by Bill Singer
SEC Imposes Pennystock Bar And Spells It Out
January 2, 2013
A financial industry veteran for over 40 years with some 38 years experience in China, Peter Siris was also a New York Daily News financial and economic columnist for 12 years ending in 2011. Since 1998, Siris has been:
- a managing member of Guerrilla Capital Management, L.L.C., which has been the investment manager to Guerrilla Partners, LP, a domestic fund, since it was formed in 1998 and to Hua-Mei 21st Century Partners, L.P., a China fund that focused on the Chinese microcap market, including reverse-merged companies, since it commenced operations in 2007; and
- the managing member of Hua-Mei 21st Century Partners, L.L.C., a consulting firm, since it was founded in 2006.
Neither Siris, nor either of the entities, nor Guerrilla Advisors, L.L.C., the general partner of both funds, are registered investment advisers. Virtually all of his Siris' family's money is in Guerrilla Partners, LP, and Hua-Mei 21st Century Partners, L.P., (the "Funds'), and, as such, there was some alignment of Siris' and his outside investors' interests.
- participate in offerings,
- accept consulting assignments, and
- purchase penny stocks,
Siris noted that 18 months earlier he had taken corrective action by discontinuing investing in PIPEs and registered direct offerings. Further, he noted that as of two years ago, he discontinued all consulting services of Hua-Mei 21st Century Partners, L.L.C.; he established compliance protocols, appointed a chief compliance officer, and set up safeguards, including maintaining a restricted list; and he established an email back-up system to ensure the maintenance of records of all communications
It appears that a prime motivating factor in Siris's decision to contest the imposition of bars is his desire to wind down the Funds in an orderly fashion -- for example, he reduced the Funds' assets from approximately $101 million as of January 1, 2012, to approximately $70 million, of which nearly $46 million is cash, as of September 30, 2012.
Telegraphing The Message
Ominously for Siris, the Adminstrative Law Judge ("ALJ") noted that:
To the extent that things could go downhill from here, they do.Siris also seeks to diminish his culpability in the events at issue in SEC v. Siris.. . .Siris acknowledged that he was not permitted to contest the factual allegations of the Commission's complaint and agreed not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis...
[R]espondent's previous occupation, if he were allowed to continue it in the future, would present opportunities for future violations. The violations are recent. The degree of harm to investors and the marketplace is indicated in the $464,011.93 civil penalty that Siris was ordered to pay and the $592,942.39 in disgorgement that he and co-defendants were ordered to pay. Further, as the Commission has often emphasized, the public interest determination extends beyond consideration of the particular investors affected by a respondent's conduct - Siris and the outside investors in the Funds - to the public-at-large, the welfare of investors as a class, and standards of conduct in the securities business generally. See Christopher A. Lowry, Advisers Act Release No. 2052 (Aug. 30, 2002), 55 S.E.C. 1133, 1145, aff'd, 340 F.3d 501 (8th Cir. 2003); Arthur Lipper Corp., Exchange Act Release No. 11773 (Oct. 24, 1975), 46 S.E.C. 78, 100. Thus, Siris' desire to participate personally in winding down the Funds cannot weigh against imposition of bars. Bars are also necessary for the purpose of deterrence. Arthur Lipper Corp., 46 S.E.C. at 100.Siris argues that his conduct was not as bad as that of respondents in various follow-on cases cited by the Division. He does not, however, cite any follow-on case in which a respondent had been enjoined against violations of the antifraud provisions and received no sanction or a sanction less than a bar. None exists. From 1995 to the present there have been over thirty follow-on proceedings based on antifraud injunctions in which the Commission issued opinions. All of the respondents were barred 3 - thirty-one unqualified bars and three bars with the right to reapply after five years.4