UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 37715 / September 24, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9093 ------------------------------ : In the Matter of : ORDER INSTITUTING PROCEEDINGS, James Warren, : MAKING FINDINGS AND IMPOSING : SANCTIONS. Respondent. : : : ------------------------------- I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public proceedings be instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") against James Warren ("Warren"). In anticipation of the institution of these administrative proceedings, Warren has submitted an Offer of Settlement ("Offer") 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, Warren, by his Offer, without admitting or denying the Commission's findings as to him, except for those findings contained in Sections III.1, which are admitted by Warren, consents to the entry of this Order Instituting Proceedings, Making Findings and Imposing Sanctions ("Order"). II. Accordingly, IT IS ORDERED that proceedings pursuant to Sections 15(b) and 19(h) of the Exchange Act be, and hereby are, instituted. ==========================================START OF PAGE 2====== III. On the basis of this Order and the Offer submitted the Commission finds-[1]- that: a. Warren is a 58 year old resident of Omaha, Nebraska and is employed by PaineWebber, Inc. ("PaineWebber"). He was the branch office manager of PaineWebber's Omaha, Nebraska office from December 1983 until July 15, 1991, when he became a non-supervisory registered representative ("RR"). b. Kevin Bartholomew ("Bartholomew"), a RR in PaineWebber's Omaha, Nebraska office, was subject to Warren's supervision from at least 1988 until July 15, 1991. c. From at least June 25, 1991 until July 15, 1991, Bartholomew sold direct investments to several investors for whom the investments were not suitable in light of their age, financial condition, sophistication and investment objectives. Some of these customers were retired or close to retirement and expressly informed him that they desired liquid, income-producing, low- risk investments. Bartholomew concentrated high percentages of many of these customers' investments in direct investments, which were not liquid and not suitable for these investors. d. As a result of the foregoing conduct, Bartholomew willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. e. From June 25, 1991 until July 15, 1991, Warren failed reasonably to supervise Bartholomew within the meaning of Section 15(b)(4)(E) of the Exchange Act, with a view to preventing Bartholomew's violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The overconcentration of customer accounts in illiquid and unsuitable direct investments was readily apparent from a review of Bartholomew's customer account records. Nonetheless, Warren failed to conduct a reasonable ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Warren's Offer and are not binding on any other person or entity named as a respondent in this or any other proceeding. ==========================================START OF PAGE 3====== inquiry into the apparent overconcentration and therefore failed to detect Bartholomew's unsuitable trading. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction specified in the Offer submitted by Warren. Accordingly, IT IS HEREBY ORDERED that: 1. Warren be, and hereby is, suspended from association in a supervisory capacity with any broker, dealer, investment adviser, investment company or municipal securities dealer for a period of nine (9) months, effective on the second Monday following entry of this Order. Warren agrees to deliver an affidavit of compliance to the Securities and Exchange Commission, Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511, within ten (10) days following his period of suspension stating that he has complied with the terms of his suspension; and 2. Warren shall, within 15 days of the entry of this Order, pay a civil money penalty in the amount of $10,000, pursuant to Section 21B of the Exchange Act, 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 United States Securities and Exchange Commission (C) delivered to the Comptroller, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and (D) submitted under cover letter that identifies the Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter, money order, or check shall be sent to Jacqueline S. Jacobson, Senior Attorney, Securities and Exchange Commission, Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60610-2511. By the Commission. Jonathan G. Katz Secretary ==========================================START OF PAGE 4======