INVESTMENT ADVISERS ACT OF 1940
RELEASE NO. 1876 / June 12, 2000

ADMINISTRATIVE PROCEEDING
FILE NO. 3-9922

In the Matter of

MPI Investment Management,
David Pequet and Ashok Shende

Respondents.

ORDER INSTITUTING
PROCEEDINGS PURSUANT TO
SECTIONS 203(e), (f) AND (k)
OF THE INVESTMENT ADVISERS ACT OF 1940

I.

In anticipation of a hearing in previously instituted administrative and cease-and-desist proceedings, MPI Investment Management (MPI), David Pequet (Pequet) and Ashok Shende (Shende) have 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 in which the Commission is a party, MPI , Pequet and Shende consent, without admitting or denying the findings, except as to jurisdiction as set forth in paragraphs II.A through C below which they admit, to the issuance of this Order Making Findings and Imposing Sanctions pursuant to Sections 203(e), (f), and (k) of the Investment Advisers Act of 1940 (Order) and to the entry of the findings and imposition of sanctions as set forth below.

II.

FINDINGS

On the basis of this Order and the Offer of Settlement, the Commission finds that:

A. At all times relevant hereto, MPI Investment Management (MPI), based in Hinsdale, Illinois, was registered with the Commission as an investment adviser pursuant to Section 203(c) of the Investment Advisers Act of 1940 (Advisers Act).

B. At all times relevant hereto, David Pequet (Pequet), age 48 and a resident of Oak Brook, Illinois, was a principal of MPI.

C. At all times relevant hereto, Ashok Shende (Shende), age 60, and a resident of Western Springs, Illinois, was a principal of MPI.

D. In the early part of 1993, MPI had four partners, including Pequet and Shende. During 1993, the other two partners left the partnership.

E. On March 24, 1993, MPI entered into an agreement with one of the departing partners. Pursuant to this agreement, this departing partner was to be compensated for his partnership interests with cash payments of $100,000. However, MPI was unable to meet the terms of this agreement. Accordingly, the agreement was revised on July 21, 1993. Pursuant to this second agreement, the former partner was to be paid $15,000 in cash and, pursuant to a provision of the agreement entitled "Soft Dollar Compensation," he was to receive $80,000 in directed commissions over a four-year period. This payment agreement allowed MPI to extinguish a pre-existing obligation by directing trades to its former partner who received commission income related to these trades. MPI directed $50,782.47 in commissions to this partner between January 1994 and February 1996.

F. On June 3, 1993, the other departing partner signed an agreement with MPI. Pursuant to this agreement, this former partner was to be paid $62,500 in cash over the course of the next year. However, once again, MPI was unable to meet the terms of this agreement. Therefore, the agreement was revised to allow MPI to compensate the former partner through the use of directed commissions. On October 31, 1993, the former partner signed a second agreement with MPI. Pursuant to a portion of the agreement entitled "Soft Dollar Compensation," he was to receive $25,000 in directed commissions. As with the other former partner, the revised agreement allowed MPI to extinguish a pre-existing obligation by directing trades to its former partner who received commission income related to these trades. MPI directed $22,261.42 in commissions to this second departing partner between January 1994 and February 1996.

G. The trades which MPI directed to the former partners came primarily from the account of one large institutional client of MPI. This client was unaware of the agreements which MPI had reached with its former partners. MPI benefited from these agreements in that it did not need to pay the former partners with cash but, instead, could simply direct trades of the institutional client to the former partners' brokerage firms in order to compensate them for their partnership interests.

H. From July 1993 through August 1996, MPI did not disclose the arrangements with its former partners in its Form ADV or elsewhere. After August 1996, MPI did disclose the agreement with one of the former partners in its Form ADV. However, it did not disclose the agreement with the other former partner. Pequet completed and signed all of MPI's Forms ADV. The large institutional client primarily used for generating commissions for the former partner terminated its account with MPI in February of 1996 and MPI directed no further trades to the former partners after that time. Accordingly, MPI never disclosed the arrangements with its former partners to the clients.

I. From July 1993 though August 1996, by failing to disclose the existence and material terms of the payment agreements with the former partners, and failing to disclose the existence and material terms of the agreement with one of the former partners after August 1996, MPI willfully violated Sections 206(1) and (2) of the Advisers Act. MPI, as an investment adviser, had a fiduciary duty to fully disclose to its clients all possible material conflicts of interest. The debt forgiveness which MPI received constituted an economic benefit to MPI which needed to be disclosed to MPI's clients. MPI harmed its clients since they did not have an opportunity to object to MPI's arrangements and to protect themselves against MPI's incentive to effect transactions in their accounts without regard to their needs.

J. By failing to disclose the agreements with its former partners in its Forms ADV from July 1993 though August 1996, and by failing to disclose the existence and material terms of the agreement with one of the former partners after August 1996, MPI and Pequet willfully violated Section 207 of the Advisers Act which prohibits any person from making any untrue statement of material fact or willfully failing to state any material fact in any registration application or report filed with the Commission.

K. As the principals and controlling persons of MPI, both Pequet and Shende caused and willfully aided and abetted MPI's violations of Section 206(1) and 206(2) of the Advisers Act. Shende caused and willfully aided and abetted MPI's violations of Section 207 of the Advisers Act. As the principals of MPI, Pequet and Shende knew of the payment arrangements and took steps to carry out the process of directing trades to the two former partners. Pequet and Shende substantially assisted MPI in carrying out the arrangements described above by drafting the appropriate documents, by negotiating the various agreements, by executing documents, by failing to disclose these arrangements and by actually making the payments to the former partners. Furthermore, both Pequet and Shende personally benefited from the arrangements as every dollar paid to the former partners through directed trades was a dollar that did not have to be paid in cash by the partnership.

L. Based on the foregoing, MPI willfully violated Sections 206(1), 206(2) and 207 of the Advisers Act. Pequet willfully violated Section 207 of the Advisers Act. Shende caused and willfully aided and abetted MPI's violations of Section 207 of the Advisers Act. Furthermore, both Pequet and Shende caused and willfully aided and abetted MPI's violations of Sections 206(1) and 206(2) of the Advisers Act.

M. Shende has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement, prejudgment interest and a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Shende and has determined that Shende does not have the financial ability to pay the full amount of disgorgement and prejudgment interest of $52,916.80 and a civil penalty.

IV.

Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement of MPI, Pequet and Shende.

Accordingly, IT IS ORDERED that the following sanctions be imposed:

A. Pursuant to Section 203(k) of the Advisers Act that Pequet, Shende and MPI shall cease and desist from committing or causing any violations and any future violation of Sections 206(1), 206(2) and 207 of the Advisers Act;

B. MPI is hereby censured;

C. MPI shall deliver a copy of the Order, together with a cover letter, in a form acceptable to the staff of the Commission, to each of its existing clients within thirty (30) days from the date of the Order. From the effective date of this Order until the expiration of twelve (12) months, MPI shall provide a copy of the Order to all prospective investment advisory client not less than forty-eight (48) hours prior to entering into any written or oral advisory contract (or no later than the time of entering into such contract if the client has the right to terminate the contract without penalty within five (5) business days after entering into the contract). MPI will obtain an acknowledgment of receipt from any client or prospective client to whom the Order is delivered. Also, within thirty (30) days from the date of this Order, MPI shall execute and deliver to the staff of the Midwest Regional Office an Affidavit that it has provided the Order to its existing clients in accordance with the Order's terms. Finally, within thirteen (13) months from the date of this Order, MPI shall execute and deliver to the staff of the Midwest Regional Office an Affidavit that it has provided a copy of the Order to its prospective clients in accordance with the Order's terms;

D. Pequet shall, within seven (7) days of the entry of the Order, pay disgorgement and prejudgment interest in the amount of $52,916.80 and a civil penalty in the amount of $5,000 to the United States Treasury. 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, Operations Center, 6432 General Green Way, Stop O-3, Alexandria, Virginia 22312; and (d) submitted under cover of letter which identifies Pequet as a respondent in this proceeding, the file number of this proceeding, a copy of which letter and money order or check shall be sent to Mary Keefe, Regional Director, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661;

E. Shende shall, within seven (7) days of the entry of the Order, pay disgorgement and prejudgment interest to the United States Treasury in the amount of $52,916.80; however, payment of all but $10,000 will be waived based upon his demonstrated inability to pay. 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, Operations Center, 6432 General Green Way, Stop O-3, Alexandria, Virginia 22312; and
(d) submitted under cover of letter which identifies Shende as a respondent in this proceeding, the file number of this proceeding, a copy of which letter and money order or check shall be sent to Mary Keefe, Regional Director, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661; and,

F. The Division of Enforcement (Division) may, at any time following the entry of the Order, petition the Commission to: (1) reopen this matter to consider whether Shende provided accurate and complete financial information at the time such representations were made;

(2) determine the amount of civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Shende's offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Shende was fraudulent, misleading, inaccurate or incomplete in any material respect and whether any additional remedies should be imposed. Respondent may not, by way of defense to any such petition, contest the findings in the Order or the Commission's authority to impose any additional remedies that were available in the original proceedings.

By the Commission.

Jonathan G. Katz
Secretary