Securities Exchange Act of 1934
Release No. 50943 / December 29, 2004
Admin. Proc. File No. 3-11700
In the Matter of JOHN N. SALERNO, Respondent. |
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ORDER MAKING FINDINGS AND IMPOSING SANCTIONS BY DEFAULT |
SUMMARY
This Order bars John N. Salerno (Salerno) from association with a broker-dealer and from participating in an offering of penny stock. Salerno previously pled guilty to filing a false broker-dealer registration statement.
I. BACKGROUND
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) against Salerno on October 8, 2004, pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act). The OIP alleges that Salerno pled guilty in 2004 to filing a false broker-dealer registration statement while he was associated with a registered broker-dealer, The Hamilton Shea Group, Inc. (Hamilton Shea). Additionally, the OIP alleges, Salerno participated in an offering of a penny stock, Certified Diabetic Services, Inc. (Certified Diabetic). Salerno was served with the OIP on December 3, 2004. He failed to file an answer, due twenty days after service of the OIP, that is, by December 23, 2004. See 17 C.F.R. § 201.220(b); OIP at 2. A respondent who fails to file an answer to the OIP may be deemed to be in default, and the administrative law judge may determine the proceeding against him. See 17 C.F.R. §§ 201.155(a), .220(f); OIP at 2. Thus, Salerno is in default, and the undersigned finds the following allegations in the OIP are true.
II. FINDINGS OF FACT
On April 21, 2004, Salerno pled guilty to one count of filing a false broker-dealer registration statement with the Commission, pursuant to Section 24 of the Securities Act of 1933 (Securities Act) and Section 15 of the Exchange Act. United States v. Salerno, Case No. 02-CR-351 (M.D. Fla.). The wrongdoing that underlies Salerno's guilty plea occurred while he was a registered principal at Hamilton Shea, a registered broker-dealer. He and others filed false broker-dealer registration forms with the Commission. The forms failed to state the identity of a co-owner of Hamilton Shea who exercised control over the firm. Additionally, while at Hamilton Shea, Salerno participated in an offering of Certified Diabetic, which is a penny stock.
III. CONCLUSIONS OF LAW
Salerno has willfully violated the rules and regulations promulgated by the Commission and omitted to state a material fact in a registration statement required to be filed with the Commission, within the meaning of Section 24 of the Securities Act and Section 15 of the Exchange Act. Further, Certified Diabetic stock was a penny stock within the meaning of Exchange Act Section 3(a)(51) and Rule 3a51-1, and Salerno was a "person participating in an offering of penny stock" within the meaning of Exchange Act Section 15(b)(6)(C).
IV. SANCTION
Salerno will be barred from association with a broker-dealer and from participating in an offering of penny stock.1 These sanctions will serve the public interest and the protection of investors, pursuant to Section 15(b) of the Exchange Act. It accords with Commission precedent and the sanction considerations set forth in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). Salerno's unlawful conduct was egregious. There are no mitigating circumstances.
V. ORDER
IT IS ORDERED that, pursuant to Section 15(b) of the Securities Exchange Act of 1934, JOHN N. SALERNO IS BARRED from association with a broker or dealer and from participating in an offering of penny stock.
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Carol Fox Foelak
Administrative Law Judge