UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 7529 / April 27, 1998
SECURITIES EXCHANGE ACT OF 1934
Release No. 39918 / April 27, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9587
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___________________________________
:
: ORDER INSTITUTING PUBLIC
In the Matter of : ADMINISTRATIVE AND CEASE-AND-
: DESIST PROCEEDING PURSUANT TO
THOMAS F. FERRIS, : SECTION 8A OF THE SECURITIES
: ACT OF 1933 AND SECTIONS 15(b),
Respondent. : 19(h), AND 21C OF THE
: SECURITIES EXCHANGE ACT OF
: 1934, MAKING FINDINGS, AND
: IMPOSING REMEDIAL SANCTIONS AND
: ORDER TO CEASE AND DESIST
___________________________________ :
I.
The Securities and Exchange Commission ("Commission") deems it
appropriate and in the public interest that a public
administrative and cease-and-desist proceeding pursuant to
Section 8A of the Securities Act of 1933 ("Securities Act") and
Sections 15(b), 19(h), and 21C of the Securities Exchange Act of
1934 ("Exchange Act"), be instituted against Thomas F. Ferris
("Ferris").
II.
In anticipation of the institution of this proceeding, Ferris has
submitted an Offer of Settlement, which the Commission has
determined to accept. Solely for the purpose of this proceeding
and any other proceedings brought by or on behalf of the
Commission or to which the Commission is a party, and without
admitting or denying the findings contained in this order, except
that Ferris admits the jurisdiction of the Commission over him
and over the subject matter of this proceeding, Ferris by his
Offer of Settlement consents to the findings and the imposition
of the sanctions contained in this Order Instituting Public
Administrative and Cease-and-Desist Proceeding Pursuant to
Section 8A of the Securities Act of 1933 and Sections 15(b),
19(h), and 21C of the Securities Exchange Act of 1934, Making
Findings, and Imposing Remedial Sanctions and Order to Cease and
Desist ("Order").
Accordingly, IT IS ORDERED that a proceeding against Ferris be,
and hereby is, instituted.
III.
On the basis of this Order, and the Offer of Settlement submitted
by Ferris, the Commission finds that:[1]
A.Ferris has been a registered representative since 1984. Ferris
was the sole owner and president of, and was associated with,
Pacific Capital Partners, Inc. ("Pacific Capital"), a registered
broker-dealer, from June 15, 1989, until November 9, 1997, when
Pacific Capital's Form BDW became effective (File No. 8-41257).
Pacific Capital was located in La Jolla, California.
B.Ferris has also been the sole owner and control person of The
Sagres Company, Inc. ("Sagres") from 1993 through the present.
Sagres is located in La Jolla, California.
C.From August 1993 through December 1996, Pacific Capital offered
and sold units in two limited partnerships, Recovery Asset Group,
Ltd. ("RAG-I") and Recovery Asset Group II, Ltd. ("RAG-II"), to
investors. Pacific Capital raised $3 million and $1.79 million
from investors in RAG-I and RAG-II, respectively. The business
of each of the partnerships is to purchase and either resell or
collect on bad debt, such as delinquent credit card accounts.
Sagres is the general partner of the RAG-I and RAG-II
partnerships.
D.From March 1994 through January 1995, Ferris caused RAG-I to
make distributions to investors which exceeded the partnership's
gross revenue from debt collections. Similarly, from November
1995 through April 1996, Ferris caused RAG-II to make
distributions which exceeded revenues to its investors.
Specifically, undisclosed to investors, Ferris caused RAG-I and
RAG-II to supplement the distribution payments by returning a
portion of the investors' original capital investment in each
partnership.
E.Ferris caused Pacific Capital and its sales representatives to
make false statements about the distribution payments described
in Paragraph III.D. to prospective investors in RAG-I and RAG-II.
Ferris prepared periodic supplements to the partnerships'
offering documents which stated the amount of the distribution
payments to previous investors. The supplements did not disclose
that investor money was partially used to make up the
distributions. Based on the supplements, sales representatives
at Pacific Capital also conveyed similar information on the
telephone to prospective investors. Ferris failed to disclose,
and caused Pacific Capital's failure to disclose, that the
distributions partially consisted of a return of the investors'
money.
F.Ferris willfully violated Section 17(a) of the Securities Act
by, directly or indirectly, using the means and instruments of
transportation or communication in interstate commerce and by use
of the mails in the offer or sale of securities: (1) to employ
devices, schemes, and artifices to defraud; (2) to obtain money
and property by means of untrue statements of material fact and
omissions to state material facts necessary in order to make the
statements made, in the light of the circumstances under which
they were made, not misleading; and (3) to engage in
transactions, practices, and a course of business which operated
as a fraud or deceit upon purchasers of securities, as is more
particularly described in Paragraphs III.C. through E., above.
G.Ferris willfully violated Section 10(b) of the Exchange Act and
Rule 10b-5 thereunder by, directly or indirectly, using the means
and instrumentalities of interstate commerce and of the mails in
connection with the purchase or sale of securities: (1) to
employ devices, schemes, and artifices to defraud; (2) to make
untrue statements of material facts and to omit to state material
facts necessary in order to make the statements made, in the
light of the circumstances under which they were made, not
misleading; and (3) to engage in acts, practices, and a course of
business which operated as a fraud or deceit upon customers, as
is more particularly described in Paragraphs III.C. through E.
above.
H.Ferris willfully aided and abetted and caused Pacific Capital's
violations of Section 15(c)(1) of the Exchange Act and Rule 15c1-
2 thereunder by making use of the mails and the means and
instrumentalities of interstate commerce to effect transactions
in, and to induce and to attempt to induce the purchase and sale
of securities otherwise than on a national securities exchange of
which Pacific Capital was a member, by: (1) engaging in acts,
practices, and a course of business which operated as a fraud or
deceit upon Pacific Capital's customers; and (2) making untrue
statements of material fact and omitting to state material facts
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading,
which statements or omissions were made with knowledge or
reasonable grounds to believe that the statements or omissions
were untrue or misleading, as is more particularly described in
Paragraphs III.C. through E. above.
IV.
On the basis of the foregoing, the Commission deems it
appropriate and in the public interest to impose the sanctions
specified in Ferris' Offer of Settlement.
Accordingly, IT IS HEREBY ORDERED that:
A.Pursuant to Section 8A of the Securities Act and Section 21C of
the Exchange Act, Ferris shall cease and desist from committing
or causing any violation and any future violation of
Section 17(a) of the Securities Act and Section 10(b) of the
Exchange Act and Rule 10b-5 thereunder; and causing any violation
and any future violation of Section 15(c)(1) of the Exchange Act
and Rule 15c1-2 thereunder;
B.Ferris be, and hereby is, barred from association with any
broker, dealer, municipal securities dealer, investment company,
or investment adviser, with the right to reapply for association
after one year and six months to the appropriate self-regulatory
organization, or if there is none, to the Commission; and
C.Ferris shall, within thirty (30) days after entry of this
order, pay a civil money penalty of $20,000 to the United States
Treasury. Such payment shall be: (1) made by United States
postal money order, certified check, bank cashier's check, or
bank money order; (2) made payable to the Securities and Exchange
Commission; (3) hand-delivered or mailed to the Comptroller,
Securities and Exchange Commission, Operations Center,
6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and
(4) submitted under cover letter that identifies Ferris as a
respondent in these proceedings, the file number of these
proceedings, a copy of which cover letter and money order or
check shall be sent to Elaine M. Cacheris, Regional Director,
Securities and Exchange Commission, 5670 Wilshire Blvd.,
11th Floor, Los Angeles, CA 90036.
By the Commission.
Jonathan G. Katz
Secretary
**FOOTNOTES**
[1]:The findings herein are made pursuant to Ferris's Offer of Settlement and are not
binding on any other person or entity named as a respondent in this or any other
proceeding.
SERVICE LIST
Rule 141 of the Commission's Rules of Practice provides that the
Secretary, or another duly authorized officer of the Commission,
shall serve a copy of the Order Instituting Public Administrative
and Cease-and-Desist Proceeding Pursuant to Section 8A of the
Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the
Securities Exchange Act of 1934, Making Findings, and Imposing
Remedial Sanctions and Order to Cease and Desist on each person
named as a party in the order and their legal agent.
The attached Order Instituting Public Administrative and Cease-
and-Desist Proceeding Pursuant to Section 8A of the Securities
Act of 1933 and Sections 15(b), 19(h), and 21C of the Securities
Exchange Act of 1934, Making Findings, and Imposing Remedial
Sanctions and Order to Cease and Desist has been served on the
following parties and other persons entitled to notice:
The Honorable Brenda P. Murray
Chief Administrative Law Judge
Securities and Exchange Commission
Mail Stop 11-6
450 Fifth Street, N.W.
Washington, D.C. 20549
Securities and Exchange Commission
Branch of Regional Office Assistance
Attn: Peter M. Hong
Mail Stop 8-9
450 Fifth Street, N.W.
Washington, D.C. 20549
Securities and Exchange Commission
Pacific Regional Office
Attn: Diana K. Tani
Kathleen K. Bisaccia
Michael R. Wilner
5670 Wilshire Blvd., 11th Floor
Los Angeles, CA 90036
Edward J. Gelfand, Esq.
Gartenberg Jaffe Gelfand & Stein
11755 Wilshire Blvd., Suite 1230
Los Angeles, CA 90025-1518
Counsel to Thomas F. Ferris
Thomas F. Ferris
2120 Caminito Del Barco
Del Mar, CA 92014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
OFFICE OF
THE SECRETARY
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Edward J. Gelfand, Esq.
Gartenberg Jaffe Gelfand & Stein
11755 Wilshire Blvd., Suite 1230
Los Angeles, CA 90025-1518
Re:In the Matter of Thomas F. Ferris
Dear Mr. Gelfand:
Please find enclosed an Order Instituting Public Administrative
and Cease-and-Desist Proceeding Pursuant to Section 8A of the
Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the
Securities Exchange Act of 1934, Making Findings, and Imposing
Remedial Sanctions and Order to Cease and Desist. The findings
and remedial sanctions imposed are in accordance with the Offer
of Settlement, dated February 20, 1998, which your client,
Thomas F. Ferris, submitted to the Commission and which the
Commission has determined to accept. The sanctions imposed by
the enclosed Order shall be effective immediately.
If you have any questions or wish to discuss any aspect of the
proceedings, you may contact Diana K. Tani, Assistant Regional
Director of the Commission's Pacific Regional Office, 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036
Sincerely,
Jonathan G. Katz
Secretary
Enclosure
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
OFFICE OF
THE SECRETARY
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Thomas F. Ferris
2120 Caminito Del Barco
Del Mar, CA 92014
Re:In the Matter of Thomas F. Ferris
Dear Mr. Ferris:
Please find enclosed an Order Instituting Public Administrative
and Cease-and-Desist Proceeding Pursuant to Section 8A of the
Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the
Securities Exchange Act of 1934, Making Findings, and Imposing
Remedial Sanctions and Order to Cease and Desist. The findings
and remedial sanctions imposed are in accordance with the Offer
of Settlement, dated February 20, 1998, which you submitted to
the Commission and which the Commission has determined to accept.
The sanctions imposed by the enclosed Order shall be effective
immediately.
If you have any questions or wish to discuss any aspect of the
proceedings, you may contact Diana K. Tani, Assistant Regional
Director of the Commission's Pacific Regional Office, 5670
Wilshire Boulevard, 11th Floor, Los Angeles, California 90036.
Sincerely,
Jonathan G. Katz
Secretary
Enclosure
For Immediate Release
NEWS DIGEST SUMMARY
ADMINISTRATIVE PROCEEDING INSTITUTED AND SETTLED AGAINST
THOMAS F. FERRIS
The Securities and Exchange Commission (Commission) announced
that on _________, 1998, it instituted and simultaneously settled
public administrative and cease-and-desist proceedings against
Thomas F. Ferris (Ferris), the owner and president of
Pacific Capital Partners, Inc. (Pacific Capital), formerly a
registered broker-dealer. The Commission alleges that, from
August 1993 through December 1996, Pacific Capital offered and
sold units in two limited partnerships, Recovery Asset Group,
Ltd. and Recovery Asset Group II, Ltd., to investors. The Order
alleges that Ferris caused the partnerships to make distributions
to investors which exceeded the partnerships' gross revenue from
business operations, and that Ferris caused Pacific Capital to
make false statements to prospective investors about these
distribution payments.
Ferris consented to the entry of a cease-and-desist order, agreed
to pay a civil penalty in the amount of $20,000, and is barred
from association with any broker, dealer, municipal securities
dealer, investment company, or investment adviser, with the right
to reapply for association in one year and six months. Ferris
consented to the administrative order without admitting or
denying the findings in the Order.
Michael R. Wilner
Pacific Regional Office/Los Angeles
(213) 965-3928