UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 39155 / September 30, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9459 : In the Matter of : ORDER INSTITUTING PROCEEDINGS : PURSUANT TO SECTION 21C OF THE Sam Moore, : SECURITIES EXCHANGE ACT OF 1934, : MAKING FINDINGS AND ORDERING Respondent. : RESPONDENT TO CEASE AND DESIST : I. The Commission deems it appropriate and in the public interest that proceedings be, and they hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Sam Moore ("Moore") committed or caused violations of Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5, 10b-6, 16a-2 and 16a-3 thereunder, in connection with the purchase on July 17-18, 1995, and an unrelated sale on August 18, 1995 of shares of the common stock of Thomas Nelson Inc. ("Thomas Nelson"). II. In anticipation of the institution of these administrative proceedings, Moore has submitted an Offer of Settlement which the Commission has determined to accept. Under the terms of the Offer of Settlement, Moore, solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice and without admitting or denying the matters set forth herein, consents to the issuance of this Order Instituting Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Ordering Respondent to Cease and Desist.<(1)> <(1)> On the same day that this proceeding was instituted, the Commission filed, in the United States District Court for the District of Columbia, the related matter, SEC v. Moore, Civil Action No. 1:97CV02256 GK (D.D.C. September 30, 1997). With that complaint, the Commission filed the Consent of Sam Moore, in which (continued...) III. The Commission makes the following findings: Sam Moore, 67, has been CEO, Chairman and President of Thomas Nelson since its inception in 1961. Moore is also Thomas Nelson's largest individual shareholder, owning more than ten percent of the company's common stock. Thomas Nelson Inc., which is not a respondent, is incorporated in Tennessee, and its executive offices are located in Nashville, Tennessee. It publishes, produces and distributes books and recorded music. The common stock of Thomas Nelson was registered with the Commission pursuant to Section 12(b) of the Exchange Act and traded on the NASDAQ National Market System until early July 1995, at which time the common stock was listed on the New York Stock Exchange ("NYSE") and began trading under the symbol "TNM." On July 18, 1995, Thomas Nelson sold 2.875 million shares of its common stock in a registered, secondary public offering. SUMMARY Moore violated Section 10(b) and Rule 10b-5 of the Exchange Act through his placement of end-of-the-day purchases, executed on the NYSE, on July 18, 1995. The purchases were executed at the offer side of the market in Moore's sister's account for which Moore made investment decisions. Because Thomas Nelson's 2.875 million share public secondary stock offering was priced on July 18, and Moore's trades caused the price of Thomas Nelson stock to close 1/8 of a point higher on that day, the investors who had purchased in the secondary offering paid an additional 1/8 of a point per share, and Thomas Nelson received an additional $359,375 in proceeds from its secondary offering. Thomas Nelson has voluntarily agreed to distribute the excess proceeds of the offering by paying 12.5 cents per share (for a total of $359,375), plus interest, to investors who purchased shares of Thomas Nelson common stock in the offering, as discussed below. Moore's purchases on July 18 (and a prior purchase on July 17) also constituted violations of former Exchange Act Rule 10b-6 because the purchases were made during the restricted period.<(2)> In <(1)>(...continued) Moore, without admitting or denying the allegations in the complaint, has offered to settle that action by consenting to the entry of a final judgment ordering him to pay $50,000 as a civil penalty. The complaint does not seek an injunction against Moore. <(2)> On December 18, 1996, the Commission adopted a comprehensive revision of Rules 10b-6, 10b-7, 10b-8, and 10b-21, which became effective on March 4, 1997. (continued...) ======END OF PAGE 2====== addition, Moore failed to file a Form 4 with the Commission disclosing a sale of Thomas Nelson common stock in August 1995, as required by Rule 16(a) of the Exchange Act. FACTS Thomas Nelson filed with the Commission, on June 27, 1995, a Registration Statement on Form S-3, registering up to 2.5 million shares of common stock to be sold to the public and granting an overallotment option to its underwriters to purchase an additional 375,000 shares. The secondary offering was declared effective 20 days later, on July 18, 1995. The roadshow for the public offering began on July 10, and lasted through July 18 and included presentations in New York City, Los Angeles, Boston, Chicago, Milwaukee and Denver. Moore and representatives of the underwriters were the primary participants in these presentations. Thomas Nelson and the representatives of the underwriters had agreed to hold a telephone conference call at 4:15 p.m. (Eastern Time) on July 18 -- fifteen minutes after the close of the NYSE market -- to establish the final terms of the offering, including, primarily, the public offering price. On July 17, 1995 (Monday), at approximately 3:00 p.m. to 3:15 p.m. (Eastern time), Moore had finished his last roadshow presentation of the day. At approximately 3:22 p.m., Moore placed an order, on behalf of his sister, to purchase 5,000 shares of Thomas Nelson common stock at $20 per share, which was the offer side of the market. Moore's 5,000 share purchase was executed at an uptick of 1/8 of a point from the previous transaction. This purchase was the last trade of the day. On July 18, the price of Thomas Nelson stock traded between 20 and 20 1/2 until approximately 30 minutes before the close of trading on the NYSE, when it moved below 20. Approximately 15 minutes prior to the close of trading on the NYSE, Moore placed an order to purchase 5,000 shares of Thomas Nelson common stock in his sister's account at 19 7/8, which was the offer side of the market. Only one thousand shares of the 5,000 share order could be executed at 19 7/8. After being advised that no shares were being offered which would fill the remainder of the order, Moore raised his bid for the remaining 4,000 shares from 19 7/8 to 20. After the execution of the 4,000 share order at 20, Moore remained on the telephone with his account executive. Later in the conversation, Moore instructed his account executive to make two additional 1,000 share purchases at a limit of 20; one was entered at 3:55:53 and executed at 3:56:18, and the other was entered at 3:58:07 and executed at 3:58:17. The <(2)>(...continued) Securities Exchange Act Release No. 38067 (Dec. 20, 1996), 62 FR 520. Among other things, these amendments deemed Rules 101 and 102 of Regulation M as successor rules to Rule 10b-6. Accordingly, this Order, at paragraph IV., below, orders that respondent cease and desist from violating Rule 102 of Regulation M. ======END OF PAGE 3====== latter trade was the last transaction in Thomas Nelson common stock on the NYSE on July 18, 1995. Representatives of the underwriting syndicate and representatives of the pricing committee of Thomas Nelson's board of directors held the scheduled telephone conference call approximately fifteen minutes after Moore's last purchase, at 4:15 p.m. (Eastern Time). During the conference call, the success of the roadshow, interest in the offering and the price levels at which the stock had been trading on the NYSE were discussed. Representatives of the underwriters advised the Thomas Nelson pricing committee members that the underwriters would be willing to purchase Thomas Nelson 2.875 million shares and offer them to the public for $20 per share, the closing price of Thomas Nelson stock on July 18. Moore's Failure to File Form 4 In August 1995, approximately 1 month after Thomas Nelson's public offering, 8,750 shares of Thomas Nelson common stock, which were held in a charitable remainder trust securities account and of which Moore was the beneficial owner, were sold. Moore failed to file timely a Form 4 with the Commission reporting this sale.<(3)> VIOLATIONS OF THE FEDERAL SECURITIES LAWS Market manipulation is "[i]ntentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the prices of securities." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976) (footnote omitted). The practice of placing orders at the end of the day in order to cause the stock to close at a price higher than the prior sale price, known as "marking the close," constitutes a manipulative practice that violates Section 10(b) of the Exchange Act and Exchange Act rules promulgated thereunder. See Harry S. Pack, Securities Exchange Act Release No. 32374 (May 27, 1993), 54 SEC Docket 486; Myron S. Levin, Securities Exchange Act Release No. 31124 (Sep. 1, 1992), 52 SEC Docket 1580; Andrew Doherty, Securities Exchange Act Release No. 29545 (Aug. 12, 1991), 49 SEC Docket 0859; Jacob Schaefer, Securities Exchange Act Release No. 13736 (July 11, 1977), 12 SEC Docket 1128. In addition, Exchange Act Rule 10b-6, which was in effect at the time of the conduct described in this Order, prohibited an "affiliated purchaser" from purchasing any security during the restricted period.<(4)> Exchange Act Rules 16a-2 and 16a-3 require that officers <(3)> On March 6, 1996, Moore voluntarily tendered to the Company "short-swing" profits associated with this sale and purchases made previously. <(4)> Rule 102 of recently enacted Regulation M -- which rule was adopted to "preclude manipulative conduct by persons with an interest in the outcome of an offering" (continued...) ======END OF PAGE 4====== and directors report securities transactions in their own company by filing a Form 4. Moore placed trades at the market's close, in a manner he should reasonably have anticipated would affect the price of the common stock. The practice of placing orders at the end of the day in order to cause the common stock price to uptick by purchasing on the offer side of the market -- from 19 7/8 to 20 -- violates Section 10(b) of the Exchange Act. By causing the price of Thomas Nelson common stock to increase from 19 7/8 to 20 at the close of the market, Moore's trades interfered with the factors upon which market price depends. The manner in which Moore purchased Thomas Nelson common stock -- i.e., at the end of the day on the day the public offering was declared effective and through the mechanics of purchasing at the offer price and thus, causing the price to uptick -- was such that he reasonably should have anticipated that his actions would increase the closing price. He knew or was reckless in not knowing that his trading activity would have this effect. These trades resulted in a 1/8 of a point uptick, which increased the proceeds to the company from the public offering by $359,375. Moore's purchases also violated Rule 10b-6 because he purchased securities in Thomas Nelson on July 17 and 18, 1995, during the restricted period. Moore violated Rules 16a-2 and 16a-3 because he failed to file timely a Form 4 in connection with the sale by a charitable remainder trust of 8,750 shares of Thomas Nelson common stock in August 1995. Based upon the foregoing, the Commission finds that Moore committed or caused violations of Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5, 10b-6, 16a-2 and 16a-3 thereunder. IV. ORDER In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Respondent's Offer of Settlement. <(4)>(...continued) -- replaced Exchange Act Rule 10b-6 and similarly prohibits such activity. See n. 2. ======END OF PAGE 5====== Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that Moore shall cease and desist from committing or causing any violation and any future violation of Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 16a-2, 16a-3 and Rule 102 of Regulation M promulgated thereunder. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 6======