UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7353 / October 2, 1996 SECURITIES EXCHANGE ACT OF 1934 Release No. 37777 / October 2, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9139 ________________________________ : ORDER INSTITUTING CEASE- In the Matter of : AND-DESIST AND PUBLIC : ADMINISTRATIVE Peacock, Hislop, Staley & Given,: PROCEEDINGS PURSUANT TO Inc. : SECTION 8A OF THE and Larry S. Given : SECURITIES ACT OF 1933 : AND SECTIONS 15(b)(4) Respondents. : 15(b)(6) AND 21C OF THE ________________________________: SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND- DESIST ORDER AND REMEDIAL SANCTIONS I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute public cease-and-desist and administrative proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b)(4), 15(b)6) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Peacock, Hislop, Staley & Given, Inc. ("PHS&G") and Larry S. Given ("Given") (collectively "the Respondents"). Accordingly, IT IS HEREBY ORDERED that said proceedings be, and hereby are, instituted. II. In anticipation of the institution of these proceedings, Respondents have submitted an Offer of Settlement ("Offer") 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, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over them and over the subject matter of these proceedings, Respondents consent to the entry of this Order Instituting Cease-and-Desist and Public Administrative Proceedings Pursuant to Section 8A of the ==========================================START OF PAGE 2====== Securities Act and Sections 15(b)(4), 15(b)(6) and 21C of the Exchange Act, Making Findings, and Imposing a Cease-and-Desist Order and Remedial Sanctions ("Order"), and to the entry of the findings and the imposition of the cease-and-desist order and sanctions set forth below. III. On the basis of this Order and the Respondents' Offer, the Commission finds that:-[1]- A. THE RESPONDENTS 1. PHS&G, headquartered in Phoenix, Arizona (File No. 8-38994), has been a registered broker-dealer since May 1989. During 1993, PHS&G served as financial adviser to Maricopa County, Arizona ("Maricopa County" or "the County") in connection with two general obligation bond offerings ("the 1993 G.O. Bond Offerings"). As financial adviser, PHS&G had access to the County's financial information including interim financial statements and budget projections. 2. Given, a registered representative, at all relevant times was and currently is a principal of PHS&G. During 1993, Given was President of PHS&G and was primarily responsible for providing financial advisory services to the County in connection with the 1993 G.O. Bond Offerings. B. FACTS 1. Between July 26, 1993 and August 10, 1993, Maricopa County offered and sold $25.575 million worth of ten year general obligation project bonds ("Project Bonds") and $22.25 million worth of four year general obligation refunding bonds ("Refunding Bonds") (collectively referred to as the "1993 G.O. Bond Offerings"). PHS&G and Given served as financial adviser to the County in connection with the 1993 G.O. Bond Offerings and, pursuant to an agreement, prepared offering statements which were to contain complete financial and other data. The Preliminary and Final Official Statements (hereinafter, the "Official Statements"), the primary disclosure documents for the 1993 G.O. Bond Offerings, were reviewed by the County, PHS&G, Given and others for accuracy and completeness. ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Respondents' Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. ==========================================START OF PAGE 3====== 2. The Official Statements for each offering contained financial statements for the year ended June 30, 1992. However, the County's financial condition at the time of the 1993 G.O. Bond Offerings had materially worsened since June 30, 1992, in that the County's operating cash flow had materially declined. Specifically, during fiscal year 1992-93, the County developed a deficit in its General Fund and had nearly doubled the deficit in its Medical Center Enterprise Fund, from $16.9 million to $31.8 million. The Official Statements, which included 1992 financial statements, failed to disclose these changes. Given was aware of the County's cash flow problems and of Moody's Investor Service's downgrade of the County's preexisting G.O. Bond rating due to the cash flow situation. In addition, the Official Statements failed to disclose that the current liabilities of the Medical Center Enterprise Fund on June 30, 1993, exceeded its current assets by approximately 40% more than on June 30, 1992. 3. Furthermore, the Official Statements for the 1993 G.O. Bond Offerings failed to disclose that the County's cash flow position had materially declined since the close of the prior fiscal year. Such information, which was available to PHS&G and Given, was included in contemporaneous documents relating to a tax anticipation note offering by the County. 4. In addition, the Project Bonds' Official Statements represented that bond proceeds would be used to finance specific County projects. However, at a July 26, 1993, meeting of the County's Board of Supervisors, Given learned that proceeds from the sale of Project Bonds would be made available for other purposes, not disclosed to investors. In fact, Project Bond proceeds were used temporarily to finance the County's cash flow deficit through July 1994. Despite knowing of the County's plan to make Project Bond proceeds available for other purposes, PHS&G, through Given, did not revise or supplement or cause the County to revise or supplement the Final Official Statement for the Project Bond Offering to reflect this plan. Consequently, persons and entities who received the Official Statements for the Project Bond Offering, including investors in the offering, were unaware of the County's plan to make investor funds available for other purposes not disclosed in the Official Statements. 5. These facts were material since: 1) the County's changed financial condition, as reflected by the development of a General Fund deficit and the doubling of the Medical Center Enterprise Fund deficit would have been important for an investor to consider in deciding whether or not to purchase the County's G.O. Bonds; and 2) use of Project Bond proceeds to alleviate the County's cash flow deficit was an undisclosed use of investor funds, which an investor may have considered important in deciding whether or not to purchase the Bonds. ==========================================START OF PAGE 4====== 6. As the County's financial adviser, PHS&G and Given were reckless in that they, in, and in connection with, the offer, purchase and sale of the 1993 G.O. Bond Offerings, by use of the means and instruments of transportation and communication in interstate commerce and the means and instrumentalities of interstate commerce, and the mails, failed to cause the County to include in the Official Statements for the G.O. Bonds interim financial information indicating that the County's operating cash flow position had materially declined and information regarding the interim use of Project Bond proceeds. Therefore, Respondents caused and willfully aided and abetted the County's violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in connection with the offer and sale of the 1993 G.O. Bonds. IV. Based on the foregoing, the Commission deems it appropriate to accept the Offer of the Respondents. Accordingly, IT IS HEREBY ORDERED, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act that PHS&G and Given cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. IT IS FURTHER ORDERED, pursuant to Section 21B of the Exchange Act that PHS&G and Given shall, within 60 days of the entry of this Order, pay a civil money penalty in the respective amounts of $50,000 (PHS&G) and $25,000 (Given) 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 to the Comptroller, Securities and Exchange Commission, 450 5th Street, N.W., Washington, D.C. 20549; and (D) submitted under cover letter that identifies PHS&G and Given as Respondents in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Sandra J. Harris, Pacific Regional Office, Securities and Exchange Commission, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, CA 90036. By the Commission. Jonathan G. Katz Secretary