U.S. Securities and Exchange Commission
Securities Act of 1933
Release No. 33-8305 / October 23, 2003
File No. 3-11307
Cease-and-Desist Proceedings Instituted Against SmallCap Solutions, Inc., Complete Financial and Operations, LLC, Tyler T. Fleming, Research Investment Group, Inc., and Scott H. Wilding
On October 23, 2003, the Securities and Exchange Commission ("Commission") instituted cease-and-desist proceedings against alleged stock promoters SmallCap Solutions, Inc. ("SmallCap Solutions"), Complete Financial And Operations, LLC ("Complete Financial"), Tyler T. Fleming ("Fleming"), Research Investment Group, Inc. ("RIG"), and Scott H. Wilding ("Wilding").
The Division of Enforcement ("Division") alleges that a Florida venture capital company, Research Capital, LLC ("Research Capital"), hired stock promoters to tout a small cap issuer with which Research Capital was affiliated. Research Capital and its principals, Carl L. Smith, III ("Smith") of Osprey, Florida, and Richard Craig Hall ("Hall"), of Sarasota, Florida, owned approximately 18% of the issuer's outstanding shares, and had agreed to provide the issuer with $1 million in working capital. Research Capital hired stock promoter Wilding of Pembroke Pines, Florida, and his company, RIG, to promote the issuer on the Internet. In exchange, RIG received an option to purchase up to 4 million of the issuer's shares at one-third of the market price. Smith and Hall transferred 3,300,000 shares to Wilding pursuant to this option.
The Division alleges that RIG subcontracted with two other stock promoters. The first was Fleming, a Las Vegas resident who promoted small cap companies on the Internet through two corporate entities he heads, SmallCap Solutions and Complete Financial. The second promoter was IR Specialists, Inc., a Rhode Island company that promotes small cap companies on the Internet.
The Division further alleges that Fleming's and IR Specialists' promotional campaigns coincided with several days of increased trading volume in the issuers stock, some days as much as 600% higher than the stock's historical trading volume. After the start of the campaign, the three stock promoters, Wilding, Fleming, and IR Specialists, sold the stock they received for over $130,000.
The Division alleges that Wilding and Fleming obtained the shares with a view to distributing them to the public, from a person directly or indirectly controlling or controlled by the issuer, or under direct or indirect common control with the issuer. Therefore, the transactions constituted an illegal distribution of securities and Small Cap Solutions, Complete Financial, Fleming, RIG, and Wilding, who participated in the distribution, violated Sections 5(a) and 5(c) of the Securities Act.
The Division further alleges that SmallCap Solutions and Fleming were hired by another publicly traded company to promote it in exchange for 30,000 of its unrestricted shares. The company's president directed a shareholder to transfer 30,000 shares to SmallCap Solutions to pay for the promotion. The company reimbursed the shareholder with 60,000 restricted shares of the company.
According to the Division's allegations, three days after SmallCap Solutions first touted the company on its website, the company's stock price rose 18 percent, from $1.0625 to $1.25, on volume that was 255 percent higher than the stock's historical average volume. SmallCap Solutions sold the shares it received for $15,955.
The Division alleges that SmallCap Solutions obtained the shares with a view to distributing them to the public from a person directly or indirectly controlling or controlled by the issuer, or under direct or indirect common control with the issuer. As a result, the shares were restricted and could not be sold to the public within a year after they were acquired by SmallCap Solutions. The transactions constituted an illegal distribution of securities and Small Cap Solutions, which participated in the distribution, violated Sections 5(a) and 5(c) of the Securities Act.
A hearing will be scheduled before an administrative law judge to determine whether the allegations in the Order are true and, if so, whether Small Cap Solutions, Complete Financial, Fleming, RIG, and Wilding should be ordered to cease and desist from committing or causing violations of and any future violations of Sections 5(a) and 5(c) of the Securities Act, and whether they should be ordered to disgorge the proceeds of their conduct.
The Commission directed that the administrative law judge shall issue an initial decision in this matter within 300 days from the date of service of the Order Instituting Proceedings.