SEC Settlement : Rooney Pace Halting Securities Business

From Reuters

Once high-flying broker Rooney, Pace Inc. agreed Monday to leave the securities industry after an investigation by the Securities and Exchange Commission found numerous violations in three of its public stock offerings.

The firm was a major player in the business of IPOs, or initial public offerings, a segment of the brokerage industry that also included First Jersey Securities Inc., which earlier reached a settlement with the SEC over fraud charges dating back to 1984.

The SEC action stems from three stock offerings that Rooney Pace underwrote between 1981 and 1983 for Artel Communications Corp., Intelplex Corp. and Captain Crab Inc.

In the Captain Crab offering, the firm acted as an underwriter without disclosing its role and took steps to reduce the supply of new Captain Crab shares publicly available, artificially driving up their price.


The firm also failed to tell the SEC, as required, that it acquired more than 5% of Captain Crab stock.

In response to the charges, Rooney Pace withdrew its registration as a registered securities broker-dealer, the SEC said.

Rooney Pace also raised $13.2 million in an offering last December for ZZZZ Best, the Reseda carpet cleaning company founded by whiz kid Barry Minkow. ZZZZ Best later collapsed amid allegations of fraud and filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Since then, numerous class-action suits have been filed against ZZZZ Best and others involved in the underwriting.

The SEC also said it suspended Randolph Pace, chairman of the firm and of its parent company, Rooney, Pace Group Inc., from the securities business for nine months.


Pace was previously suspended for three months on fraud charges, and the firm had already been barred from all underwritings for two months beginning Sept. 14. Both those suspensions stemmed from a 1984 SEC charge that the firm and two of its brokers defrauded customers in a 1981 offering of Sequential Information Systems Inc. by making false statements.

Wallace Timmeny, the firm’s outside counsel, said Rooney Pace has been scaling back its operations for several months in anticipation of the latest SEC action.

The firm has already transferred customer accounts to other firms and is not active in the brokerage business any more, he said. “This is very smooth transition,” said Timmeny, an attorney with the firm of McGuire Woods, Battle and Boothe.

After Pace completes his two personal suspensions on Sept. 14, 1988, the SEC order still places severe restrictions on his ability to function in the securities business by barring him from becoming a principal or supervisor for five years in any firm. “It basically leaves him room to be a registered representative (stockbroker) with supervision,” an SEC official said.