UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION Securities Act of 1933 Release No. 7547 / June 24, 1998 Securities Exchange Act of 1934 Release No. 40115 / June 24, 1998 Administrative Proceeding File No. 3-9629 ______________________________________ : In the Matter of : ORDER INSTITUTING PROCEEDINGS : PURSUANT TO SECTION 8A OF THE IAN FISHMAN and : SECURITIES ACT OF 1933 AND LAWRENCE FISHMAN, : SECTION 21C OF THE SECURITIES : EXCHANGE ACT OF 1934, MAKING Respondents. : FINDINGS, IMPOSING REMEDIAL : SANCTIONS AND CEASE-AND-DESIST : ORDER ______________________________________ : I. The Commission deems it appropriate and in the public interest that proceedings be, and hereby are, instituted pursuant to (i) Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Ian Fishman violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and (ii) Section 8A of the Securities Act and Section 21C of the Exchange Act to determine whether Lawrence Fishman violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and to determine the appropriateness of disgorgement and prejudgment interest. II. In anticipation of the institution of these administrative proceedings, Ian Fishman and Lawrence Fishman (the "Respondents") have submitted Offers of Settlement that the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and prior to hearing and without admitting or denying the findings set forth herein, Respondents each consent to the entry of this Order Instituting Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, Imposing Remedial Sanctions and Cease-and-Desist Order ("Order"). The Commission has determined that it is appropriate and in the public interest to accept the Offers of Settlement of Respondents, ======END OF PAGE 1====== and accordingly is issuing this Order. III. FACTS Based on the foregoing, the Commission finds that:<(1)> A. Respondents 1. Ian Fishman, age 32, is a resident of Rockland County, New York. 2. Lawrence Fishman, age 33, is currently a resident of Rockland County, New York. During the relevant time period Lawrence Fishman resided in Boca Raton, Florida. Lawrence Fishman and Ian Fishman are brothers. B. The Respondents Manipulation of the NBBO Pursuant to the Limit Order Display Rule, Rule 11Ac-4 under the Exchange Act (the Display Rule ), which became effective for fifty NASDAQ listed securities on January 20, 1997, market makers are required to display customer limit orders that are priced better than the market maker s quote for the same stock. If the customer s order is also better than the National Best Bid or Offer quotes ( NBBO ), it is incorporated into the NBBO, irrespective of the size of the order. On five occasions, on January 27 and 28, 1997, the Respondents knowingly engaged in a series of transactions designed to increase and decrease the NBBO for five securities subject to the Display Rule and to trade at those affected prices. The Respondents trading involved four steps. First, Ian Fishman would place a limit order with a NASDAQ market maker, usually for 100 shares, to sell at a price below the current NBBO offer price. Pursuant to the requirements of the Display Rule, this limit order effectively lowered the NBBO offer price. Second, Lawrence Fishman entered a market order for the purchase of 500 or more shares, which the broker-dealer executed<(2)> at the now lowered NBBO offer price. Immediately after execution of the purchase order, Ian Fishman canceled the initial limit order. Third, after purchasing at the lowered offer price, Ian Fishman placed another limit order with a NASDAQ market maker, again usually for 100 shares, to buy at a price above the current NBBO bid price. This limit <(1)> The findings herein are made pursuant to the Offers of Settlement of Respondents and are not binding on any other person or entity in this or any other proceeding. <(2)> Many broker-dealers guarantee execution of orders up to 5,000 shares at the NBBO, regardless of quoted size. ======END OF PAGE 2====== order raised the NBBO bid price. Fourth, Lawrence Fishman entered a market order to sell the shares that he had recently purchased, which was executed at the raised bid price. The sale by Lawrence Fishman was immediately followed by Ian Fishman s cancellation of the limit order that increased the bid. The Respondents engaged in the trading activity described above in the following five instances: 1. The Men s Wearhouse, Inc. On January 27, 1997, at 12:23, Ian Fishman entered a limit order to sell 100 shares of The Men s Wearhouse, Inc. at 26 3/8. At 12:23:27, pursuant to the requirements of the Limit Order Display Rule, Ian Fishman's limit order resulted in a change in the public offer for The Men's Wearhouse from 26 3/4 to 26 3/8. At 12:23:57, Lawrence Fishman s market order to buy 500 shares of The Men s Wearhouse was executed at 26 3/8. At 12:24, Ian Fishman canceled his limit order and, at 12:24:17, the public offer returned to 26 3/4. At 12:36, Ian Fishman entered a limit order to buy 100 shares of The Men's Wearhouse, Inc. at 26 5/8. At 12:36:29, the limit order resulted in a change in the public bid for The Men's Wearhouse from 26 1/4 to 26 5/8. At 12:36:50, Lawrence Fishman s market order to sell the 500 shares of The Men's Wearhouse he had just purchased was executed at 26 5/8. At approximately 12:37, Ian Fishman canceled his limit order and, at 12:37:16, the public bid returned to 26 1/4. The Respondents profit was $125.00. 2. Arbor Software Corp. On January 27, 1997, at 12:53:28, Ian Fishman's limit order to sell 100 shares of Arbor Software Corp. at 28 5/8 changed the public offer from 29 to 28 5/8. At 12:54:14, Lawrence Fishman s market order to buy 900 shares of Arbor Software was executed at 28 5/8. At 12:55:46, Ian Fishman s limit order was executed and the public offer returned to 29. At 13:12:30, Ian Fishman s limit order to buy 100 shares of Arbor Software Corp. at 28 7/8 changed the public bid from 28 1/2 to 28 7/8. At 13:12:47, Ian Fishman s limit order was executed and the public bid returned to 28 1/2. At 13:12:55, Lawrence Fishman's market order to sell 900 shares of Arbor Software Corp. was executed at 28 1/2.<(3)> The Respondents loss was $137.50. <(3)> The Respondents attempt to sell the shares at a profit failed when Ian Fishman's limit order to buy 100 shares was executed and the public quote reverted to the pre-limit order amount. The result of Ian Fishman's order being executed was that Lawrence Fishman's market sell order was executed at the lower pre-limit order price for a loss of 1/8 per share. ======END OF PAGE 3====== 3. DII Group, Inc. On January 27, 1997, at 13:27, Ian Fishman entered a limit order to sell 100 shares of DII Group at 20 7/8 and, at 13:27:27, the public offer changed from 21 1/4 to 20 7/8. At 13:27:45, Lawrence Fishman s market order to buy 900 shares of DII Group was executed at 20 7/8. At 13:27:52, the public offer returned to 21 1/4 reflecting Ian Fishman s cancellation of his limit order. At 13:39:32, Ian Fishman s limit order changed the public bid for DII Group from 20 3/4 to 21 1/8. At 13:39:47, Lawrence Fishman s market order to sell his 900 shares was executed at 21 1/8 for a profit of $225.00. At 13:39:56, the public bid returned to 20 3/4, after Ian Fishman canceled his limit order. 4. Pacificare Health Systems, Inc. On January 28, 1997, at 13:51:25, Ian Fishman entered a limit order to sell 100 shares of Pacificare Health Systems at 71 1/8, which changed the public offer from 71 1/2 to 71 1/8. At 13:51:37 Lawrence Fishman s market order to buy 900 shares of Pacificare Health Systems was executed at 71 1/8. At 13:51:54, Ian Fishman canceled his limit order and the public offer returned to 71 1/2. At 13:39:32, Ian Fishman s limit order to buy 100 shares of Pacificare Health Systems at 71 3/8 changed the public bid from 71 to 71 3/8. At 13:39:47, Lawrence Fishman s market order to sell 900 shares was executed at 71 3/8 for a profit of $225.00. At 13:59:45, the public bid returned to 71 reflecting Ian Fishman s cancellation of his limit order. 5. Remedy Corp. On January 28, 1997, at 14:41, Ian Fishman entered a limit order to sell 100 shares of Remedy Corp. at 49 1/4, which changed the public offer from 49 3/4 to 49 1/4. At 14:41:47, Lawrence Fishman s market order to buy 700 shares of Remedy Corp. was executed at 49 1/4. At 14:41:52, the public offer returned to 49 3/4 reflecting Ian Fishman s cancellation of his limit order. At 14:43:42, Ian Fishman s limit order to buy 100 shares of Remedy Corp. changed the public bid from 49 to 49 3/8. At 14:43:48, Lawrence Fishman s market order to sell 700 shares was executed at 49 3/8 for a profit of $87.50. At 14:43:55, the public bid returned to 49 reflecting Ian Fishman s cancellation of his limit order. ======END OF PAGE 4====== IV. OPINION Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, prohibit the use of any manipulative or deceptive device or contrivance in connection with the purchase or sale of any security. Section 17(a) of the Securities Act prohibits such conduct in the offer or sale of any security. These provisions prohibit trading designed to artificially affect the market price of a security. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 198 (1976). The Commission has long held that Section 10(b) and Rule 10b-5 prohibit trades made for the purpose of manipulating stock prices because their effect is to distort the character of the market as a reflection of the combined judgments of buyers and sellers. Halsey, Stuart & Co., SEC Release No. 34-4310 (1949). In essence, a manipulation is intentional interference with the free forces of supply and demand. In the Matter of Pagel, Inc., et al., SEC Release No. 34-22280 (1985). The Respondents engaged in a coordinated effort using Ian Fishman's limit orders to move the public bid or offer quote, in order to permit Lawrence Fishman to buy or sell a security at a price that otherwise would not have been available in the market. The investing public and other market participants, including broker-dealers who rely on the integrity of the NBBO, were unaware that the NBBO quotes altered as result of Ian's orders, reflected not genuine market activity, but the Fishmans coordinated actions. Cf. U.S. v. Stein, 456 F.2d 844 (2d Cir. 1972) (defendant convicted where conduct involved executing purchases at the close in order to raise the closing price); In the Matter of Myron S. Levin, SEC Release No. 34-31124 (1992) (respondent violated antifraud provisions by executing purchase orders at the close in order to raise the closing price). Accordingly, the Respondents violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. V. FINDINGS Based on the above, the Commission finds that Ian Fishman and Lawrence Fishman violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. ======END OF PAGE 5====== VI. ORDER Accordingly, IT IS HEREBY ORDERED that: A. Ian Fishman, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, cease and desist from committing any violations of, and committing or causing any future violations of, Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. B. Lawrence Fishman: 1. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, cease and desist from committing any violations of, and committing or causing any future violations of, Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; 2. Shall pay disgorgement of $662.50, and prejudgment interest of $72.00, within ten (10) days of the entry of this Order by U.S. Postal money order, certified check, bank cashier's check, or bank money order, made payable to the Securities and Exchange Commission and shall transmit the payment by certified mail (return receipt requested) to the Office of the Comptroller, U.S. Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312, under cover of a letter that identifies the respondent and the name and file number of this proceeding. A copy of the cover letter and of the form of payment shall be simultaneously transmitted to counsel for the Commission. By the Commission. _______________________ Jonathan G. Katz Secretary ======END OF PAGE 6======