UNITED STATES OF AMERICA
|In the Matter of
JOHN R. HOFF
|ORDER INSTITUTING PUBLIC
PROCEEDINGS, MAKING FINDINGS,
AND IMPOSING A CEASE-AND-DESIST ORDER
The Securities and Exchange Commission ("Commission") deems it appropriate that a public cease-and-desist proceeding be, and hereby is, instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") to determine whether John R. Hoff ("Hoff" or "Respondent") violated Section 5(c) of the Securities Act.II.
In anticipation of the institution of this proceeding, Hoff has submitted an Offer of Settlement ("Offer"), 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 in which the Commission is a party, and without admitting or denying the findings contained herein, except that Respondent admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, Hoff consents to the issuance of this Order Instituting Public Proceedings, Making Findings, and Imposing a Cease-and-Desist Order ("Order") and to the entry of the findings and the imposition of the relief set forth below.III.
On the basis of this Order and Respondent's Offer, the Commission finds the following:
A. Hoff, age 24, resides in Hudson, Wisconsin and is a co-owner of a company known as AmeriGa.net. AmeriGa.net, an Internet service provider, has never made any filings with the Commission.Introduction
B. Hoff violated the registration provisions of the securities laws, set forth in Section 5(c) of the Securities Act, by offering AmeriGa.net securities over an Internet auction site run by eBay, Inc. ("eBay"). Hoff failed to register this offering with the Commission, and there were no applicable exemptions from registration.Hoff's Offer of AmeriGa.Net Securities
C. eBay runs an Internet auction site (http://www.ebay.com) that permits users to buy and sell items 24 hours a day, seven days a week, through on-line auctions. Sellers post descriptions of items they wish to sell on the site. Potential buyers may, in turn, access these descriptions. Over the course of the next several hours or days, potential buyers may bid on the items on-line. At the close of each auction, the highest bidder wins and must purchase the item. eBay receives a flat fee from the seller for posting the item on its site and a percentage of the final sale price.
D. On April 28, 1999, Hoff posted offers to sell 1,000 shares in AmeriGa.net on the eBay Internet site. In response to the postings, several bids were made. No sale of AmeriGa.net shares was consummated.Hoff's Violation of Section 5(c) of the Securities Act
E. Hoff violated Section 5(c) of the Securities Act. Section 5(c), in part, prohibits any offer to sell securities through the mails or by making use of the means or instruments of transportation or communication in interstate commerce, unless a registration statement for the securities has been filed with the Commission.
F. In this case, at the time of Hoff's offer, no registration statement for the AmeriGa.net securities had been filed with the Commission. By offering the securities over the Internet, Hoff made use of the means or instruments of communication in interstate commerce.
G. There is no exemption from the registration requirements of Section 5(c) available for the offer of the AmeriGa.net securities. Because Hoff offered the AmeriGa.net securities over the Internet, Hoff engaged in a general solicitation. As a result, Section 4(2) of the Securities Act and the exemptions under Rules 505 and 506 of Regulation D are inapplicable.
H. Rule 504 exempts certain offerings that do not exceed an aggregate amount of $1 million and, until recently, permitted general solicitations and advertising. Effective April 7, 1999, the Commission amended Rule 504 to limit the circumstances where general solicitation is permitted to transactions: (1) registered under state law requiring public filing and delivery of a disclosure document to investors before sale; or (2) exempted under state law permitting general solicitation so long as sales are made only to accredited investors.
I. Hoff offered the AmeriGa.net securities nationwide over the Internet without making any of the requisite state filings or disclosures. As a result, Hoff's offer, which commenced on April 28, 1999, fails to qualify for exemption from registration under amended Rule 504.
J. Accordingly, Hoff violated Section 5(c) of the Securities Act by offering to sell AmeriGa.net securities over the Internet.IV.
On the basis of this Order and the Offer submitted by Respondent, the Commission finds that Hoff violated Section 5(c) of the Securities Act.V.
Accordingly, it is hereby ordered, pursuant to Section 8A of the Exchange Act, that Hoff cease and desist from committing or causing any violation, and any future violation, of Section 5(c) of the Securities Act.
By the Commission.
Jonathan G. Katz
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