UNITED STATES OF AMERICA
|In the Matter of
|ORDER INSTITUTING PUBLIC
FINDINGS AND ISSUING CEASE-AND-
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") against John Black ("Black").
In anticipation of the institution of this administrative proceeding, Black has submitted an Offer of Settlement ("Offer") which the Commission, after due consideration, has determined is in the public interest 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, Black, without admitting or denying the findings contained herein, except admitting the jurisdiction of the Commission over him and the subject matter of these proceedings, consents to the issuance of this Order Instituting Public Administrative Proceedings, Making Findings, and Issuing a Cease-and-Desist Order ("Order").
Accordingly, IT IS ORDERED that public administrative proceedings pursuant to Section 8A of the Securities Act be, and hereby are, instituted.
On the basis of this Order and the Offer, the Commission finds that:
A. This matter involves an employee of an investor relations firm, who touted stock on an Internet bulletin board without disclosing that he was being compensated for the posts by his employer. This employee, the respondent in this proceeding, failed to disclose that he was promised thousands of shares of stock as a bonus for assisting his employer in promoting the stock of Snelling Travel, Inc. ("SNLV"), which is quoted on the over-the-counter bulletin board. The respondent's failure to disclose this remuneration was fraudulent, and in violation of Section 17(b) of the Securities Act, which makes it unlawful for any person to tout stocks for consideration without fully disclosing the consideration.
B. John Black, a resident of Vancouver, Canada, was employed by a Vancouver investor-relations firm, Fleming Financial Corp. ("Fleming Financial"), during the relevant period.
C. Fleming Financial was retained in mid-1999 by a privately held company, Plus Solutions, Inc. ("Plus Solutions"), to provide various services, which included locating a publicly traded shell corporation with which Plus Solutions could merge. Plus Solutions is a development-stage company purportedly planning to develop and market software for electronic commerce. In November 1999, Fleming Financial recommended a merger with SNLV, which had filed a registration statement with the Commission and was approved for listing on the OTC-BB. Both SNLV and Plus Solutions had no operations or revenues at the time.
D. In or about late November or early December 2000, Black had a discussion with the individual who owns and operates Fleming Financial. The discussion concerned strategies for promoting the stock of SNLV. Black agreed to post messages touting SNLV's stock on the Internet as a means of promoting SNLV. Black was promised a bonus of thousands of SNLV shares in exchange for his efforts to promote the stock
E. The proposed merger agreement between Plus Solutions and SNLV provided, among other things, that Black would receive 5,000 shares of SNLV stock. SNLV issued a press release on December 15, 1999, announcing the merger of Plus Solutions and SNLV.
F. On December 30, 1999, Black started a subject area for SNLV on Raging Bull, an Internet bulletin board. Using a screen name other than his own, Black posted the first message in the SNLV subject area. Black's message compared SNLV to two highly successful companies that sell electronic commerce software applications, Commerce Once, Inc. ("CMRC") and Ariba Technologies ("ARBA"). Black's message stated:
This is THE new CMRC and ARBA!!! Merger to be complete on Jan. 6. This baby is going to rock!!! I hear they are looking for $30.00 by Mar. 15!!! We will just have to wait and see!!! The sky is the limit!!!
Black did not disclose his agreement with Fleming Financial, which entitled to him to receive 5,000 shares of SNLV as reimbursement for promoting SNLV.
G. On December 31, 1999, Black posted a second message in the SNLV subject area, using a different screen name. Black's message stated:
When will the company finish the merger? How many shares are out? What are the similarities between Plus Solutions and ARBA and CMRC? When will they be "in the money"? These are questions that MUST be answered by somebody! Anybody know a # to call?
As in the first message, Black did not disclose that he was entitled to receive remuneration for touting SNLV.
H. On or about January 11, 2000, SNLV and Plus Solutions terminated the proposed merger agreement. As a result of the termination, Black did not receive the 5,000 shares he would have received as part of the merger transaction.
Black's Violations of Sections 17(b) of the Securities Act:
I. Section 17(b) of the Securities Act makes it unlawful for any person to tout a stock without disclosing the nature and substance of any consideration, whether present or future, direct or indirect, received from an issuer, underwriter or dealer. The respondent violated Section 17(b) by touting SNLV on Raging Bull without disclosing the fact that he was promised compensation for doing so. See In the Matter of David A. Wood, Jr. et al., 68 SEC Docket 631 (Oct. 27,1998) (respondent violated Section 17(b) by posting messages on Internet message board touting company without disclosing compensation received); In the Matter of Eugene B. Martineau, 68 SEC Docket 629 (Oct. 27, 1998) (respondent violated Section 17(b) by posting messages on Internet message board touting company without disclosing expected compensation). Black committed or caused violations of Section 17(b) by failing to disclose the agreement to receive, indirectly from the issuer, compensation for touting SNLV stock.
Based upon the foregoing, the Commission deems it appropriate to accept Black's Offer of Settlement.
Accordingly, it is HEREBY ORDERED, pursuant to Section 8A of the Securities Act, that Black cease and desist from committing or causing any violation and any future violation of Section 17(b) of the Securities Act.
By the Commission.
Jonathan G. Katz
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