UNITED STATES OF AMERICA
In the Matter of
JOSEPH M. SALVANI
|ORDER MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS
AND CEASE-AND-DESIST ORDER
On September 25, 2000, the Securities and Exchange Commission instituted public administrative proceedings pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Joseph M. Salvani ("Salvani") and MainStreetIPO.com, Inc. ("MainStreet").
In response to the institution of these administrative proceedings, Salvani and MainStreet have submitted an Offer of Settlement, 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 contained herein, except as to the jurisdiction of the Commission over them and the subject matter of the proceedings, which are admitted, Respondents Salvani and MainStreet consent to the issuance of this Order Making Findings and Imposing Remedial Sanctions and Cease-and-Desist Order.
On the basis of this Order and the Offer submitted by Salvani and MainStreet, the Commission makes the following findings:
A. Salvani, a resident of Vero Beach, Florida, founded, and is the president, chief executive officer and majority shareholder of, MainStreetIPO.com, Inc. Salvani is an experienced securities industry professional. At various times over the last fifteen years he worked for three different registered broker-dealers, and held both a general securities representative license and a general securities principal license. Salvani passed the general securities principal exam in August 1997.
B. MainStreet is a Delaware corporation headquartered in New Jersey. MainStreet's primary business is owning and operating a website and associated software for Internet auctions of securities.
C. As more fully described below, Salvani and MainStreet actively solicited both issuers of initial public offerings ("IPOs") and potential investors in IPOs to participate in online auctions of securities at MainStreet's website. These solicitation efforts resulted in at least six prospective issuers signing contracts with MainStreet, paying deposits of at least $75,000. In addition, these solicitation efforts resulted in roughly 15,000 potential investors registering with MainStreet as "members."
D. MainStreet holds itself out as the source of "hot" IPOs for the average investor. Potential investors interested in purchasing the IPOs of issuers under contract with MainStreet are required to register as members of MainStreet. In an actual auction once an issuer's registration statement becomes effective, these investors would place bids through MainStreet's website, which bids are then tabulated and ranked by computers leased to issuers, but owned and operated by MainStreet.
E. By virtue of the actions described in II.C. and II.D. above, Salvani and MainStreet have attempted to induce the purchase or sale of securities and to effect transactions in securities on behalf of others without registering as a broker with the Securities and Exchange Commission, in violation of Section 15(a) of the Exchange Act.
F. Salvani founded MainStreet in early 1999 and MainStreet's website (www.mainstreetipo.com) became operational on or about November 1, 1999. According to the information posted on that website, prospective investors who register with MainStreet, known as "members," would be given the opportunity to bid on public offerings of securities to be issued by companies under contract with MainStreet. All bids would be submitted through MainStreet's website and tabulated by MainStreet's computers. MainStreet's computers would determine the winning (and losing) bids, using an automated "dutch auction" process. MainStreet then would inform the relevant company and its agents of the results.
G. MainStreet conducted an extensive solicitation campaign. This solicitation effort was intended to entice potential investors into becoming clients, or "members," of MainStreet. MainStreet purchased banner advertisements for posting on over 70 other financial websites, and sent out roughly 600,000 e-mails to potential investors. MainStreet also hosted booths at various trade shows, and, in April 2000 ran full-page color advertisements in various national magazines. Salvani also was interviewed for a television program concerning the distribution of IPOs that was broadcast nationally in February 2000. These various solicitation efforts resulted in MainStreet acquiring approximately 15,000 members by March 2000.
H. MainStreet also marketed itself to various potential issuers of IPOs. By early January 2000, MainStreet's website claimed that four companies were in the process of filing registration statements and that the first IPO auction was estimated to be offered through MainStreet in mid-January. MainStreet entered into contracts with at least six different potential issuers, and accepted deposits from three of those potential issuers totaling at least $75,000.
I. By virtue of comments raised by the Commission's Division of Corporation Finance, potential issuers under contract with MainStreet have not participated in online auctions on MainStreet's website. As a result, no securities have been posted on or sold through MainStreet's website.
J. Neither Salvani nor MainStreet are or have been registered with the Commission as brokers pursuant to the Exchange Act.
K. By virtue of their acts and omissions as described above, Salvani and MainStreet are engaged in the business of effecting transactions in securities for the account of others. Consequently, Salvani and MainStreet are "brokers" within the meaning of Section 3(a)(4) of the Exchange Act.
L. By virtue of their acts and omissions as described above, Salvani and MainStreet willfully committed and caused violations of Section 15(a) of the Exchange Act in that they, directly and indirectly, by the use of the mails or the means and instrumentalities of interstate commerce, attempted to induce the purchase or sale of securities (other than an exempted security or commercial paper, bankers' acceptances, or commercial bills), without having registered as brokers in accordance with Section 15(b) of the Exhange Act.
M. By virtue of their acts and omissions as described above, Salvani and MainStreet willfully committed and caused violations of Section 15(a) of the Exchange Act in that they, directly and indirectly, by the use of the mails or the means and instrumentalities of interstate commerce, are about to effect transactions in securities (other than an exempted security or commercial paper, bankers' acceptances, or commercial bills), without having registered as brokers in accordance with Section 15(b) of the Exhange Act.
N. MainStreet, through its representative, has submitted a sworn financial statement and other evidence and has asserted its financial inability to pay a civil penalty. The Commission has reviewed the sworn statement and other evidence provided by MainStreet and has determined that MainStreet does not have the financial ability to pay a civil penalty.
O. MainStreet, through its representative, has submitted a sworn financial statement and other evidence and has asserted its financial inability to pay disgorgement plus prejudgment interest. The Commission has reviewed the sworn financial statement and other evidence provided by MainStreet and has determined that MainStreet does not have the financial ability to pay disgorgement of $75,000 plus prejudgment interest.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Salvani and MainStreet and impose the sanctions specified therein.
Accordingly, IT IS HEREBY ORDERED that:
1. shall cease and desist from committing or causing any violation and any future violations of Section 15(a) of the Exchange Act;
2. shall, within 30 days of the entry of this Order, pay a civil money penalty in the amount of $10,000 to the United States Treasury. Such payment shall be: (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) hand delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (d) submitted under a cover letter which identifies Salvani as a Respondent in these proceedings and the Commission's file number, a copy of which cover letter and money order or check shall be sent to Ronald C. Long, District Administrator, Securities and Exchange Commission, The Curtis Center, Suite 1120E., 601 Walnut St., Philadelphia, PA 19106;
3. shall, within 10 days of the entry of this Order, comply with the following additional undertaking:
a. remove MainStreet's website (www.mainstreetipo.com) from the internet until such time as Salvani or MainStreet shall be duly registered with the Commission as a broker pursuant to Section 15(b) of the Exchange Act; and
4. shall, within 30 days of the entry of this Order, file an affidavit with the Commission's staff stating that it has complied with the undertaking listed in subparagraphs III.A.3.a. above;
1. be, and hereby is, censured;
2. shall cease and desist from committing or causing any violation and any future violations of Section 15(a) of the Exchange Act;
3. shall pay disgorgement of $75,000 plus prejudgment interest, but that payment of such amount be waived based upon MainStreet's demonstrated financial inability to pay;
4. shall, within 10 days of the entry of this Order, comply with the following additional undertaking:
a. remove MainStreet's website (www.mainstreetipo.com) from the Internet until such time as MainStreet or Salvani shall be duly registered with the Commission as a broker pursuant to Section 15(b) of the Exchange Act; and
5. shall, within 30 days of the entry of this Order, file an affidavit with the Commission's staff stating that it has complied with the undertaking listed in subparagraphs III.B.4.a. above.
IT IS FURTHER ORDERED that 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 MainStreet 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 Respondent's offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Respondent 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. Respondent 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
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