UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 37698 / September 18, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9083 -------------------------------- : ORDER INSTITUTING PROCEEDINGS In the Matter of : PURSUANT TO SECTION 21C OF THE : THE SECURITIES EXCHANGE ACT OF : 1934, MAKING FINDINGS AND : IMPOSING CEASE-AND-DESIST : ORDER PAUL STANSBERRY, : : Respondent. : : : --------------------------------- I. The Commission deems it appropriate and in the public interest that public administrative proceedings be instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Paul Stansberry ("Stansberry"). In anticipation of the institution of these administrative proceedings, Stansberry has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings herein, except for those set forth in Sections III A & B below, which Stansberry admits, he consents to the entry of this Order Instituting Proceedings, Making Findings and Imposing Cease-and- Desist Order. II. Accordingly, it is ordered that proceedings pursuant to Section 21C of the Exchange Act be, and hereby are, instituted. ==========================================START OF PAGE 2====== III. On the basis of this Order and the Respondent's Offer of Settlement, the Commission makes the following findings: -[1]- A. The Commission has jurisdiction over Stansberry and over matters set forth in this Order. B. From in or about October 1980 to the present, Stansberry has been a registered representative with broker- dealers registered with the Commission pursuant to Section 15(b) of the Exchange Act. C. From in and around 1989 until June 1991, the common stock of Angeion Corporation ("Angeion") was the subject of an elaborate fraudulent scheme. The purpose of the scheme was to create the appearance of active trading in the stock of Angeion and thus create the impression on the investing public of a demand for the stock. This was done by engaging in manipulative devices including matched trades, wash trades and stock parking.-[2]- During the course of the fraud, the manipulators engaged in at least 23 matched trades involving approximately 675,000 shares valued at approximately $5.6 million. The manipulators also engaged in at least 9 wash trades involving approximately 500,000 shares of Angeion valued at approximately $4.2 million. Further, the manipulators arranged for at least 266,000 shares of Angeion valued at approximately $2 million to be parked in customer accounts to relieve excess inventory at a broker-dealer in order to avoid selling the Angeion stock in the open market. As the scheme began to unravel ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Respondent Stansberry's Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. -[2]- A matched trade is the entering of a sell (or buy) order knowing that a corresponding buy (or sell) order of substantially the same size, at substantially the same time and at substantially the same price either has been or will be entered. A wash trade is a securities transaction which involves no change in the beneficial ownership of the security. Parking is the sale of securities subject to an agreement or understanding that the securities will be repurchased by the seller at a later time and at a price which leaves the economic risk on the seller. ==========================================START OF PAGE 3====== in May 1991, certain individuals engaged in free- riding,-[3]- purchasing 355,700 shares of Angeion at a cost of $2.54 million without sufficient funds available to pay for the shares. Such shares were sold prior to settlement date and the proceeds of the sales were used to pay for the original purchases. The manipulative activities stopped when the manipulators could no longer pay for their purchases of Angeion stock or satisfy their margin calls. After the manipulative activities ceased, the stock price of Angeion fell from a high of $10 3/8 in March 1991, to a low of $2 3/4 on July 3, 1991. D. Between January 1990 and June 1991, Stansberry caused at least one violation of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder in that he caused a registered broker- dealer to fail to keep or preserve in accordance with the requirements of Rule 17a-3 promulgated under Section 17 of the Exchange Act a memorandum of each brokerage order, or of any other instruction, given or received for the purchase or sale of securities, whether executed or unexecuted, showing the time of entry of such orders, or, to the extent feasible, the time of execution or cancellation of such orders. Specifically, on at least one occasion, Stansberry altered a time stamp on an order ticket for Angeion stock. IV. In view of the foregoing, it is in the public interest to impose the sanction specified in the Offer of Settlement. Accordingly, IT IS HEREBY ORDERED, effective immediately, that pursuant to Section 21C of the Exchange Act, Stansberry cease and desist from committing or causing any violation, and committing or causing any future violations of, Section 17(a) of the Exchange Act and Rule 17a-3 thereunder. By the Commission. ---------FOOTNOTES---------- -[3]- Free riding is the practice whereby a stock is purchased without sufficient funds available to pay for it, the stock is sold prior to settlement date, and the proceeds of the sale are used to pay for the original purchase. ==========================================START OF PAGE 4====== Jonathan G. Katz Secretary