UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 40855 / December 29, 1998 Administrative Proceeding File No. 3-9669 ______________________________ : In the Matter of : : CESAR A. MONTILLA, : : ORDER MAKING FINDINGS AND Respondent. : IMPOSING REMEDIAL SANCTIONS I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to accept the Offer of Settlement ("Offer") submitted by Cesar A. Montilla ("Montilla" or "Respondent") pursuant to Rule 240(a) of the Rules of Practice of the Commission, 17 C.F.R. § 201.240(a), for the purpose of settlement of this public administrative proceeding instituted by the Commission against him on August 7, 1998 pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act"). II. Solely for the purpose of settling this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying any of the findings contained in this Order Making Findings and Imposing Remedial Sanctions ("Order"), except as to the jurisdiction of the Commission over him and over the matters set forth in this Order, and as to the findings contained in Section III.A., below, which are admitted, Respondent consents to the entry by the Commission of this Order. III. On the basis of this Order and the Offer, the Commission finds that: A. Respondent was the chief executive officer, registered principal of the Clark Melvin Securities Corporation ("CMS" or "firm"), and the supervisor of Hernan Perez ("Perez") at all relevant times. B. During the period from at least January 1995 through September 1997, Perez, while a registered representative at CMS, willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5, thereunder, in that, while engaged in the offer and sale of securities, and in connection with the purchase and sale of securities, Perez, directly or indirectly, employed devices, schemes, and artifices to defraud; made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in acts, practices and a course of business which operated as a fraud and deceit. Specifically, as part of the aforesaid conduct, Perez misappropriated at least approximately $2.9 million from at least approximately nineteen customers of CMS and from one person who provided him with funds for the purpose of opening a securities account. In addition, Perez made false and misleading statements of material facts to those customers and an individual, including, but not limited to, false and misleading statements concerning the use of their funds, the need for them to cover margin debt, and the value of their securities accounts. C. During the period from at least January 1995 through September 1997, Montilla failed reasonably to supervise Perez with a view to preventing Perez’s violations of the provisions of the Securities Act and of the Exchange Act and of the rules promulgated thereunder, within the meaning of Section 15(b)(4)(E) of the Exchange Act. Among other things, Montilla failed to place Perez under heightened supervision despite firm procedures mandating that he do so in light of Perez’s serious disciplinary past and failed to ensure that the firm’s employees, including, but not limited to, a senior operations manager, followed procedures relating to delivery of customer checks. Montilla further failed reasonably to respond to warnings or red flags of Perez’s misconduct. IV. On the basis 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 that: A. Montilla be, and hereby is suspended from association with any broker or dealer for a period of 3 months, effective on the second Monday following the entry of the Order; B. Montilla be, and hereby is suspended from association with any broker or dealer in a supervisory capacity for a period of 9 months, effective following the suspension from association provided under Section IV.A., above; C. Montilla be, and hereby is required to pay an administrative money penalty in the amount of $5,000 to the United States Treasury within 30 days from the entry of this Order. Such payment shall be: (a) made by United States postal money order, certified check, bank cashier’s check or bank money order, (b) made payable to the Securities and Exchange Commission; (c) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, 6432 General Green Way, Alexandria, VA 22312, Mail Stop O-3; and (d) submitted under cover letter that identifies Montilla as the Respondent in these proceedings, and the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Jon B. Jordan, Senior Counsel, Southeast Regional Office, Securities and Exchange Commission, 1401 Brickell Avenue, Suite 200, Miami, Florida 33131; and D. Montilla be, and hereby is required to provide to the Commission, within 30 days after the end of the 9 month suspension period described under Section IV.B., above, an affidavit that he has complied fully with the sanctions described in Sections IV.A. - IV.C., above. By the Commission. Jonathan G. Katz Secretary