).
By March 11, 1997, JW Charles, through JWCC, beneficially owned 262,000 AGRO shares, or 20.7% of the shares outstanding. On that date, JWCC filed with the Commission what the company labeled a "voluntary" Schedule 13D. Between March 11 and June 8, 1997, JWCC's position in AGRO reached 25% of the then-outstanding AGRO shares. During this period, JWCC did not amend its March 11 "voluntary" Schedule 13D to reflect each instance it acquired an additional one percent of AGRO's outstanding shares. JW Charles's failure to amend its March 11 "voluntary" Schedule 13D violated Exchange Act Rule 13d-2. On June 9, 1997, when it held over 25% of the outstanding AGRO common stock, JW Charles commenced a tender offer for AGRO's stock, pursuant to which it eventually obtained ownership of all of the outstanding shares of common stock of AGRO.
Without admitting or denying the allegations in the Commission's Complaint and the Commission's findings in its cease-and-desist order, JW Charles has agreed to settle the Commission's claims by: (1) consenting to the entry of an administrative order requiring that it cease and desist from violations of Section 13(d) of the Exchange Act, and Exchange Act Rules 13d-1 and 13d-2, and (2) consenting to the entry of an order of the U.S. District Court requiring JW Charles to pay a civil penalty of $20,000.