ETEL, E-net is a stock brought by Stratton Oakmont, FYI. Read yourself
edgar-online.com
is
Excerpts:
The Company has been advised by Stratton Oakmont that the Commission instituted an action on December 14, 1994 in the United States District Court for the District of Columbia against Stratton Oakmont. The complaint alleged that Stratton Oakmont was not complying with the Administrative Order entered by the Commission on March 17, 1994 ("Administrative Order") by failing to adopt the recommendations of an independent consultant. The Administrative Order was previously consented to by Stratton Oakmont, without admitting or denying the findings contained therein, as settlement of an action commenced against Stratton Oakmont by the Commission in March 1992, which found willful violations of the anti-fraud provisions of the securities laws such that Stratton Oakmont:
-engaged in fraudulent sales practices;
-engaged in and/or permitted unauthorized trading in customer accounts;
-knowingly and recklessly manipulated the market price of a company's securities by dominating and controlling the market for those securities;
-made improper and unsupported price predictions with regard to recommended over-the-counter securities; and
-made material misrepresentations and omissions regarding certain securities and its experience in the securities industry.
Pursuant to the Administrative Order, Stratton Oakmont was censured and an independent consultant ("Stratton Consultant") was chosen by the Commission to advise and consult with Stratton Oakmont and to review and recommend new supervisory and compliance procedures. The complaint sought:
-to enjoin Stratton Oakmont from violating the Administrative Order;
-an order commanding Stratton Oakmont to comply with the Administrative Order; and
-to have a Special Compliance Monitor appointed to ensure compliance with the Administrative Order. Stratton Oakmont claimed that the Stratton Consultant exceeded his authority under the Administrative Order and had violated the terms of the Administrative Order.
On February 28, 1995, the court granted the Commission's motion for a permanent injunction ("Permanent Injunction") and ordered Stratton Oakmont to comply with the Administrative Order, which required the appointment of an independent consultant and a separate independent auditor and required that all recommendations be complied with, including the taping of all telephone conversations between Stratton Oakmont's brokers and their customers. In granting the Commission's motion for a Permanent Injunction, the court determined that Stratton Oakmont's conduct unequivocally demonstrated that there is a substantial likelihood that it will continue to evade its responsibilities under the Administrative Order. On April 20, 1995, Stratton Oakmont filed an appeal to the United States Court of Appeals for the District of Columbia, and on April 24, 1995 filed a motion to stay the Permanent Injunction pending the outcome of the appeal. The motion to stay was denied. Subsequently, Stratton Oakmont voluntarily dismissed its appeal. The failure by Stratton Oakmont to comply with the Administrative Order or Permanent Injunction may adversely effect Stratton Oakmont's activities in that the court may enter a further order restricting the ability of Stratton Oakmont to act as a market maker of the Company's securities. The effect of such action may prevent the holders of the Company's securities from selling such securities since Stratton Oakmont may be restricted from acting as a market maker of the Company's securities and, in such event, will not be able to execute a sale of such securities. Also, if other broker dealers fail to make a market in the Company's securities, the public security holders may not have anyone to purchase their securities when offered for sale at any price and the security holders may suffer the loss of their entire investment.
RECENT STATE ACTIONS INVOLVING STRATTON OAKMONT -- POSSIBLE LOSS OF
LIQUIDITY
As a result of the Permanent Injunction, the states of Pennsylvania and Indiana have commenced administrative proceedings seeking, among other things, to revoke Stratton Oakmont's license to do business in such states. In Indiana, the Commissioner suspended Stratton Oakmont's license for a three year period. Stratton Oakmont has appealed the decision and has requested a stay pending appeal. The requested stay would maintain the status quo pending appeal. The states of Alabama, North Carolina, South Carolina and Arkansas also have suspended Stratton Oakmont's license pending a resolution of the proceedings in those states. The states of Minnesota, Vermont, and Nevada have served upon Stratton Oakmont notices of intent to revoke Stratton Oakmont's license in such states. The state of Rhode Island has served on Stratton Oakmont a Notice of Intent to suspend its license in that state. In the state of Mississippi, Stratton Oakmont has agreed to a suspension of its license pending resolution of certain claims and review of its procedures and practices by the state authorities. In addition, Stratton Oakmont withdrew its registration in the state of New Hampshire (with the right of reapplication) and in the state of Maryland. There may be further administrative action against the firm in Maryland. The firm withdrew its registration in Massachusetts with a right to reapply for registration after two years, withdrew its registration in Delaware with a right to reapply in three years and agreed to a temporary cessation of business in Utah pending an on-site inspection and further administrative proceedings. Stratton Oakmont's license in the state of New Jersey was revoked by an administrative judge pursuant to an administrative hearing and an appeal has been filed (and such decision is not final). The state of Georgia has lifted its suspension and has granted Stratton Oakmont a conditional license. Such conditional license was granted pursuant to an order, which Stratton Oakmont has proposed to various states, which provides provisions for: (i) the suspension of revocation, (ii) compliance with recommendations of the Consultant, (iii) an expedited claims mediation arbitration process, (iv) resolution of claims seeking compensatory damages, (v) restrictions on use of operating revenue, (vi) the limitation on selling group members in offerings underwritten by Stratton Oakmont and the prohibition of participating as a selling group member in offerings underwritten by certain other NASD member firms, (vii) the periodic review of Stratton Oakmont's agents, (viii) the retention of an accounting firm, and (ix) supervision and training, restrictions on trading, discretionary accounts and other matters. The state of Oregon, as a result of the Permanent Injunction, has filed a notice of intent to revoke Stratton Oakmont's license subject to the holding of a hearing to determine definitively Stratton Oakmont's license status, and Stratton Oakmont, in this proceeding as well as other proceedings, expects to be able to demonstrate that the Permanent Injunction is not of a nature as to be a lawful basis to revoke Stratton Oakmont's license permanently. Finally, Stratton Oakmont has received an order limiting license in the state of Nebraska. Such proceedings, if ultimately successful, may adversely affect the market for and liquidity of the Company's securities if additional broker-dealers do not make a market in the Company's securities.
Moreover, should investors purchase any of the securities in this offering from Stratton Oakmont prior to a revocation of Stratton Oakmont's license in their state, such investors will not be able to resell such securities in such state through Stratton Oakmont but will be required to retain a new broker-dealer firm for such purpose. The Company cannot ensure that other broker-dealers will make a market in the Company's securities. In the event that other broker-dealers fail to make a market in the Company's securities, the possibility exists that the market for and the liquidity of the Company's securities may be adversely affected to such an extent that public security holders may not have anyone to purchase their securities when offered for sale at any price. In such event, the market for, and liquidity and prices of the Company's securities may not exist.
It should be noted that although Stratton Oakmont may not be the sole market maker in the Company's securities, it will most likely be the dominant market maker in the Company's securities. In addition, in the event that the Underwriter's license to do business is revoked in the states set forth above, the Underwriter has advised the Company that it believes the members of the selling syndicate in this offering will be able to make a market in the Company's securities in such states and that such an event will not have a materially adverse effect on this offering, although no assurance can be given.
See "Underwriting."
FOR ADDITIONAL INFORMATION REGARDING STRATTON OAKMONT, INVESTORS MAY CALL THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. AT 1-800-289-9999.
PAUL CARMICHAEL V. STRATTON OAKMONT.
The Company has been advised by Stratton Oakmont that Honorable John E. Sprizzo, United States Judge for the Southern District of New York, on May 6, 1994 denied the class certification motion in PAUL CARMICHAEL V. STRATTON OAKMONT, INC., ET AL., Civ. 0720 (JES), of the plaintiff Paul Carmichael. The class action complaint alleges manipulation and fraudulent sales practices in connection with a number of securities. The allegations were substantially similar and involve much of the same time period as the Commission's civil complaint (discussed above). The Company has further been informed that counsel for the class action plaintiff sought to re-argue the motion for class certification, which motion for re-argument was denied. |
