Initiated By
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Allegations
SEC Admin Release 34-63980, February 25, 2011: The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"), against Danielle Bionda Hughes. Jason Claffey, through his company, JDC Swan, acquired a total of over 9.8 billion shares of Advanced Optics Electronics Inc. ("ADOT") in private transactions directly with the company. None of the 9.8 billion ADOT share certificates bore a restrictive legend. Claffey contacted Michael Buonomo to open a securities account at Divine for the purpose of liquidating shares of bulletin board and pink sheet companies. Hughes and Buonomo did not know Claffey and conducted no due diligence into the securities he intended to sell. Nevertheless, Hughes approved the opening of the JDC Swan account. The same day, Buonomo, with Hughes' approval, began publicly offering and selling unregistered shares of ADOT through Claffey's JDC Swan account. Buonomo offered and sold a total of over 9.8 billion shares of ADOT on behalf of JDC Swan, without a registration statement in effect or on file and with no valid exemptions, generating over $60,000 in commissions and other remuneration for Divine on sale proceeds of over $2 million. All of the offers and sales made use of means or instruments of transportation or communications in interstate commerce or of the mails. Hughes failed reasonably to supervise Buonomo by ignoring red flags. From the inception of the account, Hughes ignored red flags that the ADOT sales constituted an unregistered distribution. Hughes hired a new chief compliance officer who alerted her on several occasions to the large number of ADOT shares flowing through the JDC Swan account. Hughes took no steps to prevent the sales or to ensure that the sales were either registered or exempt from registration. Hughes and Divine failed reasonably to supervise Buonomo by maintaining inadequate supervisory procedures. Hughes was responsible for developing and maintaining the firm's supervisory policies and procedures. Throughout the relevant period, Divine's supervisory policies were inadequate to provide guidance to supervisors regarding the appropriate inquiry to determine whether the public sale of shares acquired directly or indirectly from an issuer was prohibited by Section 5 of the Securities Act. The supervisory procedures also failed to address situations in which certificates without restrictive legends were acquired by a customer from an issuer with a view to distribution. If Hughes and Divine had developed reasonable policies and procedures requiring appropriate due diligence in situations in which a customer sold large blocks of illiquid stock in a little-known company and prohibited re-sales of such shares, the firm likely would have prevented and detected Buonomo's violations of Section 5. As a result of her conduct, Hughes failed reasonably to supervise Buonomo with a view to detecting and preventing Buonomo's violations of Section 5(a) and (c) of the Securities Act.
Resolution
Order
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$25,000.00
Sanctions
Suspension
Registration Capacities Affected
Any Supervisory capacity with any Broker or Dealer
Duration
FOUR MONTHS
Start Date
9/5/2011
End Date
1/4/2012
Registration Capacities Affected
Any Supervisory capacity with any IA, municipal securities dealer, municipal advisor, transfer agent, or NRSRO
Duration
FOUR MONTHS
Start Date
8/15/2011
End Date
12/14/2011
Sanctions
Undertaking
Broker Comment
NO HARM WAS DONE TO ANY CUSTOMER OF DIVINE, AND THERE WAS NO MONETARY GAIN REALIZED OTHER THAN THE RECEIPT OF ORDINARY BROKERAGE COMMISSIONS.