Securities Act of 1933
Release No. 7719 / August 5, 1999
Securities Exchange Act of 1934
Release No. 41708 / August 5, 1999
Administrative Proceeding File No. 3-9963
PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS INSTITUTED AGAINST RICHARD HARRITON, FORMER PRESIDENT OF BEAR, STEARNS SECURITIES CORPORATION
The Securities and Exchange Comission announced today the filing of charges against Richard Harriton, in his role as president of Bear, Stearns Securities Corporation ("Bear Stearns"), in connection with Bear Stearns' clearing relationship with A.R. Baron & Co., Inc. ("Baron"), a now-defunct broker-dealer. The Division of Enforcement alleges that Harriton willfully violated and/or aided and abetted Baron's violations of the antifraud, net capital and contingency offering provisions of the federal securities laws from July 1995 through June 1996, when Bear Stearns was the clearing broker for Baron. In October 1996, the Commission revoked Baron's registration as a broker-dealer, finding that Baron had engaged in a massive fraud.
The Order Instituting Proceedings alleges that in connection with Bear Stearns' clearing relationship with A.R. Baron, Harriton:
- directly violated the antifraud provisions by charging customers for trades that he knew had resulted from unauthorized trades made by A.R. Baron brokers, and by liquidating customer securities to pay for trades he knew were unauthorized;
- aided and abetted A.R. Baron's antifraud and net capital violations by providing Baron capital in order to keep Baron in business at a time when he knew Baron was engaging in extensive fraud and operating in violation of the Commission's net capital rules; and
- aided and abetted A.R. Baron's fraud by assisting A.R. Baron's principal in misdirecting excess subscription funds from an A.R. Baron initial public offering to the customer's Baron accounts held at Bear Stearns, so that the funds could be applied to reduce Bear Stearns' credit exposure from A.R. Baron's trading.
The Division of Enforcement alleges that Harriton willfully violated and aided and abetted violations of the antifraud provisions, specifically Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; willfully aided and abetted violations of the net capital provisions, specifically Section 15(c)(3) of the Exchange Act and Rule15c3-1 thereunder; and willfully aided and abetted contingency offering violations, specifically Section 15(c)(2) of the Exchange Act and Rule 15c2-4 thereunder.
This proceeding has been instituted pursuant to Section 8A of the Securities Act and Sections 15(b), 19(h) and 21C of the Securities Exchange Act. A hearing will be held before an Administrative Law Judge to determine whether the allegations are true, and if so, to determine what remedies and sanctions are appropriate and in the public interest.