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SEC ADMINISTRATIVE PROCEEDING
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EXTRACTED KEY WORDS
SCHWARTZ TOMMASSELLO SUPERVISE ORDER ALLEGES OFFICER EXCHANGE REGISTERED REPRESENTATIVES COMPLIANCE FUNDS EXCHANGE COMMISSION SECURITIES EXCHANGE ACT ADMINISTRATIVE PROCEEDING CUSTOMERS INVEST COLONIAL SECURITIES GROUP MICHAEL VIOLATIONS LAWS HAZLETON SCHEME MISAPPROPRIATE CONVERTING PAY FIRM DEVOTE INSPECTIONS OSJ GROWTH DESPITE |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 41908 / September 23, 1999
ADMINISTRATIVE PROCEEDING
FILE NO. 3-10026
FIRST COLONIAL SECURITIES GROUP, INC., MICHAEL E. GOLDEN AND STEVEN D.
SCHWARTZ CHARGED WITH FAILURE TO SUPERVISE
The Securities and Exchange Commission today instituted public
administrative proceedings against First Colonial Securities Group,
Inc. ("First Colonial"), Michael E. Golden ("Golden"), and Steven D.
Schwartz ("Schwartz").
The Commission's Order alleges that First Colonial, a broker-dealer
registered with the Commission, Golden, its president and chief
executive officer, and Schwartz, a shareholder and formerly First
Colonial's compliance officer, failed reasonably to supervise Robert
Tommassello ("Tommassello"), a registered representative under their
supervision, with a view toward preventing his violations of the
federal securities laws.
The Order alleges that Tommassello operated a First Colonial Office of
Supervisory Jurisdiction ("OSJ") in Hazleton, Pennsylvania, from
November 1995 until he was terminated in March 1998. During this time,
First Colonial's headquarters were in Marlton, New Jersey. Beginning
in December 1995, and continuing until February 1998, Tommassello
engaged in a scheme to misappropriate money from First Colonial
customers by soliciting customers to invest in mutual funds and
variable annuities and converting those funds to his personal use. He
used new investor funds to pay existing investors, and prepared
fictitious account statements. Through this scheme, Tommassello
converted to his own use more than $1.33 million in customer funds. As
a result of this conduct, Tommassello violated Section 17(a) of the
Securities Act of 1933 and Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 thereunder.
The Order alleges that First Colonial and Golden failed to establish
sufficient written procedures for following up on information
contained in Forms U-4 and U-5, which would have put the firm on
notice of Tommassello's past history of misappropriation, and failed
to devote adequate resources to the firm's compliance and supervisory
framework in order to keep pace with the growth of the firm. Despite
having grown from one office with three registered representatives in
1989 to 24 offices with 150 registered representatives in 1998, First
Colonial employed only one person to devote only part of his time to
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