Commission Revokes Registration of Securities of NBI, Inc. for Failure to Make Required Periodic Filings
On July 19, 2010, the Commission revoked the registration of each class of registered securities of NBI, Inc. (NBII) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, NBII consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to NBI, Inc. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of NBII's securities pursuant to Section 12(j) of the Exchange Act. This Order settled the charges brought against NBII in In the Matter of American Energy Services, Inc., et al., Administrative Proceeding File No. 3-13940.
Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:
No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .
For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of American Energy Services, Inc., et al., Administrative Proceeding File No. 3-13940, Exchange Act Release No. 62292 (June 15, 2010). (Rel. 34-62525; File No. 3-13940)
In the Matter of Martin T. Wegener
On July 19, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act), Making Findings, and Imposing Remedial Sanctions (Order) against Martin T. Wegener (Wegener).
The Order finds that on June 21, 2010, in the civil action SEC v. Wegener, et al., Case No. 1:10-CV-566, the United States District Court for the Western District of Michigan entered a final judgment by consent against Wegener, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Sections 15(a) and 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act.
The Order further finds that in the Complaint, filed on June 14, 2010, the Commission alleges that, from at least 2007 to at least March 2010, Wegener, who, along with Wealth Resources, LLC and Wealth Resources, Inc. (collectively, Wealth Resources), acted as an unregistered broker and investment adviser, raised at least $6.5 million from at least twenty investors by falsely representing that he would invest their funds in securities through Wealth Resources. According to the Order, the Complaint further alleges that after he received the customers' funds, Wegener gave them purported "brokerage account" statements from Wealth Resources that falsely represented that he invested the money in a variety of investments, including publicly traded securities, publicly traded mutual funds, two private companies in which Wegener had an ownership interest, other private companies, and other "funds." The Order also finds that, according to the Complaint, in reality, Wegener did not use the customers' money to purchase the investments as represented. Instead, Wegener used the customers' money (1) for personal expenses; (2) to pay business expenses for and make investments on his own behalf in entities in which he held an ownership interest, including WU Ventures, LLC, Secura Technology, LLC, and Trailblazer Learning, Inc., as well as Wealth Resources itself; and (3) to make Ponzi-like payments to other customers who requested a return of all or part of their investment.
Based on the above, the Order bars Wegener from association with any broker, dealer, or investment adviser. Wegener consented to the issuance of the Order without admitting or denying the findings in the Commission's Order, except that he admitted the entry of the injunction. (Rel. 34-62529; IA-3053; File No. 3-13968)
Permanent Injunction, Order of Disgorgement, Penalties, and Penny Stock Bars Entered Against Perpetrators of Penny Stock Offering Fraud
The Securities and Exchange Commission announced that on July 12, 2010, the Honorable Shira A. Scheindlin, United States District Judge for the Southern District of New York, entered a final judgment by default against defendants Gary S. Becker, Gregory S. Schaefer, and the brokerage firm they controlled, Dillon Scott Securities, for their participation in three fraudulent offerings of Gold Rush Technologies, Inc., Dillon Scott's parent company. The Court issued an order enjoining defendants from future violations of the antifraud as well as broker-dealer and securities registration provisions of the federal securities laws. The Court further ordered defendants to disgorge $1,306,950 plus prejudgment interest of $218,770.23, to be paid joint and severally, and also ordered civil penalties against each Becker and Schaefer in the amount of $1,306,950 as well as permanent penny stock bars against them.
The SEC's complaint, filed on June 22, 2009, alleged that from January 2001 through July 2007, the defendants raised at least $1.3 million from 29 investors through three unregistered offerings of Gold Rush. Becker and Schaefer, in offering memoranda, direct solicitations, and solicitations by two of their salespersons, represented that the money raised would be used to form and expand a brokerage firm, Dillon Scott. Instead, Becker and Schaefer diverted about 79% of the offering proceeds to enrich themselves and others. Becker and Schaefer used Gold Rush's corporate ATM cards over 4,200 times to withdraw approximately $600,000. They also wrote checks to themselves and others in amounts totaling approximately $361,000. In addition, Becker and Schaefer also used investor funds to pay various personal expenses including meals, groceries, and domestic and international travel. Dillon Scott, aided and abetted by Becker and Schaefer, did not disclose Becker's control over Dillon Scott in the firm's broker-dealer regulatory filings; permitted Becker and another individual to effect securities transactions when they were not registered with FINRA; and did not keep and maintain a current Form U-4 or other questionnaire or application for employment for Becker and the salesperson.
As a result of these activities, Becker, Schaefer, and Dillon Scott violated the general antifraud and registration provisions of the securities laws, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Dillon Scott also violated Sections 15(b)(7), 15(c)(1), and 17(a) of the Exchange Act and Rules 10b-3, 15b3-1, 15b7-1, and 17a-3(a)(12), and Becker and Schaefer aided and abetted these violations.
For further information see LR-21100, (June 23, 2009). [SEC v. Gary S. Becker, Gregory S. Schaefer, and Dillon Scott Securities, Inc., Civil Action No. 09-CV-5707 (SAS)(S.D.N.Y.)] (LR-21594)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the International Securities Exchange relating to a market maker incentive plan for foreign currency options (SR-ISE-2010-71) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of July 19. (Rel. 34-62503)
A proposed rule change filed by NASDAQ OMX BX (SR-BX-2010-047) to establish a Short Term Option Program has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of July 19. (Rel. 34-62505)
Proposed Rule Change
NASDAQ OMX PHLX filed a proposed rule change (SR-Phlx-2010-91) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to registration and qualification requirements for PSX. Publication is expected in the Federal Register during the week of July 19. (Rel. 34-62509)
Accelerated Approval of Proposed Rule Change
The Commission issued notice of filing of Amendment No.1, and granted accelerated approval to a proposed rule change, as modified by Amendment No. 1, submitted by the Financial Industry Regulatory Authority (SR-FINRA 2010-006) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to amend the Codes of Arbitration Procedure to provide for attorney representation of non-party witnesses in arbitration. Publication is expected in the Federal Register during the week of July 19. (Rel. 34-62521)
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