==========================================START OF PAGE 1====== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 37754 / September 30, 1996 Administrative Proceeding File No. 3-9122 ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS INSTITUTED FAHNESTOCK AND CO., INC. AND WILLIAM R. BIERLIN, JR. The Securities and Exchange Commission has instituted public administrative and cease-and-desist proceedings against Fahnestock and Co., Inc. ("Fahnestock"), a registered broker- dealer, and William E. Bierlin, Jr. ("Bierlin") pursuant to Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"). The Commission's Order alleges that Fahnestock and Bierlin failed to reasonably supervise Wendell Jeffrey Lee, a registered representative formerly associated with the Jenkintown, Pennsylvania branch office of W.H. Newbold's Son & Co., a division of Fahnestock. Specifically, the Order alleges that Fahnestock and Bierlin, the branch manager of the Jenkintown office, failed reasonably to supervise Lee in connection with his misappropriation of $262,000 from the brokerage accounts of two Newbold's customers. Commonwealth of Pennsylvania v. Wendell Jeffrey Lee, Docket Nos. 1319-95 and 1478-95, Court of Common Pleas, Montgomery County, Pennsylvania; SEC v. Wendell Jeffrey Lee, 2:95-CV-6088.) (See also Exchange Act Release No. 14659 (Sep. 28, 1995)). The Order further alleges, among other things, that Bierlin failed to follow existing supervisory procedures and that Fahnestock's policies and procedures regarding checks drawn on customer accounts and wire transfers of cash from customer accounts either were not followed or were inadequate to detect and prevent the kind of activity engaged in by Lee. Furthermore, both Fahnestock and Bierlin failed to respond reasonably to clear warning signs indicating the existence of Lee's fraudulent scheme. The Order also alleges that Fahnestock willfully violated the record keeping provisions of Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-4 thereunder and that Bierlin aided and abetted and caused those violations. Specifically, the Order alleges that, to conceal the deficient supervisory procedures at the Jenkintown office, Bierlin altered certain brokerage documents and produced those documents pursuant to Commission subpoenas.