SECURITIES EXCHANGE ACT OF 1934
Release No. 43759 / December 21, 2000
ADMINISTRATIVE PROCEEDING
File No. 3-10141
In the Matter of H.J. Meyers & Co., Inc.,
Respondents. |
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ORDER MAKING FINDINGS AND
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I.
In this public administrative proceeding ordered pursuant to Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), H.J. Meyers & Co., Inc. ("H.J. Meyers") submitted an Offer of Settlement (Offer), which the Commission has determined to accept.1 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 contained in this Order, except for the Commission's jurisdiction with respect to the matters set forth in this Order and those facts which are set forth in paragraph II.A. below, which H.J. Meyers admits, H.J. Meyers consents to the entry of this Order.
II.
On the basis of this Order, the Order Instituting Public Administrative Proceedings in this matter and the Offer submitted by H.J. Meyers, the Commission finds that: 2
A. H.J. Meyers is a broker-dealer registered pursuant to Section 15(b) of the Exchange Act. During 1998, H.J. Meyers was required to file monthly FOCUS reports with the National Association of Securities Dealers Regulation, Inc. pursuant to Exchange Act Rule 17a-5(a). These FOCUS Reports required a calculation of the firm's net capital.
Respondent Falsified Accounting Records, and Filed False
Focus Reports and a False Notice of Net Capital Deficiency
B. In June 1998, an outside investor agreed to loan $2.5 million jointly to H.J. Meyers and H.J. Meyers Group (HJM Group). HJM Group was a holding company that owned H.J. Meyers. Pursuant to the terms of the loan, H.J. Meyers and HJM Group were jointly and severally bound to repay the full $2.5 million plus interest of 15% per annum payable monthly. One of the loan documents stated that the $2.5 million loan was to be secured by collateral -- 130,000 shares of a specified common stock then in H.J. Meyers' inventory.
C. On or about June 29, 1998, H.J. Meyers executed a number of loan documents in order to facilitate the loan transaction. Although the loan documents were signed in June, neither H.J. Meyers nor HJM Group received any funds from the outside investor until July 1998.
D. Nevertheless, on or before the time H.J. Meyers filed its June FOCUS report in July of that year, H.J. Meyers made entries to its accounting records that falsely indicated that H.J. Meyers had received $2.25 million of cash in June 1998. Without these false accounting entries, H.J. Meyers would have reported a net capital deficiency of over $360,000 as of the end of June 1998.
E. H.J. Meyers ultimately received the proceeds from the loan in the early part of July 1998. Thereafter, H.J. Meyers should have recorded a liability to the outside investor reflecting the loan. H.J. Meyers did not record the loan as a liability on H.J. Meyers' accounting records or reflect it in its Focus reports for July or August.
F. Also in July 1998, the 130,000 shares of common stock to be pledged as collateral for the loan were transferred to HJM Group. Thereafter, at all times relevant to this proceeding, the shares were owned by HJM Group. Nevertheless, these same shares were reported as an asset in H.J. Meyers' July and August FOCUS reports. H.J. Meyers made false entries to the firm's accounting records that falsely recorded a transfer of the shares from HJM Group back to H.J. Meyers. No such transfer ever occurred.
G. Without the false accounting entries described in paragraphs II. E. and II. F. above, H.J. Meyers would have reported net capital deficiencies for July and August 1998 of about $3,078,697 and $4,548,162, respectively.
H. H.J. Meyers filed false FOCUS reports for the months of June, July and August, 1998, which all contained false net capital calculations.
I. On September 9, 1998, H.J. Meyers notified the Commission of H.J. Meyers' net capital deficiency. In the notification, H.J. Meyers falsely reported a net capital deficiency of about $1,050,840. In reality the deficiency was over $4.5 million.
J. From June 30, 1998, through September 9, 1998, H.J. Meyers failed to maintain adequate net capital. During that same period, H.J. Meyers conducted securities transactions on a continuous basis.
K. This proceeding against H.J. Meyers is in the public interest.
L. From June 30, 1998, through September 9, 1998, H.J. Meyers willfully violated Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-1, 17a-3, 17a-5 and 17a-11 thereunder.
III.
In view of the foregoing, the Commission finds that it is in the public interest to impose the sanctions specified in the Offer.
Accordingly, IT IS HEREBY ORDERED that:
A. H.J. Meyers' registration with the Commission as a broker-dealer is hereby revoked;
B. Pursuant to Section 21C of the Exchange Act, H.J. Meyers is hereby ordered to cease and desist from committing or causing any violation and any future violation of Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-1, 17a-3, 17a-5, and 17a-11 thereunder.
For the Commission, by its Secretary, pursuant to delegated authority.
Jonathan G. Katz
Secretary
Footnotes
| 1 | The Order Instituting Proceedings in this matter was issued on February 7, 2000. |
| 2 | The findings herein are made pursuant to Respondent H.J. Meyers' offer of settlement and are not binding on any other persons or entity in this or any other proceeding. |