SEC Wins Court Order Against Penny Stock Firm
WASHINGTON (AP) _ A federal judge extended a court order Monday barring a Manhattan securities brokerage from penny stock sales activities that regulators allege are illegal.
U.S. District Judge Kevin T. Duffy in New York issued an opinion that temporarily bars Wellshire Securities Inc., two of its top officers and two former employees from further alleged securities law violations.
″The record is replete with evidence that Wellshire employed misleading and misrepresentative tactics to defraud its investors,″ Duffy’s opinion said in part.
A lawyer for Willshire maintained there was ″no fraudulent activity.″
Duffy’s decision, extended a ban he issued last month in response to a Securities and Exchange Commission request, which accused Wellshire of using high pressure and deceptive sales practices to induce investors to buy risky, over-the-counter securities.
Penny stocks are low cost, high risk securities - usually issued by new or small companies. The stocks, which sell for as little as a few cents, are prone to fraud and manipulation because information about them is hard for investors to obtain and verify.
In March, the SEC filed a civil lawsuit alleging that Wellshire Securities operated as a penny stock ″boiler room″ from July 1988 to the present. Boiler rooms are high pressure sales operations that use banks of telephones, staffed by sales personnel who use questionable tactics to persuade investors to buy risky stocks.
″We feel it wasn’t a boiler room operation,″ said Mitchell Lampert, attorney for Wellshire Securities. ″My client runs an honest business, within the confines of the law. He feels there was no fraudulent activity. We’re unhappy that the opinion is issued.″
The SEC lawsuit charged that Wellshire made exorbitant price predictions, gave out false information about stocks, made unauthorized sales and tried to stop clients from selling their securities when the price rose.
In one case mentioned in the SEC complaint, a 68-year-old retiree was persuaded to borrow money from a home equity loan to buy securities.
Duffy’s decision applied to Wellshire’s president, Robert Cohen; Carol Martino, the firm’s executive vice president; Joseph Jenkins Jr., a former Wellshire broker and Alan Diamond, a former Wellshire trader.
Also barred from further alleged securities law violations was Ventura Inc., a Needham, Mass., leasing company, whose securities was one of the penny stocks sold by Wellshire.
Wellshire, with six branch offices in New York, New Jersey, Florida, Georgia and Germany, has about 50,000 customer accounts and employs 100 brokers, the SEC said.