The U.S. Securities and Exchange Commission announced today that it has issued an order revoking the registration of Republic New York Securities Corp., a New York-based broker-dealer that is now a subsidiary of HSBC USA.

The commission found that Republic Securities violated federal securities laws by participating in a massive Ponzi scheme operated by Martin Armstrong. In September 1999, the commission charged Armstrong and two companies he controlled, Princeton Economics International and Princeton Global Management, in an emergency action alleging that they defrauded scores of Japanese companies that had invested billions of dollars in Princeton Global Management notes.

In the parallel criminal proceeding, the Office of the U.S. Attorney for the
Southern District of New York today announced a guilty plea by Republic Securities. As part of the resolution of the criminal case, Republic Securities has agreed to pay US$606 million in restitution to defrauded investors. The Commodity Futures Trading Commission also announced a related enforcement action against Republic Securities today. In settling the commission’s enforcement action, Republic Securities neither admitted nor denied its findings.

The commission found that from 1995 through 1999 Republic Securities engaged in a fraudulent scheme involving hundreds of accounts opened by Armstrong at Republic Securities for investors’ funds. It revoked the firm’s registration as a broker-dealer, and in recognition of the restitution paid by the firm in the criminal case, which far exceeded the firm’s profits from its handling of Armstrong’s account, and the firm’s cooperation with the investigation, it did not seek monetary sanctions from the firm.

http://www.sec.gov/news/digest/12-17.txt