UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 39926 / April 28, 1998 Investment Company Act of 1940 Release No. 23131 / April 28, 1998 Administrative Proceeding File No. 3-9590 ____________________________ : In the Matter of : ORDER INSTITUTING PUBLIC : PROCEEDINGS PURSUANT TO R. James Brower : SECTION 9(b) OF THE INVESTMENT : COMPANY ACT OF 1940 AND SECTIONS : 15(b), 19(h) AND 21C OF THE : SECURITIES EXCHANGE ACT OF 1934, : MAKING FINDINGS AND : IMPOSING REMEDIAL RELIEF AND : MONETARY PENALTIES, AND CEASE- : AND- DESIST ORDER ___________________________: I. The Commission deems it appropriate and in the public interest that public administrative proceedings pursuant to Section 9(b) of the Investment Company Act of 1940 ("IC Act") and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), be, and they hereby are, instituted against R. James Brower ("Brower" or "Respondent"). II. In anticipation of the institution of these administrative proceedings, Brower has submitted an Offer of Settlement, which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, Brower, without admitting or denying the findings set forth herein except those pertaining to the jurisdiction of the Commission over the Respondent and over the subject matter of these proceedings which are admitted, consents to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Section 9(b) of the IC Act and Sections 15(b), 19(h) and 21C of the Exchange Act, Making Findings and Imposing Remedial Relief and Monetary Penalties, and Cease-and-Desist Order ("Order"). 1 III. Based on this Order and Respondent's offer, the Commission finds the following: [1] A. Brower was the president and compliance officer of a broker-dealer registered with the Commission during the period May 1995 through January 1996 and was also the financial principal of the broker-dealer during the period from October 25, 1995 through January 1996. Free Riding for the Benefit of Brower B. Brower engaged in free riding in a personal account of his with knowledge and consent for the purpose of generating profits to be taken by him in lieu of his $3500 monthly salary. Brower placed only $15,000 in this account. On September 27, 1995, 15,000 shares of a stock were purchased for $411,687.80, at a time when Brower had no ability to pay for these shares. On the same day 12,600 of these shares were sold. The remainder of these shares were sold on October 26, 1995. On October 12, 1995, 7,000 shares of another stock were purchased for $143,048.80 for Brower's account, at a time when Brower had no ability to pay for the shares. These shares were sold on October 20, 1995. Brower knew about the account from its inception, knew about the trades, and knew that he did not have assets to pay for such large transactions. Brower's liquid assets at the time were only about $20,000. Net Capital Violations C. During the period from on or about December 31, 1995 through January 24, 1996, the broker-dealer effected transactions in and induced and attempted to induce the purchase and sale of securities (other than an exempted security or commercial paper, bankers' acceptances, or commercial bills) when the broker-dealer did not have and did not maintain net capital of not less than $5,000. Brower, the broker-dealer's president, compliance officer, and financial principal, failed adequately to monitor the value of securities supporting the broker-dealer's net capital. **FOOTNOTES** [1]: The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding. 2 Brower Violated Provisions of the Exchange Act D. During the period from August 1995 through January 1996, Brower committed violations of and willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, by, directly and indirectly, using the means and instrumentalities of interstate commerce and the mails: (1) to employ devices, schemes and artifices to defraud, (2) to make untrue statements of material facts and to omit to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (3) to engage in acts, practices, and a course of business which operated or would have operated as a fraud and deceit upon persons, in connection with the purchase and sale of securities, as more particularly described in Paragraph III. B. above. E. By reason of the conduct described in Paragraph III. C. above, Brower caused violations and willfully aided and abetted violations, of Section 15(c)(3) of the Exchange Act and Rule 15c3-1 thereunder. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Respondent's Offer. ACCORDINGLY, IT IS HEREBY ORDERED: A. Pursuant to Section 21C of the Exchange Act, that Brower cease and desist from committing or causing any violation and any future violation of Sections 10(b) and 15(c)(3) of the Exchange Act and Rules 10b-5 and 15c3-1 thereunder; B. Pursuant to Sections 15(b) and 19(h) of the Exchange Act and Section 9(b) of the IC Act, that Brower be suspended from association with any broker, dealer, investment adviser, investment company or municipal securities dealer for a period of 12 months, effective on the second Monday following the entry of this order; C. Pursuant to Section 21C of the Exchange Act, that Brower shall pay disgorgement and prejudgment interest totaling sixteen thousand two hundred fifty-five dollars and twenty-eight cents ($16,255.28) to the United States Treasury, with the first installment of five thousand dollars ($5,000.00) to be paid within thirty (30) days of the date of the Commission's Order, and with the balance of eleven thousand two hundred fifty-five dollars and twenty-eight cents ($11,255.28) to be paid within ninety (90) days of the date of the Commission's Order. Such payments shall be: (1) made by United States postal money order, certified check, bank cashier's check, or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand delivered or delivered by overnight courier to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22313; and (4) submitted under cover letter that identifies Brower as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to William P. Hicks, Securities and Exchange Commission, Atlanta District Office, 3475 Lenox Road, Suite 1000, Atlanta, Georgia 30326-1232; D. Pursuant to Section 21B of the Exchange Act, that Brower shall, within ninety (90) days of the date of the Commission's Order, pay a civil money penalty in the amount of five thousand dollars ($5,000.00) to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check, or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand delivered or delivered by overnight courier to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22313; and (4) submitted under cover letter that identifies Brower as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to William P. Hicks, Securities and Exchange Commission, Atlanta District Office, 3475 Lenox Road, Suite 1000, Atlanta, Georgia 30326-1232; E. That Brower shall provide to the Commission, within 30 days after the end of the 12 month suspension period described above, an affidavit that he has complied fully with the sanctions described in Section IV. B. above. By the Commission. Jonathan G. Katz Secretary 1