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                     UNITED STATES OF AMERICA
                           Before the 
                SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act 
Release No. 37494 / July 30, 1996

Administrative Proceeding File No. 3-9051

In the Matter of Kenneth J. Schulte

The Securities and Exchange Commission (Commission) instituted
public administrative proceedings against Kenneth J. Schulte
(Schulte), who is alleged to have been employed from Spring 1990
to the present as a registered representative by three broker-
dealers.  The Order Instituting Public Administrative Proceedings
(Order) alleges that, throughout his career Schulte sold volatile
and risky mortgage-backed derivatives to at least fourteen Ohio
cities, counties and school districts while a registered
representative at the three broker-dealers.  The Order further
alleges that two NASD arbitration judgments have been entered
against Schulte arising from these sales.

The Order also alleges that on April 16, 1996, the United States
District Court for the Northern District of Ohio, in the case of
Securities and Exchange Commission v. Kenneth J. Schulte (94-CV-
2657), entered by default a Final Judgment of Permanent
Injunction and Disgorgement (Final Judgment) against Schulte,
which Final Judgment permanently enjoins Schulte from further
violations of Section 17(a) of the Securities Act, Section 10(b)
of the Exchange Act and Rule 10b-5 thereunder and ordered Schulte
to pay $398,787.62 in disgorgement.  The Commission's complaint
in this injunctive action alleged that from the Spring of 1990 to
April 1994, Schulte offered and sold several million dollars in
mortgage-backed derivatives to at least fourteen Ohio
municipalities and school districts.   The Commission further
alleged that Schulte violated 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 derivatives by making
material misrepresentations and omissions concerning, among other
things, the nature of derivative securities, the risks involved
in derivative securities and the government guarantee of
derivative securities.  

A hearing will be scheduled to determine what, if any, remedial
action would be appropriate against Schulte.