UNITED STATES OF AMERICA
In the Matter of
ERICH A. KLINE,
ORDER INSTITUTING PROCEEDINGS, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934 and SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest and that public administrative proceedings be instituted against Erich A. Kline ("Kline") pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Investment Advisers Act").
In anticipation of the institution of these proceedings, Kline has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except to as the Commission's jurisdiction over Kline and over the subject matter of this proceeding, and to the Commission's findings set forth in Paragraphs III.A. and III.B., which are admitted, Kline consents to the entry of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Exchange Act and Section 203(f) of the Investment Advisers Act ("Order").
Accordingly, IT IS HEREBY ORDERED that proceedings pursuant to Sections 15(b) of the Exchange Act and Section 203(f) of the Investment Advisers Act.
On the basis of this Order and Kline's Offer, the Commission finds that:
A. Erich Kline was a registered representative for various broker-dealers registered with the Commission from at least 1996 through 2000. From February 2000 through March 2001, Erich Kline was a registered representative of a registered broker-dealer and investment adviser.
B. On April 17, 2002, in the case of SEC v. George Kline, et al., (Case No. 02-CV-817), the United States District Judge for the District of Minnesota, entered an Order of Permanent Injunction against Erich Kline, pursuant to his consent and without Erich Kline admitting or denying the allegations in the Commission's Complaint, enjoining Erich Kline from violating Sections 10(b), 16(a) and 16(c) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 16a-3 promulgated thereunder. The complaint alleged that from 1989 through March 2001, Erich Kline along with others engaged in a wide ranging scheme to secretly trade on material non-public information related to a number of local Minneapolis corporations. In addition, the complaint alleged that Erich Kline along with others took part in a concerted effort to conceal the trading activity from law enforcement authorities and regulators, including the SEC. The complaint also alleged that Erich Kline along with others, conspired to illegally engage in the short sale of the stock of companies on which his father, George Kline, served as a board member in violation of federal law
C. On April 17, 2002, in the case of United States of America v. George E. Kline, et. al. Criminal No. 01-69(1) (JMR/FLN), the United States District Court for the District of Minnesota, accepted Erich Kline's plea of guilty and entered a conviction against Erich Kline for conspiracy to commit securities fraud and mail fraud in violation of 18 U.S.C. § 371 and 15 U.S.C. §§ 78j(b) and 78ff(a). The criminal indictment against Erich Kline in that case was based on conduct similar to that alleged in the complaint described in paragraph B above.
In light of the foregoing, it is appropriate in the public interest and for the protection of investors to impose the sanctions specified in the Offer submitted by Kline.
Accordingly, IT IS HEREBY ORDERED that Erich A. Kline be, and hereby is, barred from association with any broker, dealer or investment adviser.
By the Commission.
Jonathan G. Katz
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