United States of America
In the Matter of
|ORDER MAKING FINDINGS AND|
IMPOSING REMEDIAL SANCTIONS
AND CEASE-AND-DESIST ORDER
In connection with a public administrative proceeding instituted against him on September 13, 2000, pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondent Tyrone Killebrew ("Killebrew" or "Respondent") has submitted an Offer of Settlement ("Offer") to the Securities and Exchange Commission ("Commission"), which the Commission has determined to accept.
Solely for the purpose of this proceeding and any other proceeding 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 as to jurisdiction, which he admits, Respondent consents to the entry of findings and remedial sanctions as set forth below.
On the basis of this Order and the Offer submitted by Respondent, the Commission makes the following findings:1
A. BNB Capital, Inc., formerly known as BNB Securities, Inc. (File No. 8-50266), was incorporated in Texas in December 1996. The Commission issued an order granting its broker-dealer registration on September 24, 1997, effective upon its approval for membership in a self-regulatory organization.
B. Tyrone Killebrew, 41, of Spring, Texas, was the executive vice president of BNB. Killebrew has been employed in the securities industry since 1986, working for various registered broker-dealers. Killebrew has no disciplinary history.
C. NASDR approved BNB's membership on April 7, 1998.
D. In April and May 1996, Killebrew and an associate, by means or instruments of interstate commerce, transportation and communication, offered and sold securities in the form of unregistered one year promissory notes convertible into common stock issued by a start-up communications company. At the time Killebrew and the associate offered and sold the convertible notes, they were employed by registered broker-dealers. However, Killebrew and the associate made their offers and sales without the knowledge, approval or involvement of their respective employers. Killebrew and the associate received a 25 percent commission on their sales of the convertible notes.
E. In the offer and sale, or in connection with the purchase or sale, of the convertible notes, Killebrew and the associate made material misrepresentations, and omitted material facts necessary to make statements made not misleading, including: that an investment in the convertible notes posed little or no risk; that the issuer had an enormous potential for profit; that the issuer owned rights to the communications technology it sought to develop; that investors could profit from an initial public offering by the issuer; and that Killebrew's associate had personally invested $1.6 million in the issuer. The issuer is no longer in business, and investors in the convertible notes never received any return on their investment.
F. In mid-1996, Killebrew and the associate were discharged by the registered broker-dealers employing them. The two then formed BNB. However, before BNB was registered with the Commission as a broker-dealer, Killebrew and the associate agreed to have BNB undertake a private placement of the unregistered common stock of a lighting company. In return, the lighting manufacturer agreed to reimburse BNB for its expenses and to pay BNB a 10 percent commission on all stock sales. Between February 1997 and July 1997, BNB, by and through Killebrew and the associate, raised approximately $1.5 million from the sale of the lighting manufacturer's stock to 34 investors in five states, all before BNB's registration became effective.
G. As a result of the aforesaid activities, Killebrew willfully violated, and committed or caused violations of Section 17(a) of the Securities Act and Sections 10(b), 15(a)(1) and 15(c) of the Exchange Act and Rules 10b-5 and 15c1-2 thereunder.
H. As a result of the aforesaid activities, Killebrew was unjustly enriched in the amount of $5,000. Killebrew received commissions in the amount of $20,000. Killebrew, however, has provided the Commission with evidence that he disgorged $15,000 of this unjust enrichment through settlement amounts paid in private litigation involving aforesaid activities.
I. Respondent has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement plus prejudgment interest and to pay a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Respondent and has determined that Respondent does not have the financial ability to pay a disgorgement of $5,000 plus prejudgment interest or to pay a civil penalty.
In view of the foregoing, the Commission deems it appropriate and in the public interest and for the protection of investors to impose the sanctions specified in the Offer.
A. IT IS ORDERED that pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Respondent Killebrew shall cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act, and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.
B. IT IS FURTHER ORDERED THAT Killebrew is barred from association with any broker or dealer with a right to reapply for association after one year to the appropriate self-regulatory organization, or if there is none, to the Commission, effective on the second Monday following the entry of this Order.
C. IT IS FURTHER ORDERED THAT Killebrew shall pay disgorgement of $5,000 plus prejudgment interest, but that payment of such amount be waived based on Respondent's demonstrated inability to pay.
D. IT IS FURTHER ORDERED THAT the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent provided accurate and complete financial information at the time such representations were made; (2) determine the amount of civil penalties to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Respondent's offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Respondent 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. Respondent may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any addition remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
1 The findings herein are made pursuant to the Offer and are not binding on any other person or entity in this or any other proceeding.
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