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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 47326 / February 6, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-11034


In the Matter of

Heartland Securities Corporation,

Respondent.


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ORDER INSTITUTING ADMINISTRATIVE PROCEEDING PURSUANT TO SECTION 15(b)(4) OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING SANCTIONS

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative proceeding be instituted against Heartland Securities Corporation ("Respondent" or "Heartland") pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934 ("Exchange Act").

II.

In anticipation of these administrative proceedings, Respondent has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding 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 findings contained herein, except as to those findings contained in Section III.B below and as to jurisdiction of the Commission over Respondent and over the subject matter of this proceeding, which Respondent admits, Heartland consents to the issuance of this Order Instituting Administrative Proceeding Pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934, Making Findings, and Imposing Sanctions ("Order").

Accordingly, IT IS ORDERED that a proceeding pursuant to Section 15(b)(4) of the Exchange Act against Heartland be, and hereby is, instituted.

III.

On the basis of this Order and Respondent's Offer, the Commission makes the following findings:

A. From March 1998 to June 2001, Heartland was a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act.

B. Pursuant to a Final Judgment of the U.S. District Court for the Southern District of New York entered on January 23, 2003, in an action styled Securities and Exchange Commission v. Sheldon Maschler, et al., 03 Civ. 0264 (S.D.N.Y.), Heartland is permanently enjoined from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 15(c) and 17(a)(1) of the Exchange Act and Rules 10b-5, 15c1-2, 17a-3(a)(1), 17a-3(a)(2), 17a-3(a)(3), 17a-3(a)(9), 17a-5(a), and 17a-5(d) promulgated thereunder.

C. The Commission's Complaint in Securities and Exchange Commission v. Sheldon Maschler, et al. alleged that from 1993 to March 1998, certain individuals associated with Datek Securities engaged in a widespread fraudulent scheme to execute proprietary trades illegally through the Nasdaq Stock Market's Small Order Execution System ("SOES"), resulting in tens of millions of dollars in illegal profits. The fraudulent scheme was carefully planned and orchestrated, and was concealed from regulators through the use of sophisticated software, allocation of trades to nominee accounts, creation of fictitious books and records, and filing of false reports with the Commission. The Complaint further alleged that Heartland acquired Datek Securities' day-trading business on March 30, 1998, and continued the SOES fraudulent scheme from April 1998 to June 2001. Heartland's unlawful SOES trading practices and concealment methods were virtually identical to those of Datek Securities' former day-trading operation. In particular, almost all of the nominee accounts at Datek Securities were transferred to Heartland in furtherance of the SOES scheme.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction specified in the Offer of Settlement submitted by Heartland.

Accordingly, IT IS ORDERED that Heartland be, and hereby is, censured.

By the Commission.

Jonathan G. Katz
Secretary

 

http://www.sec.gov/litigation/admin/34-47326.htm


Modified: 02/06/2003