UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16495 \ March 31, 2000
SEC v. Thomas E. Loyd, individually, and d/b/a Loyd Financial Consulting. CA-00-CV-1085, USDC, SD/TX [Houston Division]
On March 29, 2000, the Securities and Exchange Commission filed a Complaint in the United States District Court for the Southern District of Texas alleging that Thomas E. Loyd, individually, and d/b/a Loyd Financial Consulting, engaged in a stock touting and scalping scheme through the dissemination of his investment newsletter, Investors' Alert. The Complaint alleges that on 14 separate occasions between April 1999 and October 1999, Loyd published "strong buy" recommendations in Investors' Alert for the securities of seven microcap companies. In addition to his subscribers, the Complaint alleges that Loyd sent certain of his recommendations to millions of potential investors through unsolicited Internet e-mails, commonly known as "spams." With respect to almost every stock touted by the defendant, the Complaint alleges that: (1) the volume and/or price increased sharply, sometimes by as much as 160%, shortly after the defendant's "strong buy" recommendation; and (2) the defendant took advantage of the market interest he created by selling into the inflated market large amounts of stock he had received in consideration for his promotional services. According to the Complaint, Loyd realized profits of $168,000 from sales of these securities and subscription fees from his subscribers. Moreover, the Compliant alleges that Loyd failed to disclose that in many instances he had, directly or indirectly, received tens of thousands of shares of stock from the recommended companies in consideration for featuring the companies in Investors' Alert. Lastly, the Complaint alleges that Loyd failed to advise his subscribers and readers that he intended to sell the stock in contravention of his buy recommendations - a fraudulent practice known as "scalping."
Simultaneous with the filing of the Complaint, Loyd consented, without admitting or denying the allegations of the Complaint, to the entry of a final judgment permanently enjoining him from violations of Section 17(b) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Loyd also agreed to pay disgorgement and pre-judgment interest of $172,093, and a $50,000 civil penalty.