Initial Decision Release No. 1349

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Administrative Proceeding

File No. 3-17888

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

William D. Bucci

Initial Decision of Default

February 12, 2019

Appearances:

Christopher R. Kelly for the Division of Enforcement,

Securities and Exchange Commission

Before:

James E. Grimes, Administrative Law Judge

Summary

I grant the Division of Enforcement’s motion for default and sanctions.

Respondent William D. Bucci is barred from associating with a broker,

dealer, investment adviser, municipal securities dealer, municipal advisor,

transfer agent, or nationally recognized statistical rating organization, and

from participating in an offering of penny stock.

Procedural Background

The Securities and Exchange Commission initiated this proceeding in

March 2017, when it issued an order instituting proceedings (OIP) under

Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f ) of the

Investment Advisers Act of 1940.1 This is a follow-on proceeding based on

Bucci’s June 2016 guilty plea in the United States District Court for the

Eastern District of Pennsylvania.2

OIP at 1; see 15 U.S.C. §§ 78o(b), 80b-3(f ).

See United States v. Bucci, No. 2:14-cr-191 (E.D. Pa.).

A different administrative law judge originally presided over this

proceeding and issued an initial decision of default.3 But the Commission

vacated that decision following the Supreme Court’s decision in Lucia v.

SEC,4 and the matter was reassigned to me to provide Bucci with the

opportunity for a new hearing.5 Bucci was directed to propose how further

proceedings should be conducted,6 but he never submitted a proposal or filed

an answer.7 Thereafter, I found that Bucci had been served with the OIP and

ordered him to show cause why the proceeding should not be determined

against him due to his failure to answer the OIP or otherwise defend the

proceeding.8

After Bucci failed to respond to the order to show cause or participate in

a prehearing conference,9 the Division filed a motion for default and

sanctions, supported by a declaration and five exhibits.10 In conducting this

proceeding and considering the Division’s motion, I have given no weight to

the opinions, orders, or rulings issued by the prior administrative law

judge.11

William D. Bucci, Initial Decision Release No. 1144, 2017 WL 2572436

(ALJ June 14, 2017).

138 S. Ct. 2044 (2018); see Pending Admin. Proc., Securities Act of 1933

Release No. 10536, 2018 WL 4003609, at *1 (Aug. 22, 2018).

Pending Admin. Proc., Admin. Proc. Rulings Release No. 5955, 2018 SEC

LEXIS 2264, at *2–3 (ALJ Sept. 12, 2018).

William D. Bucci, Admin. Proc. Rulings Release No. 5979, 2018 SEC

LEXIS 2322, at *1 (ALJ Sept. 14, 2018).

William D. Bucci, Admin. Proc. Rulings Release No. 6225, 2018 SEC

LEXIS 2895, at *1 (ALJ Oct. 18, 2018).

Id. at *1–2.

William D. Bucci, Admin. Proc. Rulings Release No. 6317, 2018 SEC

LEXIS 3189, at *1 (ALJ Nov. 9, 2018).

The exhibits are cited as “Div. Ex. _” using the documents’ internal

pagination.

See Pending Admin. Proc., 2018 WL 4003609, at *1.

Findings of Fact

The findings and conclusions in this initial decision are based on the

record and on facts officially noticed.12 Because Bucci is in default, I have

deemed true the allegations in the OIP and, consistent with Commission

precedent, will rely on those allegations in conjunction with other evidence in

the record developed since the proceeding was reassigned to me.13 That other

evidence includes the facts admitted when Bucci pleaded guilty in the

criminal action that serves as the basis for this proceeding,14 and the facts

found by the district court during sentencing.15 In making the findings below,

I have applied preponderance of the evidence as the standard of proof.16

For at least a decade Bucci was an active participant in the securities

industry. He was a registered representative of Ryan Beck & Company from

April 2002 through April 2007, of Oppenheimer & Company from April 2007

through August 2011, and of Financial Network Investment Corporation

from August 2011 through May 2012.17 All three companies were registered

with the Commission as broker-dealers and investment advisers when Bucci

17 C.F.R. § 201.323.

See Pending Admin. Proc., 2018 WL 4003609, at *1; see also 17 C.F.R.

§ 201.155(a); David E. Lynch, Exchange Act Release No. 46439, 2002 WL

1997953, at *1 & n.12 (Aug. 30, 2002) (instructing that, “if additional

evidence is adduced in a proceeding against a respondent” who is in default,

“the decisionmaker properly should consider that evidence in the

determination of the proceeding”).

In pleading guilty, Bucci stipulated to certain facts specified in a written

plea memorandum and supplemented by his counsel during the plea colloquy.

See Div. Exs. 1, 2. I therefore rely on those facts rather than the facts alleged

in the second superseding indictment. See, e.g., United States v. White, 408

F.3d 399, 402–03 (8th Cir. 2005) (finding that a defendant’s guilty plea did

not constitute an admission to facts that the defendant disavowed during his

plea hearing); Valansi v. Ashcroft, 278 F.3d 203, 216 n.10 (3d Cir. 2002)

(recognizing that a defendant “may . . . plead guilty to only one of the

allegations required to prove an element of her crime”).

See Div. Ex. 5.

See John Francis D’Acquisto, Advisers Act Release No. 1696, 1998 WL

34300389, at *2 (Jan. 21, 1998).

OIP at 1–2.

was associated with them.18 And for most of that time, Bucci was operating a

patchwork scheme to defraud his clients, friends, and family.19

From 2004 through 2011, Bucci promised prospective investors that they

would earn “as much as 10% annual interest” with return of principal within

two or three years.20 But instead of investing his investors’ money in real

estate or an olive oil and wine business as promised, Bucci used it to pay

principal and interest on his substantial preexisting indebtedness.21 He did

not disclose these debts to his investors before they invested.22 And even

when pressed for financial records by disgruntled investors, he disclosed only

his debts to financial institutions, omitting his substantial debts to personal

lenders.23 He continued to promise repayment even when he “had little

reasonable expectation that he would be able to repay outstanding debts.”24

Bucci later acknowledged that the information that he concealed from

prospective investors was material to their decision to invest.25

On June 8, 2016, Bucci pleaded guilty to one count of securities fraud in

violation of Exchange Act Section 10(b) and Rule 10b-5, four counts of mail

fraud, and one count of mortgage fraud.26 He stipulated to facts sufficient to

establish the elements of those offenses, including using a device or scheme to

defraud in connection with the purchase or sale of a security.27 He also

pleaded nolo contendere to five counts of submitting a false tax return.28

Id.

Div. Ex. 1 at 1.

Id. at 1–2

Id. at 1; Div. Ex. 2 at 48.

Div. Ex. 1 at 1–2

Id. at 2.

Id.

OIP at 2; Div. Ex. 1 at 1–2; see 15 U.S.C. §§ 78j(b); 18 U.S.C. §§ 1014,

1341; 17 C.F.R. § 240.10b-5.

Div. Exs. 1 at 2; 2 at 31–32, 43, 48–49.

OIP at 2; Div. Ex. 1 at 1; see 26 U.S.C. § 7206(1).

The district court sentenced Bucci to seventy-eight months’

imprisonment and ordered him to pay $3,011,951.24 in restitution to the

Internal Revenue Service and twenty-one identified victims.29 During the

sentencing hearing, the court found that “Mr. Bucci has not truthfully

admitted the conduct for which he is accountable” or “accept[ed]

responsibility,” and it was “not convinced that Mr. Bucci understands the full

magnitude of what he’s done.”30 The court further criticized Bucci for

“attempt[ing] to minimize, to some extent,” the number of people injured by

his scheme.31

Conclusions of Law

Under the Exchange Act, the Commission may impose collateral and

penny stock bars32 against Bucci if, as is relevant here, (1) he was associated

with or seeking to become associated with a broker or dealer at the time of

his misconduct; (2) he was convicted within ten years before the issuance of

the OIP of an offense “involv[ing] the purchase or sale of any security”; and

(3) imposing a bar is in the public interest.33 The Advisers Act gives the

Div. Ex. 4 at 2, 5–7.

Div. Ex. 5 at 93–94, 141.

Id. at 141.

A collateral bar, also referred to as an industry bar, is a bar that

prevents an individual from participating in the securities industry in

capacities in addition to those in which the person was participating at the

time of his or her misconduct. See Toby G. Scammell, Advisers Act Release

No. 3961, 2014 WL 5493265, at *1 & n.1 (Oct. 29, 2014).

15 U.S.C. § 78o(b)(4)(B)(i), (6)(A)(ii). Although Bucci’s misconduct began

before Congress conferred the authority to impose a collateral bar in the

Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L.

No. 111-203, 124 Stat. 1376 (2010), he continued to sell securities as part of

an ongoing fraudulent scheme for over a year after collateral bars were

authorized. See Bartko v. SEC, 845 F.3d 1217, 1220–21, 1224 (D.C. Cir. 2017)

(holding that a collateral bar cannot be imposed for wrongdoing committed

before July 22, 2010, the effective date of Dodd-Frank); Div. Ex. 1 at 1

(admitting that the scheme continued “through 2011”).

Commission similar authority with respect to a person associated with or

seeking to be associated with an investment adviser.34

The first two requirements are satisfied. During the entire duration of

Bucci’s fraudulent scheme, he was a registered representative of a series of

three companies that were dually registered as broker-dealers and

investment advisers.35 And, in 2016, Bucci pleaded guilty to securities fraud

based on that same scheme.36

The third requirement—the public’s interest—is also satisfied. In

making that determination, I have considered the factors discussed in

Steadman v. SEC37:

the egregiousness of the respondent’s actions, the

isolated or recurrent nature of the infraction, the degree

of scienter involved, the sincerity of the respondent’s

assurances against future violations, the respondent’s

recognition of the wrongful nature of his conduct, and

the likelihood that the respondent’s occupation will

present opportunities for future violations.38

I have also considered the deterrent effect of administrative sanctions.39 This

public interest inquiry is “flexible, and no one factor is dispositive.”40

15 U.S.C. § 80b-3(e)(4), (f ). The Advisers Act does not authorize

imposition of a penny stock bar.

Compare OIP at 1–2, with Div. Ex. 1 at 1; Div. Ex. 2 at 43.

OIP at 2; Div. Exs. 1 at 1–2, 4 at 1. Bucci also pleaded guilty to four

counts of mail fraud in 2016—an additional and independent basis for finding

the second requirement satisfied. See OIP at 2; 15 U.S.C. §§ 78o(b)(4)(B)(iv),

(6)(A)(ii), 80b-3(e)(2)(D), (f ).

603 F.2d 1126, 1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91

(1981); see Scammell, 2014 WL 5493265, at *5.

David R. Wulf, Exchange Act Release No. 77411, 2016 WL 1085661, at

*4 (Mar. 21, 2016) (citing Vladimir Boris Bugarski, Exchange Act Release

No. 66842, 2012 WL 1377357, at *4 & n.18 (Apr. 20, 2012)).

See Peter Siris, Exchange Act Release No. 71068, 2013 WL 6528874, at

*11 n.72 (Dec. 12, 2013), pet. denied, 773 F.3d 89 (D.C. Cir. 2014). Although

relevant, general deterrence is not determinative in assessing whether the

(continued…)

In weighing the public interest, I am mindful that “in most” cases

involving fraud, the public-interest analysis will weigh in favor of a “severe

sanction.”41 And because “[t]he securities industry presents continual

opportunities for dishonesty and abuse,” it “depends heavily on the integrity

of its participants and on investors’ confidence.”42 Investment advisers, in

particular, serve as fiduciaries who owe their clients “an affirmative duty of

‘utmost good faith, and full and fair disclosure of all material facts,’ as well as

an affirmative obligation to employ reasonable care to avoid misleading

clients.”43 Given the industry’s dependence on the integrity of its

participants, the duty investment advisers owe their clients, and the

confidence and trust investors necessarily place in investment advisers, the

Commission takes a particularly dim view of investment advisers who

defraud their clients.44 Evaluating the Steadman factors through this lens, it

is plain that collateral and penny stock bars are appropriate.

Bucci’s fraud was egregious and recurrent. He made promises regarding

repayment and rates of return that he knew were improbable, if not

public interest weighs in favor of imposing a bar. PAZ Sec., Inc. v. SEC, 494

F.3d 1059, 1066 (D.C. Cir. 2007).

Gary M. Kornman, Exchange Act Release No. 59403, 2009 WL 367635,

at *6 (Feb. 13, 2009) (quoting David Henry Disraeli, Securities Act Release

No. 8880, 2007 WL 4481515, at *15 (Dec. 21, 2007), pet. denied, 334 F. App’x

334 (D.C. Cir. 2009)), pet. denied, 592 F.3d 173 (D.C. Cir. 2010).

Siris, 2013 WL 6528874, at *11 n.71 (quoting Jeffrey L. Gibson,

Exchange Act Release No. 57266, 2008 WL 294717, at *7 (Feb. 4, 2008), pet.

denied, 561 F.3d 548 (6th Cir. 2009)).

Mark Feathers, Exchange Act Release No. 73634, 2014 WL 6449870, at

*3 (Nov. 18, 2014) (alteration in original) (quoting Tzemach David Netzer

Korem, Exchange Act Release No. 70044, 2013 WL 3864511, at *6 & n.53

(July 26, 2013)).

Conrad P. Seghers, Advisers Act Release No. 2656, 2007 WL 2790633, at

*7 (Sept. 26, 2007) (ultimately quoting Capital Gains Research Bureau v.

SEC, 375 U.S. 180, 194 (1963)), pet. denied, 548 F.3d 129 (D.C. Cir. 2008).

See James C. Dawson, Advisers Act Release No. 3057, 2010 WL 2886183,

at *4 (July 23, 2010) (“[W]e have consistently viewed misconduct involving a

breach of fiduciary duty or dishonest conduct on the part of a fiduciary, such

as the fraud committed by Dawson on his clients, as egregious.”).

impossible.45 He concealed information regarding his personal finances that

he knew would be material to investors.46 He exploited not only his adviseradvisee relationships, but personal relationships with friends and family.47 In

short, over the course of a decade, Bucci stole at least $3 million from over

twenty people who trusted him.48

The behavior that made Bucci’s fraud egregious also evidences a high

degree of scienter. He told investors that he was using their money to invest

in one thing—an olive oil and wine shop, real estate—when he was, instead,

using it to pay the personal debts that he had concealed from the same

investors.49 No matter how much he may have “hope[d]” to make up that

money from other deals, there can be no doubt that he knew as a long-time

industry professional that he was abusing his clients’ trust.50 Furthermore,

his Section 10(b) violation necessarily involved scienter.51

By defaulting in this proceeding, Bucci has neither made assurances

against future violations nor shown that he recognizes the wrongful nature of

his conduct. Insofar as there is any evidence relevant to his recognition of his

wrongdoing in the record, the district court found that he failed to accept

responsibility for his actions or to fully understand why his behavior was

wrong in the first place.

Moreover, allowing Bucci to remain in the securities industry would

present him with future opportunities for further misconduct and would put

the investing public at risk. In this regard, the fact of Bucci’s criminal

Div. Ex. 1 at 2.

Id. at 1–2.

Id. at 1.

See Id.; Div. Ex. 4 at 2, 5–7.

Div. Ex. 1 at 1–2.

Id.

See 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5; Aaron v. SEC, 446 U.S.

680, 701–02 (1980).

misconduct “raises an inference that” he will repeat it.52 That inference is

supported by my determination that Bucci’s conduct was egregious.53

Finally, imposing a bar will serve the Commission’s interest in deterring

others from engaging in similar misconduct.

In sum, Bucci’s egregious conduct harmed investors and if he were able

to remain in the industry, he would have the opportunity to cause additional

harm. The Commission’s interest in protecting the investing public would be

served by imposing a collateral and penny stock bar.

Order

The Division of Enforcement’s motion for default and sanctions is

GRANTED.

Under Section 15(b) of the Securities Exchange Act of 1934 and Section

203(f ) of the Investment Advisers Act of 1940, William D. Bucci is BARRED

from associating with a broker, dealer, investment adviser, municipal

securities dealer, municipal advisor, transfer agent, or nationally recognized

statistical rating organization.

Under Section 15(b) of the Securities Exchange Act of 1934, William D.

Bucci is BARRED from participating in an offering of penny stock, including

acting as a promoter, finder, consultant, agent, or other person who engages

in activities with a broker, dealer, or issuer for purposes of the issuance of

trading in any penny stock, or inducing or attempting to induce the purchase

or sale of any penny stock.

This initial decision will become effective in accordance with and subject

to the provisions of Rule 360.54 Under that rule, a party may file a petition for

review of this initial decision within twenty-one days after service of the

Korem, 2013 WL 3864511, at *6 n.50 (quoting Geiger v. SEC, 363 F.3d

481, 489 (D.C. Cir. 2004)).

See Geiger, 363 F.3d at 489 (holding that a finding of egregiousness

“justifies the inference” that misconduct will recur); Warwick Capital Mgmt.,

Inc., Advisers Act Release No. 2694, 2008 WL 149127, at *11 (Jan. 16, 2008)

(“The existence of a violation raises an inference that the violation will be

repeated, and where the misconduct resulting in the violation is egregious,

the inference is justified.”).

See 17 C.F.R. § 201.360.

initial decision. A party may also file a motion to correct a manifest error of

fact within ten days of the initial decision, pursuant to Rule 111.55 If a motion

to correct a manifest error of fact is filed by a party, then a party shall have

twenty-one days to file a petition for review from the date of the

undersigned’s order resolving such motion to correct a manifest error of fact.

The initial decision will not become final until the Commission enters an

order of finality. The Commission will enter an order of finality unless a

party files a petition for review or motion to correct a manifest error of fact or

the Commission determines on its own initiative to review the initial decision

as to a party. If any of these events occurs, the initial decision shall not

become final as to that party.

Bucci may move to set aside a default. Rule 155(b) permits the

Commission, at any time, to set aside a default for good cause, in order to

prevent injustice and on such conditions as may be appropriate.56 A motion to

set aside a default shall be made within a reasonable time, state the reasons

for the failure to appear or defend, and specify the nature of the proposed

defense in the proceeding. Such motion, if filed, should be directed to the

Commission, as the hearing officer may only set aside a default “prior to the

filing of the initial decision.”57

_______________________________

James E. Grimes

Administrative Law Judge

See 17 C.F.R. § 201.111.

17 C.F.R. § 201.155(b).

Id.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.