SECURITIES AND EXCHANGE COMMISSION
In the Matter of
Del Mar Financial Services, Inc., Kevin C. Dills, Private Brokers Corporation, Robert A. Roberts, and Matthew R. Jennings
On October 24, 2003, we issued an opinion dismissing charges that Private Brokers Corporation, a clearing broker-dealer, and its president and partial owner, Robert A. Roberts, violated, and aided, abetted, and caused violations of, antifraud, net capital, and recordkeeping provisions.1 The charges arose in connection with a fraudulent scheme involving the changing of ticket prices by Del Mar Financial Services, Inc., a former registered broker-dealer, and its owner, Kevin C. Dills. Private Brokers cleared Del Mar's trades during the relevant period pursuant to the parties' Fully-Disclosed Correspondent Agreement.2
The Division of Enforcement asks that we clarify the October 24 opinion.3 In support of its motion, the Division points to a single sentence appearing in a paragraph of the October 24 opinion that discussed the lack of evidence that Private Brokers and Roberts initiated or directly participated in the ticket price changing scheme with intent to deceive and defraud.4
In that discussion, we stated:
The record reveals that Roberts acted immediately once he discovered what he saw as errors in the prices for agency trades. Roberts contacted Dills and advised him that he needed to correct the errors in prices and bring them in line with the market. Roberts suggested that if Dills could not identify the mismatched trades one possible way to remedy the pricing errors was to give an average price to May 3 trades that did not match. Roberts then left the corrections to Del Mar and Dills while he concerned himself with trading to cover the oversale. Private Brokers later received corrected order tickets from Del Mar for May 3 and May 6 trades. Roberts did not review the corrected tickets and had no knowledge that Del Mar and Dills had falsified the prices on these tickets. Private Brokers and Roberts also had no knowledge of Del Mar's communications with customers about the changes. Private Brokers processed the changed order tickets and sent new confirmations to customers. On this record, Private Brokers' and Roberts' conduct amounted to nothing more than the performance of their activities as clearing brokers in addressing trading problems resulting from an introducing broker's actions.5
The Division contends that the highlighted sentence, taken in context, could be "misinterpreted to authorize brokers to improperly change the prices of securities transactions retroactively to an 'average price' that differs from the market prices that the customers actually received."
While, as the Division notes, absent consent, a broker should not charge or induce others to charge "average" prices where a customer received an actual price (and that price was accurately recorded), given the facts established in this proceeding, we do not believe that the identified sentence can be read to endorse that practice. On May 3, 1996, Del Mar lost track of its trading and sold more shares than it had customers' orders for, at a range of different prices. The October 24 opinion expressly found, based on the evidence presented, that Roberts was acting with knowledge of a chaotic trading situation at Del Mar and what he perceived as widespread errors in the sale prices for May 3 trades. Roberts made a general suggestion to Dills that, if Dills could not identify and correct the mismatched trades, one possible way to address this situation was to give those May 3 customers an average sales price. The evidence before us did not demonstrate that Roberts actually knew or had reason to know that any of the May 3 sale prices were accurately recorded. Nor did the evidence demonstrate that Roberts was suggesting that Dills use a system of average pricing in connection with May 3 trades that matched and were accurately recorded, or that Dills otherwise engage in conduct in derogation of Del Mar's duties to its customers.
The record also did not establish that Roberts and Dills discussed specific price corrections to any May 3 trades, the amount of any such corrections, or any errors in the sales prices of the subsequent May 6, 1996 trades. Dills and Del Mar were the parties who dealt directly with the customers and effected the correction of the mismatched May 3 trades.6
We therefore believe that the Division is mistaken in its reading of the October 24 opinion. Accordingly, we conclude that clarification of the October 24, 2003 opinion is unnecessary.
Accordingly, IT IS ORDERED that the motion for reconsideration filed by the Division of Enforcement be, and it hereby is, DENIED.
By the Commission.
Jonathan G. Katz
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