UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
|In the Matter of
DORTHY A. CHIKLY,
|ORDER INSTITUTING PUBLIC
PROCEEDINGS PURSUANT TO
SECTIONS 15(b), 19(h)
AND 21C OF THE SECURITIES
EXCHANGE ACT OF 1934 AND
SECTIONS 203(f) AND (k) OF THE
INVESTMENT ADVISERS ACT OF 1940,
MAKING FINDINGS, AND IMPOSING
A CEASE AND DESIST ORDER AND
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute public administrative proceedings against Dorthy A. Chikly ("Chikly") pursuant to Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Sections 203(f) and (k) of the Investment Advisers Act of 1940 ("Advisers Act").
In anticipation of the institution of these proceedings, Chikly 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 in which the Commission is a party, and without admitting or denying the findings herein, except that Chikly admits the Commission's jurisdiction over her and over the subject matter of these proceedings, Chikly has consented to the entry of this Order and to the imposition of the cease and desist order and remedial sanctions set forth below. The Commission has determined that it is appropriate and in the public interest to accept Chikly's Offer.
On the basis of this Order and Chikly's Offer, the Commission finds1 that:
2. O'Toole has done business as O'Toole Capital Management ("OTCM") since the summer of 1996. He has been registered with the Commission as an investment adviser (# 801-52976) doing business as OTCM since September 1996.
3. O'Toole was married to Chikly from September 1993 to March 1998.
4. After he was discharged by his Prior Firm in June 1996, O'Toole contacted approximately 25 brokerage firms and expressed his desire to associate with those firms as a registered representative. Only two of those firms were willing to review his application. He submitted written materials to Spectrum Securities Inc. ("Spectrum") in June or July of 1996. O'Toole contends that he withdrew his request to associate with Spectrum shortly after he submitted it, but Spectrum claims that it declined O'Toole's application in July 1996.
5. Chikly also applied to become associated with Spectrum as a registered representative. Her application was approved, and she became associated with Spectrum as a registered representative in August 1996. Chikly was also identified as an associated person giving investment advice on O'Toole's Form ADV.
6. During at least the last half of 1996, O'Toole held himself out to clients, potential clients and the public as a registered representative of Spectrum. He informed at least 150 to 200 of his Prior Firm customers that he was affiliated with Spectrum and provided them with forms to transfer their accounts to Spectrum. The business card he provided to those customers indicated that the corporate headquarters of OTCM were located at Spectrum. O'Toole continued to make these representations and provide these materials after he withdrew his request to associate with Spectrum or Spectrum rejected it.
7. O'Toole also created and used brochures for OTCM which falsely stated, among other things, that he was a registered representative, that he was affiliated with Spectrum, and that he would earn commissions on trades placed through Spectrum. O'Toole used these brochures after he withdrew his request to associate with Spectrum or Spectrum rejected it.
8. After Chikly became associated with Spectrum, O'Toole began using her license to function as a registered representative. In the period from approximately August 1996 through April 1997, he transferred over forty-nine customers and forty accounts to Spectrum, and effected forty-eight trades for those customers totaling over $200,000. None of these customers ever spoke to Chikly concerning any aspect of their accounts or trades. Rather, as to all of these customers and accounts, O'Toole obtained the information for and completed all of the transfer and new account forms. Similarly, as to all of the trades, O'Toole communicated with the customer, completed any paperwork associated with the trade, and communicated with the traders. O'Toole failed to disclose to customers that Chikly was their Spectrum representative and that their trades were being effected through her registration.
9. Chikly knew that O'Toole was using and allowed him to use her registration at Spectrum to effect securities transactions and otherwise function as a registered representative.
10. O'Toole willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in that, directly or indirectly, 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, he employed devices, schemes or artifices to defraud; made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in acts, transactions, practices, or courses of business which would or did operate as a fraud or deceit. Among other things, O'Toole misled clients and potential clients by holding himself out as a registered representative with Spectrum and by conducting a securities business using Chikly's registration. Chikly willfully aided, abetted and caused these violations by allowing O'Toole to use her registration to effect securities transactions and otherwise function as a registered representative.
11. O'Toole willfully violated Section 15(a)(1) of the Exchange Act in that, while he was not registered as a broker with the commission, he made use of the mails or the means or instrumentalities of interstate commerce to engage in the business of effecting transactions in securities for the account of others, and effected transactions in, or induced or attempted to induce the purchase or sale of securities. Chikly willfully aided, abetted and caused these violations by allowing O'Toole to use her registration to effect securities transactions and otherwise function as a registered representative.
12. O'Toole willfully violated Sections 206(1) and (2) of the Advisers Act in that, directly or indirectly, by use of the mails or means or instrumentalities of interstate commerce, he employed devices, schemes or artifices to defraud clients or prospective clients, and engaged in transactions, practices or courses of business which operated as a fraud or deceit upon clients or prospective clients. Among other things, O'Toole misled clients and potential clients by holding himself out as a registered representative with Spectrum and by conducting a securities business using Chikly's registration. Chikly willfully aided, abetted and caused these violations by allowing O'Toole to use her registration to effect securities transactions and otherwise function as a registered representative.
13. Chikly has submitted a sworn financial statement and other evidence and has asserted her inability to pay a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Chikly and has determined that Chikly does not have the financial ability to pay a civil penalty.
In view of the foregoing, the Commission finds that it is appropriate and in the public interest to impose the sanctions specified in Chikly's Offer.
Accordingly, IT IS ORDERED that:
2. Chikly be, and hereby is, barred from association with a broker, dealer, or investment adviser, with the right to reapply for association after eighteen months to the appropriate self-regulatory organization, or if there is none, to the Commission.
3. The Division of Enforcement may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Chikly provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Chikly's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Chikly 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. Chikly may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
|1||The findings herein are not binding on anyone other than Chikly.|
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