UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SEC Admin Release 34-80197 / March 10, 2017: The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Talman Harris ("Respondent" or "Harris"). The Division of Enforcement alleges that Between approximately February 2008 and November 2009, Respondent defrauded investors in Lenco Mobile Inc. ("Lenco"), an issuer with common stock registered pursuant to Section 12(g) of the Exchange Act that was subject to Exchange Act reporting obligations pursuant to Section 13(a). While acting as a registered representative associated with broker-dealers registered with the Commission, Respondent bought Lenco stock in his customers' accounts in exchange for undisclosed commissions paid to him by Lenco's principal. Respondent participated in an offering of Lenco stock, which was a penny stock. On February 7, 2017, a final judgment was entered against Harris, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in Civil Action Number 1:14-cv-07575, in the United States District Court for the Southern District of New York. On September 7, 2016, Harris was convicted of one count of conspiracy to commit securities fraud, 18 U.S.C. § 1348, and wire fraud, 18 U.S.C. § 1343, in violation of 18 U.S.C. § 1349; three counts of wire fraud in violation of 18 U.S.C. § 1343; and one count of obstruction of justice in violation of 18 U.S.C. §§ 2, 1503, before the United States District Court for the Northern District of Ohio, in Crim. Indictment No. 1:15-cr-335. On January 26, 2017, a judgment in the criminal case was entered against Harris. He was sentenced to a prison term of 60 months followed by five years of supervised release and ordered to make restitution in the amount of $843,423.91.

Decision

Bar (Permanent)

Any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

Indefinite

1/8/2021

Offering of penny stock

Indefinite

1/8/2021

Obstruction of Justice

Conviction for count 5 reversed and remanded by the Sixth Circuit Court of Appeals. The Government declined to seek retrial.

18 USC 1349 Conspiracy to Commit Securities and Wire Fraud; 18 USC 1348 Securities Fraud; 18 USC 1343 Wire Fraud

Convicted

Wire Fraud

Convicted

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission (the "Commission") alleges that this case concerns a series of sophisticated fraudulent schemes orchestrated by an individual and a series of confederates. These schemes involved the control and manipulation of the common stock of various microcap issuers, including Lenco Mobile Inc., with the ticker symbol LNCM ("Lenco"); Kensington Leasing, Ltd., with the ticker symbol KNSL ("Kensington Leasing"); Wikifamilies Inc., with the ticker symbol WFAM ("Wikifamilies"); Casablanca Mining Ltd., with the ticker symbol CUAU ("Casablanca"); Lustros Inc. with the ticker symbol LSTS ("Lustros"); and Gepco, Ltd., with the ticker symbol GEPC ("Gepco"). Collectively, these issuers will be referred to as the "Fraudulent Issuers." The schemes, which took place between approximately 2008 and 2014, followed the same general blueprint: the individual would cause each issuer to issue tens of millions of shares of restricted stock to him and his nominees, which he then used for two types of illegal distributions. In the first type of illegal distribution, the individual, along with his confederates, illegally sold the shares into the public market, often by inducing Harris, and others (the "Registered Representative Defendants"), to place buy orders in their customers' accounts with the purpose of matching trades with the individual's sales. In the second type of illegal distribution, the individual and his confederates paid unregistered individuals undisclosed commissions to sell his shares to investors in purported private placements. In both, the individual, the Registered Representative Defendants, and unregistered individuals frequently made misrepresentations and omissions to investors in connection with the sales of these shares. Harris directly or indirectly, singly or in concert, has engaged in acts, practices, and courses of business that constitute violations of Section 17(a)(2) and (a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder.

Judgment Rendered

Civil and Administrative Penalty(ies)/Fine(s)

Disgorgement

$775,104.00

Monetary Penalty other than Fines

Injunction

bar

FINRA

HARRIS WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT HE PREVENTED A REVIEW BY HIS MEMBER FIRM'S HOME OFFICE COMPLIANCE STAFF OF A WRITTEN CUSTOMER COMPLAINT BY MARKING THE EMAIL AS PRIVILEGED. THE COMPLAINT ALLEGES THAT HARRIS HAD AN OBLIGATION TO BRING THE CUSTOMER'S COMPLAINT LETTER TO THE ATTENTION OF THE FIRM'S COMPLIANCE STAFF SO THAT THEY COULD TAKE APPROPRIATE ACTION.

Decision

Civil and Administrative Penalty(ies)/Fine(s)

$50,000.00

Suspension

Any capacity

six months

12/19/2016

6/18/2017

Amended Default decision rendered October 18, 2016 wherein respondent Harris is suspended in all capacities for six months and is fined $50,000. The sanctions are based on findings that Harris prevented a review by his member firm's home office compliance staff of a written customer complaint by marking the email as privileged. The findings stated that Harris had an obligation to bring the customer's complaint letter to the attention of the firm's compliance staff so that they could take appropriate action. This default decision is amended to clarify that Harris is suspended in all capacities. The decision became final on November 15, 2016.

FINRA

WILLFULLY VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934, RULE 10B-5 PROMULGATED THEREUNDER, VIOLATED FINRA RULES 2010, 2020, NASD RULES 3110, 3030: HARRIS AND THREE INDIVIDUALS ENTERED INTO A CONSULTING AGREEMENT WITH A COMPANY, PURSUANT TO WHICH THE COMPANY WAS TO PAY THEM $350,000 TO PERFORM FINANCIAL ADVISORY SERVICES. THE COMPANY PAID THEM $350,000, ALTHOUGH NO ADVISORY SERVICES WERE PROVIDED, AND THEY USED THE MONEY TO START A BRANCH OF A MEMBER FIRM. HARRIS, ONE OF THE INDIVIDUALS, AND BROKERS AT THE BRANCH WORKING UNDER THEIR DIRECTION SOLICITED AND RECOMMENDED THE PURCHASE OF OVER $2.8 MILLION OF COMPANY STOCK TO FIRM CUSTOMERS. HARRIS AND THE INDIVIDUAL KNEW AT THE TIME OF THE SOLICITATIONS OF THE CONSULTING AGREEMENT WITH THE COMPANY THAT THE FIRM, THE BRANCH, AND THEY PERSONALLY HAD BENEFITED FROM THE $350,000 PAYMENT MADE BY THE COMPANY PURSUANT TO THE AGREEMENT. HARRIS AND THE INDIVIDUAL DID NOT DISCLOSE THE EXISTENCE OF THE CONSULTING AGREEMENT WITH THE COMPANY OR THE $350,000 PAYMENT FROM THE COMPANY TO ANY CUSTOMERS FROM WHOM THEY SOLICITED A PURCHASE OF COMPANY STOCK OR THE REGISTERED REPRESENTATIVES WHO WORKED UNDER THEIR DIRECTION. ACCORDINGLY, THOSE REPRESENTATIVES DID NOT DISCLOSE THIS INFORMATION TO THEIR CUSTOMERS. BY THEIR FAILURE, HARRIS AND THE INDIVIDUAL CAUSED THE OTHER REGISTERED REPRESENTATIVES TO FAIL TO DISCLOSE THE AGREEMENT AND THE PAYMENT. THE EXISTENCE OF THE CONSULTING AGREEMENT WITH THE COMPANY AND THE $350,000 PAYMENT FROM THE COMPANY WERE MATERIAL INFORMATION ABOUT WHICH A REASONABLE INVESTOR WOULD HAVE WANTED TO KNOW. THEIR FAILURE TO DISCLOSE THE EXISTENCE OF THE CONSULTING AGREEMENT WITH THE COMPANY AND THE $350,000 PAYMENT WAS INTENTIONAL, OR AT A MINIMUM RECKLESS. AT THE TIME, HARRIS AND THE INDIVIDUAL ENTERED INTO THE CONSULTING AGREEMENT WITH THE COMPANY AND RECEIVED THE $350,000 PAYMENT FROM THE COMPANY PURSUANT TO THE AGREEMENT, HARRIS AND THE INDIVIDUAL WERE EMPLOYED BY AND REGISTERED WITH ANOTHER FINRA MEMBER FIRM. HARRIS AND THE INDIVIDUAL FAILED TO DISCLOSE THEIR OUTSIDE BUSINESS ACTIVITY TO THE FIRM, IN WRITING OR OTHERWISE. THE FIRM HAD AN EXISTING BUSINESS RELATIONSHIP WITH THE COMPANY PURSUANT TO WHICH IT HAD PROVIDED FINANCIAL CONSULTING AND INVESTMENT BANKING SERVICES. AT THE TIME HARRIS AND THE INDIVIDUAL ENTERED INTO THE AGREEMENT, THEY KNEW THEY WOULD DIRECTLY OR INDIRECTLY RECEIVE A FINANCIAL BENEFIT FROM THAT ARRANGEMENT. THE INDIVIDUAL PERFORMED SERVICES AND HARRIS ANTICIPATED PERFORMING SERVICES PURSUANT TO THE CONSULTING AGREEMENT WITH THE COMPANY, AND THEY BENEFITED FINANCIALLY FROM THE AGREEMENT. HARRIS AND THE INDIVIDUAL ENTERED INTO A WRITTEN AGREEMENT WITH THE OWNER, PRESIDENT AND DIRECTOR OF A MEMBER FIRM, AND ANOTHER INDIVIDUAL, UNDER WHICH THE FIRM PAID $350,000 TO THE OTHER INDIVIDUAL FOR BRANCH EXPENSES AND COMMISSIONS EARNED BY HARRIS AND THE TWO INDIVIDUALS. BY ARRANGING FOR A LUMP SUM PAYMENT OF $350,000 OF COMMISSIONS AND EXPENSES TO AN INDIVIDUAL ALONE IN A PERSONAL ACCOUNT, HARRIS, ACTING WITH OTHERS, CAUSED THE FIRM'S BOOKS AND RECORDS TO BE FALSE AND MISLEADING IN NOT REFLECTING THE ACTUAL COMMISSION PAYMENTS TO EACH INDIVIDUAL REPRESENTATIVE ASSOCIATED WITH THE PURCHASE AND SALE OF THE SECURITIES.

Order

Bar (Permanent)

All Capacities

Indefinite

12/29/2014

Monetary Penalty other than Fines

$5,223.93

HEARING PANEL DECISION RENDERED AUGUST 16, 2013 WHEREIN HARRIS IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR COMMITTING FRAUD IN VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER AND FINRA RULES 2010 AND 2020. HARRIS ENGAGED IN OUTSIDE BUSINESS ACTIVITIES WITHOUT GIVING PRIOR WRITTEN NOTICE TO HIS FIRM, IN VIOLATION OF FINRA RULE 2010 AND NASD RULE 3030. IN LIGHT OF THE BAR, NO ADDITIONAL SANCTION IS IMPOSED FOR THIS VIOLATION. THE CAUSE OF ACTION ALLEGING THAT HARRIS CAUSED A BOOKS AND RECORDS VIOLATION, IN VIOLATION OF FINRA RULE 2010 AND NASD RULE 3110, IS DISMISSED. THE HEARING PANEL FINDS THAT ENFORCEMENT FAILED TO PROVE BY A PREPONDERANCE OF THE EVIDENCE THAT HARRIS CAUSED THE BOOKS AND RECORDS OF HIS FIRM TO BE FALSE AND INACCURATE. HARRIS IS ORDERED TO PAY COSTS IN THE AMOUNT OF $3,904.89. THE ASSESSED COSTS SHALL BE DUE ON A DATE SET BY FINRA, BUT NOT SOONER THAN 30 DAYS AFTER THIS DECISION BECOMES FINRA'S FINAL DISCIPLINARY ACTION IN THIS PROCEEDING. ON AUGUST 30, 2013, HARRIS APPEALED THE DECISION TO THE NATIONAL ADJUDICATORY COUNCIL (NAC). NAC DECISION RENDERED DECEMBER 29, 2014 WHEREIN THE NAC AFFIRMED THE HEARING PANEL'S FINDINGS AND SANCTIONS IMPOSED. THE BAR IS IN EFFECT AS OF DECEMBER 29, 2014. THE NAC ALSO IMPOSED APPEAL COSTS OF $1,319.04. HARRIS' WILLFUL VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 GIVES RISE TO A STATUTORY DISQUALIFICATION. ON JANUARY 28, 2015, HARRIS APPEALED THE DECISION TO THE SECURITIES AND EXCHANGE COMMISSION (SEC). THE BAR REMAINS IN EFFECT. SEC RELEASE 34-74437, MARCH 4, 2015: IT WAS ORDERED THAT, PENDING THE SEC'S REVIEW OF HIS APPEAL, HARRIS' MOTION TO STAY THE SANCTIONS FINRA IMPOSED IS DENIED. SEC decision rendered March 31, 2016, wherein the findings of violations and sanctions imposed are sustained. On May 31, 2016, Harris filed with the United States Court of Appeals for the Second Circuit a Petition for Review of the SEC decision. On October 25, 2017, the U.S. Court of Appeals for the Second Circuit issued a Summary Order which denied Harris' petition for review. On December 18, 2017, the Court issued its mandate. As a result, the Court's Summary Order is final on January 23, 2018.

HEARING PANEL DECISION RENDERED AUGUST 16, 2013 WHEREIN HARRIS IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR COMMITTING FRAUD IN VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER AND FINRA RULES 2010 AND 2020. HARRIS ENGAGED IN OUTSIDE BUSINESS ACTIVITIES WITHOUT GIVING PRIOR WRITTEN NOTICE TO HIS FIRM, IN VIOLATION OF FINRA RULE 2010 AND NASD RULE 3030. IN LIGHT OF THE BAR, NO ADDITIONAL SANCTION IS IMPOSED FOR THIS VIOLATION. THE CAUSE OF ACTION ALLEGING THAT HARRIS CAUSED A BOOKS AND RECORDS VIOLATION, IN VIOLATION OF FINRA RULE 2010 AND NASD RULE 3110, IS DISMISSED. THE HEARING PANEL FINDS THAT ENFORCEMENT FAILED TO PROVE BY A PREPONDERANCE OF THE EVIDENCE THAT HARRIS CAUSED THE BOOKS AND RECORDS OF HIS FIRM TO BE FALSE AND INACCURATE. HARRIS IS ORDERED TO PAY COSTS IN THE AMOUNT OF $3,904.89. THE ASSESSED COSTS SHALL BE DUE ON A DATE SET BY FINRA, BUT NOT SOONER THAN 30 DAYS AFTER THIS DECISION BECOMES FINRA'S FINAL DISCIPLINARY ACTION IN THIS PROCEEDING. ON AUGUST 30, 2013, HARRIS APPEALED THE DECISION TO THE NATIONAL ADJUDICATORY COUNCIL (NAC). NAC DECISION RENDERED DECEMBER 29, 2014 WHEREIN THE NAC AFFIRMED THE HEARING PANEL'S FINDINGS AND SANCTIONS IMPOSED. THE BAR IS IN EFFECT AS OF DECEMBER 29, 2014. THE NAC ALSO IMPOSED APPEAL COSTS OF $1,319.04. HARRIS' WILLFUL VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 GIVES RISE TO A STATUTORY DISQUALIFICATION. IF NO FURTHER ACTION IS TAKEN, THE DECISION WILL BE FINAL ON FEBRUARY 2, 2015.