UNITED STATES OF AMERICA
|In the Matter of
Michael T. Fearnow d/b/a Financial Broker
|Order Instituting Proceedings Pursuant to Sections 15(b)(4) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order|
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 15(b)(4) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondents Michael T. Fearnow, d/b/a Financial Broker Relations, and Focus Tech Investments, Inc. (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. Michael T. Fearnow, ("Fearnow") d/b/a Financial Broker Relations ("FBR"), age 55, of
Montgomery, Texas, performs financial consulting and investor relations services. Fearnow also owns and operates Focus Tech Investments, Inc. From 1973 to 1989, Fearnow was a registered representative associated with various broker-dealers. In 1989, the National Association of Securities Dealers, Inc. ("NASD") revoked Fearnow's registration.
B. Focus Tech Investments, Inc. ("Focus Tech") is a Delaware corporation located in Montgomery, Texas. Focus Tech is an investment consulting firm owned and operated by Fearnow.
C. Fearnow created and maintains a website entitled Financial Broker Relations at www.gopublic.com. According to the website, FBR provides, among other things, services for companies planning to go public. The website offers advice regarding alternative methods for privately held companies to become public and begin trading. One of the methods described on the website is merging with an existing shell company at a cost of $150,000 to $400,000. The website provides contact information for interested parties and seeks information from companies through an on-line questionnaire. Fearnow also owns and operates Focus Tech, which works in conjunction with FBR and performs the same services as FBR.
D. From at least September 1999 through July 2000, Fearnow and Focus Tech received a total of $232,000 in cash and at least 96,000 shares of stock for assisting in efforts to merge three public shell companies. Fearnow and Focus Tech located buyers and sellers of public shell companies using an Internet website and other sources. Contacts received through those means led to Fearnow and Focus Tech introducing parties to reverse mergers with public shells. Fearnow and Focus Tech also entered into consulting or "finders fee" agreements with numerous other public and private companies seeking to engage in reverse merger transactions. Further, Fearnow and Focus Tech in a number of instances transmitted documents between private companies and public shells seeking to merge, and evaluated public shell companies and potential buyers of public shell companies and transmitted that information to parties seeking to merge prior to making introductions. Moreover, in at least one instance Fearnow and Focus Tech relayed other information to parties seeking to merge and offered advice and suggestions regarding the terms of a reverse merger transaction.
E. Section 15(a) of the Exchange Act requires that any person or entity engaged in the interstate business of effecting securities transactions for the account of others must register with the Commission as a broker or dealer or, if a natural person, be associated with an entity that is registered with the Commission as a broker or dealer. By virtue of the conduct described above, the Respondents willfully violated Section 15(a) of the Exchange Act.1
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 Section 15(b)(4) of the Exchange Act, the Respondents be censured;
B. Pursuant to Section 21C of the Exchange Act, the Respondents cease and desist from committing or causing any violation or future violation of Section 15(a) of the Exchange Act;
C. Pursuant to Section 21B and Section 15(b)(4) of the Exchange Act, within thirty (30) days of the entry of this Order, Fearnow and Focus Tech Investments, Inc. 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 Fearnow and Focus Tech Investments, Inc. as the Respondents in this proceeding, the file number of the proceeding, 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, Central Regional Office, 1801 California Street, Suite 4800, Denver, Colorado 80202.
By the Commission.
Jonathan G. Katz
1 In applying the term "willful" in Commission administrative proceedings instituted pursuant to Sections 15(b), 15B, 15C, 17A, and 19(h) of the Securities Exchange Act, Section 9 of the Investment Company Act, and Section 203 of the Investment Advisers Act, the Commission evaluates on a case-by-case basis whether the respondent knew or reasonably should have known under the particular facts and circumstances that his conduct was improper. In this case, as in all Commission administrative proceedings charging a willful violation under these statutory provisions, the Commission applies this standard to persons -- specifically, securities industry professionals -- who are directly subject to Commission jurisdiction and who have a responsibility to understand their duties to the investing public and to comply with the applicable rules and regulations which govern their behavior.
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