UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 47102 / December 27, 2002
File No. 3-10777
In the Matter of
Stephen A. Finn,
| ORDER MAKING FINDINGS, IMPOSING A CEASE-AND-DESIST ORDER, AND IMPOSING REMEDIAL SANCTIONS PURSUANT TO SECTIONS 17A(c)(3), 17A(c)(4), and 21C OF THE SECURITIES EXCHANGE ACT OF 1934|
In these proceedings previously instituted pursuant to Sections 17A(c)(3), 17A(c)(4) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondents Gemisys Corporation ("Gemisys") and Stephen A. Finn ("Finn") (collectively "Respondents") have submitted an Offer of Settlement ("Offer"), which the Securities and Exchange Com-mission 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 Commission's findings herein, except as to the jurisdiction of the Commission over them and over the subject matter of these proceedings, and the findings contained in Section II. paragraphs 1 and 2 below, which are admitted, Respondents Gemisys and Finn consent to the entry of this Order Making Findings, Imposing a Cease-and-Desist Order, and Imposing Remedial Sanctions Pursuant to Sections 17A(c)(3), 17A(c)(4) and 21C of the Securities Exchange Act of 1934 ("Order"), as set forth below.
On the basis of this Order and the Respondents' Offer, the Commission finds that:
- Gemisys (File No. 84-1008) a California corporation, has been registered with the Commission as a transfer agent since March 1985 pursuant to Section 17A(c)(2) of the Exchange Act.
- Finn has been the sole owner of Gemisys since 1988 and the president and chief executive officer of Gemisys since 2000.
- During the period of April 1992 through October 2001, the staff of the Commission performed ten examinations of the books and records of Gemisys to determine whether Gemisys was in compliance with the Exchange Act and the Exchange Act rules applicable to transfer agents.
- During eight of these examinations, the staff of the Commission observed violations by Gemisys of several transfer agent rules and regulations. After each examination, the staff advised Gemisys by letter of its violations of the Exchange Act and certain rules.
- During the relevant time period, Gemisys violated the Exchange Act and certain rules thereunder as described below by failing:
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."
- to submit timely and properly amendments to Form TA-1 to correct information previously reported on Form TA-1, or SEC Supplement that becomes inaccurate, misleading, or incomplete as required by Rule 17Ac2-1;
- to submit timely and properly annual reports on Form TA-2 as required by Rule 17Ac2-2;
- to maintain properly records relating to letters of appointment, routine items, non-routine items, Gemisys' turnaround time of routine items, and written inquiries or requests as required by Rule 17Ad-6;
- to follow record retention requirements as required by Rule 17Ad-7;
- to make and keep current accurate securityholder files and maintain properly a control book for each issue handled as required by Rule 17Ad-10;
- to cancel previously transferred certificates and maintain certificates pending transfer in a secure area as required by Rule 17Ad-12;
- to submit annually a study concerning the transfer agent's system of internal controls as required by Rule 17Ad-13;
- to timely and properly notify the guarantor and presentor of rejection of a signature guarantee and the reasons for the rejection within two business days after rejecting a transfer request because of a determination that the guarantor does not satisfy the transfer agent's written standards and procedures as required by Rule 17Ad-15;
- to notify timely the appropriate qualified registered securities depository of the assumption or termination of transfer agent services as required by Rule 17Ad-16;
- to report timely and properly lost or stolen securities to the Securities Information Center (the "SIC"), and to preserve properly confirmations from the SIC as required by Rule 17f-1; and
- to fingerprint certain employees of Gemisys and to process and maintain properly those fingerprints as required by Rule 17f-2.
As a result of the conduct described above, Gemisys willfully violated, and Finn, subsequent to January 2000, willfully aided and abetted and caused violations of Sections 17(a)(3) and 17A(d)(1) of the Exchange Act and Rules 17Ac2-1; 17Ac2-2; 17Ad-6; 17Ad-7; 17Ad-10; 17Ad-12; 17Ad-13; 17Ad-15; 17Ad-16; 17f-1; and 17f-2 thereunder.
- Gemisys undertakes to:"
- Engage, at its own cost, within thirty (30) days of the date of this Order, an independent certified public accountant ("Accountant"), who is not unacceptable to the staff, to perform four semi-annual reviews of Gemisys' practices, policies and procedures. Gemisys will send a copy of the Accountant's engagement letter to the Central Regional Office of the Commission within ten (10) days of its receipt of the letter."
- Require the Accountant's review to include:
||Examining the books and records of Gemisys every six months (the "Examination Period"), the first commencing not more than sixty (60) days after the engagement of the Accountant and concluding not more than 180 days after the engagement of the Accountant, to determine whether Gemisys is in compliance with all applicable rules and regulations of the Exchange Act;|
||Recommending improvements to Gemisys' practices, policies and |
||Preparing a report for each examination setting forth the findings of the Accountant's examination, the deficiencies, if any, identified during the examination, the Accountant's recommendations for improvement to Gemisys' practices, policies and procedures, and stating whether Gemisys has designed and implemented practices, policies and procedures in a manner reasonably necessary to ensure compliance with all applicable rules and regulations of the Exchange Act. A copy of each report shall be delivered to Respondent and the Central Regional Office of the Commission within fifteen (15) days after the conclusion of the examination.|
- Implement the recommendations of the Accountant within sixty (60) days of the delivery of the report described in paragraph II.B.8.b.(3) above.
- Subject itself to continuing semi-annual Accountant reviews if the fourth semi-annual Accountant's report fails to state that the practices, policies and procedures of Gemisys have been designed and implemented in a manner reasonably necessary to ensure compliance with all applicable rules and regulations of the Exchange Act. The semi-annual Accountant reviews shall continue after the fourth report until one such report states that the practices, policies and procedures of Gemisys have been designed and implemented in a manner reasonably necessary to ensure compliance with all applicable rules and regulations of the Exchange Act.
- Not assert the absence of Commission comment on any Accountant's report described herein as a defense in any future action by the Commission.
- Require the Accountant to enter into an agreement that provides that for the period of the engagement and for a period of two (2) years from the completion of the engagement, the Accountant shall not enter into any employment, consulting, attorney-client, auditing or other professional relationship with Gemisys or Finn, or any of their present or former affiliates, directors, officers, employees, or agents acting in their capacity as such. Any firm with which the Accountant is affiliated or of which he or she is a member, and any person engaged to assist the Accountant in the performance of his or her duties under the Order shall not, without prior written consent of the Commission's staff, enter into any employment, consultant, attorney-client, auditing or other professional relationship with Gemisys or Finn, or any of their present or former affiliates, directors, officers, employees, or agents acting in their capacity as such for the period of the engagement and for a period of two (2) years after the engagement.
- Employ a compliance officer to monitor the compliance of Gemisys with the applicable rules and regulations of the Exchange Act and to report to the chief executive officer of Gemisys any deficiencies in compliance with such rule and regulations. Gemisys shall send a letter to the Central Regional Office of the Commission within fifteen (15) days of the hiring of the compliance officer identifying the person hired to act as the compliance officer.
- Respondent Finn shall provide to the Commission, within ten (10) days after the end of the six-month suspension period described below, an affidavit that he has complied fully with the sanctions described in Section III. B. below.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Respondents' Offer.
ACCORDINGLY, IT IS ORDERED that:
- Pursuant to Section 17A(c)(3) of the Exchange Act, Respondents Gemisys and Finn be, and hereby are censured;
- Pursuant to Section 17A(c)(4)(C) of the Exchange Act, Respondent Finn be, and hereby is, suspended from association with any transfer agent for a period of six months commencing on the second Monday following the entry of this Order;
- Pursuant to Section 21C of the Exchange Act, Respondent Gemisys shall cease and desist from committing or causing, and Respondent Finn shall cease and desist from causing, any violations or future violations of Sections 17(a)(3) and 17A(d)(1) and Rules 17Ac2-1; 17Ac2-2; 17Ad-6; 17Ad-7; 17Ad-10; 17Ad-12; 17Ad-13; 17Ad-15; 17Ad-16; 17f-1; and 17f-2 promulgated thereunder;
- Pursuant to Section 21B of the Exchange Act, within thirty (30) days of the entry of the Order, Respondents shall pay civil money penalties to the United States Treasury as follows: Gemisys shall pay $15,000 and Finn shall pay $10,000. 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 Financial Management, 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 Gemisys and Finn 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 Leslie Hendrickson Hughes, Trial Counsel, Securities and Exchange Commission, Central Regional Office, 1801 California St., Suite 1500, Denver, CO 80202-2656;
- Respondent Gemisys shall comply with the undertakings enumerated in Section II.B. paragraph 8 above and Respondent Finn shall comply with the undertakings enumerated in Section II.B. paragraph 9 above.
By the Commission.
Jonathan G. Katz