SHELDON S. TRAUBE-> UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
Securities Act of 1933
Release No. 7409 / March 27, 1997
Securities Exchange Act of 1934
Release No. 38448 / March 27, 1997
Administrative Proceeding
File No. 3-9283
_________________________________
:
In the Matter of :
: ORDER INSTITUTING PROCEEDINGS
SHELDON S. TRAUBE and : PURSUANT TO SECTION 8A OF
GEORGE F. SWEENEY, : THE SECURITIES ACT OF 1933
: AND SECTION 15(B)(6) OF THE
: SECURITIES EXCHANGE ACT OF
: 1934, MAKING FINDINGS,
: IMPOSING REMEDIAL SANCTIONS
: AND CEASE-AND-DESIST ORDER
Respondents. :
_________________________________:
I.
The Commission deems it appropriate and in the public
interest that proceedings be, and hereby are, instituted pursuant
to (i) Section 8A of the Securities Act of 1933 ("Securities
Act") to determine whether Sheldon S. Traube ("Traube") and
George F. Sweeney ("Sweeney") violated or caused violations of
Section 17(b) of the Securities Act and seeking to determine the
appropriateness of disgorgement and prejudgment interest, and
(ii) Section 15(b)(6) of the Securities Exchange Act of 1934
("Exchange Act") to determine whether Traube willfully violated
Section 17(b) of the Securities Act and seeking to determine the
appropriateness of sanctions pursuant to Section 15(b)(6) of the
Exchange Act.
II.
In anticipation of the institution of these administrative
proceedings, Traube and Sweeney have submitted Offers of Settle-
ment that the Commission has determined to accept. Solely for
the purposes of these proceedings and any other proceedings
brought by or on behalf of the Commission or to which the
Commission is a party, and prior to hearing and without admitting
or denying the findings set forth herein, Traube and Sweeney each
consent to the entry of this Order Instituting Proceedings
Pursuant to Section 8A of the Securities Act of 1933 and Section
15(b)(6) of the Securities Exchange Act of 1934, Making Findings,
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Imposing Remedial Sanctions and Cease and Desist Order ("Order").
The Commission has determined that it is appropriate and in the
public interest to accept Offers of Settlement from Traube and
Sweeney, and accordingly is issuing this Order.
III.
FACTS
Based on the foregoing, the Commission finds that:-[1]-
A. Respondents
1. Sheldon S. Traube
During the period from at least January 1992 until July
1992, Traube was self-employed as a research analyst. Traube
currently is a research analyst employed by a broker-dealer
registered with the Commission.
2. George F. Sweeney
From September 1991 until May 1992, Sweeney provided
investor relations services to Ferrofluidics Corporation
("Ferrofluidics"). Sweeney currently is the principal of a
financial investor relations firm.
B. The Traube Research Report
In January 1992, Ronald Moskowitz ("Moskowitz"),
Ferrofluidics' former Chief Executive Officer and Chairman of the
Board of Directors, retained Traube to write a research report on
the company. Moskowitz agreed that Ferrofluidics would pay
Traube $3,500 plus expenses to write the report, payable after
the report was published. Subsequently, Moskowitz asked Sweeney
to bill Ferrofluidics for Traube's work and to pay Traube after
Sweeney's bill had been paid by Ferrofluidics. Sweeney agreed to
do so.
After Traube completed his research report, he sent Sweeney
an invoice, dated March 25, 1992, for the report ($4,500) and
expenses ($987), for a total of $5,487. On April 2, 1992,
Sweeney sent an invoice to Ferrofluidics for $6,982, which
covered the services of Sweeney and Traube. Ferrofluidics paid
Sweeney $5,982, and Sweeney, in turn, paid Traube $4,487.
Ferrofluidics later sent Traube a check for an additional $550.
---------FOOTNOTES----------
-[1]- The findings herein are made pursuant to Traube's
and Sweeney's Offers of Settlement and are not binding on any
other person or entity in this or any other proceeding.
==========================================START OF PAGE 3======
Traube's research report was published by Dickinson & Co., a
broker-dealer registered with the Commission, on March 30, 1992.
The report did not disclose the source or amount of Traube's
compensation. Sweeney obtained approximately 1,200-1,500 copies
of the report from Ferrofluidics, which he distributed to various
brokers and analysts.
In early June 1992, Traube agreed to prepare an update to
his research report for $1,500 plus expenses. Traube completed
the update during July 1992 and sent Ferrofluidics an invoice,
dated July 15, 1992, for the update ($1,500) and expenses ($183),
for a total of $1,683. Ferrofluidics paid Traube that amount
through one of the company's investor relations firms. The
update disclosed that it had been prepared "for cash
compensation," but did not disclose the source or amount of the
compensation that Traube received.
IV.
OPINION
Section 17(b) of the Securities Act prohibits any person
from publishing, giving publicity to, or circulating any notice,
circular, advertisement, newspaper article, letter, investment
service, or communication which describes a security for a
consideration received or to be received, directly or indirectly,
from an issuer, underwriter or dealer, without disclosing the
receipt of such consideration and the amount thereof. Traube
violated Section 17(b) by preparing for publication the research
report and update without disclosing that Ferrofluidics had paid
him and the amount of such payment. Sweeney caused Traube's
violations of Section 17(b) by assisting in the concealment of
Ferrofluidics' payments to Traube for the March 1992 research
report and distributing copies of the report.
V.
FINDINGS
Based on the above, the Commission finds that:
A. Traube willfully violated Section 17(b) of the
Securities Act; and
B. Sweeney caused violations of Section 17(b) of the
Securities Act.
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VI.
ORDER
Accordingly, IT IS HEREBY ORDERED that,
A. Traube:
1. Be, and hereby is, censured;
2. Pursuant to Section 8A of the Securities Act,
cease and desist from committing or causing any
violations of, and committing or causing any
future violations of, Section 17(b) of the
Securities Act;
3. Disgorge $5,555, plus prejudgment interest in the
amount of $2,508.05; and
4. Shall pay the disgorgement and interest within
thirty (30) days of the entry of the Order, by
U.S. Postal money order, certified check, bank
cashier's check, or bank money order, made payable
to the Securities and Exchange Commission and
shall transmit the payment by certified mail
(return receipt requested) to the Office of the
Secretary, U.S. Securities and Exchange
Commission, Mail Stop 6-9, 450 Fifth Street, N.W.,
Washington, D.C. 20549, under cover of a letter
that identifies the respondent and the name and
file number of this proceeding. A copy of the
cover letter and of the form of payment shall be
simultaneously transmitted to counsel for the
Commission.
B. Sweeney:
1. Pursuant to Section 8A of the Securities Act,
cease and desist from committing or causing any
violations of, and committing or causing any
future violations of, Section 17(b) of the
Securities Act;
2. Disgorge $1,495, plus prejudgment interest in the
amount of $697.31; and
3. Shall pay the disgorgement and interest within ten
(10) days of the entry of the Order, by U.S.
Postal money order, certified check, bank
cashier's check, or bank money order, made payable
to the Securities and Exchange Commission and
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shall transmit the payment by certified mail
(return receipt requested) to the Office of the
Secretary, U.S. Securities and Exchange
Commission, Mail Stop 6-9, 450 Fifth Street, N.W.,
Washington, D.C. 20549, under cover of a letter
that identifies the respondent and the name and
file number of this proceeding. A copy of the
cover letter and of the form of payment shall be
simultaneously transmitted to counsel for the
Commission.
By the Commission.
_________________________
Jonathan G. Katz
Secretary |
