SEC Revokes Registration of Republic New York Securities Corp., a Broker-Dealer Pleading Guilty to Securities Fraud in Related Criminal Action
FOR IMMEDIATE RELEASE
The Commission found that Republic Securities violated federal securities laws by participating in a massive Ponzi scheme operated by Martin Armstrong. In September 1999, the Commission charged Armstrong and two companies he controlled, Princeton Economics International and Princeton Global Management, in an emergency action alleging that they defrauded scores of Japanese companies that had invested billions of dollars in Princeton Global Management notes. Armstrong, who was indicted by a federal grand jury in New York, was also charged by the Commodity Futures Trading Commission.
In the parallel criminal proceeding, the Office of the United States Attorney for the Southern District of New York today announced a guilty plea by Republic Securities. As part of the resolution of the criminal case, Republic Securities has agreed to pay $606 million in restitution to defrauded investors. The Commodity Futures Trading Commission also announced a related enforcement action against Republic Securities today. In settling the Commission's enforcement action, Republic Securities neither admitted nor denied the Commission's findings.
The Commission found that from 1995 through 1999 Republic Securities engaged in a fraudulent scheme involving hundreds of accounts opened by Armstrong at Republic Securities for investors' funds. As set forth in the Order, which is available on the Commission's website, the Commission found:
The Commission revoked the firm's registration as a broker-dealer. In recognition of the restitution paid by the firm in the criminal case, which far exceeded the firm's profits from its handling of Armstrong's account, and the firm's cooperation with the Commission's investigation, the Commission did not seek or obtain monetary sanctions from the firm. Separately, the Commission issued a temporary order exempting Republic Securities' new parent, HSBC, as well as HSBC Asset Management from the provisions of Section 9(a) of the Investment Company Act.
Wayne M. Carlin, Regional Director of the Commission's Northeast Regional Office, pointed to the significant contributions of the U.S. Attorney's Office for the Southern District of New York, the Commodity Futures Trading Commission, the Federal Bureau of Investigation, the Federal Reserve Bank of New York and the Japanese Financial Services Agency ("FSA") in the coordinated investigations that preceded today's announcement. "From the moment we learned that the FSA had questioned NAV letters from Republic Securities, we joined our fellow regulators to get to the bottom of the problem. With the FSA's assistance, we were able to overcome language and other barriers, and work speedily with the CFTC to freeze existing funds at Republic Securities. It is truly gratifying to join with the U.S. Attorney's Office and the CFTC in announcing this resolution. The public interest is obviously served when the victims of criminal conduct are compensated, without the drain of expensive litigation. Moreover, the historic size of the restitution order stands as a warning to regulated entities of the consequences that can ensue if they permit their facilities to be misused in aid of wrongdoing."
For further information, please contact:
Wayne M. Carlin