UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 40100 / June 19, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9444 ______________________________ : In the Matter of :ORDER MAKING FINDINGS, :IMPOSING REMEDIAL SANCTIONS CORTLANDT CAPITAL CORP., :AND ORDERING RESPONDENT MAYER AMSEL, and :TO CEASE AND DESIST JOSEPH MICHAEL GUCCIONE, :PURSUANT TO SECTIONS 15(b), : 21B AND 21C OF THE SECURITIES Respondents. :EXCHANGE ACT OF 1934 AGAINST :MAYER AMSEL ______________________________: I. On September 26, 1997, the Securities and Exchange Commission ( Commission ) instituted these administrative proceedings pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ( Exchange Act ). II. Respondent Mayer Amsel ( Amsel ) has submitted an Offer of Settlement (the Offer ) which the Commission has determined to accept. Under the terms of the Offer, Amsel consents, without admitting or denying the findings contained in this order, solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, to the issuance of the Order Making Findings, Imposing Remedial Sanctions and Ordering Respondent to Cease and Desist Pursuant to Sections 15(b), 21B and 21C of the Securities Exchange Act of 1934 Against Mayer Amsel ( Order ). ======END OF PAGE 1====== III. The Commission makes the following findings: RESPONDENT Mayer Amsel was the head equities trader at Cortlandt Capital Corp. ( Cortlandt ), responsible for the market making activities in Vertex stock. He also was a registered representative with active clients. On October 11, 1995, the NASD barred Amsel from association with any member firm because of conduct at a previous employer, unrelated to the present matter. OTHER RELEVANT ENTITIES Vertex Industries, Inc. ( Vertex ) is based in New Jersey and manufactures and sells bar code scanners and provides related operating software. Vertex common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act. During the relevant time period, Vertex common stock traded over-the-counter as a Nasdaq SmallCap security. On November 26, 1993, Vertex also listed its common stock on the Boston Stock Exchange. SUMMARY From September 1993 through February 1994, Amsel manipulated the market for Vertex common stock. Between March 2, 1993 and September 2, 1993, Cortlandt s customers, at Amsel's urging, accumulated large, margined positions in Vertex stock after Cortlandt's clearing broker improperly designated Vertex stock a margin security in its internal computer system.<(1)> Upon discovering its mistake in late August 1993, the clearing broker required Cortlandt to reduce the margin debits in its customers' accounts, and eventually conducted sell-outs of Cortlandt's customers' margined Vertex holdings. In order to stabilize or increase the price of Vertex stock in the face of substantial selling pressure, Amsel (1) made unauthorized purchases in customers accounts, (2) refused to execute customers sell orders with respect to Vertex stock, (3) arranged for customers to transfer margined Vertex shares to newly opened accounts at other broker-dealers, (4) directed nominees to purchase stock at other broker-dealers, and (5) interpositioned wholesale broker-dealers between Cortlandt and the nominees in order to disguise Cortlandt as the source of the shares sold to the nominees. Amsel, therefore, used manipulative and deceptive devices in a scheme to defraud the market for Vertex stock. FACTS From late 1990 to February 1993, Cortlandt customers accumulated positions in Vertex stock. Amsel touted the stock as the next Microsoft to his customers and to other Cortlandt brokers. By February 1993, Cortlandt customers held approximately 260,050 shares of Vertex stock. Cortlandt customers bought all of their Vertex holdings in cash accounts because Cortlandt's clearing broker would not extend credit for purchases of Vertex stock because it was not a margin security under Regulation T of the Exchange Act. Early in 1993, Amsel requested that Cortlandt s clearing broker make Vertex stock a margin security. On March 2, 1993, an employee of the clearing broker improperly designated Vertex stock as a margin security in the clearing broker's internal computer system, thus making it possible for the clearing broker's correspondent firms to purchase Vertex stock on margin. Many Cortlandt customers purchased large amounts of Vertex stock in margin accounts using the buying power of their appreciated Vertex holdings to do so. As Cortlandt customers continued to buy Vertex shares, the stock price rose, creating even more buying power in customers margin accounts and allowing the customers to buy even more Vertex on margin. By September 1993, Cortlandt customers holdings in Vertex had quadrupled -- from 260,050 shares as of February 26, 1993 to 1,067,873 shares as of September 2, 1993. The latter amount represented approximately 22% of the total shares outstanding and two-thirds of the float. During this time, the price of Vertex stock also quadrupled -- from approximately $6 to nearly $22 per share. <(1)> The clearing broker consented to the entry of a cease-and-desist order and the payment of a $50,000 civil penalty for violations of Section 7(c) of the Exchange Act, and Regulation T thereunder, in connection with this matter. National Financial Services Corp., Exchange Act Release No. 38150 (Jan. 10, 1997). ======END OF PAGE 2====== In late August 1993, the clearing broker determined that it had improperly extended and maintained nearly three million dollars credit on purchases of approximately 900,000 shares of Vertex stock held by Cortlandt s customers. The clearing broker advised Cortlandt that it had corrected its erroneous designation of Vertex stock as a margin security, and that resulting debit balances created in Cortlandt's customers' accounts had to be eliminated by either depositing cash or other securities into the accounts, or by selling Vertex shares or other securities in the accounts. Amsel knew that liquidating Cortlandt's customers' holdings in Vertex would cause the share price to decline sharply because Vertex stock was illiquid and thinly traded, and Cortlandt controlled approximately two-thirds of the float. The potential consequences to Cortlandt of an imminent sharp decline in the price of Vertex were obvious -- it could cause a wave of margin defaults by Cortlandt customers which could threaten Cortlandt's solvency. In response to this problem, Amsel employed manipulative and deceptive practices to create artificial demand for, and restrict the supply of, Vertex stock in the market. Amsel restricted the supply of Vertex stock by refusing to execute customers sell orders and by transferring margined shares that would have been sold-out to other broker-dealers, without disclosing to Cortlandt customers or the other broker-dealers the manipulative scheme to support Vertex's stock price. Moreover, Amsel created artificial demand for Vertex stock by making unauthorized purchases in customers accounts and by directing nominees to purchase shares at other broker-dealers for his benefit. Amsel and his nominees never paid for the majority of these shares, leaving debit balances totaling approximately $2.3 million with six broker-dealers. Finally, Amsel was able to unload thousands of Vertex shares from Cortlandt's proprietary trading account and customers accounts by disguising Cortlandt as the source of shares sold into the market. Amsel did this by interpositioning wholesale broker-dealers between Cortlandt and his nominees who were purchasing Vertex shares at other broker-dealers. Amsel, therefore, willfully violated Section 10(b) of the Exchange Act and Rule 10b-5. Amsel also caused, aided, abetted, counseled, induced or procured the violation by Cortlandt of Sections 10(b) and 15(c) of the Exchange Act and Rules 10b-5 and 15c1-2. Amsel has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Amsel and has determined that Amsel does not have the financial ability to pay a civil penalty. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement of Amsel. Accordingly, IT IS ORDERED: (a) pursuant to Section 21C of the Exchange Act, that Amsel cease and desist from committing or causing any violation and any future violation of Sections 10(b) and 15(c) of the Exchange Act and Rules 10b-5 and 15c1-2; (b) that Amsel be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company; and (c) that the Division of Enforcement may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Amsel provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Amsel's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Amsel was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of civil penalty to be imposed and whether any additional remedies should be imposed. Amsel may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding. ======END OF PAGE 3====== By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 4======