The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Russell C. Turek ("Turek" or "Respondent") violated the federal securities laws and, if so, what remedial actions or sanctions are appropriate under the circumstances of this case.
In anticipation of the institution of these administrative proceedings, Turek 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 Turek admits the Commission's jurisdiction over him and over the subject matter of these proceedings, Turek has consented to the entry of the findings and the imposition of the remedial sanctions, monetary penalties, and cease-and-desist order as set forth below.
On the basis of this Order and the Offer submitted by Turek, the Commission finds1 that:
A. Turek, age 48, a resident of Aurora, Colorado, was a registered representative associated with a registered broker-dealer from January 1999 until June 2000. Respondent operated from a two-person branch office of that broker-dealer in Aurora, Colorado and maintained approximately 900 customer accounts. Respondent was placed on administrative leave by the broker-dealer in October 1999 and he voluntarily resigned in June 2000.
B. In April 1999, Respondent, without authorization, signed an elderly customer's name on a "banklink" form permitting the transfer of funds from the customer's bank account to the broker-dealer. Respondent also, without authorization, signed the name of another employee of the broker-dealer in order to guarantee the validity of the customer's signature on a letter authorizing partial liquidation of an annuity product held by the customer. In May 1999, after the customer's annuity funds were liquidated and deposited into the customer's bank account, Respondent used the forged banklink form to transfer the funds to an account at the broker-dealer without the customer's authorization.
C. Between February 1999 and August 1999, on at least seven occasions Respondent engaged in improper mutual fund switching. He induced customers, most of whom were elderly, to sell shares of one mutual fund and to use the proceeds to buy shares of another mutual fund from a different fund family. Respondent omitted to inform these customers of their right to exchange their current funds for different funds within the same fund family to reduce substantially or eliminate any sales load. These transactions provided no economic benefit to the customers and were made for the sole purpose of generating commissions for Respondent.
D. In April 1999, on at least two occasions Respondent induced the purchase of mutual fund shares resulting in the avoidance of breakpoints (the price level at which the sales charge paid by an investor decreases) in order to increase his commission. Respondent solicited a customer to purchase shares of two nearly identical mutual funds, from different fund families, knowing that the customer would have paid Respondent lower commissions if the investment had not been split between the funds. Respondent also split another customer's purchase of shares in a single mutual fund into two separate transactions, a practice known as "marketbasketing," in order to avoid the fund's breakpoint. In each instance, Respondent omitted to disclose to his clients the availability of breakpoints and, improperly orchestrated the purchases to avoid breakpoints.
E. On at least two occasions, in May 1999 and again in July 1999, Respondent purchased shares of mutual funds for customers without the customers' authorization.
F. Respondent received commissions relating to the conduct described in paragraphs B-E above. Respondent reimbursed two of his customers the commissions he received. The amount of Respondent's commissions that has not been reimbursed to his customers is $1413.55.
G. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit any person, directly or indirectly, in connection with the purchase or sale of securities, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, to employ any device, scheme, or artifice to defraud; to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. By reason of the foregoing, Respondent willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Turek and to impose the sanctions specified therein.
Accordingly, IT IS ORDERED that:
A. Turek be, and hereby is, barred from association with any broker or dealer with the right to reapply for association after two (2) years to the appropriate self-regulatory organization, or if there is none, to the Commission; and
B. Pursuant to Section 21C of the Exchange Act, Turek shall cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and
C. Turek shall, within 30 days of the date of this Order, pay disgorgement and prejudgment interest in the total amount of $1747.41 and pay a civil money penalty in the amount of $10,000 to the United States Treasury. Such payments 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 Russell C. Turek as the Respondent 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, Denver Regional Office, 1801 California Street, Suite 4800, Denver, Colorado 80202.
By the Commission.
Jonathan G. Katz
|1|| The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.|