[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