Initial Decision Release No. 1348

Administrative Proceeding

File No. 3-17621

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Andrew Stitt

Initial Decision

February 6, 2019

Appearance: Chris Davis for the Division of Enforcement,

Securities and Exchange Commission

Before: James E. Grimes, Administrative Law Judge

Summary

I grant the Division of Enforcement’s renewed motion for entry of 

sanctions by default. Respondent Andrew Stitt is barred from associating 

with a broker, dealer, investment adviser, municipal securities dealer, 

municipal advisor, transfer agent, or nationally recognized statistical rating 

organization or from participating in an offering of penny stock.

Procedural Background

The Securities and Exchange Commission initiated this proceeding in 

October 2016, when it issued an order instituting proceedings (OIP) under 

Section 15(b) of the Securities Exchange Act of 1934.1 This proceeding is a 

follow-on proceeding based on a permanent injunction entered against Stitt 

by the United States District Court for the Northern District of Texas.

2

 

1 OIP ¶ I; see 15 U.S.C. § 78o(b).

2 See SEC v. Team Res., No. 3:15-cv-1045-N (N.D. Tex.) (civil case); OIP 

¶ II.A.2.
2

Stitt was served with the OIP in December 2017.

3 At the time Stitt was 

served, this proceeding was assigned to a different administrative law judge, 

who issued an initial decision in January 2018.

4 The Commission later issued 

a notice that the initial decision had become final.5

In June 2018, the Commission stayed all pending cases.6 In August 2018, 

the Commission allowed the stay to lapse, vacated decisions in all pending 

cases, remanded all cases pending before it, and ordered that all pending 

cases be reassigned.7 The Commission’s remand order included this case 

among a list of vacated and remanded cases.8 Following the Commission’s 

August order, this proceeding was reassigned to me.9

Following reassignment, I determined that Stitt had been served with 

the OIP.10 Because he had not answered the OIP, I ordered him to show 

cause why he should not be found in default.11 Stitt did not respond to the 

order to show cause and he also failed to participate in a telephonic 

prehearing conference held in early November 2018.12 Following the 

prehearing conference, I invited the Division to submit supplemental 

 

3 Andrew Stitt, Admin. Proc. Rulings Release No. 6188, 2018 SEC LEXIS 

2840, at *1, *3 (ALJ Oct. 15, 2018). 

4 Andrew Stitt, Initial Decision Release No. 1231, 2018 WL 637806 (ALJ 

Jan. 30, 2018).

5 Andrew Stitt, Exchange Act Release No. 83258, 2018 SEC LEXIS 1159 

(May 16, 2018).

6 Pending Admin. Proc., Securities Act of 1933 Release No. 10510, 2018 

WL 3193858 (June 21, 2018).

7 Pending Admin. Proc., Securities Act Release No. 10536, 2018 WL 

4003609, at *1 (Aug. 22, 2018).

8 Id. at Ex. A.

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

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

10 Stitt, 2018 SEC LEXIS 2840, at *3.

11 Id. at *3–4.

12 Andrew Stitt, Admin. Proc. Rulings Release No. 6349, 2018 SEC LEXIS 

3278, at *4 (ALJ Nov. 20, 2018).
3

evidence in support of a motion for default it had previously filed.13 After it 

declined that invitation, I denied the motion without prejudice.14 The 

Division then renewed its motion, this time including supporting evidence. 

Findings of Fact

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

record and on facts officially noticed under Commission Rule of Practice 323, 

17 C.F.R. § 201.323.15 Because he failed to answer the OIP or otherwise 

participate in this proceeding, Stitt is in default.16 As a result of Stitt’s 

default, I have accepted as true the factual allegations in the OIP.17 In 

making the findings below, I have applied preponderance of the evidence as 

the standard of proof.18 

Stitt was part of a fraudulent oil and gas investing scheme that lasted 

five years, and involved over 450 investors and losses in excess of $33 

million.19 As part of the scheme, fronters identified potential investors from 

lists of leads, phoned the potential investors, and read prepared scripts, 

spinning tales of significant profits from investments “in highly productive oil 

and gas wells.”20 Stitt, whose role in the scheme lasted from October 2010 

until March 2012, served as a closer whose job was to secure investments 

after the fronters contacted potential investors.21 As a closer, Stitt, using the 

alias “Andy Belson,” reiterated the fronters’ representations, and promised 

 

13 Andrew Stitt, Admin. Proc. Rulings Release No. 6290, 2018 SEC LEXIS 

3147 (ALJ Nov. 5, 2018).

14 Stitt, 2018 SEC LEXIS 3278, at *15.

15 I take official notice of the docket in the civil case and the orders the 

court has issued.

16 See 17 C.F.R. §§ 201.155(a), .220(f); Pending Admin. Proc., 2018 WL 

4003609, at *1.

17 See 17 C.F.R. §§ 201.155(a), .220(f). 

18 See John Francis D’Acquisto, Investment Advisers Act of 1940 Release 

No. 1696, 1998 WL 34300389, at *2 (Jan. 21, 1998).

19 See civil case, ECF No. 75, at 1.

20 Div. Ex. 1 at 2; Div. Ex. 5 at 45–46, 53–54; Div. Ex. 7 at 27–31, 58, 61–

63, & Sub Ex. 129; Div. Ex. 8, at Sub Ex. 153.

21 Div. Ex. 1 at 2; Div. Ex. 5 at 54–55.
4

unreasonable returns.22 But Stitt omitted that: (1) past investment programs 

had fared poorly, (2) area oil wells were producing little or no oil, (3) he 

received sales commissions on investments, and (4) he was using an alias.23

Considering these facts, it is apparent that the scheme in which Stitt 

participated was essentially a boiler room. A boiler-room scheme has been 

described as “a telemarketing operation in which salespeople call lists of 

potential investors in order to peddle speculative or fraudulent securities.”24

For his part in the scheme, Stitt received $214,371 in sales commissions.25

The securities Stitt offered and sold as part of the scheme were not 

registered.26 Stitt has never registered with the Commission as a brokerdealer and has never been associated with a registered broker-dealer.27

In August 2016, the United States District Court for the Northern 

District of Texas permanently enjoined Stitt from violating Sections 5(a), 5(c), 

and 17(a) of the Securities Act of 1933, Section 10(b) and 15(a) of the 

Exchange Act, and Exchange Act Rule 10b-5.28

 

22 Div. Ex. 1 at 2; see Div. Ex. 8 at 465–66.

23 Div. Ex. 1 at 2–3.

24 SEC v. Wolfson, 539 F.3d 1249, 1252 n.6 (10th Cir. 2008). According to 

the Commission, boiler room schemes are characterized by the use of 

numerous sales people cold-calling potential investors, high-pressure tactics, 

and “inaccurate, highly exaggerated and misleading representations.” 

Barnett & Co., Exchange Act Release No. 6466, 1961 WL 60017, at *2 (Feb. 8, 

1961); see also Nicholas S. Savva, Exchange Act Release No. 72485, 2014 WL 

2887272, at *3 n.20 (June 26, 2014).

25 Div. Ex. 1 at 3; OIP ¶ II.A.I.; see Div. Ex. 7 at 34–35, 130 (discussing 

commission payments); Div. Ex. 9, at Sub Ex. 2 (selected checks made 

payable to Andy Stitt).

26 OIP ¶ II.A.I.

27 Id.

28 Div. Ex. 10 at 2.
5

Conclusions of Law

The Exchange Act gives the Commission authority to impose a collateral 

bar29 against Stitt if, as is relevant here, (1) he was associated with or 

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

misconduct at issue; (2) he was enjoined “from engaging in or continuing any 

conduct or practice ... in connection with the purchase or sale of any 

security”; and (3) imposing a bar is in the public interest.30 

The first factor is met in this case. A broker is a person “engaged in the 

business of effecting transactions for the account of others.”31 Receipt of 

transaction-based compensation is a strong indicator that one is acting as a 

broker.32 The fact that Stitt was involved in recruiting and soliciting potential 

investors lends additional weight to the determination that he was a 

broker.33 And given the relevant factors, it is not surprising that boiler room 

participants are often described as brokers.34

Stitt’s participation in the scheme was the basis for his injunction.35

There is therefore no doubt that he was associated with a broker—himself—

at the time of his misconduct.36

 

29 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). 

30 15 U.S.C. § 78o(b)(4)(C), (6)(A)(iii).

31 15 U.S.C. § 78c(a)(4)(A).

32 James S. Tagliaferri, Exchange Act Release No. 80047, 2017 WL 632134, 

at *4 & n.27 (Feb. 15, 2017).

33 Id. at *4; see SEC v. George, 426 F.3d 786, 797 (6th Cir. 2005) (holding 

that factors relevant to whether a person is a broker include “regular 

participation in securities transactions,” being employed by the securities 

issuers, receipt of commissions instead of salary, past history of selling the 

securities of other issuers, giving advice to investors, and active recruitment 

of investors).

34 See, e.g., United States v. Becker, 502 F.3d 122, 125 (2d Cir. 2007) 

(describing the participants in a boiler-room scheme as brokers).

35 See Div. Ex. 9 at 1–3; Div. Ex. 10.
6

Turning to the second factor, the district court permanently enjoined 

Stitt from selling unregistered securities, acting as an unregistered brokerdealer, committing fraud in the offer or sale of any securities, and committing 

fraud in connection with the purchase or sale of any securities.37 The terms of 

this injunction meet the requirement that a court has enjoined Stitt from 

“engaging in ... any conduct ... in connection with the ... sale of any

security.”38

To determine whether imposing a collateral bar would be in the public 

interest, I must weigh the public-interest factors set forth in Steadman v. 

SEC.

39 These include: 

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.40

 

36 See Tagliaferri, 2017 WL 632134, at *5 (“Because we find that 

Tagliaferri himself met the definition of a ‘broker,’ we also find that he met 

the definition of a ‘person associated with a broker’ for purposes of Exchange 

Act Section 15(b)(6)”); Tzemach David Netzer Korem, Exchange Act Release 

No. 70044, 2013 WL 3864511, at *8 (July 26, 2013) (it is “well established 

that [the Commission is] authorized to sanction an associated person of an 

unregistered broker-dealer or investment adviser in a follow-on 

administrative proceeding”).

37 See Div. Ex. 10 at 2.

38 15 U.S.C. § 78o(b)(4)(C) (emphasis added). 

39 603 F.2d 1126, 1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91 

(1981); see Gary M. Kornman, Securities Act Release No. 59403, 2009 WL 

367635, at *6 (Feb. 13, 2009), pet. denied, 592 F.3d 173 (D.C. Cir. 2010).

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

*4 (Mar. 21, 2016).
7

The Commission also considers the deterrent effect of administrative 

sanctions.41 The public interest inquiry is “flexible” and “no one factor is 

dispositive.”42 

Before imposing a collateral bar, an administrative law judge must 

determine, based on the evidence presented, whether a bar “is necessary or 

appropriate to protect investors and markets.”43 I must therefore “‘review 

[Stitt’s] case on its own facts’ to make findings regarding [his] fitness to 

participate in the industry in the barred capacities.”44 A decision to impose a 

collateral bar “should be grounded in specific ‘findings regarding the 

protective interests to be served’ by barring the respondent and the ‘risk of 

future misconduct.’”45 

In Stitt’s case, resolving the public-interest inquiry is not difficult. The 

Commission has remarked that “[t]he securities industry presents continual 

opportunities for dishonesty and abuse, and depends heavily on the integrity 

of its participants and on investors’ confidence.”46 And “boiler-room activity is 

the antithesis of fair dealing.”

47 Indeed, “misrepresentations ... are an 

 

41 Id. General deterrence is relevant but not determinative of whether the 

public interest weighs in favor of imposing a collateral bar. See Peter Siris, 

Advisers Act Release No. 3736, 2013 WL 6528874, at *11 n.72 (Dec. 12, 2013), 

pet. denied, 773 F.3d 89 (D.C. Cir. 2014). 

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

*4 (Sept. 26, 2007), pet. denied, 548 F.3d 129 (D.C. Cir. 2008).

43 Ross Mandell, Exchange Act Release No. 71668, 2014 WL 907416, at *2 

(Mar. 7, 2014) (internal quotation marks omitted), vacated in part on other 

grounds, Exchange Act Release No. 77935, 2016 WL 3030883 (May 26, 2016). 

44 Id. (quoting McCarthy v. SEC, 406 F.3d 179, 188 (2d Cir. 2005)). 

45 Id. (quoting McCarthy, 406 F.3d at 189–90); see also John W. Lawton, 

Advisers Act Release No. 3513, 2012 WL 6208750, at *9 (Dec. 13, 2012) 

(“[T]he Commission must consider not only past misconduct, but the broader 

question of the future risk the respondent poses to investors.”), vacated in 

part on other grounds, Advisers Act Release No. 4402, 2016 WL 3030847 

(May 27, 2016).

46 Seghers, 2007 WL 2790633, at *7.

47 Wright, Myers & Bessell, Inc., Exchange Act Release No. 7415, 1964 WL 

66911, at *5 (Sept. 8, 1964).
8

inherent part of a boiler-room operation.”48 Allowing a willing boiler-room 

participant to avoid responsibility for his actions, therefore, “would be highly 

unrealistic and contrary to the public interest.”49

Bearing these observations in mind, and considering the Steadman

public-interest factors in turn, Stitt’s conduct was egregious. Stitt played an 

important role in a larger fraud involving over 450 investors and losses in 

excess of $33 million. Stitt personally misrepresented or omitted material 

facts while inducing investors to invest. Stitt’s willing participation in a 

fraudulent scheme shows that he should not be trusted with investors’ funds 

and that excluding him from the securities industry would best serve the 

Commission’s interest in protecting the investing public. 

Additionally, Stitt sold unregistered securities and acted as an 

unregistered broker.

50 The registration requirements in Section 5 and Section 

15 are central to the Commission’s investor-protection mission.51 In 

particular, by selling unregistered securities in violation of Section 5 of the 

Securities Act, Stitt deprived investors of information they needed to make 

informed investment decisions.52

Stitt’s conduct was not isolated. He participated in the scheme for 

approximately 18 months and received at least 19 commission payments for 

his efforts.53

Stitt also acted with a high degree of scienter. He knew his name was 

not Andy Belson, but used that alias anyway when soliciting investors. He 

knew he would receive commissions but never told investors about that 

material fact. And Stitt repeated the fronters’ assertions about highly 

 

48 Id. at *5 n.10; see Savva, 2014 WL 2887272, at *9 (explaining that boilerroom operations “are, at a minimum, deceptive and violate antifraud 

provisions of the securities laws”).

49 Wright, Myers & Bessell, 1964 WL 66911, at *5.

50 OIP ¶ II.A.I.

51 See Allen M. Perres, Securities Act Release No. 10287, 2017 WL 280080, 

at *3 (Jan. 23, 2017), pet. denied, 695 F. App’x 980 (7th Cir. 2017); Joseph J. 

Fox, Securities Act Release No. 10328, 2017 WL 1103693, at *3 (Mar. 24, 

2017).

52 See Perres, 2017 WL 280080, at *3.

53 Div. Ex. 9 at Sub Ex. 2.
9

productive wells but said nothing about the fact that past investment 

programs had fared poorly and area oil wells were producing little or no oil. 

Because Stitt has not participated in this proceeding, he has not made 

assurances against future misconduct or demonstrated that he understands 

or recognizes the wrongfulness of his criminal acts.

Additionally, allowing Stitt to remain in the securities industry would 

present him with future opportunities for further misconduct and would put 

the investing public at risk. This determination is supported by my finding 

that Stitt’s conduct was egregious.54 

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

deterring others from engaging in similar misconduct. 

In light of the factors discussed above, I find that it is in the public 

interest to impose a collateral and penny-stock bar against Stitt. 

Order

The Division of Enforcement’s renewed motion for sanctions by default is 

GRANTED. 

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

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, Andrew

Stitt, 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 360.55 Under that rule, a party may file a petition for 

 

54 See Geiger v. SEC, 363 F.3d 481, 489 (D.C. Cir. 2004) (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”).

55 See 17 C.F.R. § 201.360. 
10

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

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 111.56 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.

Stitt may move the Commission to set aside the default under Rule of 

Practice 155(b), which 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.57 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.

58 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.”59

_______________________________

James E. Grimes

Administrative Law Judge

 

56 See 17 C.F.R. § 201.111. 

57 17 C.F.R. § 201.155(b). 

58 Id.

59 Id.