Securities Exchange Act of 1934
Release No. 50720 / November 23, 2004
Admin. Proc. File No. 3-11745
IN THE MATTER OF FREDERICK J. GILLILAND
On November 23, 2004, the Commission instituted administrative proceedings against Frederick J. Gilliland based on the entry, on October 26, 2004, of a final judgment by the United States District Court for the Western District of North Carolina. The final judgment in that civil action, entitled SEC v. Frederick J. Gilliland et al., Civil Action File Number 3:02-CV128McK (W.D.N.C.), enjoined Gilliland from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
The Commission's complaint in the civil action alleged that Frederick Gilliland sold more than $29 million in interests in a succession of non-existent prime bank trading programs to more than 200 investors between at least mid-1997 through November 1998. In connection with his scheme, the complaint alleged that Gilliland misrepresented and omitted material facts concerning: (1) the existence of the trading programs; (2) the use of investor funds; (3) the promised return; and (4) the safety of the funds invested. For example, the investment agreements that Gilliland's investors typically signed referred to the investment programs as a "high-yield banking transaction." Most of these programs guaranteed rates of return ranging from 30% per month to as high as 130% per 10 days. According to the Commission's complaint, Gilliland also misrepresented that investments were safe because they would be fully collateralized by U.S. Treasury bills. According to the complaint, Gilliland acted as broker-dealer without registering with the Commission as a broker-dealer.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the Respondent an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions are appropriate and in the public interest.
The Order requires the Administrative Law Judge to issue an initial decision no later that 210 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice.
See also the Order in this matter