[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] ======================================================================= ----------------------------------------------------------------------- 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''). ----------------------------------------------------------------------- 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