[Federal Register Volume 60, Number 153 (Wednesday, August 9, 1995)]
[Notices]
[Pages 40630-40631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19650]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21266; 812-9700]
Stifel Nicolaus & Company, Incorporated; Notice of Application
and Temporary Order
August 3, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Temporary order and notice of filing of application for
permanent order under the Investment Company Act of 1940 (the ``Act'').
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Applicant: Stifel Nicolaus & Company, Incorporated (``Stifel'').
Relevant investment company act sections: Permanent order requested,
and temporary order granted, under section 9(c) of the Act for an
exemption from the provisions of section 9(a) of the Act.
summary of application: Applicant has been granted a temporary order,
and has requested a permanent order, under section 9(c) exempting it
from the disqualification provisions of section 9(a).
Filing date: The application was filed on August 3, 1995.
hearing or notification of hearing: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on August 28, 1995
and should be accompanied by proof of service on applicant, in the form
of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicant, 500 N. Broadway Street, St. Louis, Missouri 63102.
FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or C. David
Messman, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. Stifel, a subsidiary of Stifel Finance Corp., is registered as a
broker dealer and a municipal securities dealer under the Securities
Exchange Act of 1934 (``Exchange Act''), and as an investment adviser
under the Investment Advisers Act of 1940. Stifel acts from time to
time as principal underwriter for unit investment trusts.
2. On August 3, 1995, the Commission filed a complaint in the
United States District Court for the Western District of Oklahoma
alleging violations of section 17(a) of the Securities Act of 1933,
sections 10(b), 17(a)(1), and 15B(c)(1) of the Exchange Act and rules
10b-5, 17a-3, and 17a-4 thereunder, and Rules
G-8, G-9, and G-17 of the Municipal Securities Rulemaking Board. The
complaint related to undisclosed compensation received by Stifel in
connection with municipal bond issues. On the same date as the
complaint, Stifel entered into a related consent in which Stifel
neither admitted nor denied any of the allegations in the complaint,
except as to jurisdiction. Pursuant to the consent, the District Court
entered a Final Judgment of Permanent Injunction, permanently enjoining
Stifel from violating the above-named provisions. Stifel also agreed to
disgorge $922,741 and pay prejudgment interest on that amount of
$263,637, and to pay a penalty of $250,000.
3. In making the application, applicant acknowledges, understands
and agrees that the application and any temporary exemption issued by
the Commission shall be without prejudice to the Commission's
consideration of any application for exemptions from statutory
requirements, including the consideration of the instant application
for a permanent exemption pursuant to section 9(c) or the revocation or
removal of any temporary exemption granted in connection with the
application.
[[Page 40631]]
Applicant's Legal Analysis
1. Applicant seeks relief exempting it from the provisions of
section 9(a) of the Act solely with respect to the proposed injunction,
for itself and any future entity that may become an affiliated person
of Stifel.
2. Section 9(a) provides, in pertinent part, that it is unlawful
for any person, or any affiliated person of such person, to serve or
act in the capacity of investment advisor or depositor of any
registered investment company, or principal underwriter of any
registered open-end investment company or unit investment trust, if
such person has been permanently or temporarily enjoined from engaging
in any conduct in connection with its activities as an underwriter,
broker, dealer, or investment adviser, or in connection with the
purchase or sale of any security.
3. Section 9(c) provides that, upon application, the Commission
shall by order grant an exemption from the provisions of section 9(a),
either unconditionally or on a temporary or other conditional basis, if
it is established that the prohibitions of section 9(a), as applied to
the applicant, are unduly or disproportionately severe or that the
conduct of such person has been such as not to make it against the
public interest or protection of investors to grant the exemption.
4. As a result of the injunction, Stifel is subject to the
disqualification provisions of section 9(a). Applicant asserts that the
application of such provisions to it is unduly and disproportionately
severe. Applicant further asserts that Stifel's conduct has been such
as not to make it against the public interest or protection of
investors to grant the requested relief.
5. Applicant states that the conduct that gave rise to the
injunction involved Stifel's Oklahoma Public Finance Office, which is
now closed, and was not in any way related to activities of application
as underwriter for unit investment trusts. In addition, none of the
individuals who acted improperly were involved in Stifel's underwriting
of unit investment trusts.
6. Stifel has taken the following remedial actions in response to
the events that led to the injunction:
a. Stifel formed a special committee of outside directors to
conduct an investigation into the matters that formed the basis of the
injunction. Stifel hired the law firm of Bryan Cave to assist the
company in that regard. Bryan Cave hired the accounting firm of Coopers
& Lybrand to assist them with the investigation.
b. As a result of the investigation mentioned above, Stifel has
implemented new procedures regarding the disclosure and the prior
review of certain fees.
c. The Stifel officer responsible for the majority of the illegal
conduct, and his supervisor, have been terminated by the firm. The
firm's assets in Oklahoma have been sold.
d. Stifel has hired a former Wisconsin State Securities
Commissioner as its Director of Compliance and an attorney formerly in
the Commission's Pacific Regional Office as General Counsel. The firm
also has replaced the head of its municipal securities operations.
7. The prohibitions of section 9(a) would be unduly and
disproportionately severe as applied to applicant because, if the
exemption were not granted, the prohibitions would unfairly and
unreasonably deprive applicant of its ability to provide uninterrupted
services to the unit investment trusts for which it provides
distribution services. Such inability would have an adverse effect on
applicant's business. Applicant makes a market in the units of the unit
investment trusts that it underwrites, which it no longer would be able
to do absent the requested relief. In addition, applicant would be
unable to render distribution services to registered unit investment
trusts that may be organized in the future.
8. Applicant represents that it has not previously filed an
application for relief pursuant to section 9(c), has no prior record of
Commission enforcement proceedings, and is not subject to any judgment
that would disqualify it under section 9(a).
9. Applicant believes that its ability to serve as principal
underwriter for any registered unit investment trust, and to comply
with the requirements of the Investment Company Act, are not impaired
by the injunction.
Applicant's Condition
Applicant agrees that any order granted by the Commission pursuant
to the application will be subject to the condition that Stifel will
comply with the Final Judgment of Permanent Injunction.
Temporary Order
The Commission has considered the matter and, without necessarily
agreeing with all of the facts represented or all of the arguments
asserted by applicant, finds that the issuance of a temporary order
under section 9(c) of the Investment Company Act, subject to the
foregoing condition, is not inconsistent with the public interest or
the protection of investors.
Accordingly, it is ordered, under section 9(c) of the Investment
Company Act, that the applicant be, and hereby is, granted a temporary
exemption from the provisions of section 9(a) of the Act, solely with
respect to the injunction specifically described in the application,
subject to the condition contained in the application, which condition
is expressly incorporated herein.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-19650 Filed 8-8-95; 8:45 am]
BILLING CODE 8010-01-M
