SECURITIES EXCHANGE ACT OF 1934
Rel. No. 45694 / April 4, 2002

Admin. Proc. File No. 3-9024

In the Matter of

FU-SUNG PETER WU
2900 Valley Spring Road
Plano, Texas 75025

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ORDER IMPOSING REMEDIAL SANCTIONS

On the basis of the Commission's opinion issued this day, it is

ORDERED, that Fu-Sung Peter Wu cease and desist from committing or causing any violation of or future violation of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; and it is further

ORDERED that Fu-Sung Peter Wu be, and he hereby is, barred from association with a broker or dealer, provided that he can reapply for association after two years; and it is further

ORDERED that Fu-Sung Peter Wu pay a civil money penalty of $50,000, provided that the amount of this civil money penalty will be reduced by $1.00 for every $2.50 that Wu pays in satisfaction of the outstanding arbitration awards to GVR Company and to customers Yuanzhen Tong and Tong Shu Li.

Wu's payment of the civil money penalty shall be: (i) made by United States postal money order, certified check, bank cashier's check, or bank money order; (ii) made payable to the Securities and Exchange Commission; (iii) delivered by hand or courier to the Comptroller, Securities and Exchange Commission, 450 5th Street, N.W., Washington, D.C. 20549 within thirty days of the date of this order; and (iv) submitted under cover letter which identifies Wu as the respondent in this proceeding, and the file number of this proceeding. A copy of this cover letter and check shall be sent to Stephen Webster, Counsel for the Division of Enforcement, Securities and Exchange Commission Fort Worth District Office, Burnett Plaza, Suite 1900, 801 Cherry Street, Fort Worth, Texas 76102.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes

1 15 U.S.C. §§ 77q(a)(2) and (a)(3).
2 Fu-Sung Peter Wu, Initial Decision Rel. No. 144 (July 22, 1999), 70 SEC Docket 513.
3 15 U.S.C. § 77q(a)(1).
4 15 U.S.C. § 78(j)(b).
5 17 C.F.R. § 240.10b-5.
6 On September 19, 1995, AAA withdrew its registration by filing a Form BD-W with the Commission. The withdrawal became effective on November 19, 1995.
7 Robert Roberts of PBC testified that Wu had failed, in prior instances, to report some of AAA's outside trades. As a result, PBC issued a warning to Wu that an extra charge would be assessed on future outside trades not reported in a timely fashion.
8 Maomian Fan was employed as a research associate at Southern Methodist University, and Yuanzhen Tong was employed as a waitress at a Chinese restaurant. The couple was acquainted with Wu through the church they attended, but had no prior business dealings with him.
9 In explaining this notation, Wu testified that, "I use a 16,000 divided by 30." The Division, in order to clarify Wu's statement, asked, "...so you took the amount of money you knew they wanted to spend, divided by 30 and came up with 500 shares." Wu agreed. Thus, we conclude that the notation indicates that Tong agreed to buy 500 shares of Netscape at $30 per share.
10 Erza Wang testified that he initially learned of the Netscape IPO from reading a business magazine.
11 Wu wrote this notation on an article faxed to Wang.
12 Wu wrote this notation on a cover sheet faxed to Kwok Fong (Betty) Siu. Yuan (Rose) Chang testified that Wu wrote a similar notation on materials faxed to her.
13 Wu also wrote this notation on the article faxed to Wang.
14 The article explained that shareholders receiving the initial allocation of Netscape shares were likely to flip the stock for a quick profit but suggested other investors choosing to hold the stock were less likely to achieve such success because of the volatility and uncertainty in the field of software development.
15 See, e.g., Personal Investment Activities of Investment Company Personnel, Securities Act Rel. No. 7728 (Aug. 27, 1999), 70 SEC Docket 1191, 1195, n.50 (defining a hot issue IPO to mean "an IPO in which the securities trade in the aftermarket at a premium over the offering price"). Cf. Sherman, Fitzpatrick & Co., 51 S.E.C. 1048, 1054 (1994), appeal filed, No. 02-4010 (2d Cir. 2002).
16 The translation offered by the Division of the advertisement, which was written in Chinese, states that Netscape "will make you rich." However, Wu, as well as the translator present at the hearing, provided this more abstract translation: "This premier special offering of stock will take you together to a different deal at the Sierra [mountains] and beautiful land." Wu did agree that he meant investing in Netscape would put his customers in a better place; we conclude that he meant that the investor would improve his or her financial condition.
17 After trading began on August 9 and after GVR had purchased the stock, Wu called Roy in an attempt to reduce his block order. One of Wu's customers had refused to purchase a portion of the Netscape stock that Wu had ordered. Roy, in refusing to reduce Wu's block order, stated:

No, that's why I called you in the morning. That's why I wanted you to check with them and tell them that it's gonna be opening so high that are they sure they wanted to buy it. I made calls to everyone and [sic] I had orders with on the desk. I talked to every account and said this and said, "The thing is going to open at ridiculous prices. Do you still want to buy your stock?"

18 ACT is an automated system operated by Nasdaq, among other things, to transmit trading information to ACT participants for clearance and settlement purposes and to disseminate such information to the public. See NASD Systems and Programs Rule 6110.
19 Wu testified that he tried to pay for the shares and asserted that he had a copy of a facsimile transmission to prove it. The facsimile is not in the record. Robert Roberts of PBC testified that the firm was never instructed to put the remaining shares in Wu's or AAA's account.
20 GVR brought an arbitration claim against AAA. The arbitrators' determination awarded GVR $91,581.54 in actual damages. (GVR v. AAA Stockbrokers, Inc., 1996 WL 520118 (N.A.S.D. 1996)). At the time of the hearing, Wu had not paid the claim.
21 On or about August 24, 1995, Fan received a letter from Wu informing him that the Netscape shares remaining in Tong's AAA account would have to be transferred to another broker or sold. Fan sold the remaining 319 shares at a substantial loss. Tong brought an arbitration claim against AAA and Wu. The arbitration awarded her over $10,000 in damages. (Yuanzhen Tong v. AAA Stockbrokers, Inc., 1996 WL 704910 (N.A.S.D. 1996) (Whitaker et al., Arbs.)).

Another customer, Tong Shu Li, filed an arbitration against Wu, which awarded Li approximately $26,000 in damages. (Tong Shu Li v. AAA Stockbrokers, Inc., 1996 WL 779371 (N.A.S.D.) (Kimball et. al., Arbs.)).

Wu sued the remaining three customer witnesses for failure to pay. The results of these suits are not in the record.

22 The Division also appealed the law judge's dismissal of the remaining charges in the Order Instituting Proceedings. Her dismissal was based on various credibility determinations. We have held that, without substantial evidence in the record to the contrary, we cannot depart from the fact finder's determination of credibility. See, e.g., Martin Kaiden, Securities Exchange Act Rel. No. 41629 (July 20, 1999), 70 SEC Docket 439, 450 n. 32. While the customers' testimony appears credible and consistent with the record, we did not observe their or Wu's demeanor. Given the nature of the allegations, the bulk of the evidence is the competing testimony of the witnesses and Wu. We therefore conclude that we are constrained to dismiss the allegations that the customers who testified did not authorize Wu to purchase Netscape on their behalf and that Wu altered customer account documents in connection with executing transactions in customer accounts.
23 See Joseph J. Barbato, 53 S.E.C. 1259, 1273 (1999); Donald A. Roche, 53 S.E.C. 16, 19 (1997); Lester Kuznetz, 48 S.E.C. 551, 553 (1986), petition for review denied, 828 F.2d 844 (D.C. Cir. 1987)(table). Cf. First Virginia Bankshares v. Benson, 559 F.2d 1307, 1314 (5th Cir. 1997)(finding an opinion or prediction is actionable if there is a gross disparity between prediction and fact).
24 As discussed above, Wu testified that, based on this information, he revised his price projection to $55 per share. Other than Wu's testimony, the record does not reflect when and under what circumstances he made this purported calculation. In any event, Wu did not share the purported $55 projection with his customers.
25 Wu maintains that the high opening price of Netscape surprised the industry as a whole and that the unusual circumstances surrounding the IPO, rather than his conduct, caused the losses suffered by his customers. As discussed above, the evidence in the record belies Wu's assertions.
26 The courts have defined recklessness in this context as "'an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it.'" Sunstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1045 (7th Cir. 1977), cert. denied, 434 U.S. 875 (1977) (quoting Franke v. Midwestern Okla. Dev. Auth., 428 F.Supp. 719, 725 (W.D.Okl. 1976)). Proof of scienter is not required to establish a violation of Sections 17(a)(2) or 17(a)(3) of the Securities Act. Aaron v. SEC, 446 U.S. 680, 701-2 (1980).

Wu's scienter is further demonstrated by his attempt to alter the "500 s. · 30" notation on Tong's New Account Approval Form. We believe this activity demonstrates an attempt to hide from PBC the misrepresentations that he made to his customers. Based on these circumstances, Wu's failure to correct his prior misrepresentations regarding the price of Netscape was at least reckless.

27 A misstatement or omission is material if there is a substantial likelihood that a reasonable investor would consider the misstated or omitted information to be important in making an investment decision. See Basic Inc. v. Levinson, 485 U.S. 224, 231 (1988) (citing TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).
28 See supra note 14.
29 Michael J. Boylan, 47 S.E.C. 680, 685 (1981), aff'd, SEC v. Boylan, 703 F.2d 573 (9th Cir. 1983)(Table)(finding customer's likely inability to pay for trades to be material and broker-dealer's withholding of this information from clearing brokers to be fraudulent).

See also A.T. Brod & Co. v. Perlow, 375 F.2d 393, 395, 397 (2d Cir. 1967) (Allegation that customers placed orders with brokers with fraudulent intent to pay only if securities' market value increased stated a claim of action for violation of antifraud provisions.).

30 United States v. Naftalin, 441 U.S. 768, 770, 775-77 (1979) (clarifying that Section 17(a)(1) prohibits frauds against brokers as well as investors and therefore finding fraud occurred when respondent placed orders with brokers to sell stock which he fraudulently represented that he owned). See also United States v. Naftalin, 579 F.2d 444, 446 (8th Cir. 1978)(explaining that Naftalin placed these orders without disclosing that he did not own the stock or by affirmatively misrepresenting that he did own the stock).
31 Courts have determined that "willfully" in this context does not require proof that the actor knew that his conduct violated the law. Wonsover v. SEC, 205 F.3d 408, 415 (D.C. Cir. 2000) and cases cited therein (finding that a broker acted willfully when he failed to conduct sufficient inquiry into the securities he sold to customers).
32 Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 185 (1973).
33 Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981).
34 15 U.S.C. § 78u-2(a).
35 See supra note 21.
36 We have considered all of the contentions made by the parties. We have rejected or sustained their arguments to the extent that they are inconsistent or in accord with the views expressed herein.