SECURITIES ACT OF 1933
Release No. 7784 / December 10, 1999
SECURITIES EXCHANGE ACT OF 1934
Release No. 42221 / December 10, 1999
ADMINISTRATIVE PROCEEDING
File No. 3-10115
| In the Matter of MICHAEL L. PITTS, |
ORDER INSTITUTING PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTIONS 15(b)(6), 19(h) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS |
I.
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest and for the protection of investors that a public administrative and cease-and-desist proceeding be, and hereby is, instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b)(6), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondent Michael L. Pitts ("Pitts").
II.
In anticipation of the institution of these administrative proceedings, the Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. 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, and without admitting or denying the findings, Respondent consents to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b)(6), 19(h) and 21C of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (the "Order").
III.
On the basis of this Order and the Respondent's Offer, the Commission makes the following findings:1
A. Summary
This matter involves violations by Pitts of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in connection with transactions in the common stock of The Tracker Corporation of America ("Tracker"). From November 1994 through January 1995, Pitts, a registered representative, recommended and sold shares of Tracker common stock to his customers. Pitts failed to disclose to his clients that he had been or would be compensated by Corporate Relations Group, Inc. ("CRG"), a public relations firm that was promoting Tracker, for inducing his clients to buy this stock. Pitts accepted $13,805.50 from CRG.
B. Respondent
Michael L. Pitts was a registered representative from September 1980 through April 1996. During the relevant time, Pitts was a registered representative at Alex. Brown & Sons.
C. Other Relevant Entities
1. Corporate Relations Group, Inc. is a public relations firm located in Winter Park, Florida. During the relevant time, CRG provided public relations services for its clients through various financial publications and through its sales personnel, whose primary function was to interest brokers in soliciting their clients to purchase the stocks CRG was promoting.
2. The Tracker Corporation of America was, during the relevant time, a Delaware corporation whose common stock, which was not registered with the Commission, traded on the OTC Bulletin Board. The company provided services to locate lost property.
D. Facts
Tracker retained CRG in early 1994 to promote the company. In August 1994, Pitts opened a securities account for CRG at Alex. Brown & Sons, and, in November 1994, CRG deposited into the account 25,000 shares of purportedly free-trading Tracker common stock. CRG offered Pitts money to cause his clients to buy Tracker stock and to cross those purchases with stock from CRG's Tracker position. Pitts accepted CRG's offer, and from November 1994 until January 1995, Pitts induced his clients to buy 21,900 shares of Tracker stock. CRG paid Pitts $13,805.50 under the agreement. Pitts did not disclose to his clients these payments or the agreement to be paid.
E. Violations
A registered representative's failure to disclose to his customers that he has received or will receive compensation to recommend a security violates Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Respondent willfully violated, and committed or caused violations of, these antifraud provisions by accepting payments from CRG or agreeing to accept payment for inducing his clients to buy Tracker common stock and failing to disclose this material information to his clients.
IV.
Based on the foregoing, the Commission deems it appropriate in the public interest and for the protection of investors to accept the Respondent's Offer and to impose the remedial relief specified in the Offer.
Accordingly, IT IS ORDERED, pursuant to Section 8A of the Securities Act, that Respondent Michael L. Pitts cease and desist from committing or causing any violation, and any future violation, of Section 17(a) of the Securities Act.
Accordingly, IT IS ORDERED, pursuant to Section 21C of the Exchange Act, that Respondent Michael L. Pitts cease and desist from committing or causing any violation, and any future violation, of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
IT IS FURTHER ORDERED that Respondent Michael L. Pitts shall, within thirty (30) days of the entry of this Order, pay disgorgement and prejudgment interest in the total amount of $20,425.03 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop O-3, Alexandria, Virginia 22312; and (D) submitted under cover letter that identifies Michael L. Pitts as a Respondent in these proceedings and the file number of these proceedings, a copy of which shall be sent to Thomas Newkirk, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Washington, D.C. 20549-0801.
IT IS FURTHER ORDERED that Respondent Michael L. Pitts shall, within thirty (30) days of the entry of this Order, pay a civil money penalty in the amount of $13,805.50 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop O-3, Alexandria, Virginia 22312; and (D) submitted under cover letter that identifies Michael L. Pitts as a Respondent in these proceedings and the file number of these proceedings, a copy of which shall be sent to Thomas Newkirk, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Washington, D.C. 20549-0801.
IT IS FURTHER ORDERED that Respondent Michael L. Pitts be, and hereby is, barred from association with any broker or dealer with the right to reapply for association after five years to the appropriate self-regulatory organization, or if there is none, to the Commission.
By the Commission.
Jonathan G. Katz
Secretary
Footnotes
| 1 | The findings herein are made pursuant to the Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding. |