UNITED STATES OF AMERICA
|In the Matter of
ORDER INSTITUTING PROCEEDINGS PURSUANT
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be instituted pursuant to Sections 17A(c)(3), 17A(c)(4) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondents Alpha Tech Stock Transfer Trust ("Alpha Tech") and James W. Farrell (together "Respondents").
In anticipation of the institution of these administrative proceedings, Respondents have submitted a joint Offer of Settlement ("Offer"), which 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 in which the Commission is a party, and without admitting or denying the findings herein, except for those findings contained in paragraphs II. A. and B. below and the jurisdiction of the Commission over them and over the subject matter of these proceedings, which are admitted, Respondents have consented to the entry of the findings and the imposition of the remedial sanctions and cease-and-desist order as set forth below.
On the basis of this Order and the Offer submitted by each Respondent, the Commission makes the following findings:
A. Alpha Tech (File No. 84-1735), a trust with its principal place of business in Draper, Utah, has been registered with the Commission as a transfer agent since March 26, 1989 pursuant to Section 17A(c)(2) of the Exchange Act. Alpha Tech formerly was known as Alpha Tech Transfer Company, Inc., a Utah corporation. On August 26, 1999, the Commission censured Alpha Tech and imposed a cease-and-desist order in connection with its deficiencies in filing Form TA-Y2K as required by Rule 17Ad-18.
B. Farrell, a resident of Sandy, Utah, has served as the trustee of Alpha Tech since its creation. Farrell previously served as President of Alpha Tech Transfer Company, Inc. Farrell has been the principal person in charge of Alpha Tech since its registration as a transfer agent, and he alone planned and conducted all of Alpha Tech's business activities, including its compliance with the Exchange Act and the rules thereunder.
C. During the period of January 1990 through November 1999, the staff of the Commission performed six routine and one cause examination of Alpha Tech's books and records to review whether Alpha Tech was in compliance with the Exchange Act and the Commission's rules and regulations applicable to transfer agents.
D. During each of these examinations, the staff of the Commission noted certain areas of noncompliance by Alpha Tech with one or more rules and regulations. After each examination, the staff forwarded to Alpha Tech a deficiency letter which described the areas of non-compliance with the Exchange Act and certain rules and regulations by Alpha Tech.
E. During the relevant time period, the staff noted numerous repeat deficiencies in that Alpha Tech failed:
F. Section 17(a)(3) of the Exchange Act states: "Every registered transfer agent shall also make and keep for prescribed periods such records, furnish such copies thereof, and make such reports as the appropriate regulatory agency for such transfer agent, by rule, prescribes as necessary or appropriate in furtherance of the purposes of section 17A of this title." Section 17A(d)(1) of the Exchange Act states: "No registered clearing agency or registered transfer agent shall, directly or indirectly, engage in any activity as clearing agency or transfer agent in contravention of such rules and regulations (A) as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, or (B) as the appropriate regulatory agency for such clearing agency or transfer agent may prescribe as necessary or appropriate for the safeguarding of securities and funds." By virtue of the conduct described above, Alpha Tech willfully violated Sections 17(a)(3) and 17A(d)(1) of the Exchange Act and Rules 17Ac2-1; 17Ac2-2; 17Ad-4; 17Ad-6; 17Ad-7; 17Ad-10; 17Ad-12; 17Ad-13; 17Ad-15; 17Ad-16; 17Ad-18; 17Ad-21T; 17f-1; and 17f-2 thereunder, and Farrell willfully aided and abetted Alpha Tech's violations.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Respondents and to impose the sanctions specified therein.
Accordingly, IT IS ORDERED that:
A. Pursuant to Sections 17A(c)(3) and 17A(c)(4) of the Exchange Act, the Respondents be, and they hereby are, censured;
B. Pursuant to Section 21C of the Exchange Act, Respondents shall cease and desist from committing or causing any violation or any future violation of Sections 17(a)(3) and 17A(d)(1) of the Exchange Act and Rules 17Ac2-1; 17Ac2-2; 17Ad-4; 17Ad-6; 17Ad-7; 17Ad-10; 17Ad-12; 17Ad-13; 17Ad-15; 17Ad-16; 17f-1; and 17f-2 thereunder;
C. Respondents shall engage, at their cost, an independent certified public accountant who is acceptable to the staff ("Accountant") within 30 days of the date of this Order to perform four semi-annual reviews of Alpha Tech's practices, policies and procedures.
1. The Accountant's review shall include:
a. Examining the books and records of Alpha Tech every six months (the "Examination Period"), commencing not more than 60 days after the engagement of the Accountant, to determine whether Alpha Tech is in compliance with all applicable rules and regulations of the Exchange Act;
b. Recommending improvements to Alpha Tech's practices, policies and procedures immediately after each Examination Period; and
c. Preparing a report setting forth the findings of the Accountant's examination, the deficiencies, if any, identified during the examination, and the Accountant's recommendations for improvement to Alpha Tech's practices, policies and procedures. A copy of the report shall be delivered to Respondents and the Central Regional Office of the Commission within 15 days after the conclusion of the examination.
2. Respondents shall implement the recommendations of the Accountant within 60 days of the delivery of the report described in paragraph C.1.c. above.
3. For each failure by Respondents to comply with any of the undertakings required to be performed in this paragraph C, Respondents shall be subject to one additional Accountant's review.
4. If the final semi-annual Accountant's report fails to state that the practices, policies and procedures of Alpha Tech have been designed and implemented in a manner reasonably necessary to ensure compliance with all applicable rules and regulations of the Exchange Act, the provisions of paragraph C shall continue until one such report satisfies this standard.
5. Neither Alpha Tech nor Farrell shall assert the absence of Commission comment on any Accountant's report described herein as a defense in any future action by the Commission; and
D. Pursuant to Section 21B of the Exchange Act, within thirty (30) days of the entry of the Order, Respondents shall together pay a civil money penalty in the amount of $10,000 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered or mailed to the Office of the Comptroller, U.S. Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria VA 22312; and (4) submitted under cover letter which identifies Alpha Tech and Farrell as the Respondents in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Donald M. Hoerl, Associate Regional Director, Securities and Exchange Commission, Denver Regional Office, 1801 California St., Suite 4800, Denver, CO 80202.
By the Commission.
Jonathan G. Katz
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