UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 34-40922 / January 11, 1999
ADMINISTRATIVE PROCEEDING
File No. 3-9803
______________________________
:
In the Matter of : ORDER MAKING FINDINGS
: AND IMPOSING SANCTIONS
CERTAIN MARKET MAKING : AS TO RAYMOND JAMES &
ACTIVITIES ON NASDAQ : ASSOCIATES, INC.,
: THOMAS J. DUDENHOEFER
: AND TIMOTHY J. KANE
______________________________:
I.
In the accompanying Orders 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 Raymond James &
Associates, Inc., Thomas J. Dudenhoefer, Timothy J. Kane,
and other firms and individuals. Contemporaneously, Raymond
James & Associates, Inc., Thomas J. Dudenhoefer and Timothy
J. Kane ("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 Raymond James & Associates, Inc.,
Thomas J. Dudenhoefer and Timothy J. Kane (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
Raymond James & Associates, Inc., a Florida
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,
Raymond James & Associates, Inc., made markets in a number
of securities traded in the Nasdaq market. Raymond James &
Associates, Inc.'s principal place of business during the
relevant time period was St. Petersburg, Florida. Raymond
James & Associates, Inc., traded Nasdaq stocks for its own
accounts and for the accounts of institutional and retail
investors. At all times relevant herein, Raymond James &
Associates, Inc. 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.
Thomas J. Dudenhoefer , age 39, resides in Largo,
Florida and, at all relevant times, was a Nasdaq trader at
Raymond James & Associates, Inc. As a Nasdaq trader, Thomas
J. Dudenhoefer was responsible for making markets in
securities traded on the Nasdaq Stock Market.
Timothy J. Kane, age 37, resides in Treasure Island,
Florida and, at all relevant times, was a Nasdaq trader at
Raymond James & Associates, Inc. As a Nasdaq trader,
Timothy J. Kane was responsible for making markets in
securities traded on the Nasdaq Stock Market.
B. Factual Summary
In connection with its activities as a Nasdaq market
maker, Raymond James & Associates, Inc., Thomas J.
Dudenhoefer and Timothy J. Kane 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
Raymond James & Associates, Inc., 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 Checkmate Electronics Inc. ("CMEL")
on May 27, 1994;
b. the stock of Players International, Inc. ("PLAY")
on September 20
1994, aided and abetted by its trader Thomas J.
Dudenhoefer; and
c. the stock of Danka Business Systems PLC ADR
("DANKY") on September 23, 1994, aided and abetted
by its trader Thomas J. Dudenhoefer.
2. Undisclosed Arrangements to Coordinate Quotations
Raymond James & Associates, Inc. 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 Station Casinos, Inc. ("STCI") on
September 21, 1994, aided and abetted by its
trader Thomas J. Dudenhoefer;
b. the stock of MTL, Inc. ("MTLI") on September
22, 1994, aided and abetted by its trader Thomas
J. Dudenhoefer;
c. the stock of Ladd Furniture, Inc. ("LADF") on
October 24, 1994; and
d. the stock of Bally Gaming International, Inc.
("BGII") on October
27, 1994, aided and abetted by its trader Timothy J. Kane.
3. Other Market Maker Misconduct
Raymond James & Associates, Inc. engaged in, or caused,
other manipulative conduct in the manner described in
Section II.C.4. of the Order Instituting Proceedings in
connection with making markets in:
a. the stock of Equity Corp. ("ECII") on October
19, 1994, aided and abetted by its trader Timothy
J. Kane.
4. Best Execution Violations
Raymond James & Associates, Inc. failed, or caused the
failure, to provide best execution in the handling of
customer orders in one or more of the respects described in
Section II.C.5. of the Order Instituting Proceedings in
violation of Section 15(c)(1) of the Exchange Act and Rule
15c1-2 thereunder, in a market making transaction or related
series of market making transactions in:
a. the stock of Tech Data Corp. ("TECD") on
October 27, 1994, aided and abetted by its trader
Timothy J. Kane.
In addition, on October 28, 1994, Raymond James &
Associates Inc., aided and abetted by its Nasdaq trader,
Thomas J. Dudenhoefer, failed to provide best execution for
a customer order to sell the common stock of Players
International, Inc. ("PLAY") in that it purchased the
customer’s stock at a price below the inside bid price in
order to compensate the customer’s registered representative
with an undisclosed amount of sales credit.
5. Failure to Keep Accurate Books and Records
Raymond James & Associates, Inc. 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 Astec Industries Inc. ("ASTE")
in three violations on September 20, 1994;
b. the stock of MTL Inc., ("MTLI") on September
22, 1994;
c. the stock of Equity Corp. ("ECII") on
October 19, 1994;
d. the stock of Tech Data Corp. ("TECD") in two
violations on October 27, 1994; and
e. the stock of Players International, Inc.
("PLAY") on October 28, 1994.
**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. Failure to Reasonably Supervise Nasdaq Trading
Raymond James & Associates, Inc. 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, and in the other following
respects:
a. In 1994, Respondent Raymond James & Associates,
Inc. failed to promulgate, maintain and enforce adequate
policies and procedures to prevent violations of the rules
and regulations governing the accurate and timely reporting
of transactions. Raymond James & Associates, Inc. did not
have any written policy regarding trade reporting and did
not have adequate procedures to monitor for compliance with
the trade reporting rules.
7. Unlawful Profits and Other Gains
While engaged in certain of the improper activities
described above, Raymond James & Associates, Inc. obtained
unlawful profits and gains, which, together with interest,
total $7,431.
III.
By reason of the foregoing, Raymond James & Associates,
Inc. 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. Thomas J. Dudenhoefer and Timothy J.
Kane willfully aided and abetted and caused violations of
Sections 15(c)(1) and 15(c)(2) of the Exchange Act and Rules
15c1-2 and 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. Raymond James & Associates, Inc. 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. Raymond James & Associates, Inc. shall, within 10
business days of the entry of this Order, pay a
civil penalty in the amount of $400,000 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
Raymond James & Associates, Inc. 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. Raymond James & Associates, Inc. shall, within 10
business days of written notice from the
Commission staff or the Independent Consultant (as
defined below), pay disgorgement in the amount of
$7,431 pursuant to Section 21C(e) of the Exchange
Act;
4. Raymond James & Associates, Inc. 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 Raymond
James & Associates, Inc. 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 Raymond James & Associates, Inc.
described in Section II of this Order. Raymond
James & Associates, Inc. shall cooperate with the
Independent Consultant’s review of Raymond James &
Associates, Inc.’s policies, procedures and
practices, and shall, among other things, provide
such further information as the Independent
Consultant reasonably requests or that Raymond
James & Associates, Inc. deems relevant to the
Independent Consultant’s review, provided,
however, that Raymond James & Associates, Inc.
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 Raymond James & Associates, Inc. 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
Raymond James & Associates, Inc.’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 Raymond James &
Associates, Inc. described in Section II of this
Order, the Independent Consultant shall inform
Raymond James & Associates, Inc. of this
conclusion in writing, and his or her
responsibilities with respect to Raymond James &
Associates, Inc. shall conclude. If the
Independent Consultant cannot conclude that
Raymond James & Associates, Inc.’s policies,
procedures and practices meet the aforesaid
standard, he or she may recommend changes in or
additions to Raymond James & Associates, Inc.’s
policies, procedures or practices for the purpose
of improving their ability to meet the aforesaid
standard. Raymond James & Associates, Inc. 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
Raymond James & Associates, Inc. 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, Raymond James & Associates, Inc. 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 Raymond James & Associates, Inc.’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 Raymond James &
Associates, Inc. shall conclude. If Raymond James
& Associates, Inc.’s report on implementation is
qualified, or in any respect indicates that
implementation is not full and effective, Raymond
James & Associates, Inc. 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 Raymond James & Associates, Inc.
has fully and effectively implemented said
recommendations and/or alternatives, he or she
shall inform Raymond James & Associates, Inc. in
writing of this conclusion and his or her
responsibilities with respect to Raymond James &
Associates, Inc. shall conclude. The fees and
expenses of the Independent Consultant arising
from his or her review of the policies, procedures
and practices of Raymond James & Associates, Inc.
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 Raymond James &
Associates, Inc.’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 Raymond James &
Associates, Inc.;
5. Thomas J. Dudenhoefer 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) of the Exchange Act, and
Rules 15c1-2 and 15c2-7 thereunder;
6. Thomas J. Dudenhoefer shall, within 10 business
days of the entry of this Order, pay a civil
penalty in the amount of $40,000 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
Thomas J. Dudenhoefer 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;
7. Thomas J. Dudenhoefer be suspended from
association with any broker, dealer, municipal
securities dealer, investment adviser or
investment company, for a period of ten weeks,
effective one day after the date of this Order.
Thomas J. Dudenhoefer shall provide to the Commission,
within 10 days after the end of the ten week
suspension described above, an affidavit that he
has complied fully with the sanctions described in
this Section;
8. Timothy J. Kane 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) of the Exchange Act, and
Rules 15c1-2 and 15c2-7 thereunder;
9. Timothy J. Kane shall, within 10 business days of
the entry of this Order, pay a civil penalty in
the amount of $25,000 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
Timothy J. Kane 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
10. Timothy J. Kane be suspended from association with
any broker, dealer, municipal securities dealer,
investment adviser or investment company, for a
period of seven weeks, effective one day after the
date of this Order.
Timothy J. Kane shall provide to the Commission, within
10 days after the end of the seven week 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