Securities Act of 1933
Release No. 8218 / April 1, 2003
Securities Exchange Act of 1934
Release No. 47611 / April 1, 2003
File No. 3-10765
In the Matter of
J.W. BARCLAY & CO., INC.
JOHN A. BRUNO
MICHAEL J. WILLS
EDGAR B. ALACAN
EMMANUEL P. CUBE
DANOO NOOR, SR.
EMANUELE A. SCARSO
MICHAEL B. SCOTT
| ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTIONS 15(b) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AS TO MICHAEL B. SCOTT|
On April 24, 2002, the Securities and Exchange Commission ("Commission") instituted public administrative proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondent Michael B. Scott ("Scott" or "Respondent") and others. Scott has submitted an Offer of Settlement ("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 to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, Respondent consents to the entry of this Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Michael B. Scott ("Order"), as set forth below.
On the basis of this Order and Respondent's Offer, the Commission finds1 that:
- Scott, age 37, has been a registered representative since June 1994. Scott was associated as a registered representative with J.W. Barclay & Co., Inc. ("Barclay"), a broker-dealer registered with the Commission, between January 1997 and March 1998.
Scott Defrauded Customers
- During the time period from in or about June 1997 through in or about March 1998, Scott engaged in the following conduct in the accounts of his customers at Barclay:
- Scott made unauthorized purchases and sales of securities in the account of at least one customer.
- Scott churned the accounts of at least three customers. He controlled the customers' accounts, and traded excessively in the customers' accounts in light of the customers' investment objectives. The accounts which Scott churned had turnover ratios ranging from approximately 7.04 to approximately 21.98, and break-even ratios ranging from approximately 56.76% to approximately 150.44%.
- Scott made materially misleading statements or omissions to at least one customer by, among other things, promising specific amounts of profit within a short timeframe.
- Scott made unsuitable purchases and sales of securities in the account of at least one customer. He did so by recommending purchases or sales of securities that were not suitable for the customer in light of the customer's age, investment experience, financial status, risk tolerance and investment objectives, and by conducting transactions on margin without ascertaining the customer's understanding of the risks associated with the use of margin, among other things.
- Scott failed to execute sell orders or follow other instructions from at least one customer, by failing to sell a stock upon a customer's request and by failing to transfer the account to another firm upon the customer's request.
- Based on the foregoing, Scott willfully violated Section 17(a) of the Securities Act in that he, in the offer or sale of securities, by use of the means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: employed devices, schemes or artifices to defraud; obtained money or property by means of untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstance under which they were made, not misleading; or engaged in transactions, practices or courses of business which would or did operate as a fraud or deceit upon purchasers or prospective purchasers of such securities. As part of his fraudulent conduct, Scott engaged in the activities described in paragraphs 2(a)-(e) above.
- Based on the foregoing, Scott willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder in that he, in connection with the purchase or sale of securities, by use of the means or instrumentalities of interstate commerce or by use of the mails or of the facilities of any national securities exchange, directly or indirectly: employed devices, schemes or artifices to defraud; made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or engaged in acts, practices or courses of business which would or did operate as a fraud or a deceit upon any person. As part of his fraudulent conduct, Scott engaged in the activities described in paragraphs 2(a)-(e) above.
In view of the foregoing, the Commission deems it appropriate in the public interest to impose the sanctions specified in Respondent's Offer.
ACCORDINGLY, IT IS HEREBY ORDERED THAT:
- Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Respondent shall cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
- Pursuant to Section 15(b)(6) of the Exchange Act, Respondent be, and hereby is barred from association with any broker or dealer.
- Respondent shall pay disgorgement of $53,113.50 plus prejudgment interest, but that payment of such amount is waived based upon Respondent's sworn representations in his Statement of Financial Condition dated November 10, 2002 and other documents submitted to the Commission. Based upon Respondent's sworn representations in his Statement of Financial Condition dated November 10, 2002 and other documents submitted to the Commission, the Commission is not imposing a penalty against Respondent.
- 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; and (2) seek an order directing payment of disgorgement, prejudgment interest and the maximum civil penalty allowable under the law. No other issue 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. Respondent may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of disgorgement and interest or a penalty should not be ordered; (3) contest the amount of disgorgement and interest to be ordered, or the imposition of the maximum civil penalty allowable under the law; or (4) assert any defense to liability or remedy, including, but not limited to, any statute of limitations defense.
By the Commission.
Jonathan G. Katz
|1||The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.|