Happy Turkey day, Steven Muth and Schneider Securities!
ENFORCEMENT PROCEEDINGS
IN THE MATTER OF SCHNEIDER SECURITIES, INC.
On November 26, the Commission issued an Order
Instituting
Administrative Proceedings Pursuant to Section 15(b) of the
Securities
Exchange Act of 1934, Making Findings and Imposing Remedial
Sanctions
(Order) against Schneider Securities, Inc. (Schneider), a Denver
based
registered broker-dealer. The Order finds that Schneider failed
to
supervise reasonably a registered representative from December
2000
through April 2001.
According to the Order, from December 2000 through April 2001,
the
registered representative made misstatements of material facts
to
Schneider customers, including false statements that: (i)
analyst
research reports for two securities existed and would be published
by
Schneider in December 2000; (ii) a hedge fund purportedly would
be
formed to invest millions of dollars in two securities; (iii)
Schneider
customers would not owe any funds for margin purchases; and
(iv)
Schneider customers would not receive margin calls on
securities
purchased on margin. The Order also finds that the
registered
representative gave baseless stock price predictions for two
securities
to Schneider customers. Moreover, the Order finds that the
registered
representative engaged in sales practice abuses in the accounts
of
Schneider customers. For example, the registered
representative
recommended unsuitable margin trading to several elderly
Schneider
customers with modest financial profiles and failed to follow
sell
instructions from several Schneider customers.
According to the Order, Schneider hired the registered
representative
and established procedures for the heightened supervision of
the
registered representative, while knowing that the
registered
representative had a disciplinary history and a history of
customer
complaints. The Order finds that Schneider failed to develop a
system
to monitor whether the registered representative's supervisors
were
adequately carrying out their responsibilities. Specifically, the
Order
finds that Schneider failed to establish a system for overseeing
and
monitoring the supervisors' implementation of the heightened
supervisory
procedures and other firm procedures for oversight of the
registered
representative's activities.
In the Order, Schneider undertakes to file a Form BDW withdrawing
its
registration with the Commission. Moreover, the Order did not impose
a
civil money penalty based upon representations in Schneider's
sworn
financial statements. Schneider consented to the issuance of the
Order
without admitting or denying any of the findings in the Order.
(Rel.
34-48849; File No. 3-11321)
IN THE MATTER OF JAMES PATRICK DRIVER
On November 26, the Commission issued an Order
Instituting
Administrative Proceedings Pursuant to Section 15(b) of the
Securities
Exchange Act of 1934, Making Findings and Imposing Remedial
Sanctions
(Order) against James Patrick Driver (Driver). The Order finds
that,
during Driver's tenure as the Compliance Director for
Schneider
Securities, Inc. (Schneider), a Denver based registered
broker-dealer,
Driver failed to supervise reasonably a registered representative
from
December 2000 through April 2001.
According to the Order, from December 2000 through April 2001,
the
registered representative made misstatements of material facts
to
Schneider customers, including false statements that: (i)
analyst
research reports for two securities existed and would be published
by
Schneider in December 2000; (ii) a hedge fund purportedly would
be
formed to invest millions of dollars in two securities; (iii)
Schneider
customers would not owe any funds for margin purchases; and
(iv)
Schneider customers would not receive margin calls on
securities
purchased on margin. The Order also finds that the
registered
representative gave baseless stock price predictions for two
securities
to Schneider customers. Moreover, the Order finds that the
registered
representative engaged in sales practice abuses in the accounts
of
Schneider customers. For example, the registered
representative
recommended unsuitable margin trading to several elderly
Schneider
customers with modest financial profiles and failed to follow
sell
instructions from several Schneider customers.
According to the Order, Driver participated in hiring the
registered
representative and in establishing procedures for the
heightened
supervision of the registered representative, while knowing that
the
registered representative had a disciplinary history and a history
of
customer complaints. The Order finds that Driver failed to develop
a
system to implement and monitor the implementation of the
special
supervisory procedures for the registered representative. According
to
the Order, Driver was also responsible for formulating procedures
and
systems to implement these procedures to respond to customer
complaints.
The Order finds that Driver failed to develop these procedures
and
systems to ensure that he and others responded adequately to
a
customer's complaint in January 2001 regarding the
registered
representative's misrepresentations of material fact and
fraudulent
sales practices.
Based on the above, the Order bars Driver from association with
any
broker or dealer in a supervisory capacity with a right to reapply
after
two years. Moreover, the Order did not impose a civil money
penalty
based upon representations in Driver's sworn financial
statements.
Driver consented to the issuance of the Order without admitting
or
denying any of the findings in the administrative proceeding. (Rel.
34-
48852; File No. 3-11345)
THE COMMISSION INSTITUTES PROCEEDINGS AGAINST STEVEN MUTH FOR VIOLATIONS
OF
THE ANTIFRAUD PROVISIONS OF THE SECURITIES ACT OF 1933 AND THE
SECURITIES
EXCHANGE ACT OF 1934, AND AGAINST RICHARD ROUSE AND BRUCE BATES FOR
FAILING
TO SUPERVISE MUTH
November 26, the Commission instituted cease-and-desist
and
administrative proceedings against Steven E. Muth (Muth), a
former
registered representative with Schneider Securities, Inc.
(Schneider),
Richard J. Rouse (Rouse), the former Executive Vice President and
a
Director of Schneider, and Bruce J. Bates (Bates), a former
branch
office manager of Schneider (collectively, Respondents). Muth is
a
resident of Houston, Texas, Rouse is a resident of Highlands
Ranch,
Colorado, and Bates is a resident of Parker, Colorado.
The Division of Enforcement alleges that Muth engaged in
fraudulent
sales practices and made misrepresentations of material facts
to
Schneider customers from December 2000 through April 2001. The
Division
of Enforcement also alleges that Rouse and Bates failed to
supervise
Muth reasonably to prevent and detect his illegal activities.
The Division of Enforcement alleges, from December 2000 through
April
2001, Muth made false statements that: (i) analyst research reports
for
two securities existed and would be published by Schneider in
December
2000; (ii) a hedge fund purportedly would be formed to invest
millions
of dollars in two securities; (iii) Schneider customers would not
owe
any funds for margin purchases; and (iv) Schneider customers would
not
receive margin calls on securities purchased on margin. The Division
of
Enforcement further alleges that Muth gave baseless stock
price
predictions and engaged in sales practice abuses in the accounts
of
Schneider customers, including recommending unsuitable margin trading
to
several elderly Schneider customers with modest financial profiles
and
failing to follow sell instructions from customers.
The Division of Enforcement alleges that Rouse participated in
hiring
the registered representative and in establishing procedures for
the
heightened supervision of the registered representative, while
knowing
that the registered representative had a disciplinary history and
a
history of customer complaints. The Division of Enforcement
further
alleges that Rouse failed reasonably to supervise Muth with a view
to
preventing Muth's violations of the federal securities laws by
failing
to develop a system to monitor whether Muth's supervisors,
including
himself, were adequately carrying out their responsibilities.
The
Division of Enforcement further alleges that Rouse and Bates
failed
reasonably to supervise Muth by failing to follow the firm's
procedures
regarding heightened supervision and failed to respond to red
flags
relating to Muth's misconduct. Finally, the Division of
Enforcement
alleges that Bates failed reasonably to supervise Muth with a view
to
preventing and Muth's violations of the federal securities laws
by
failing to follow-up on a customer complaint relating to
Muth's
misconduct.
The Commission instituted these proceedings against Respondents
to
determine whether: (a) the allegations against Respondents are true
and
to afford Respondents an opportunity to establish any defense to
such
allegations; (b) Muth should be ordered to cease and desist
from
committing or causing any violations and any future violations of
the
antifraud provisions of the Securities Act of 1933 and the
Securities
Exchange Act of 1934 (Exchange Act) (collectively, the
antifraud
provisions); (c) remedial sanctions against Muth, pursuant to
Sections
21B and 21C of the Exchange Act, should be ordered,
including
disgorgement and civil money penalties; and (d) remedial
sanctions
against Rouse and Bates, pursuant to Sections 15(b)(6) and 21B of
the
Exchange Act, should be ordered, including civil money penalties,
for
their failure reasonably to supervise Muth with a view to
preventing
Muth's violations of the antifraud provisions.
A hearing will be scheduled before an administrative law judge
to
determine whether the allegations contained in the Order
Instituting
Public Administrative and Cease-and-Desist Proceedings Pursuant
to
Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C
of
the Securities Exchange Act of 1934 (Order) are true, to provide
the
Respondents an opportunity to dispute these allegations, and
to
determine what sanctions, if any, are appropriate in the
public
interest. The Commission directed that an administrative law
judge
shall issue an initial decision in this matter within 300 days from
the
date of service of the Order. (Rels. 33-8341; 34-48853; File No.
3-
11346) |
