UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7441 / August 27, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No. 38977 / Aigist 27, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9375 __________________________________ :ORDER INSTITUTING ADMIN- In the Matter of :ISTRATIVE AND CEASE-AND- :DESIST PROCEEDINGS PUR- :SUANT TO SECTION 8A OF :THE SECURITIES ACT OF :1933 AND SECTIONS 15(b), WILLIE DANIELS, :15B(c)(4), 19(h) AND 21C :OF THE SECURITIES :EXCHANGE ACT OF 1934, Respondent. :MAKING FINDINGS AND :IMPOSING SANCTIONS AND A :CEASE-AND-DESIST ORDER : I. The Securities and Exchange Commission ( Commission ) deems it appropriate and in the public interest to institute public administrative and cease- and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 ( Securities Act ) and Sections 15(b), 15B(c)(4), 19(h) and 21C of the Securities Exchange Act of 1934 ( Exchange Act ) against Respondent Willie Daniels ( Daniels ). II. In anticipation of the institution of these proceedings, Respondent Daniels has submitted an Offer of Settlement ( Offer ) to the Commission, which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over the Respondent and over the subject matter of this proceeding and as to Sections III.A. and B. below, which are admitted, Respondent Daniel by his Offer consents to the entry of findings, remedial sanctions and cease-and-desist order set forth below. Accordingly, IT IS ORDERED that proceedings pursuant to Section 8A of the ======END OF PAGE 1======. Securities Act and Sections 15(b), 15B(c)(4), 19(h) and 21C of the Exchange Act be, and, they hereby are, instituted. III. On the basis of this Order and the Offer submitted by Respondent Daniels, the Commission finds <(1)> that: A.Daniels, at all relevant times, operated as a non-registered principal of a municipal securities broker-dealer ( the broker-dealer ). Daniels was the founder of the broker-dealer, and remains its president and sole owner. Daniels was registered with the National Association of Securities Dealers, Inc. ( NASD ) as a municipal securities principal of the broker-dealer until April 1995. B.The broker-dealer, at all relevant times, operated as a municipal securities broker-dealer within the meaning of Sections 3(a)(30) and 3(a)(31) of the Exchange Act. Until March 1995, the broker-dealer was headquartered in New York City and maintained eight offices throughout the United States. The broker-dealer was founded and registered by Daniels with the Commission in 1984. C.Since its inception, the broker-dealer s primary source of business had been underwriting state and local municipal debt. D.In 1994, Daniels and the broker-dealer were financially distressed. In approximately February 1995, Daniels decided to close the firm. Daniels, on behalf of the broker-dealer, filed the withdrawal of its registration as a broker-dealer on March 31, 1995. The broker-dealer s withdrawal became effective with the NASD and the Commission on April 27, 1995 and on June 9, 1995, respectively. As a result of this action, Daniels also surrendered his Municipal Securities Principal registration. Thereafter, Daniels proceeded to wind down the broker-dealer s affairs, including the liquidation of the firm s equipment and furniture. E. By May 1995, the broker-dealer had effectively withdrawn its NASD registration as a broker-dealer. Daniels failed to inform the various municipalities with which the broker-dealer had been registered in underwriting pools that it no longer could do business as a broker-dealer. As a result, the broker-dealer continued to be selected as an underwriter for municipal underwritings from various municipal underwriting pools. F.After being advised of the broker-dealer s selection to these underwritings, the broker-dealer, through Daniels and another individual acting on behalf of the broker-dealer, executed underwriting agreements with senior underwriters. Certain of these agreements contained affirmative mater misrepresentations to the effect that the broker-dealer was then <(1)> The findings contained herein are not binding on anyone other than Daniels. ======END OF PAGE 2======. currently registered with the NASD and the Commission and that it was in regulatory compliance with those entities. G.The broker-dealer, through Daniels and another individual acting at his direction, also prepared and submitted solicitations for additional business to various other municipalities after the broker-dealer had withdrawn its registration. The broker-dealer solicited underwriting business from at least five municipal bond issuers. These solicitations also contained misrepresentations and material omissions concerning the broker-dealer and its employees. For example, in a September 6, 1995 response by the broker-dealer to a request for proposals for underwriters from an issuer, the broker-dealer omitted to inform the issuer that the broker-dealer was not currently registered as a broker-dealer and misrepresented, among other things, the number of salespeople capable of distributing the upcoming transaction and the amount of secondary trading in which the firm was engaged. H.During the period of May 10, 1995 through April 18, 1996, while unregistered, the broker-dealer purchased and sold $14,800,000 bonds in at least fifteen different underwritings. The broker-dealer received over $200,000 in compensation as a result of its participation in these transactions. I.Daniels was aware of his role in the broker-dealer s scheme to conduct unregistered underwriting business and rendered substantial assistance to that scheme by arranging for the offices of the broker-dealer to be maintained, by executing underwriting agreements, by submitting solicitations for underwritings, and by paying employees and otherwise meeting the costs of conducting the illicit business. J.Respondent Daniels has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement plus prejudgement interest or a civil money penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Daniels and has determined that Daniels does not have the financial ability to pay disgorgement of $218,419.54 plus prejudgement interest or a civil money penalty. ======END OF PAGE 3======. Violations K.As a result of the conduct described above, Daniels willfully aided and abetted the broker-dealer s violations of Sections 15(a)(1), 15(c)(1), 15B(a)(1) and 15B(c)(1) of the Exchange Act, and Rule 15c1-2 thereunder, and Municipal Securities Rulemaking Board ( MSRB ) Rule G-17, by effecting and inducing and attempting to induce the purchase and sale of municipal securities while the broker-dealer was not registered with the Commission as a broker-dealer or municipal securities dealer, and by misrepresenting the registration status and qualifications of the broker-dealer. L.As a result of the conduct described above, Daniels committed or caused violations of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act, Sections 10(b), 15(a)(1), 15(c)(1), 15B(a)(1) and 15B(c)(1) of the Exchange Act, and Rules 10b-5 and 15c1-2 thereunder, and MSRB Rule G-17 by effecting and inducing and attempting to induce the purchase and sale of municipal securities while the broker-dealer was not registered with the Commission as a broker dealer or municipal securities dealer, and by misrepresenting the registration status and qualifications of the broker- dealer. Daniels, acting through the broker-dealer, also willfully violated MSRB Rule G-2 by engaging in municipal securities business while not registered as a municipal securities principal and failing to requalify in accordance with MSRB Rule G-3. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Daniels and impose the remedial sanctions and cease-and-desist order specified therein. Accordingly, IT IS ORDERED that: A.Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Daniels is ordered to cease-and-desist from committing or causing any violation or any future violation of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act, Sections 10(b), 15(a)(1), 15(c)(1), 15B(a)(1) and 15(B)(c)(1) of the Exchange Act and Rules 10b-5 and 15c1-2 thereunder, and MSRB Rules G-2 and G-17. B.Daniels be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment advisor or investment company. C.Daniels shall be liable for, and pay disgorgement of $218,419.54 plus prejudgement interest, but the payment of such amount shall be waived and a civil money penalty will not be imposed based upon Daniels demonstrated financial inability to pay. D. The Division of Enforcement ( Division ) may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent Daniels provided accurate and incomplete financial information at the time such representations were made; (2) ======END OF PAGE 4======. determine the amount disgorgement and prejudgement interest to order; (3) determine the amount of civil penalty to be imposed; and (4) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Respondent 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 the Respondent was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of disgorgement and prejudgement interest to order, the amount of civil penalty to be imposed and whether any additional remedies should be imposed. Respondent may not, by way of defense to any such petition, contest the findings in this Order or the Commission s authority to impose any additional remedies that were available in the original proceeding. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 5======.