UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 34-40906 / January 11, 1999
ADMINISTRATIVE PROCEEDING
File No. 3-9803
___________________________________
:
In the Matter of : ORDER MAKING
FINDINGS : AND IMPOSING
CERTAIN MARKET MAKING : SANCTIONS AS TO
ACTIVITIES ON NASDAQ : DONALDSON, LUFKIN
: & JENRETTE SECURITIES
: CORPORATION AND
: LAWRENCE H. KURTZ
___________________________________:
I.
In the accompanying Order Instituting Proceedings
Pursuant to Sections 15(b) and 21C of the Securities
Exchange Act of 1934 and Findings of the Commission ("Order
Instituting Proceedings"), the Securities and Exchange
Commission ("Commission") instituted these public
administrative proceedings against Donaldson, Lufkin &
Jenrette Securities Corporation, Lawrence H. Kurtz, and
other firms and individuals. Contemporaneously, Donaldson,
Lufkin & Jenrette Securities Corporation and Lawrence H.
Kurtz ("Respondents") have submitted Offers of Settlement
("Offers") in anticipation of the institution of these
proceedings, which the Commission has determined to accept.
In their Offers, Respondents, solely for the purposes of
these proceedings and any other proceedings brought by or on
behalf of the Commission or to which the Commission is a
party, prior to a hearing pursuant to the Commission’s Rules
of Practice, and without admitting or denying the findings
herein, except for the findings of Section II.A., which are
admitted, have consented to the entry of the Order
Instituting Proceedings and this Order Making Findings and
Imposing Sanctions as to Donaldson, Lufkin & Jenrette
Securities Corporation and Lawrence H. Kurtz (which are
hereinafter referred to as the "Orders").
The Commission has determined that it is appropriate
and in the public interest to accept the Respondents’ Offers
and accordingly is issuing this Order.
II.
On the basis of the Orders and Respondents’ Offers, the
Commission finds[1] the following:
A. Respondents
Donaldson, Lufkin & Jenrette Securities Corporation, a
Delaware corporation, is registered with the Commission as a
broker-dealer pursuant to Section 15(b) of the Securities
Exchange Act of 1934 ("Exchange Act"). At all relevant
times, Donaldson, Lufkin & Jenrette Securities Corporation
made markets in a number of securities traded in the Nasdaq
market. Donaldson, Lufkin & Jenrette Securities
Corporation's principal place of business during the
relevant time period was New York, New York. Donaldson,
Lufkin & Jenrette Securities Corporation traded Nasdaq
stocks for its own accounts and for the accounts of
institutional and retail investors. At all times relevant
herein, Donaldson, Lufkin & Jenrette Securities Corporation
was a member of the National Association of Securities
Dealers, Inc. ("NASD"), a national securities association
registered with the Commission under Section 15A of the
Exchange Act.
Lawrence H. Kurtz, age 51, resides in Brooklyn, New
York and, at all relevant times, was a Nasdaq trader at
Donaldson, Lufkin & Jenrette Securities Corporation. As a
Nasdaq trader, Lawrence H. Kurtz was responsible for making
markets in certain securities traded on the Nasdaq Stock
Market.
B. Factual Summary
In connection with its activities as a Nasdaq market
maker, Donaldson, Lufkin & Jenrette Securities Corporation
and Lawrence H. Kurtz engaged in the following activities,
as more fully described in the applicable sections of the
accompanying Order Instituting Proceedings, in the following
securities and on the following dates.
1. The Fraudulent Coordination of Quote Movements
Donaldson, Lufkin & Jenrette Securities Corporation
engaged in, or caused, the coordinated entry of quotations
on Nasdaq in violation of Sections 15(c)(1) and (2) of the
Exchange Act and Rules 15c1-2 and 15c2-7 thereunder, in one
or more of the respects described in Section II.C.1. of the
Order Instituting Proceedings in a market making transaction
or a related series of market making transactions in:
a. the stock of Exide Electronics Group, Inc.
("XUPS") on May 26, 1994; and,
b. the stock of Legent Corp. (LGNT") on
June 9, 1994.
2. Undisclosed Arrangements to Coordinate Quotations
Donaldson, Lufkin & Jenrette Securities Corporation
entered, or caused to be entered, in the Nasdaq market
fictitious quotations in one or more respects described in
Section II.C.2. of the Order Instituting Proceedings in
violation of Section 15(c)(2) of the Exchange Act and Rule
15c2-7 thereunder, in a market making transaction or related
series of market making transactions in:
a. the stock of Legent Corp. ("LGNT") on April
19, 1994;
b. the stock of Liberty Media Corp. ("LBTYA") on
June 2, 1994;
c. the stock of Novell Inc. ("NOVL") on June 17,
1994, aided and abetted by its trader Lawrence H.
Kurtz;
d. the stock of 3 Com Corporation ("COMS") on
July 21, 1994, aided and abetted by its trader
Lawrence H. Kurtz;
e. the stock of United Video Satellite Group,
Class A ("UVSGA") on August 9, 1994;
f. the stock of Bell Cablemedia PLC - ADR
("BCMPY") on August 29, 1994; and
g. the stock of Autodesk Inc. ("ACAD") on
October 25, 1994, aided and abetted by its trader
Lawrence H. Kurtz.
3. Failure to Keep Accurate Books and Records
Donaldson, Lufkin & Jenrette Securities Corporation
failed to keep and maintain accurate books and records in
one or more of the respects described in Section II.C.7. of
the Order Instituting Proceedings in violation of Section
17(a) of the Exchange Act and Rule 17a-3 thereunder, in a
market making transaction or related series of market making
transactions in:
a. the stock of Novell Inc. ("NOVL") on
June 17, 1994; and,
b. the stock of United Video Satellite
Group, Class A ("UVSGA") on August 9, 1994.
4. Failure to Reasonably Supervise Nasdaq Trading
Donaldson, Lufkin & Jenrette Securities Corporation
failed reasonably to supervise its Nasdaq market making
activities with a view to preventing future violations
within the meaning of Section 15(b)(4)(E) of the Exchange
Act, in one or more of the respects described in Section
II.C.8.a. and b. of the Order Instituting Proceedings.
III.
By reason of the foregoing, Donaldson, Lufkin &
Jenrette Securities Corporation willfully violated Sections
15(c)(1) and (2), and 17(a) of the Exchange Act, and Rules
15c1-2, 15c2-7, and 17a-3 thereunder, and failed reasonably
to supervise its Nasdaq trading personnel within the meaning
of Section 15(b)(4)(E) of the Exchange Act. Lawrence H.
Kurtz willfully aided and abetted and caused violations of
Section 15(c)(2) of the Exchange Act and Rule 15c2-7
thereunder.
IV.
In view of the foregoing and Respondents’ Offers, IT IS
HEREBY ORDERED, pursuant to Sections 15(b) and 21C of the
Exchange Act, that:
1. Donaldson, Lufkin & Jenrette Securities
Corporation shall cease and desist from committing
or causing any violation of, and committing or
causing any future violation of, Sections 15(c)(1)
and (2), and 17(a) of the Exchange Act, and Rules
15c1-2, 15c2-7, and 17a-3 thereunder;
2. Donaldson, Lufkin & Jenrette Securities
Corporation shall, within 10 business days of the
entry of this Order, pay a civil penalty in the
amount of $260,000.00 by wire transfer in
accordance with instructions furnished by the
Commission staff, or by U.S. Postal money order,
certified check, bank cashier’s check, or bank
money order, made payable to the Securities and
Exchange Commission, which shall be hand-delivered
or mailed to the Comptroller, Securities and
Exchange Commission, Operations Center, 6432
General Green Way, Mail Stop O-3, Alexandria, VA
22312, under cover of a letter that identifies
Donaldson, Lufkin & Jenrette Securities
Corporation as a Respondent in these proceedings
and provides the caption and file number for these
proceedings; with (a) written confirmation of
payment by such wire transfer, or (b) a copy of
such cover letter and money order or check, to be
sent to Leonard W. Wang, Division of Enforcement,
Securities and Exchange Commission, 450 5th
Street, N.W., Mail Stop 7-1, Washington, D.C.
20549;
3. Donaldson, Lufkin & Jenrette Securities
Corporation shall, within 90 days of the date of
the entry of this Order, provide to the
independent consultant appointed by the Commission
in connection with these proceedings (the
"Independent Consultant") a description of its
policies, procedures and practices relating to
prevention or detection of the types of improper
conduct involving Donaldson, Lufkin & Jenrette
Securities Corporation described in Section II of
this Order. Within such time as the Commission
directs, the Independent Consultant shall review
such policies, procedures and practices with a
view to determining if they would reasonably be
expected to prevent and detect, insofar as
practicable, any of the types of improper conduct
involving Donaldson, Lufkin & Jenrette Securities
Corporation described in Section II of this
Order. Donaldson, Lufkin & Jenrette Securities
Corporation shall cooperate with the Independent
Consultant’s review of Donaldson, Lufkin &
Jenrette Securities Corporation’s policies,
procedures and practices, and shall, among other
things, provide such further information as the
Independent Consultant reasonably requests or that
Donaldson, Lufkin & Jenrette Securities
Corporation deems relevant to the Independent
Consultant’s review, provided, however, that
Donaldson, Lufkin & Jenrette Securities
Corporation need not provide any information to
which it asserts a valid claim of the attorney-
client privilege. The Independent Consultant
shall maintain the confidentiality of all
materials provided by Donaldson, Lufkin & Jenrette
Securities Corporation and shall not provide the
materials to any person, provided, however, that
such materials may be provided to the Commission
or its staff.
If the Independent Consultant concludes that
Donaldson, Lufkin & Jenrette Securities
Corporation’s policies, procedures and practices,
as presented, would reasonably be expected to
prevent and detect, insofar as practicable, any of
the types of improper conduct involving Donaldson,
Lufkin & Jenrette Securities Corporation described
in Section II of this Order, the Independent
Consultant shall inform Donaldson, Lufkin &
Jenrette Securities Corporation of this conclusion
in writing, and his or her responsibilities with
respect to Donaldson, Lufkin & Jenrette Securities
Corporation shall conclude. If the Independent
Consultant cannot conclude that Donaldson, Lufkin
& Jenrette Securities Corporation’s policies,
procedures and practices meet the aforesaid
standard, he or she may recommend changes in or
additions to Donaldson, Lufkin & Jenrette
Securities Corporation’s policies, procedures or
practices for the purpose of improving their
ability to meet the aforesaid standard.
Donaldson, Lufkin & Jenrette Securities
Corporation shall implement all such recommended
changes or additions in a timely manner, but in
any event no later than three months after
receiving the recommendations of the Independent
Consultant or such other reasonable time as
determined by the Independent Consultant;
provided, however, if Donaldson, Lufkin & Jenrette
Securities Corporation believes that a change or
addition to its policies, procedures and practices
recommended by the Independent Consultant is
unduly burdensome or unreasonable, it may: (a)
propose an equally effective alternative to the
Independent Consultant, and, with the Independent
Consultant’s approval, implement that alternative
in lieu of the Independent Consultant’s
recommended change or addition; or (b) petition
the Commission, with notice to the Independent
Consultant and the Division of Enforcement, for
relief from the recommendation of the Independent
Consultant.
Within three months of receiving recommendations
of the Independent Consultant for changes in or
additions to its policies, procedures and
practices, Donaldson, Lufkin & Jenrette Securities
Corporation shall report in writing to the
Independent Consultant with respect to the
implementation of the recommendations and/or any
equally effective alternatives approved by the
Independent Consultant. If Donaldson, Lufkin &
Jenrette Securities Corporation’s report on
implementation is without qualification and states
that said recommendations and/or alternatives have
been fully and effectively implemented, the
Independent Consultant’s responsibilities with
respect to Donaldson, Lufkin & Jenrette Securities
Corporation shall conclude. If Donaldson, Lufkin
& Jenrette Securities Corporation’s report on
implementation is qualified, or in any respect
indicates that implementation is not full and
effective, Donaldson, Lufkin & Jenrette Securities
Corporation shall cooperate with all further
efforts of the Independent Consultant to ensure
that said recommendations and/or alternatives are
fully and effectively implemented. When the
Independent Consultant concludes that Donaldson,
Lufkin & Jenrette Securities Corporation has fully
and effectively implemented said recommendations
and/or alternatives, he or she shall inform
Donaldson, Lufkin & Jenrette Securities
Corporation in writing of this conclusion and his
or her responsibilities with respect to Donaldson,
Lufkin & Jenrette Securities Corporation shall
conclude. The fees and expenses of the
Independent Consultant arising from his or her
review of the policies, procedures and practices
of Donaldson, Lufkin & Jenrette Securities
Corporation and the other respondent firms subject
to the Independent Consultant’s review shall be
prorated evenly among such firms, and in such
prorated amounts, be paid by each such firm,
provided however, that if the Independent
Consultant recommends changes or additions to
Donaldson, Lufkin & Jenrette Securities
Corporation’s policies, procedures or practices,
the fees and expenses of the Independent
Consultant relating to the making and
implementation of those recommendations and/or any
alternatives approved by the Independent
Consultant, and any disagreements relating
thereto, shall be paid by Donaldson, Lufkin &
Jenrette Securities Corporation;
4. Lawrence H. Kurtz shall cease and desist from
committing or causing any violation of, and
committing or causing any future violation of
Section 15(c)(2) of the Exchange Act, and Rule
15c2-7;
5. Lawrence H. Kurtz shall, within 10 business days
of the entry of this Order, pay a civil penalty in
the amount of $15,000.00 by wire transfer in
accordance with instructions furnished by the
Commission staff, or by U.S. Postal money order,
certified check, bank cashier’s check, or bank
money order, made payable to the Securities and
Exchange Commission, which shall be hand-delivered
or mailed to the Comptroller, Securities and
Exchange Commission, Operations Center, 6432
General Green Way, Mail Stop O-3, Alexandria, VA
22312, under cover of a letter that identifies
Lawrence H. Kurtz as a Respondent in these
proceedings and provides the caption and file
number for these proceedings; with (a) written
confirmation of payment by such wire transfer, or
(b) a copy of such cover letter and money order or
check, to be sent to Leonard W. Wang, Division of
Enforcement, Securities and Exchange Commission,
450 5th Street, N.W., Mail Stop 7-1, Washington,
D.C. 20549; and
**FOOTNOTES**
[1]: The findings herein are solely for the purpose of these
proceedings, and are not binding on any person not a
respondent in these proceedings.
1
6. Lawrence H. Kurtz be, and hereby is,
suspended from association with any broker,
dealer, municipal securities dealer, investment
adviser or investment company, for a period of one
(1) month, effective one day after the date of
this Order.
Lawrence H. Kurtz shall provide to the Commission,
within 10 days after the end of the one (1) month
suspension described above, an affidavit that he
has complied fully with the sanctions described in
this Section.
By the Commission.
Jonathan G. Katz
Secretary
2