SECURITIES AND EXCHANGE COMMISSION
In the Matter of
ROBERT THOMAS CLAWSON
OPINION OF THE COMMISSION
Ground for Remedial Action
Fraud in the Offer and Sale of Securities
Registered representative participated in a scheme in which salespersons were paid undisclosed compensation in return for selling issuer's stock to retail customers and failed to disclose to his own customers that he anticipated receiving such compensation. Held, it is in the public interest to bar respondent from association with a broker or dealer, to bar him from participation in any penny stock offering, and to assess a civil money penalty in the amount of $100,000.
H. Thomas Fehn and Gregory J. Sherwin, of Fields, Fehn, and Sherwin, for Robert Thomas Clawson.
Kenneth L. Miller and Gina M. Joyce, for the Division of Enforcement.
Appeal filed: October 3, 2001
Last brief received: April 3, 2003
Robert Thomas Clawson, who formerly was associated with Cruttenden Roth, Inc. ("Cruttenden"), a registered broker-dealer, appeals from the decision of an administrative law judge. Thelaw judge found that Clawson participated in a fraudulent scheme in violation of Section 17(a)(1) of the Securities Act of 1933, 1 Section 10(b) of the Securities Exchange Act of 1934, 2and Exchange Act Rule 10b-5. 3
The law judge barred Clawson from association with a broker or dealer and from participation in any penny stock offering. The law judge further assessed a civil monetary penalty of $100,000 against Clawson. We base our findings on an independent review of the record, except with respect to those findings not challenged on appeal.
A. Background. Enrotek, Ltd., a Nevada corporation, made a public offering of its common stock in 1988. However, through November 1991, Enrotek had not engaged in any form of business activity. In December 1991, Enrotek acquired land in Portugal for development. This real property was Enrotek's sole asset and the company had no revenue. John Banach (also known as Leo Lawson) was Enrotek's chairman, chief executive officer, and a director. 4
Banach hired Kevin Woodbridge and Woodbridge's company, Woodbridge & Associates, to promote Enrotek. 5 Under a ServiceAgreement, dated September 25, 1991, Woodbridge undertook to "create demand for" Enrotek "at the 5 dollar or better level with a goal of 50,000 or more shares traded on a monthly basis for a period of 1 year from the signing of this agreement."
In turn, Woodbridge introduced Banach to Dennis Williams. 6 Woodbridge and Williams previously had successfully manipulated the stock price of Aqua Vie Beverage, Inc., raising Aqua Vie's price from 75 cents to $2-3 per share. As part of the Aqua Vie manipulation, Woodbridge paid salesmen undisclosed compensation for selling Aqua Vie to their customers.
Banach gave Williams 300,000 shares of Enrotek, which Williams deposited in an account at Russo Securities, Inc. Banach deposited an additional 300,000 Enrotek shares in a separate account at Russo. When a retail customer purchased Enrotek, Banach and Williams took the opposite side of the customer's order.
Williams used approximately $1 million from his sales of Enrotek to make undisclosed payments to salespersons at various firms throughout the United States for selling Enrotek stock to their customers. Williams testified that he could not interest salespersons in selling Enrotek without additional payments because the company was "all promises," adding "but we did have a history of paying on time to people."
In December 1991, Williams stopped making these payments and Enrotek's stock price declined. Banach then began giving Woodbridge money to pay salespersons for Enrotek sales. Woodbridge paid between $100,000 and $110,000 to salespersons until Banach ran out of money during the first half of 1992.
B. Clawson. Clawson met Woodbridge in 1987 when they both worked in the same branch office of Stuart-James & Company, a broker-dealer. In 1991, Woodbridge worked at Cruttenden, and was instrumental in Clawson's being hired at Cruttenden. At another point, Woodbridge owed between $1500 and $2500 in rent to Williams. He asked Clawson to make the payment for him, and Clawson gave Williams a personal check to cover Woodbridge's rent. 7 After Woodbridge left Cruttenden, Clawson and Woodbridge kept in contact. For example, Clawson admitted going to Woodbridge & Associates' offices, which Woodbridge sublet from Williams.
Clawson knew that Woodbridge had successfully "promoted" Aqua Vie and "had a successful track record." Clawson sold Woodbridge his interest in a beach house in return for 55,000 shares of Aqua Vie. Reagan Richmond, a former salesman at Stuart-James and Cruttenden, testified that, while he was at Stuart-James, Clawson had told him about Aqua Vie. 8 Although Stuart-James did not permit its salespersons to sell Aqua Vie, Clawson told Richmond that, if Richmond would "steer" his clients to another firm to purchase Aqua Vie, Richmond would receive "some extra compensation," "around 20 or 30 cents a share."
Clawson admitted that he knew that Woodbridge was attempting to raise Enrotek's price to $5 per share. Although Clawson testified that he did not know until late in the events at issue that he would receive special compensation for selling Enrotek to his customers, the law judge did not credit this testimony. We accept a fact finder's credibility finding, absent overwhelming evidence to the contrary, which we do not find here. 9 Moreover, according to Richmond, Woodbridge and Clawson told Richmond that he "would get 25 cents a share" in addition to his regular commission if Richmond sold Enrotek to his customers.
Between January and March 1992, Clawson sold between 60-70,000 shares of Enrotek to at least ten Cruttenden retail customers. Clawson knew that Enrotek was a high-risk, speculative stock that was quoted only in the National Quotation Bureau's pink sheets. Clawson also testified that Enrotek was the only pink sheet security for which he had ever solicited trades.
Anthony Micari, one of Clawson's customers, testified that Clawson told him that Enrotek was the "deal of the century." Clawson assured Micari that Enrotek was involved in an "incredible" deal to develop land in Portugal and that the land alone was worth "more than the float." He also told Micari that Enrotek was a "no-lose situation" that was "going through the roof." On January 8, 1992, Micari purchased 25,000 shares of Enrotek. When, on "three or four [subsequent] occasions," Micari sought to sell some of his Enrotek shares, Clawson discouraged him. 10 Micari did not indicate that he had knowledge of any extra compensation paid with respect to Enrotek stock.
John Campos, another customer, testified that Clawson told him that Clawson was very close to Enrotek. Clawson assured Campos that Enrotek, which was then trading in the $3 range, would shortly go to $6, and that the price would eventually go to $18. Clawson did not tell Campos that Clawson would receive special compensation for his Enrotek sales.
Sometime around the beginning of March, Cruttenden ordered its salespersons to stop soliciting orders for Enrotek. However, Clawson continued to urge Campos to purchase more Enrotek, recommending that Campos purchase Enrotek at First American Biltmore Securities, Inc. ("FABS"). 11 Clawson told Campos that FABS would give him a "better price" and "better execution."
Although Clawson remained associated with Cruttenden, he oversaw the opening of an account for Campos at FABS. Mikulka, Woodbridge's partner, was a FABS associated person. 12 Mikulka was designated the registered representative for Campos' FABS account. However, Campos dealt exclusively with Clawson. 13 Campos' subsequent three orders for Enrotek were effected through FABS.
Campos made one of his Enrotek purchases through FABS around March 26, 1992. At that time, Clawson told Campos that he had gone to Canada, met with Enrotek management, and gone horseback riding with them. Clawson admits that he went to Calgary, Alberta with two other Cruttenden salesmen and met with Banach where he and Banach discussed Clawson's being paid for selling Enrotek stock.
When Clawson returned to the United States, he sent a bill to Banach asking for payment for his Enrotek sales. Clawson did not receive any money as a result of his solicitation. Instead, the company informed him that its policy had changed and that it no longer paid money for solicitations. The company offered Clawson restricted stock instead, but Clawson declined.
Clawson continued his participation with Woodbridge and Mikulka in the Enrotek scheme even after the price of Enrotek stock fell. Campos became concerned about his Enrotek investmentbecause the price declined. He flew to Los Angeles to meet with Clawson. Clawson took Campos to a meeting at Woodbridge's office with Woodbridge and Mikulka. 14 All three assured Campos that Enrotek would go to $6 per share shortly and that "they were controlling the stock, they knew where it was, it was in friendly hands."
When a securities salesperson recommends a stock to a customer, the salesperson must disclose "'material adverse facts,' including any self-interest that could influence the salesman's recommendations." 15 If the salespersons fails to disclose extra compensation that he or she anticipates earning from the sale, the customer cannot weigh whether the salesperson may be recommending the stock for the salesperson's own financial interest, rather than based on the investment value of the security. 16 We conclude that Clawson participated in the Enrotek scheme to make undisclosed payments for sales of Enrotek to retail customers and that he sold Enrotek stock in anticipation of receiving those payments.
On appeal, Clawson asserts that it "may be inferred that he had ample legitimate reasons" for selling Enrotek to at least ten of his customers. However, he did not explain those reasons at the hearing or before us. Rather, Clawson admitted that he knew about Woodbridge's success with Aqua Vie and that he knew Woodbridge was trying to increase Enrotek's price to $5 per share. He recommended Enrotek to his customers although heconceded it was highly risky and speculative. Clawson testified that he had never before solicited transactions for a pink sheet stock. The record confirms that, as Williams testified, Enrotek was "all promises."
Moroever, if he had "legitimate reasons" for his recommendations, he did not reveal them to Micari or Campos. These witnesses described material misrepresentations, omissions of material facts, unwarranted price predictions, claims that he was "close" to the company, and a stock that was purportedly the "deal of the century." 17
Clawson continued to recommend Enrotek after Cruttenden ordered its salespersons not to sell the stock, which meant he would not receive compensation through Cruttenden. Clawson instead arranged for Campos to open an account at FABS to continue to purchase Enrotek and designated Mikulka as the registered representative for Campos' account. He arranged a meeting for Campos at Woodbridge's office, at which Woodbridge, Mikulka, and Clawson all repeated Clawson's misrepresentations about Enrotek and attempted to lull Campos into retaining his Enrotek stock.
Following his trip to Canada, Clawson admits he solicited payment from Banach. 18 Clawson claims that he was not aware that he could receive additional compensation for selling Enrotek to his customers until he went to Canada to meet with Banach. As discussed above, the law judge specifically did not credit this testimony. We further agree with the law judge's observation that "there is no plausible explanation as to why Clawson would go to Canada to research a company that he was prohibited fromselling at Cruttenden, unless he was intentionally participating in the scheme to sell Enrotek stock as evidenced by his diverting trades to FABS." Clawson's testimony also contradicts that of Richmond, who stated that Clawson and Woodbridge told him about the payments for selling Enrotek.
We conclude that all the circumstances demonstrate that Clawson participated in the scheme to manipulate Enrotek and to pay salesmen to sell Enrotek to their unsuspecting customers. We also conclude that Clawson anticipated receiving additional payments to compensate his individual selling efforts with respect to Enrotek, and that, with scienter, failed to disclose this anticipated compensation. 19 We find that Clawson willfully violated Securities Act Section 17(a), Exchange Act Section 10(b), and Exchange Act Rule 10b-5. 20
A. Clawson argues that the Order Instituting Proceedings ("OIP") in this matter charged him only with actually receiving "bribes." He complains that, since the law judge found that he did not actually receive undisclosed payments, we must dismiss this proceeding. 21
Section 554 of the Administrative Procedure Act requires that a respondent receive timely notice of "the matters of fact and law asserted." 22 Courts have held that notice under Section 554 "is sufficient as long as the party to an administrative proceeding is reasonably apprised of the issues in controversy and is not misled." 23
Here, the OIP alleged that Banach, Woodbridge, and Mikulka solicited salespersons "to participate in the payment arrangements" to sell Enrotek, and that Banach and others "arranged for funds to be made available to make payments to" the salespersons. The OIP further alleged that Clawson participated in a scheme to sell "Enrotek stock to unsuspecting customers in return for undisclosed payments of money made or arranged by the other respondents." We believe that this language gave Clawson notice that he was charged with participation in a scheme to sell Enrotek stock, under which certain respondents intended to make undisclosed payments to Clawson, among others, in return for his sales.
Clawson asserts that he did not have the opportunity to defend against this theory of the case. In particular, he complains that neither his counsel nor the Division asked him whether he anticipated receiving undisclosed payments. Clawson further asserts that we may infer that he had unspecified "legitimate reasons" for his recommendations of Enrotek stock. Clawson testified that he was aware of Woodbridge's attempts toincrease the price of both Aqua Vie and Enrotek, that he recommended Enrotek (a stock that he admits was highly speculative), that he had never previously solicited transactions in a pink sheet stock, and that he met Banach in Canada and thereafter requested payment for his sales. 24 Although Clawson claims to be the only credible witness in this proceeding, he does not dispute the accuracy of Micari's and Campos' testimony with respect to what Clawson told them about Enrotek or the meeting he arranged among Campos, Woodbridge, Mikulka, and himself to lull Campos. We believe that this testimony put Clawson on notice that his basis and motivation for recommending Enrotek to his customers were at issue. 25
Clawson further complains that the law judge found that he violated the antifraud provisions through his misrepresentations to his customers about the business and prospects of Enrotek. Clawson notes that these violations were not alleged in the OIP and asserts that any amendment to the OIP to include the violations found by the law judge would be barred by the general five-year statute of limitations in 28 U.S.C. § 2462. We believe that the law judge's findings were not consistent with the OIP. Thus, we make no findings of such violations here.
B. Clawson asserts that this proceeding is unfair in light of our decision in Jeffrey Ainsley Hayden. 26 Hayden dealt with the principle that a national securities exchange must "provide a fair procedure for the disciplining of its members" and their associated persons. 27 We found that the NYSE's institution of proceedings more than 6 to 14 years after the alleged violative conduct when the NYSE had much earlier notice of that conduct was not consistent with that principle. Here, the proceeding was instituted approximately four years after the violative conduct. Clawson also does not cite any particular disadvantage resulting from the delay. 28
Clawson also complains that the hearing in this proceeding did not occur until February 2001. As Clawson is aware, the proceeding was stayed at the request of the United States Attorney for the District of Nevada to permit completion of criminal matters arising from the scheme at issue here and related conduct. Clawson did not object to those stays until January 2001, shortly before the hearing in this matter. We do not believe that Clawson has demonstrated any unfairness. 29
The Supreme Court has held that the determination of sanctions is peculiarly within an administrative agency's expertise. 30 Exchange Act Section 15(b)(6)(A)(i) authorizes the Commission to bar an associated person of a broker-dealer whowillfully violates the securities laws or any rule thereunder if it is in the public interest. 31 Exchange Act Section 21B authorizes the Commission to impose a civil money penalty on those who willfully violate the securities laws. 32
Clawson's conduct was egregious. He participated in a scheme to sell a highly speculative stock to his customers. 33 He failed to disclose that he hoped to receive additional compensation for his sales and thus put his interests ahead of his customers. His representations to his customers and his attempts to lull Campos amply evidence scienter. His argument that he received no actual funds although he admits soliciting undisclosed payments demonstrates a lack of remorse and a lack of understanding of his obligations as an associated person of a broker-dealer.
We conclude that it is in the public interest to bar Clawson from association with a broker-dealer and from participation in any penny stock offering. We may assess a second-tier penalty of $50,000 for each act or omission that involves fraud, deceit, manipulation, or the deliberate or reckless disregard of a regulatory requirement. Here, Clawson sold highly speculative securities to at least ten of his customers in hopes of benefitting himself. We therefore impose a $100,000 civil money penalty. 34
An appropriate order will issue. 35
By the Commission (Chairman DONALDSON and Commissioners GLASSMAN, GOLDSCHMID, ATKINS and CAMPOS).
Jonathan G. Katz
In the Matter of
ROBERT THOMAS CLAWSON
ORDER IMPOSING REMEDIAL SANCTIONS
On the basis of the Commission's opinion issued this day, it is
ORDERED that Robert Thomas Clawson be, and he hereby is, barred from association with any broker or dealer; and it is further
ORDERED that Clawson be, and he hereby is, barred from acting as a promoter, finder, consultant, agent, or other person who engages in activities with a broker, dealer, or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock; and it is further
ORDERED that Clawson pay a civil money penalty of $100,000. Clawson's payment of the civil money penalty shall be: (a) made by United States postal money order, certified check, bank cashier's check, or bank money order; (b) made payable to the Securities and Exchange Commission; (c) delivered by hand or courier to the Comptroller, Securities and Exchange Commission, 6432 General Green Way, Alexandria VA 22312; and submitted under cover letter that identifies the particular respondent in this proceeding, as well as the Commission's administrative proceeding file number. A copy of this cover letter and money order or check shall be sent to Kenneth L. Miller, Securities and Exchange Commission, 450-5th Street N.W., Washington, D.C. 20549-0911.
By the Commission.
Jonathan G. Katz
1 15 U.S.C. § 77q(a)(1).
2 15 U.S.C. § 78j(b).
3 17 C.F.R. § 240.10b-5.
4 Banach defaulted in this proceeding. John L. Banach, Order Making Findings and Imposing Remedial Sanctions by Default as to Respondent Banach, Respondent Villa, and Respondent 381143 Alberta Ltd., Exchange Act Rel. No. 42818 (May 24, 2000), 72 SEC Docket 1411.
5 Woodbridge owned Woodbridge & Associates jointly with Troy Mikulka, his friend.
Woodbridge pled guilty to violations of Exchange Act Section 10(b) and Exchange Act Rule 10b-5. United States v. Nance, No. CR-S-96-271 (D. Nev. 1996). See also Order Making Findings and Imposing Remedial Sanctions as to Kevin Lee Woodbridge, Securities Act Rel. No. 7939 (Jan. 18, 2001), 74SEC Docket 272 (consenting to bar from association with broker-dealer and penny stock bar); Order Making Findings and Imposing Remedial Sanctions as to Woodbridge & Associates, Securities Act Rel. No. 7940 (Jan. 18, 2001), 74 SEC Docket 279 (consenting to penny stock bar); Order Making Findings and Imposing Remedial Sanctions as to Ronald Troy Mikulka, Securities Act Rel. No. 7936 (Jan. 18, 2001), 74 SEC Docket 258 (consenting to bar from association with broker-dealer and penny stock bar).
6 Williams testified that in 1994 or 1995 he was convicted of racketeering for "bribing salespersons."
7 Clawson also testified that he may have made other payments on Woodbridge's behalf.
8 Richmond pleaded guilty to insider trading. See also Order Making Findings and Imposing Remedial Sanctions as to Reagan B. Richmond, Securities Act Rel. No. 7938 (Jan. 18, 2001), 74 SEC Docket 265 (consenting to bar from association with a broker-dealer and penny stock bar).
9 See, e.g., Laurie Jones Canady, Exchange Act Rel. No. 41250 (Apr. 5, 1999), 69 SEC Docket 1468, 1480, aff'd, 230 F.3d 362 (D.C. Cir. 2000).
Woodbridge, Richmond, and Williams each testified to particular instances where Woodbridge and Williams allegedlypaid money to Clawson in return for his sales of Enrotek. The law judge specifically did not credit this testimony. However, in his initial decision, the law judge repeatedly cited the testimony of each of these witnesses in describing the overall scheme to sell Enrotek and make undisclosed payments to induce sales of Enrotek. We therefore accept Woodbridge's, Richmond's, and Williams' testimony for these purposes.
10 In March 1992, Micari sold 5,000 shares of his 25,000-share block and made a small profit. When Micari tried to sell more, Clawson told him that he would get nothing for the stock because there were no buyers for Enrotek.
11 The Williams/Woodbridge & Associates offices were across the hall from FABS. Williams acted as a "consultant" to FABS although he was barred.
12 Clawson knew that Woodbridge and Mikulka were childhood friends, as well as business partners.
13 Campos had purchased 10,000 shares of Enrotek for a joint account belonging to his wife and her mother at Cruttenden in January 1992. Through FABS, Campos purchased 10,000 shares during the first week of March, 5,000 shares on March 26, and 10,000 shares on April 1, 1992.
14 Campos testified that this meeting was the only time that he had any contact with Mikulka.
15 Richard H. Morrow, 53 S.E.C. 772, 781 (1998) (salesperson failed to disclose to his customers anticipated compensation from sales of securities).
16 Richard H. Morrow, 53 S.E.C. at 782. See also Affiliated Ute Citizens v. United States, 406 U.S. 128, 153 (1972) (sellers had right to know that defendants, who were acting as market makers, would benefit financially from sales); Chasins v. Smith Barney & Co., 438 F.2d 1167 (2d Cir. 1970) (failure to disclose that firm was making a market in the recommended stock). Cf. SEC v. Hasho, 748 F. Supp. 1059, 1110 (S.D.N.Y. 1992) (salespersons falsely stated that they would receive no commissions on the customers' transactions).
17 Clawson argues that, since the Order Instituting Proceedings ("OIP") did not mention these material misrepresentations and omissions, such allegations are barred by the five-year statute of limitations contained in 28 U.S.C. § 2462. However, statutes of limitation do not act as an evidentiary bar. We may consider evidence of events extending beyond the statute to show motive, intent, a continuing scheme, and lack of inadvertent action. Joseph J. Barbato, 53 S.E.C. 1259, 1278, n.26 (1999), citing United States v. Gavin, 565 F.2d 519, 523 (8th Cir. 1977). See text accompanying note 26 infra.
18 He did not receive payment only because Enrotek had stopped making payments to salespersons and instead offered him restricted stock, which he declined.
19 Courts have made clear that circumstantial evidence can be "more than sufficient" to establish scienter. Herman & McLean v. Huddleston, 459 U.S.375, 390 n.30 1983); Valicenti Advisory Services, Inc. v. SEC, 198 F.3d 62, 65 (1st Cir. 1999) (same), cert. denied, 530 U.S. 1276 (2000).
20 Clawson notes that, unlike the other respondents in this proceeding, he was not indicted, let alone convicted, as a result of his conduct. We do not find the fact that the Department of Justice chose not to pursue a case against Clawson to be dispositive of whether the record before us demonstrates that he willfully violated the antifraud provisions.
21 We previously accepted this issue on our own motion pursuant to Rule of Practice 411(d) and asked the parties to brief whether the record demonstrates that Clawson in fact anticipated receiving additional compensation for his selling efforts and did not disclose that fact.
22 5 U.S.C. § 554(b)(3).
23 Rapp v. Office of Thrift Sueprvision, 52 F.3d 1510, 1519-20 (10th Cir. 1995). See also Boston Carrier v. ICC, 746 F.2d 1555, 1560 (D.C. Cir. 1984).
24 Clawson also claims that he testified that this trip occurred in April 1992, after he had finished recommending Enrotek stock. As discussed above, the law judge did not credit Clawson's testimony that he first discovered that salespersons were being given additional compensation to sell Enrotek when he went to Canada.
At the hearing, Clawson did not mention the date of that trip. In addition, Campos described a conversation that occurred with Clawson near the end of March 1992 about Clawson's meeting with Enrotek management in Canada. This conversation occurred before Campos made at least one additional purchase of Enrotek.
25 We have previously stated that it is the respondent's obligation to marshal all evidence in his defense. Maximo Justo Guevara, Exchange Act Rel. No. 9838 (May 18, 2000), 72 SEC Docket 1281, petition denied, 2002 U.S. App. LEXIS 21207 (3d Cir.); G.K. Scott & Co., Inc., 51 S.E.C. 961, 972 (1994), aff'd, 56 F.3d 1531 (D.C. Cir. 1995) (Table)
26 Exchange Act Rel. No. 42772 (May 11, 2000), 72 SEC Docket 1125.
27 Exchange Act Section 6(b)(7), 15 U.S.C. § 78f(b)(7).
28 Since we issued the OIP less than five years after the alleged violative conduct, 28 U.S.C. § 2462 is not a bar to this proceeding, contrary to Clawson's assertion.
29 Clawson was the sole defense witness, and he did not introduce any exhibits. There is no indication in the record that Clawson wished to introduce additional evidence.
30 Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 185 (1973).
31 15 U.S.C. § 78o(b)(6)(A)(i). In determining the public interest with respect to sanctions, we consider the factors identified in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). The factors include: egregiousness of the conduct; the isolated or recurrent nature of the violation; the degree of scienter involved; the sincerity of the respondent's assurance against future violations; the respondent's recognition of the wrongful nature of his conduct; and the likelihood that the respondent will have opportunities for future violations.
32 15 U.S.C. § 78u-2. To determine whether civil penalties are in the public interest, we examine whether the respondent's actions involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; the harm caused to another person; the extent to which any person was unjustly enriched; the respondent's prior disciplinary history; deterrence; and other matters as justice may require. 15 U.S.C. § 78u-2(c).
33 Clawson does not dispute that Enrotek was a penny stock. See 15 U.S.C. § 78c(a)(51)(A) (defining penny stock) and 17 C.F.R § 240.3a51-1 (defining penny stock to exclude stocks where the share price is $5 or more or where the issuer has substantial assets).
34 Even if the factors enumerated in Section 21B(b) make "it appropriate to impose second-tier penalties, . . . it does not follow that we must impose the maximum second-tier penalties." New Allied Development Corporation, 52 S.E.C. 1119, 1130 (1996).
35 We have considered all of the parties' contentions. We have rejected or sustained those contentions to the extent that they are inconsistent or in accord with the views expressed in this opinion.
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