SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 7998 / August 3, 2001
SECURITIES EXCHANGE ACT OF 1934
Release. No. 44649 / August 3, 2001
File No. 3-10545
PROCEEDINGS INSTITUTED AGAINST HARVEY M. BURSTEIN AND JAMES D. LOEFFELBEIN
The Commission announced that it has instituted public administrative and cease-and-desist proceedings against Harvey M. Burstein and James D. Loeffelbein. In the Order Instituting Proceedings ("Order"), the Division of Enforcement ("Division") alleges, among other things, that:
Burstein and Loeffelbein were employed by BMA Financial Services, Inc. ("BMA"), a registered broker-dealer, during 1997. In February and May of that year, Burstein and Loeffelbein acquired stock of Edgerton Musical Amplifiers, Inc. ("Edgerton") directly from the issuer at a discount to the market price. Shortly after the first purchase, Burstein and Loeffelbein began recommending Edgerton stock to their customers, some of whom purchased the stock in market transactions. At the same time, Burstein and Loeffelbein sold some of their stock in market transactions at prices significantly higher than the discounted price they had paid for the stock. Because the stock was very thinly traded at the time of the sales by Burstein and Loeffelbein, the purchases by their customers significantly enhanced Burstein's and Loeffelbein's ability to sell. Nevertheless, while recommending Edgerton stock to their customers, neither Burstein nor Loeffelbein disclosed that they were simultaneously selling their stock. They also did not disclose that their customers could possibly pay a lower price for their stock by buying directly from Edgerton through its ongoing offering of stock, which continued until June 1997.
The Division also alleges that Burstein and Loeffelbein made four open-market purchases of Edgerton stock at the time that they were engaged in a distribution of Edgerton stock, and that they sold Edgerton stock without a registration statement filed or in effect as to the stock.
The proceedings were instituted under Sections 15(b)(6), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Section 8A of the Securities Act of 1933 ("Securities Act"). As a result of the acts described above, the Division alleges that Burstein and Loeffelbein violated the antifraud provisions of the federal securities laws, including Section 10(b) of the Exchange Act, Rules 10b-5 and 10b-6, and Rule 101 of Regulation M, and the registration provisions of Sections 5(a) and 5(c) of the Securities Act.
A hearing before an administrative law judge will be scheduled to determine whether the allegations are true and, if so, what sanctions, if any, are appropriate and in the public interest.