United States 
                          Securities and Exchange Commission


     SECURITIES ACT of 1933
     Release No.  7462 / September 30, 1997

     SECURITIES EXCHANGE ACT of 1934
     Release No. 39158 / September 30, 1997

     ADMINISTRATIVE PROCEEDING
     File No. 3-9461

     In the Matter of Fundamental Portfolio Advisers, Inc., Lance M. Brofman,
     Vincent J. Malanga, and Fundamental Service Corporation

          The Securities and Exchange Commission announced that it instituted
     public administrative and cease-and desist proceedings against:

          *    Fundamental Portfolio Advisors, Inc. ("FPA"), a registered
               investment adviser located in New York City; 
          *    Lance M. Brofman ("Brofman"), the former portfolio manager of the
               Fundamental U.S. Government Strategic Income Fund ("Fund") and
               the subject of two prior Commission enforcement actions; 

          *    Vincent J. Malanga ("Malanga"), FPA's president; and

          *    Fundamental Service Corporation ("FSC"), a registered broker-
               dealer affiliated with FPA which distributes and markets the Fund
               and other funds managed by FPA.  

          The proceeding arises from the failure of the Fund -- a limited
     duration U.S. government bond fund -- to disclose the risks of the Fund,
     stemming in large part from its substantial investment in inverse floating
     collateralized mortgage obligations ("inverse floaters"), and to maintain
     the promised limited duration.  The Order alleges as follows: 

          From its creation in 1992, the Fund was marketed as a relatively safe
     and conservative investment, designed to provide "high current income with
     minimum risk of principal and relative stability of net asset value."  As a
     U.S. government bond fund, interest rate risk posed the greatest risk to
     the Fund's net asset value.  According to the Fund's prospectus and sales
     materials, the Fund sought to limit that risk, and thus to maximize
     stability of net asset value, by limiting the Fund's "duration" to three
     years or less.  The term "duration" generally refers to the sensitivity of
     the value of a security or a portfolio of securities to changes in interest
     rates.  (Although measured in years, an instrument's duration is not
     necessarily the same as its term to maturity.)  Duration is a measure of
     the price sensitivity of a fixed income fund, such as a U.S. government
     bond fund, to changes in interest rates.  A portfolio with a low duration
     will be less sensitive to changes in interest rates than a high duration
     portfolio.  

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          The Order alleges that, contrary to the representations of safety and
     low volatility, the Fund had a heightened sensitivity to changes in
     interest rates, due in large part to its substantial investment in inverse
     floaters.  Beginning in May 1993, an increasing portion of the Fund's
     portfolio was invested in inverse floaters.  By the fourth quarter of 1993,
     and throughout 1994, inverse floaters represented approximately 30% of the
     Fund's net assets and approximately 20% of its total assets.  Further, at
     least from the time the Fund became substantially invested in inverse
     floaters, the Fund's duration was much higher than three years.  

          When interest rates rose in 1994, the Fund incurred significant
     losses; in 1994, the Fund's net asset value declined approximately 32%, far
     more than almost all other U.S. government bond funds.

          The Order charges that FPA, Brofman, Malanga violated certain
     antifraud provisions of the federal securities laws because they marketed
     the Fund as a safe investment, offering relative stability of net asset
     value when it was not.  The Order also charges that FPA, Brofman and
     Malanga failed to disclose FPA's soft dollar arrangements to the board of
     the Fund and other funds managed by FPA when questioned about such
     arrangements at three board meetings in 1994 and 1995.

          The Order alleges that FPA violated Section 17(a) of the Securities
     Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange
     Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, Sections 206(1) and
     (2) of the Investment Advisers Act of 1940 ("Advisers Act"), and Section
     34(b) of the Investment Company Act of 1940 ("Investment Company Act");
     that Brofman and Malanga violated Section 17(a) of the Securities Act,
     Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section
     34(b) of the Investment Company Act, and aided and abetted FPA's violations
     of Sections 206(1) and (2) of the Advisers Act; that Malanga violated
     Section 15(c)(1) of the Exchange Act, and Rules 10b-3 and 15c1-2
     thereunder; and that FSC violated Section 17(a) of the Securities Act,
     Sections 10(b) and 15(c)(1) of the Exchange Act and Rules 10b-3, 10b-5 and
     15c1-2 thereunder.
       
          A hearing will be scheduled to determine whether the allegations
     against FPA, Brofman, Malanga and FSC are true, and, if so, what remedial
     action, if any, is appropriate.