UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION Securities Act of 1933 Release No. 7409 / March 27, 1997 Securities Exchange Act of 1934 Release No. 38448 / March 27, 1997 Administrative Proceeding File No. 3-9283 _________________________________ : In the Matter of : : ORDER INSTITUTING PROCEEDINGS SHELDON S. TRAUBE and : PURSUANT TO SECTION 8A OF GEORGE F. SWEENEY, : THE SECURITIES ACT OF 1933 : AND SECTION 15(B)(6) OF THE : SECURITIES EXCHANGE ACT OF : 1934, MAKING FINDINGS, : IMPOSING REMEDIAL SANCTIONS : AND CEASE-AND-DESIST ORDER Respondents. : _________________________________: I. The Commission deems it appropriate and in the public interest that proceedings be, and hereby are, instituted pursuant to (i) Section 8A of the Securities Act of 1933 ("Securities Act") to determine whether Sheldon S. Traube ("Traube") and George F. Sweeney ("Sweeney") violated or caused violations of Section 17(b) of the Securities Act and seeking to determine the appropriateness of disgorgement and prejudgment interest, and (ii) Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Traube willfully violated Section 17(b) of the Securities Act and seeking to determine the appropriateness of sanctions pursuant to Section 15(b)(6) of the Exchange Act. II. In anticipation of the institution of these administrative proceedings, Traube and Sweeney have submitted Offers of Settle- ment that the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and prior to hearing and without admitting or denying the findings set forth herein, Traube and Sweeney each consent to the entry of this Order Instituting Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings, ==========================================START OF PAGE 2====== Imposing Remedial Sanctions and Cease and Desist Order ("Order"). The Commission has determined that it is appropriate and in the public interest to accept Offers of Settlement from Traube and Sweeney, and accordingly is issuing this Order. III. FACTS Based on the foregoing, the Commission finds that:-[1]- A. Respondents 1. Sheldon S. Traube During the period from at least January 1992 until July 1992, Traube was self-employed as a research analyst. Traube currently is a research analyst employed by a broker-dealer registered with the Commission. 2. George F. Sweeney From September 1991 until May 1992, Sweeney provided investor relations services to Ferrofluidics Corporation ("Ferrofluidics"). Sweeney currently is the principal of a financial investor relations firm. B. The Traube Research Report In January 1992, Ronald Moskowitz ("Moskowitz"), Ferrofluidics' former Chief Executive Officer and Chairman of the Board of Directors, retained Traube to write a research report on the company. Moskowitz agreed that Ferrofluidics would pay Traube $3,500 plus expenses to write the report, payable after the report was published. Subsequently, Moskowitz asked Sweeney to bill Ferrofluidics for Traube's work and to pay Traube after Sweeney's bill had been paid by Ferrofluidics. Sweeney agreed to do so. After Traube completed his research report, he sent Sweeney an invoice, dated March 25, 1992, for the report ($4,500) and expenses ($987), for a total of $5,487. On April 2, 1992, Sweeney sent an invoice to Ferrofluidics for $6,982, which covered the services of Sweeney and Traube. Ferrofluidics paid Sweeney $5,982, and Sweeney, in turn, paid Traube $4,487. Ferrofluidics later sent Traube a check for an additional $550. ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Traube's and Sweeney's Offers of Settlement and are not binding on any other person or entity in this or any other proceeding. ==========================================START OF PAGE 3====== Traube's research report was published by Dickinson & Co., a broker-dealer registered with the Commission, on March 30, 1992. The report did not disclose the source or amount of Traube's compensation. Sweeney obtained approximately 1,200-1,500 copies of the report from Ferrofluidics, which he distributed to various brokers and analysts. In early June 1992, Traube agreed to prepare an update to his research report for $1,500 plus expenses. Traube completed the update during July 1992 and sent Ferrofluidics an invoice, dated July 15, 1992, for the update ($1,500) and expenses ($183), for a total of $1,683. Ferrofluidics paid Traube that amount through one of the company's investor relations firms. The update disclosed that it had been prepared "for cash compensation," but did not disclose the source or amount of the compensation that Traube received. IV. OPINION Section 17(b) of the Securities Act prohibits any person from publishing, giving publicity to, or circulating any notice, circular, advertisement, newspaper article, letter, investment service, or communication which describes a security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter or dealer, without disclosing the receipt of such consideration and the amount thereof. Traube violated Section 17(b) by preparing for publication the research report and update without disclosing that Ferrofluidics had paid him and the amount of such payment. Sweeney caused Traube's violations of Section 17(b) by assisting in the concealment of Ferrofluidics' payments to Traube for the March 1992 research report and distributing copies of the report. V. FINDINGS Based on the above, the Commission finds that: A. Traube willfully violated Section 17(b) of the Securities Act; and B. Sweeney caused violations of Section 17(b) of the Securities Act. ==========================================START OF PAGE 4====== VI. ORDER Accordingly, IT IS HEREBY ORDERED that, A. Traube: 1. Be, and hereby is, censured; 2. Pursuant to Section 8A of the Securities Act, cease and desist from committing or causing any violations of, and committing or causing any future violations of, Section 17(b) of the Securities Act; 3. Disgorge $5,555, plus prejudgment interest in the amount of $2,508.05; and 4. Shall pay the disgorgement and interest within thirty (30) days of the entry of the Order, by U.S. Postal money order, certified check, bank cashier's check, or bank money order, made payable to the Securities and Exchange Commission and shall transmit the payment by certified mail (return receipt requested) to the Office of the Secretary, U.S. Securities and Exchange Commission, Mail Stop 6-9, 450 Fifth Street, N.W., Washington, D.C. 20549, under cover of a letter that identifies the respondent and the name and file number of this proceeding. A copy of the cover letter and of the form of payment shall be simultaneously transmitted to counsel for the Commission. B. Sweeney: 1. Pursuant to Section 8A of the Securities Act, cease and desist from committing or causing any violations of, and committing or causing any future violations of, Section 17(b) of the Securities Act; 2. Disgorge $1,495, plus prejudgment interest in the amount of $697.31; and 3. Shall pay the disgorgement and interest within ten (10) days of the entry of the Order, by U.S. Postal money order, certified check, bank cashier's check, or bank money order, made payable to the Securities and Exchange Commission and ==========================================START OF PAGE 5====== shall transmit the payment by certified mail (return receipt requested) to the Office of the Secretary, U.S. Securities and Exchange Commission, Mail Stop 6-9, 450 Fifth Street, N.W., Washington, D.C. 20549, under cover of a letter that identifies the respondent and the name and file number of this proceeding. A copy of the cover letter and of the form of payment shall be simultaneously transmitted to counsel for the Commission. By the Commission. _________________________ Jonathan G. Katz Secretary