COR#95/058

      Gregory Walsh, for Commission Staff.

      On August 28, 1992, the Superintendent of Brokers gave notice of a hearing to be held before the Commission to consider whether it is in the public interest to make orders under section 144(1)(c) and (d), 144.1 and 154.2 of the Securities Act, S.B.C. 1985, c. 83, against Atlantic Trust Management Group, Richard Frank John Newsom, Douglas Newsom, Donald Newsom, Norman John Newsom ("John Newsom"), David V. Ellison and Michael Jolly.  The notice was subsequently amended on June 23, 1993.  The Superintendent alleged that:

-		during the period March 2, 1992 to May 29, 1992, (the "Trading Period") Atlantic, Richard Newsom, Donald Newsom, Douglas Newsom, John Newsom, Ellison and Jolly participated in a scheme relating to the trading of shares of Riviera Explorations Inc. and Yellow Point Mining Corp. when they knew or reasonably ought to have known that the scheme would create or result in a misleading appearance of trading activity in, or an artificial price for, the shares of Riviera and Yellow Point, contrary to section 41.1 of the Act;
-		at various times during the period from 1991 to August 28, 1992, (the "Relevant Period") Douglas Newsom, Donald Newsom, John Newsom, and Ellison advised in the securities of Yellow Point, Riviera, and TTC/Truck Tech Corp. ("TTC") without registration, contrary to section 20 of the Act, and telephoned from within the Province to residences for the purpose of trading in securities, contrary to section 34 of the Act; and
-		during the Trading Period, Richard Newsom and Atlantic were insiders of Riviera and failed to file insider reports as required under section 70 of the Act.

      On August 23, 1993, the Superintendent and Tatjana Pessl, in related proceedings, signed an agreed statement of facts and undertaking and Pessl consented to an order under section 144(1)(c) of the Act removing her trading rights for a period of 12 months and to an order under section 144(1)(d) of the Act prohibiting her from being an officer or director of a reporting issuer for a period of 42 months.  The Settlement documents were published in the BCSC Weekly Summary, (1993) Vol. 93:33, page 4.

      On October 13, 1993, the Superintendent and Ellison signed an agreed statement of facts and undertaking and Ellison consented to an order under sections 144(1)(c) and (d) of the Act for a period of two years.  The Settlement documents were published in the BCSC Weekly Summary, (1993) Vol. 93:40, page 4.

      On October 18, 1993, the Superintendent and Jolly signed an agreed statement of facts and undertaking and Jolly consented to an order under sections 144(1)(c) and (d) of the Act for a period of one year.  The Settlement documents were published in the BCSC Weekly Summary, (1993)Vol. 93:41, page 4.

      At the hearing the Superintendent gave notice that he would not proceed against John Newsom. The hearing proceeded against Atlantic and the Newsoms.  Ellison and Jolly appeared and testified. Neither Atlantic nor any of the Newsoms appeared at the hearing, although each of them, with the exception of Donald, had been represented by counsel prior to the commencement of the hearing.  The Commission ruled that each of the respondents received notice of the hearing in accordance with section 156 of the Act.

2.  BACKGROUND

2.1  The Respondents

      Atlantic is an unincorporated business that is owned and controlled by Richard Newsom.  During the Relevant Period, Atlantic and Richard Newsom were in the business of investing in and providing "investor relations services" to various junior companies whose shares traded on the Vancouver Stock Exchange.

      Richard Newsom is 60 years old, has a high school education and has some history in the business of mining exploration.  Records at the Commission indicate that in the late 1970s he had been a director and officer of a reporting issuer whose shares were listed on the Exchange.  Neither Atlantic nor Richard Newsom is registered in any capacity under the Act.  Atlantics employees included Richards twin sons, Donald and Douglas, and a third son John, none of whom were registered in any capacity under the Act.

      Beginning in the early summer of 1990, through to August 1992, Atlantic also employed Michael Jolly, a student, on a periodic basis.  David Ellison was employed on a more regular basis beginning in January 1991.  Both had been high school friends and classmates of Donald and Douglas Newsom and had accepted Richard Newsoms offer to work at Atlantic.  During the Relevant Period  these young men were in their early twenties.  Neither Ellison nor Jolly had any business or investment background independent of the experience they acquired while at Atlantic.

      Although Atlantics offices were located at suite 110 12761 -16th Avenue, White Rock, British Columbia, the Newsoms lived in Ferndale, Washington, and at times operated their business out of Douglas Newsoms residence in Ferndale.  The Ferndale office was simply a converted bedroom containing several desks and telephones with four incoming lines in addition to the home line and fax number.

      Atlantics White Rock offices consisted of a series of adjoining offices, the largest of which contained several desks and telephones with six or seven separate incoming lines.  This office also contained a ticker tape type of machine indicating the current price and volume of shares trading on the Exchange and the brokerage house through which the shares were purchased.  A boardroom and a smaller private office belonging to Richard Newsom were connected by a common hall.  Rivieras and Yellow Points business addresses were at Atlantics White Rock office.  Pessl, who provided office management services to Yellow Point, River and TTC, also had an office in the same building as Atlantic.

      Most of Atlantics "investor relations services" were provided out of the White Rock offices and at times there were up to seven employees working the telephones.  Employee cheques were signed by Richard and by all accounts he was considered to be "the boss" and directing mind of Atlantic.

      When Commission staff attended the Atlantic offices on the afternoon of Friday, August 28th, 1992, to serve the temporary orders on the respondents, Atlantics offices had already closed for the day.  Looking through windows into the main office, Commission staff noticed what appeared to be glossy promotional materials stacked up against the walls and the telephones appeared to be simply connected by way of individual wires dangling from the ceiling.  When staff returned on the following Monday, the offices had been vacated, the telephones removed and none of the respondents could be found in the Province.

2.2  Yellow Point, Riviera and TTC

      Riviera, Yellow Point and TTC were incorporated under the Company Act, R.S.B.C. 1979, c. 59, are reporting issuers under the Act and their common shares were listed and posted for trading on the Exchange during the Relevant Period.

      Riviera and Yellow Point are junior resource issuers in the business of mineral exploration and development.  During the Relevant Period, Yellow Point and Riviera had mutual business interests as well as having three directors in common.  None of the Newsoms were directors or officers of Riviera or Yellow Point, however Pessl, Richard Newsoms stepdaughter, was a director and senior officer of both companies.

      On July 29, 1992, Riviera filed a statement of material facts (SMF). The SMF, which was not accepted as a result of the initiation of these proceedings, indicated that Riviera and Yellow Point were parties to a gold property joint venture in the Czech Republic.  By way of the SMF, Riviera was proposing to raise approximately $900,000 by offering 1,200,000 shares to the public through the facilities of the Exchange.  Approximately half of the proceeds to be raised were to be used for the Czech joint venture with the remainder set aside for working capital.  Unaudited financial statements for the 11 months ended June, 30, 1992, filed with Rivieras SMF, revealed that over 80% of Rivieras expenses of $209,000 were categorized as "indirect and administrative".  Less than 20% of the expenses were spent on property and explorations. The statements also showed an accumulated deficit of $538,688 and a net worth of $458,296 at the end of the 11 month period.

      During the first four months of 1992, Rivieras share price hovered around $0.60.  However, in May, on heavier volume, the share price rose from $0.60 to $2.35 at the very end of May, followed by an equally steep decline in June.  On June 9, 1992, Riviera, issued a news release stating that "no material changes occurred in the affairs of the company that would account for the strong fluctuations experienced by the companys shares trading in the marketplace."  A review of Rivieras news releases does not indicate any significant event which would account for the sudden rise in Rivieras share price in May of 1992.

      Throughout the Trading Period, Riviera had 3,307,205 shares issued and outstanding.  Therefore, during the Trading Period, Rivieras market capitalization increased from $1.98 million to $7.77 million.

      Within two weeks of Riviera filing its SMF, Yellow Point filed a SMF also proposing to raise financing for the Czech joint venture by offering 1,800,000 shares to the public through the facilities of the Exchange.  Yellow Points SMF, which was receipted August 12, 1992, indicated that approximately $1,000,000 of the $1,200,000 to be raised was to be allocated toward the Czech gold property.  Unaudited financial statements for the 10 months ended June 30, 1992, filed with Yellow Points SMF, showed that 40% of its expenses of approximately $500,00 were categorized as "general and administrative expenses".  The statements also showed that Yellow Point had assets at June 30, 1992 of $2,096,760, consisting mostly of resource properties and equipment.  Its accumulated deficit was $2,335,394 and net worth was $1,985,609.

      Although less pronounced, the trading patterns in Yellow Point parallel those in Riviera.  In the first three months of 1992, Yellow Points share price hovered around $0.40 on low volumes.  From April to mid-May the share price rose slightly above $0.40 on heavier volumes.  In approximately mid-May Yellow Points share price started to rise rapidly peaking at $1.25 at the end of May, followed by an equally steep decline in June on lower volumes.

      At the end of a news release issued on May 28, 1992, Yellow Point management stated that it "knows of no apparent reasons for the recent fluctuations in the price of the companys stock."  A review of Yellow Points news releases does not reveal any significant event or news that would account for the significant rise in share price in May of 1992.

      Throughout the Trading Period there were 3,599,781 Yellow Point shares issued and outstanding.  Therefore the market capitalization increased during the Trading Period from $1.43 million to $4.5 million.

      TTC is a junior industrial issuer whose business is to develop and market electronic equipment for the transportation industry.  According to Jolly, TTC was touted by Atlantic employees as having an electronic product for monitoring tire pressure for semi trucks and mining rigs and would become a major player in the transportation industry.  Pessl was a senior officer and director of TTC.

2.3  Atlantics "Investor Relations" Services

      Throughout 1991 and up to August 1992, under the direction of Richard Newsom, Douglas and Donald Newsom and other Atlantic employees provided a number of companies whose shares were listed on the Exchange, including Yellow Point, Riviera and TTC, with what so far has been simply referred to as "investor relations services". While the arrangement appears to have been undocumented, one witness testified that Richard Newsom described Atlantics business to him as "...PR work and that they did mailouts, and they got remunerated in kind-in shares, and thats the way they paid their bills." The testimony of two ex-employees, Jolly and Ellison, and two investors provided a graphic description of what services Atlantic actually delivered.

      When Jolly first came to work for Atlantic he was given to understand that his general function was to initiate and maintain investor interest in the "stable" of companies Atlantic was involved with.  His training  consisted of sitting in on the preparation of company news releases before they were sent to the Exchange, learning to do investor mailouts, and learning to take and make investor telephone calls by listening to Donald and Douglas Newsom.

      A typical day consisted of Richard meeting with Douglas and Donald at least twice, once in the morning before the markets opened to decide what the Atlantic employees would do for the day, and again after the trading market closed. Richards instructions were often communicated to the employees through Douglas and Donald.  They in turn would tell the employees which company to concentrate on and, as Jolly stated, Douglas and Donald would "set the tone for the day" with the employees taking their lead from them.

      Working off updated computer shareholder lists and extensive mailing lists purchased by Atlantic, the employees mailed out promotional material on Yellow Point, Riviera and TTC and conducted an intensive telephone campaign.

      Mailouts usually consisted of a corporate profile with company news releases or brochures, along with a reply card on which the recipient could request further information on the company.  We were provided a copy of an information package mailed out on behalf of Yellow Point.  It included a covering letter,  a reply card and a corporate brochure which included the following representations:

	A GOLDEN OPPORTUNITY ....AND MORE:  For some investors a portfolio that holds no gold is simply unthinkable. Others prefer to pursue purely gold, seeking at the same time a strong investment hedge.  Finally a single investment opportunity delivers both.  Yellow Point Mining Corp. Rich diversity ... Immeasurable worth......
	Yellow Point is positioned to deliver the proven performance of gold plus a profit-rich investment add-on of immeasurable worth to the earths environmental future...

   "You just come in whenever they decided to get up and come to work.  As a general employee, you just start calling people right off the bat. After the markets closed, then you were supposed to -- they had a set 5/5/5 pattern where you were supposed to call five new people a day and qualify them.  You know, send them information or ask if they had information. Then youre supposed to talk, make five second calls,  five more people.  A second call would be if I had already talked to you once and sent you information, a couple of weeks later Id call you back, you know, if I sent you any more information or whatever.  And then third calls, similarly the same way.  You had to do 5/5/5 every day, and then they said youd never run out of people to call."

      When calling potential investors Jolly said he was cautioned not to use the word "buy".  However, he went on to say that there was no doubt that the object of those calls was to get the person on the other end of the phone to do just that. Ellison was more definitive.  According to him "Douglas's theory was -- his main objective was  for them to buy stock, period, and there was no ands, ifs or buts about it. If you picked a phone call they should buy stock."

      With this directed agenda, Jolly testified that they started working the phones by calling in the morning to eastern Canada and the United States and moved west with the time zones, ending up in Hawaii.  Jolly said that often he would have the preliminary discussions with the investors and Donald or Douglas would handle them at a more advanced stage. Jolly confirmed that calls would be made to both businesses and residences and that often they were cold calls.

      Atlantic employees were told to promote the merits of investing in a particular stock and to say that the investment would provide a good return.  No instruction was given on how to determine whether the investment was suitable for the investor or how to deal with questions about risk.  Indeed, as Jolly described his promotion of TTC, he said: "So basically it was, as we related it, it was almost risk free. That was the case. It was almost risk free, and thats the information we were provided in this."  Investors were invariably made to feel that they were given inside information not yet made public. As Jolly acknowledged, "Every investor was made to feel like they were being treated special, receiving special insight into what was happening with those companies, yes." If investors asked for a prospectus, Jolly was told to send the corporate profile.  Jolly testified that during that time he really had no understanding of what a prospectus was and merely followed the Newsoms directions.

      Ellison, who sat next to Douglas Newsom in the telephone room in White Rock, particularized one of the more aggressive sales techniques used by Douglas.  In response to questions from Counsel for Commission Staff, Ellison testified as follows:

	Q:	Would he make predictions concerning where the share
		prices would be moving to?
	A:	Oh, he would do that with his bigger shareholders.
		Hed tell them its going to be up five cents a day
		every day, you know, and of course it was, you know,
		hed buy it.
	Q:	What do you mean by that, "Of course it was"?
	A:	Because at the end of every day he would always make
		sure there was a five-cent uptick, or you know,
		whatever.  Hed say it would be higher at the end of
		the day, and that was his little game hed play.
	Q:	Did you ever see Douglas in a position where he was
		able to make his predictions come true?
	A:	Oh, he would always make his predictions come true.
	Q:	How would he do that?
	A:	Hed just tell the guy, "Look, you know, this stock,
		I swear to God, before I get off the phone its
		going to be up five cents," or two cents or
		whatever.  Of course he had already called a broker
		and told him to wait a couple of minutes and buy the
		stock.  So by the time he got off the phone, the
		stock was already up.  So then hed tell the guy to
		call his broker.  Then he would wait five, ten
		minutes and call the guy back, "Well, did you call
		your broker?" The guy might say, "No, I didnt."
		"Well, its up ten cents since I talked to you last.
		I mean how long are you going to wait, till its up
		a buck?"  So then as soon hed get off the phone
		hed call a guy, another broker back and say, "Well,
		how much is offered at this price? Well buy 500, buy
		1,000 shares."  So by the time this guy really does
		call a broker, its already up 15 cents for the day,
		you know."

      The relevant portions of the tape, which begins in mid conversation, are as follows:

Newsom:	...buy Yellow Point.
Houston:	Yeah, well thats what I was thinking Id have to
	do.
Newsom:	Um,hm, um hm, um hm.  Well, why am I moving Riviera
	first?  Two reasons.  One, the financing and number
	two, Yellow Points got 2.8 million shares it can
	trade.
Houston:	Um hm.
Newsom:	Rivieras got 681,000.
Houston:	Oh.
Newsom:	You see the difference?
Houston:	Oh.
Newsom:	Now, its gonna be much easier to show people that
	one stock can move to five bucks.
Houston:	Yeah.
Newsom:	Then Yellow Point.  But Bob, get a load of this
	one...this news just came to me today. Not even
	Arnie knows this, Bob.  Whos the biggest mutual
	fund in the entire world today?
Houston:	Mmm I dont know, Magelin?
Newsom:	Mm ....Magelin, Templeman, whatever.
Newsom:	Well, Bob, this should be kept under your hat but we
	just got them giving a shout and if they say the
	numbers are right on the Czechoslovakian property
	theyll fund the whole thing
Houston:	Holy Cow!
Newsom:	Holy Cow!  When this stock starts to move Bob,
	youre going to need a helmet.  Because were gonna
	move it very, very fast.  I know you hold 29 Yellow
	Point, I know you hold 20 Truck Tech but Bob, sell
	the house, sell the kids, get rid of the wife, put
	her on the street, get her to work, sell everything
	you own, your coin collection, your stamp
	collection...buy all the Riviera you can.
Houston:	All the Riviera?
Newsom:	All the Riviera you can.
Houston:	OK, thats gonna move first?
Newsom:	That will more first.
Houston:	All right.
Newsom:	Its not that your Yellow Point...youll make so
	much money on your Riviera in the next month, youll
	be able to sell it off, pay all your Truck Tech off,
	all your Yellow Point off, every share you have ever
	bought with me, plus take-home money.
Houston:	[laughs] All right, old buddy, but um, OK, now, um
	is there...are these gonna be sort of pushed
	together or....
Newsom:	No....
Houston:	....is it Riviera first?
Newsom:	Yellow Points probably gonna climb to 60 or 70
	cents while Rivieras moving....
Houston:	Yeah.
Newsom:	...you know what I mean?  Just because its got a
	bigger percentage in that Czech property.
Houston:	OK.
Newsom:	See, thats why I want you to load up on the Yellow
	Point but not yet and I was telling you to at 45
	cents and sadly theres so many things that changed
	since last Ive called you its kind of hard for me
	to tell you that your concentration should be on
	Riviera.
Houston:	Yeah.
Newsom:	But we made that switch about two weeks ago and
	thats when you saw Riviera climb from 70 cents....
Houston:	Yeah.
Newsom:	....and just went Boom!  90 cents.
Houston:	Yeah.
Newsom:	Well, Bob, your Riviera is gonna be the first one to
	go ballistic.  I know its gonna be tough for ya but
	Bob, if youve got it in you, pick up a block.
Houston:	Um hm, um hm.  Of Riviera?  OK
Newsom:	I dont know how big you can play Bob but fill your
	boots.  Youre gonna be the happiest man that...when
	Im done with Yellow Point and Riviera it should
	take me about three months to maximize your money.

Newsom:	But Bob, pick up all the Riviera you can possibly
	get your hands on. Phone up Arnie, because tomorrow
	Im gonna make you a promise.
Houston:	Mm.
Newsom:	Your Rivieras gonna be trading somewhere in the
	dollar range.
Houston:	Um hm.
Newsom:	So were gonna be moving it up pretty fast come
	tomorrow because of this news.
Houston:	Mm hm.
Newsom:	But Bob, your Riviera....call Arnie, put in a bid
	at, call it 90 cents, 91 cents, no sorry its
	bidding 17,000 shares at 91, bid 92 cents but pick
	up a block Bob.  How much can you pick up?
Houston:	Well, right off the top of my head, I dont know.
	You caught me...Id have to sharpen my pencil here,
	Im not too sure Douglas really.
Newsom:	Take a wild guess.
Houston:	Oh gosh, Ive got several things going here and I
	dont want to make any rational or even irrational
	guesses, you know.  Uh, Im not sure  Im gonna have
	to figure out where the heck to get the money
	because uh....
Newsom:	Do this Bob...
Houston:	..uh, Ive gotta be kinda careful here.
Newsom:	....do this, bid for 8,000 at 92.
Houston:	uh huh.
Newsom:	And then if you have to, if worse comes to worse,
	you might have to, if worse comes to worse, and the
	stocks rolling at say $1.10/$1.15 and you cant pay
	for all of it, sell a few of it.
Houston:	Uh huh.
Newsom:	You see what I mean.
Houston:	Yeah.
Newsom:	But Bob, your Rivieras gonna move up over a dollar
	tomorrow.  Were gonna start increasing the price
	very, very...at a quicker pace until the brokers
	move in.
Houston:	Um hm, um hm.
Newsom:	And it should be trading somewhere next week around
	$1.25 and then when the brokers step in, Bob, all
	hells gonna break lose.
Houston:	All right......

Newsom:	...the fund
Houston:	Right
Newsom:	Well the mutual fund that just is getting involved
	with your Riviera is so much bigger Bob.
Houston:	OK. Yeah, thats what you were thinking yesterday.
Newsom:	This goes beyond what Ive been told yesterday . Its
	incredible.
Houston:	Great.
Newsom:	Thats why Im down for a week to meet em.
Houston:	Are ya?
Newsom:	They wanna know if the numbers jibe, your Riviera is
	gonna go...I mean when I say ballistic, five bucks
	is a piece of shit Bob.
Houston:	Really?
Newsom:	Youre talking 40...the stock...Im not gonna give
	it a price tag because you wouldnt believe me and
	something even more than that Bob.  We just got the
	numbers today.
Houston:	Which numbers now are your speaking of?
Newsom:	Thats the drilling numbers, the sampling numbers...
Houston:	Oh, OK.
Newsom:	And Im not talking five or six numbers...
Houston:	Yeah.
Newsom:	...Im talking hundreds of numbers...
Houston:	Great.
Newsom:	Bob, they all go out of this world...
Houston:	Yeah.
Newsom:	I mean, all the numbers.
Houston:	Yeah.
Newsom:	Theyre so unbelievable Bob, if I told you, Id have
	to kill ya!
Houston:	[laughs]
Newsom:	Your Yellow Point and your Riviera are gonna be big
	time but Bob, the Czechoslovakian deal is going
	phenomenal.  It should be announced next week
	sometime, Bob the same day we announce this,
	Rivierall be trading somewhere over $2.  Itll move
	up so fast Bob youll make money hand over fist.
Houston:	Outstanding.  I need it.
Newsom:	Sell your C.D.s and your bonds, all your good safe
	stocks, your IBM, your Boeing, if youve got stocks
	in those, if youve got a hundred grand invested in
	blue chips or youve got a pension plan or whatever
	Bob, give it all up.
Houston:	Well, Ive been trying to do that since we first
	talked last year, that pension fund I cant get my
	hands on it, I cant touch it right now.
Newsom:	Really?
Houston:	Thats the problem.
Newsom:	Bob, whatever you got...give up everything youve
	got, live on wieners and beans for a week...
Houston:	[laughs]
Newsom:	Youll only be living on it for a week Bob.
Houston:	[laughs]
Newsom:	Bob, fill your boots in Riviera.
Houston:	Right.
Newsom:	I know that its now trading around 97, itll be
	trading over a buck today like I was telling you.
Houston:	Right
Newsom:	But Bob, your Rivieras gonna go mad and youre
	really gonna need a helmet for this one.  Bob, all
	the best to you.
Houston:	Hey, listen Douglas , what do you think about Yellow
	Point now?  Is it going to....
Newsom:	Yellow Pointll do the same think in about a month
	or two.
Houston:	OK, good.
Newsom:	Bob, its just gonna go after the Riviera.
Houston:	Outstanding.
Newsom:	But Riviera first.  See when youre done with
	Riviera, youll be able to sell it at a few hundred
	percent higher than where it is....

2.4  The Newsoms Trading Accounts

      Each of the Newsoms had brokerage accounts opened at various brokerage houses in Vancouver.  Jolly and Ellison also opened brokerage accounts at the suggestion  of the Newsoms. In total, Richard, Douglas and Donald Newsom exercised trading authority over at least thirteen brokerage accounts at five Exchange member firms.  The Accounts were held in the names of Atlantic, Donald Newsom (a.k.a. Lawrence Newsom), Douglas Newsom, Richard Newsom, Ellison and Jolly (the "Accounts"). The Accounts were treated by Richard, Douglas and Donald Newsom as family accounts, where proceeds and securities were moved among the Accounts.

      Brokerage statements and other records indicate that there were at least 24 transactions which resulted in the transfer of over 600,000 shares of Riviera and Yellow Point among the Accounts during the Trading Period.  During the same period, over 70,000 TTC shares were either deposited into or transferred among certain of the Accounts in 4 transactions. These records also indicate that over $400,000 was transferred among the Accounts in at least 35 transactions during the Trading Period.

      Ellison and Jolly were not always aware of trading or other transactions occurring in their accounts.  Some of their account statements were sent directly to Atlantics offices. Neither Jolly nor Ellison had the financial ability to pay for the thousands of dollars in transactions which occurred in their various accounts.  Proceeds or debits derived from trading in their accounts, as well as shares, were frequently transferred to a Newsom or Atlantic brokerage account.  Jolly and Ellison were expected as part of their job to sign over account proceeds cheques to Atlantic or the Newsoms. Occasionally even these transactions occurred without their authority or knowledge.  In one particular instance, Jolly confirmed that someone else had signed his name to endorse a $9,000 brokerage cheque made payable to him, a cheque he saw for the first time at the hearing.  On another occasion, a hand-written note to a broker, purporting to be from Jolly, directed a transfer of funds from one of Jollys brokerage accounts to an account in the name Donald Newsom.  Jolly firmly denied that he had written or ever seen that note.

      Ellison testified that, to keep track of the extensive group trading, Douglas Newsom worked from a spreadsheet which itemized the financial and security position of some 15 accounts, including nominee accounts.  Of the time Douglas spent on the trading spreadsheet, Ellison said "Oh, he worked on it all day long, that was his life."

      When nominee trading ended in the Ellison and Jolly accounts, there were substantial debts owing to brokerage firms Yorkton Securities Inc. and Brink, Hudson & Lefever Ltd. These firms have not pursued Ellison or Jolly to pay the debts.  Yorkton broker, Betty Evison, testified that the extensive trading in Ellisons Yorkton account was directed by, and for the benefit of, Douglas Newsom and she regarded Newsom, not Ellison, as liable for the large debit that accrued in the account.  Brink Hudson broker, James Mathers, testified that he took instructions from Douglas Newsom in Ellisons presence to execute trades in Ellisons account and obtained verbal authority from Jolly to permit Douglas Newsom to trade in Jollys account.  Jolly denies giving such verbal authority to Mathers.  However Douglas Newsom advised Mathers that he was accepting liability for the debits in Jollys accounts and, after trading in the account ceased, met with Mathers to discuss payment of the final debit position in the account.

2.5  Analyzer and Trading Activity in the Accounts

      The Superintendent presented several reports produced by a computer program developed by the Exchange called Analyzer, which summarized trading in the Accounts in Yellow Point and Riviera during the three month Trading Period.  Analyzer takes the trading that occurs through the computerized trading system of the Exchange and matches it up with the actual clients that bought and sold the shares.  Analyzer can also produce a report that analyzes overall trading activity rather than individual trades.  This report shows the total number of shares bought and sold by an identified group, and the groups percentages as a buyer and as a seller of the total number of shares traded, at each price for each day.

      The Analyzer relies upon information contained in trading surveillance reports maintained by the Exchange and blotters maintained by each member firm recording all trades executed every day through them.  In considering the Analyzer reports, we also have had the benefit of reviewing all of the brokerage account statements for the Accounts during the Trading Period. All of these records are made and kept in the usual and ordinary course of the Exchanges and each member firms business.

      In its decision, In The Matter of  Eugenio Sirianni et al., (1991) BCSC Weekly Summary, Vol. 91:40, page 7, the Commission found that reports produced by Analyzer regarding trading through the Exchange are reliable and accurate and can be accepted as evidence in hearings before the Commission.  We accept the reports of Analyzer, produced by Exchange staff member Ross Alexander, as evidence of trading activity in the shares of Yellow Point and Riviera by the Accounts during the Trading Period.

      The Analyzer evidence was summarized by Commission staff member Martin Eady.  This evidence demonstrated that during the relevant period the Accounts dominated trading in the market for both Riviera and Yellow Point.

      During the Trading Period 3,233,085 shares of Riviera were traded on the Exchange.  The Accounts purchased 1,139,000 (35.2 per cent) and sold 1,460,700 (45.2 per cent) of these shares, making them net sellers of over 300,000 shares.  The Accounts were on one or both sides of 969 (69.9 per cent) of the 1,387 trades on the Exchange during the Trading Period. During the Trading Period, the Accounts were on both sides of 135 trades.

      During the Trading Period, 3,885,230 shares of Yellow Point were traded on the Exchange.  The Accounts purchased 1,108,200 (28.5%) and sold 1,125,200 (29.0%) of these shares during the Trading Period.  The Accounts were on one or both sides of 533 (41.0%) of the 1,299 trades on the Exchange during the Trading Period.  During the Trading Period, the Accounts were on both sides of 63 trades.

      The Accounts were the price leaders in Riviera trading:

70% of the 480 upticks in the price of Riviera shares during the Trading Period were on purchases by the Accounts and 76.9% of the total new highs for Riviera during this time occurred on purchases by the Accounts.  For example, on May 1, 1992, the closing Riviera trade was made from one of the Accounts to another, establishing a new high for the day.

      The Accounts were also the price leaders in Yellow Point:

42.7% of the 344 upticks in the shares of Yellow Point during the Trading Period were on purchases by the Accounts and 45.7% of the total new highs for Yellow Point during this period occurred on purchases by the Accounts.  As an example of the price leadership in Yellow Point, the Accounts engineered every single uptick on March 25.  The same occurred on March 26 with the exception of one trade.

      A review of Analyzer indicates that on May 15, investor Robert Houston purchased a total of 7,500 Riviera shares from the Accounts, on May 19, he purchased a total of 5,000 Riviera shares from the Accounts and on May 25 he purchased a total of 9,000 Riviera shares from the Accounts.

      Each of the brokers who testified regarding the trading in the Accounts was aware at the time that the trading was often irrational, serving no apparent investment or economic purpose.  Arnie Fehr, of Pacific International Securities Inc., a broker through whom Douglas Newsom conducted considerable trading, said that, after bringing his initial concerns about Donald and Douglass trading to their fathers attention, he believed and was satisfied with Richards explanation that, "I know what theyre doing. Ive instructed them.  Ive taught them myself.  Everything is above board the way its supposed to be", and "If there is any problems, let me know, but what they do, they do it in my authority."  Despite concerns,  all of the brokers who executed these trades testified that they were unaware of any impropriety in the Accounts.

2.6  Stock Options

      Throughout 1991 and 1992, Pessl, on Richard Newsoms instructions, caused Riviera, Yellow Point and TTC to distribute hundreds of thousands of options to several individuals, including the Newsoms, Ellison and Jolly. Reports of exempt distribution were filed under the Act, represented that the options were being distributed in reliance upon the prospectus exemption set out in section 55(2)(9) of the Act, namely that the options were entitled to receive the options as employee incentives.  This was not true. None of the optionees were employees of these issuers.

      The options, although issued in the names of Atlantic employees like Ellison and Jolly, were beneficially owned by the Newsoms.  Ellison and Jolly did not receive or pay for the options or the shares issued upon the exercise of the options. They signed stock powers of attorney to effectively transfer the shares to the Newsoms as soon as they were issued.

2.7  Insider Reports

      Commission staff testified that the Accounts held more than 10% of the issued and outstanding shares of Riviera as of April 30, 1992 and as of August 31, 1992.  A review of Commission files indicates that no insider reports were filed by any of the Newsoms regarding Riviera shareholdings in the Accounts.

3.  ANALYSIS AND FINDINGS

Our analysis and findings are focused on the following issues:

1.		Did Donald and Douglas Newsom advise in the securities of Riviera, Yellow Point, and TTC without being registered, contrary to section 20 of the Act?
2.		Did Donald and Douglas Newsom telephone from within the Province to residences for the purposes of trading in securities, contrary to section 34 of the Act?
3.		Did Douglas Newsom, with the intention of effecting a trade in a security, give an undertaking relating to the future value of that security contrary to section 35 of the Act?
4.		Did Richard Newsom contravene section 70 of the Act in failing to file insider reports in respect of his holdings of Riviera during the Relevant Period?
5.		Did Richard, Donald and Douglas Newsom participate in a scheme during the Trading Period relating to the trading of shares of Yellow Point and Riviera when they knew, or oughtto have known, that the scheme would create or result in a misleading appearance of trading activity in, or an artificial price for, the shares of Riviera or Yellow Point, contrary to section 41.1 of the Act?

      Commission staff alleged that Donald and Douglas Newsom were advising in the securities of Yellow Point, Riviera and TTC without being registered, contrary to section 20 of the Act.

      Section 1 of the Act defines "adviser" as a person engaging in, or holding himself out as engaging in, the business of advising another with respect to investment in or the purchase or sale of securities.

      Section 20(1)(c) of the Act provides that "no person shall act as an adviser unless he is registered as

(i)		an adviser,
(ii)		a partner, director or officer of a registered adviser and is acting on behalf of that adviser

      Section 14 of the Securities Regulation, B.C. Reg. 270/86, requires advisers to be in registered in one or more of the following categories:

(a)		investment counsel - a person who engages in or holds himself out as engaging in the business of advising others as to the investing in or buying or selling of specific securities or who is primarily engaged in giving continuous advice on the investment of funds on the basis of the particular objectives of each client;
(b)		portfolio manager - a person who is managing the investment portfolio of clients through discretionary authority granted by them; or
(c)		securities adviser - a person who engages in or holds himself out as engaging in the business of advising others through direct advice or through publications as to the investing in or buying or selling of specific securities, not purporting to be tailored to the needs of specific clients.

      Registrants are also obliged to comply with comprehensive conflict of interest rules set out in Part 13.1 of the Regulation.  These rules require registrants to disclose to their clients certain defined relationships they may have with other parties in a securities transaction, as well as any interests that may create a conflict with the duty registrants have to their clients.  Every registrant, in accordance with these regulations, must file and provide to each client, a Conflict of Interest Rules Statement that clearly discloses these defined relationships and describes the time and manner by which disclosure must be made of a conflict of interest relating to a particular securities transaction.  For example, where a registrant is advising a client with respect to a purchase of a security, and the security may be purchased from the registrant or one of its officers or employees, that fact must be disclosed to the client before advice is given.  For example, Douglas Newsom would have been obliged to disclose to Houston the fact that Houston may be purchasing from the Accounts the very Riviera securities Newsom was urging him to buy.  This is the kind of information a client should, and is entitled to, know.  Analyzer in fact confirmed that Houston did purchase over 21,000 Riviera shares from the Accounts between May 14 and 26, 1992.

      All of these provisions are intended to ensure that the investing public receives expert advice and ethical treatment from persons engaged in the securities business by imposing levels of competence and minimum standards of conduct for each category.  It is through the registration requirement that discipline can be imposed on those failing to meet these standards.

      Requiring persons in the business of advising to be registered under the Act is a fundamental part of the regulatory scheme to protect investors from fraudulent, abusive and unfair practices.  The purpose of registration is well settled.  It was described by Fauteux J. in the Supreme Court of Canada case of Gregory & Co. Inc. v. Quebec Securities Commission [1961] S.C.R. 584 at p. 588:

The paramount object of the Act is to ensure that persons who, in the province, carry on the business of trading in securities or acting as investment counsel, shall be honest and of good repute and, in this way, to protect the public, in the province or elsewhere, from being defrauded as a result of certain activities initiated in the province by persons therein carrying on such a business.

      The concise Oxford Dictionary of Current English (1990 ed.) defines "advice" as "words given or offered as an opinion or recommendation about future action or behaviour...".  As indicated by the definition of "advice", the nature of the information given or offered by a person is the key factor in determining whether that person is advising with respect to investment in or the purchase or sale of securities.  A person who does nothing more than provide factual information about an issuer and its business activities is not advising in securities.  A person who recommends an investment in an issuer or the purchase or sale of an issuers securities, or who distributes or offers an opinion on the investment merits of an issuer or an issuers securities, is advising in securities.  If a person advising in securities is distributing or offering the advice in a manner that reflects a business purpose, the person is required to be registered under the Act.

      Further guidance as to what kind of activity falls within the definition of advising can be had from the description of the registrant categories themselves as well as those regulations that prescribe standards of conduct for advisers. Determining whether specific acts constitute advising within these parameters then becomes simply a question of fact.

      In this case there is ample evidence for us to conclude that Donald and Douglas Newsom, through the provision of Atlantics "investor relations services", were in the business of advising, and did advise, individuals to buy and sell securities of Yellow Point, Riviera and TTC.  Indeed, Atlantics operation was simply a typical boiler room where the Newsoms conducted a concentrated publicity campaign designed to hype these issuers and induce participation in the market they had artificially created.  They accomplished this in part by using young and untrained individuals who were not qualified to assess investment suitability or risk.  They made, or caused to be made, false statements about these issuers affairs, frequently representing to investors that they were privy to undisclosed information.  All of this activity was under the guise of legitimate "investor relations".

      We are of the view that the activities of Donald and Douglas Newsom, individually and collectively, fall within the meaning of advising under the Act and are activities that the Legislature intended to regulate.

      Atlantics investor relations or promotional services were clearly designed to induce the public to invest in the companies being promoted.

      Telephone calls and mailouts to individuals urged them to invest in or to buy and sell Yellow Point, Riviera and TTC shares, and offered advice and opinions regarding the investment merits, prospective share price, potential profits and expected rates of return for these issuers.  For example, Douglas Newsom advised Houston to sell all his blue chip stocks, cash in his pension plan and "fill your boots" with Riviera shares on the representation that Riviera would be "going phenomenal" within one week, at which time he predicted share prices would double.  Also Reimer received a tout sheet from Donald Newsom containing similar opinions regarding TTCs prospects, future earnings and potential share price.

      The distribution of promotional literature such as the Yellow Point corporate brochure, was not purported to be tailored to the specific needs of individuals but offered advice and opinions on the investment merits of Yellow Point to potential investors.

      Douglas and Donald Newsom were not registered as advisers under the Act.  However in the process of delivering Atlantics "investor relations" services they were in the business of advising others with respect to investment in, or the purchase of securities of, Yellow Point, Riviera and TTC within the meaning of the Act.  As consequence of acting as advisers without being registered, they breached section 20 of the Act.

      Although it was not alleged in the notice of hearing it appears that Atlantic and Richard Newsom were also in the business of advising and ought to have been registered under the Act.

3.2

Telephoning Residences and Giving Undertakings as to Future Value For the Purpose of Trading

      Section 34 of the Act states that no person shall telephone from within the Province to any residence within or outside the Province for the purpose of trading in a security. In the course of advising individuals like Reimer and Houston to invest in the securities of Yellow Point, Riviera and TTC, Donald and Douglas Newsom, with other Atlantic employees, routinely made cold calls to residences within and outside the Province during the Trading Period, contrary to section 34 of the Act.

      Section 35 of the Act states that no person, with the intention of effecting a trade in a security shall give an undertaking, written or oral, relating to the future value or price of that security.

      The tape recorded calls to Houston from Douglas Newsom, which were representative of the calls Houston received from Douglas, lead us to conclude that representations like "...pick up all the Riviera you can... because tomorrow Im gonna make you a promise.... Your Rivieras gonna be trading somewhere in the dollar range" and  "...its trading now around 97, itll be trading over a buck today like I was telling you", were also  routinely made by Douglas in his effort to lure individuals to buy shares in the companies he was promoting.  By giving these undertakings as to future value to induce investment, we find that Douglas Newsom breached section 35 of the Act.

3.3  Insider Reports

      Commission staff alleged that, during the Trading Period, Richard Newsom was an insider of Riviera and failed to file insider reports as required by section 70 of the Act.  The relevant statutory provisions are as follows.

      Under section 1 of the Act an insider of an issuer is defined as, inter alia, "a person whose control, or direct or indirect beneficial ownership, or a combination of that control and ownership, over securities of the issuer extends ... to securities carrying more than 10% of the voting rights attached to all that issuers outstanding voting securities".

      Section 70(2) of the Act requires that an insider of a reporting issuer file an insider report within 10 days of becoming an insider disclosing any direct or indirect beneficial ownership of, or control or direction over, securities of the issuer (his "holdings").

      Section 70(4) of the Act requires an insider to file an insider report within 10 days after the end of a month in which there is any change in his holdings, disclosing the changes and disclosing his holdings at the end of the month, so long as he was an insider of the reporting issuer at any time during that month.

      Riviera shares held by the Accounts exceeded 10 per cent on April 30, 1992.  As can be seen in the following section, we have concluded that Richard, Donald and Douglas Newsom were acting in concert with respect to trading in the securities of Riviera.  With Richard Newsom providing overall direction, the Newsoms exercised control over the Accounts.  No insider reports were filed by Richard Newsom in respect of the holdings in the Accounts.  We find that Richard Newsom failed to file insider reports as required by section 70 of the Act when he controlled or directed more than 10% of the outstanding shares of Riviera.

      As this Commission has noted in earlier decisions, insider reports are a important method of informing the public about material information relating to a company.  We do not consider the contravention of section 70 by Richard Newsom to be insignificant.  Trading by the Accounts was the dominant factor in the market during the Trading Period.  The comments by the Commission in its decision In the Matter of Robert Theodore Slavik, (1990) BCSC Weekly Summary, Vol. 90:28 are equally appropriate here:

Failure of an insider to file reports under section 70 of the Act suppresses the disclosure of important information about the trading activities of a person closely associated with the issuer.  Disclosure of trading by insiders is a key element of the system of continuous disclosure concerning the affairs of reporting issuers.  Contravention is particularly serious when, as in this case, the insider is trading significant volumes of shares.

3.4

Acting in Concert to Create a Misleading Appearance of Trading Activity - The Manipulation

      Commission staff alleged that Richard, Douglas and Donald Newsom acted in concert in carrying out a scheme which was designed to, and did, create a misleading appearance of trading activity and an artificial price for the shares of Riviera and Yellow Point during the Trading Period.

      The first issue to be determined is whether Richard, Donald and Douglas Newsom were acting in concert with respect to trading in the securities of Yellow Point and Riviera.

      In our view, it is a question of fact whether persons are acting in concert for the purpose of trading in particular securities.  In this case, there is more than sufficient evidence for us to conclude that Richard, Douglas and Donald Newsom were acting in concert regarding their trading activity in Yellow Point and Riviera shares.

      First and foremost, Atlantic's boiler room operation was a family business orchestrated under Richard Newsom's general authority.  The business at times operated out of Douglas Newsom's home in Ferndale, Washington.  There was no doubt that Richard was the boss and that Atlantic was his business. He hired and paid young friends of his sons like Jolly and Ellison.  Douglas and Donald followed Richard's instructions as to the direction Atlantic's daily promotional activities were to take.  They in turn would communicate these instructions to the other employees and "set the tone for the day"

      The Newsoms' common purpose with respect to Yellow Point and Riviera is given by the very purpose of their running the boiler room and having control and direction over more than 13 family and nominee brokerage accounts.  They simply wanted to profit by controlling the market in these shares.  During the Trading Period the Accounts dominated the market in both Riviera and Yellow Point.  Most telling of their common purpose was the intra-group activity between the Accounts. This included not only the trading between the Accounts, but numerous transfers of securities and profits or debits at any of Donald, Douglas or Richard Newsoms' direction.  Jolly or Ellison did not have the financial ability to pay for the thousands of dollars in transactions which occurred in their various accounts nor did the Newsoms, or brokers, expect them to.  Some of Jolly's and Ellison's account statements were sent directly to Atlantic's offices.

      Douglas kept a detailed record of the daily trading in the Accounts on his spreadsheet.  Clearly the Accounts were considered family accounts by the Newsoms and the brokers they dealt with.  Richard himself, in defending his sons' trading activity in the Accounts to a broker, acknowledged the commonality of their activity by acknowledging his supervisory role: "If there is any problems, let me know, but what they do, they do it in my authority"

      To facilitate the Newsoms' control of the market in these shares, Richard's stepdaughter, Pessl, was conveniently a director and officer of Yellow Point and Riviera.  Pessl's company provided the administrative services and Atlantic provided the "investor relations" services.  Their efforts were co-ordinated.  Atlantic, Riviera, Yellow Point and Pessl all shared office space.  Following Richard's instructions Pessl improperly issued employee options in Riviera and Yellow Point to the Newsoms, Jolly and Ellison.  The options issued to Jolly and Ellison were exercised, and intended to be exercised, by the Newsoms.  The options were used to gain control of more shares of Riviera and Yellow Point, shares which were delivered into the Accounts.

      All of this evidence leads us to conclude that the Newsoms were acting in concert regarding their trading activity in the shares of Riviera and Yellow Point.

      The second issue is whether trading in the Accounts had the effect of creating a misleading appearance of trading in, or artificial price for, the shares of Riviera and Yellow Point.

      In our view the evidence makes it abundantly clear that the trading activity by the Accounts had the effect of creating a misleading appearance of trading activity in, and an artificial price for, the shares of Yellow Point and Riviera.

      The evidence demonstrated that during the Trading Period the Accounts dominated trading in the market for both Riviera and Yellow Point.

      During the Trading Period 3,233,085 shares of Riviera were traded on the Exchange.  The Accounts purchased 1,139,000 (35.2%) and sold 1,460,700 (45.2%) of these shares, making them net sellers of over 300,000 shares.  The Accounts were on one or both sides of 969 (69.9%) of the 1,387 trades on the Exchange during the Trading Period.

      During the Trading Period, 3,885,230 shares of Yellow Point were traded on the Exchange.  The Accounts purchased 1,108,200 (28.5%) and sold 1,125,200 (29.0%) of these shares during the Trading Period.  The Accounts were on one or both sides of 533 (41.0%) of the 1,299 trades on the Exchange during the Trading Period.

      Over the 3 month Trading Period, the Accounts engaged in 135 trades of Riviera where they were on both sides of the trade.  During the same period they conducted 63 trades of Yellow Point where they were on both sides of the trade.  All of these intra-group trades were fictitious trades.

      The Accounts were the price leaders in Riviera trading:

70% of the 480 upticks in the price of Riviera shares during the Trading Period were on purchases by the Accounts and 76.9% of the total new highs for Riviera during this time occurred on purchases by the Accounts.  For example, on May 1, 1992, the closing Riviera trade was made from one of the Accounts to another, establishing a new high for the day.

      The Accounts were also the price leaders in Yellow Point:

42.7% of the 344 upticks in the shares of Yellow Point during the Trading Period were on purchases by the Accounts and 45.7% of the total new highs for Yellow Point during this period occurred on purchases by the Accounts.

      The aggressiveness of price leadership by the Accounts was highlighted on March 25 and 26 where the Accounts engineered every single uptick in Yellow Point except one. These successively higher bids were made without any legitimate underlying demand.  The fact that the Newsoms engaged in this conduct to create the appearance of a active market and to raise the bid for Riviera and Yellow Point was vividly illustrated in Ellison' s describing Douglas' "little game" of advancing the bid with the effect of increasing the price and attracting further trading interest.

      Over the Trading Period, the Newsoms engaged in intra - group trading through the Accounts buying at increasing prices despite high transaction costs.  The Accounts created a demand where there was no demand.  The trading by the Accounts during the Trading Period was often irrational with no economic purpose other than to have a enormous illusory effect on the reported trading activity in Riviera and Yellow Point shares. The trading activity in the Accounts by the Newsoms succeeded in pushing the trading price of Riviera from $0.60 to $2.35 and the price of Yellow Point from $0.40 to $1.25 in three months.  A review of the companies' affairs during the Trading Period provides no information, other than the Newsom's trading, that would explain the substantial increase in the price at which Riviera and Yellow Point were trading.  Both companies issued news releases stating that there were no material changes that would account for the strong fluctuations in the trading prices of their shares.

      We find that the trading by the Newsoms through the Accounts created a misleading appearance of trading activity in, and an artificial price for, the shares of Riviera and Yellow Point during the Trading Period, contrary to section 41.1 of the Act.

      The last issue concerns the Newsoms' knowledge and intent.  In our view the evidence shows that the Newsoms knew, and indeed intended, to create a misleading appearance of trading activity in, and an artificial price for, the shares of Yellow Point and Riviera during the Trading Period.

      A litany of classic manipulative practices initiated and continued by the Newsoms throughout the Relevant Period confirms our view.  Although all have been mentioned earlier throughout these reasons, a brief review is useful.

      Atlantic, the business providing the "investor relations" services, was controlled by the very individual orchestrating the manipulation.  These "investor relations" services were the typical boiler room fare consisting of:

	-    a specific marketing scheme designed to hype the market and induce the public to invest;
	-    the use of young and inexperienced individuals to implement the scheme;
	-    obtaining extensive mailing lists to ensure a large potential pool of unsuspecting investors; and
	-    subjecting those on the list to an aggressive telephone and mail campaign that consisted of:  cold calling; high pressure sales pitches emphasizing the necessity of immediate action with no time to consider the decision to buy or sell; the suggestion that investors were privy to information not yet disclosed to the public; false or misleading statements about the companies' business activities and prospects, assets, potential earnings, and future share prices; guaranteed investment returns and future share prices; and the suggestion of no or little risk.

      The Newsoms' trading activities complemented their boiler room antics.  To advance the scheme on this front they deliberately:

	-    obtained control and direction over at least 13 brokerage accounts, including nominee accounts;
	-    effected numerous transactions between the Accounts, including the transfer of securities, debits and profits;
	-    dominated the market through trading in the Accounts; this included high volumes of fictitious intra-group trading, price leadership, and high closings;
	-    increased the price of Riviera and Yellow Point shares to such an extent during the Trading Period that share price bore no rational relationship to the value of the companies; and
	-    failed to file insider reports while trading significant volumes of shares.

4.   DECISION

      Fair and orderly markets are dependent upon bona fide transactions between persons dealing at arm's length.  As stated by the SEC in Re Edward Mawod & Co. 46 SEC 865, (1977), aff'd., 591 F.2d588 (10th Cir. 1979) at 871 - 872:

When investors and prospective investors see activity, they are entitled to assume that it is real activity. They are also entitled to assume that prices that they pay and receive are determined by the unimpeded interaction of real supply and real demand so that those prices are the collective marketplace judgements that they purport to be.  Manipulations frustrate these expectations.  They substitute fiction for fact ... the vice is that the market has been distorted and made into 'a stage-managed performance.'

      The Newsoms used blatant manipulative practices to defeat the fundamental principles of securities regulation.  In doing so they breached sections 20, 34, 35, 41.1 and 70 of the Act.

      While the Newsoms stood to gain, the public stood to lose from these deliberately deceptive and unfair trading practices.  Neither their gain nor the public's loss can be ascertained reliably by the evidence available to the Commission in this hearing.  The only thing that is clear is that the dramatic price increases in Riviera and Yellow Point in the spring of 1992 were followed by equally dramatic declines in the summer.

      The penalty imposed by the Commission in this case must serve to deter not only the Respondents but any like minded people from perpetrating such blatantly unscrupulous practices on the capital markets.  Although each of Richard, Douglas and Donald Newsom knowingly participated in this conduct, there are nonetheless some distinctions to be bear in mind when considering what orders should be made in the public interest.

      Richard Newsom was by far the most experienced market participant and was the initiating and guiding hand in this manipulative scheme.  Without his participation, others would not have been drawn in.  When necessary he used and misled employees like Ellison and Jolly.  He had no compunction in introducing these young inexperienced individuals, including his sons, to unscrupulous conduct.  He passed on his disregard for the unsuspecting investor and his contempt for regulatory compliance.  The only interest he considered protecting was his own.  His conduct merits the severest consequence.

      Douglas and Donald Newsom willingly walked in their father's footsteps.  They implemented his every direction and in turn instructed those employees under them in the tools of the boiler room trade.  In doing so, both breached sections 20 and 34 of the Act.  Douglas also breached section 35 of the Act.  Their egregious conduct however did not stop there. Again, hand in hand with their father, they engaged in a variety of manipulative trading practices through a substantial number of controlled accounts.  Their conduct cannot be condoned or permitted to occur again to the detriment of the public markets.  Their conduct also merits severe sanction.

      The Commission considers it to be in the public interest to remove the Newsoms from the market for a substantial period of time and to impose significant administrative penalties under section 144.1 of the Act.

      The Commission considers that it is in the public interest to order:

(a)		under section 144(1)(c) of the Act that the exemptions described in sections 30 to 32, 55, 58, 80 and 81 of the Act do not apply to Richard Newsom or Atlantic for 25 years from the date of this decision and do not apply to Douglas Newsom or Donald Newsom for 20 years from the date of this decision;
(b)		under section 144(1)(d) of the Act that Richard Newsom is prohibited from becoming or acting as a director or officer of any issuer for 25 years from the date of this decision and that Douglas Newsom and Donald Newsom are each likewise prohibited for 20 years from the date of this decision;
(c)		under section 144.1 of the Act that Richard Newsom pay an administrative penalty of $75,000 and that Douglas Newsom and Donald Newsom each pay an administrative penalty of $25,000; and
(d)		under section 154.2 of the Act that Richard, Douglas and Donald Newsom pay the prescribed fees or charges for the costs of or related to the hearing incurred by the Commission and the Superintendent, the amount to be determined following further submissions from the parties.