UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 38459 / April 1, 1997 INVESTMENT ADVISERS ACT OF 1940 Release No. 1626 / April 1, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9284 ______________________________ : ORDER INSTITUTING PROCEEDINGS : PURSUANT TO SECTIONS 15(b) AND In the Matter of : 19(h) OF THE SECURITIES : EXCHANGE ACT OF 1934 AND ROBERT D. GERSH : SECTION 203(f) OF THE : INVESTMENT ADVISERS ACT OF : 1940, MAKING FINDINGS AND ______________________________: IMPOSING REMEDIAL SANCTIONS I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that an administrative proceeding be instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Robert D. Gersh ("Gersh"). II. In anticipation of the institution of this administrative proceeding, Gersh has submitted an Offer of Settlement ("Offer") that 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 to which the Commission is a party, Gersh, by his Offer, and without admitting or denying the findings contained herein except that he admits the jurisdiction of the Commission over him and over the subject matter of this proceeding and the entry of the injunction set forth in paragraph 7 in Section III hereunder, consents to the entry of the findings and the imposition of the remedial sanctions set forth below. Accordingly, IT IS ORDERED that proceedings pursuant to Sections 15(b) and 19(h) of the Exchange Act and Section 203(f) of the Advisers Act be, and hereby are, instituted. ==========================================START OF PAGE ii====== III. On the basis of this Order Instituting Proceedings Pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions, and the Offer submitted by Gersh, the Commission finds that: Background 1. From April 19, 1990 to November 20, 1991, Gersh, a resident of Burlington, Massachusetts, was an associated person of Boston Municipal Securities, Inc. ("BMS"), an investment adviser registered with the Commission during that time period. 2. From June 1990 to July 1995, Gersh was an associated person of Burlington Securities Corp. ("Burlington"), a broker- dealer registered with the Commission. 3. Gersh and two corporations that he controlled, BMS and Devonshire Escrow and Transfer Corp. ("Devonshire"), packaged, offered, sold and administered securities in the form of Certificates of Participation ("COPs") that were issued in 1990. Since early 1990, Devonshire has served as the trustee for several COPs offerings. Injunction for Securities Law Violations 4. On November 29, 1995, the Commission filed a Complaint for Injunctive and Other Relief (the "Complaint") against Gersh, BMS and Devonshire, and against several relief defendants, in the United States District Court for the District of Massachusetts. -[1]- The Complaint alleged that Gersh violated Section 10(b) of the Exchange Act, Rule 10b-5 promulgated thereunder and Section 17(a) of the Securities Act of 1933 ("Securities Act"). 5. The Complaint alleged, among other things, that, from early 1990 to the date of the Complaint, Gersh, BMS and ---------FOOTNOTES---------- -[1]- SECURITIES AND EXCHANGE COMMISSION v. ROBERT D. GERSH, BOSTON MUNICIPAL SECURITIES, INC. AND DEVONSHIRE ESCROW AND TRANSFER CORP., Defendants, and MA'AYAN BOOK COMPANY, INC., CHARLES RIVER LANDING, LTD., CRL GROUP, INC., CULINARY CLASSICS OF CHESTNUT HILL, INC., CULINARY CLASSICS OF BURLINGTON, INC., THE KITCHEN SHELF, INC., AND THE COMPU-BILL CO., INC., Relief Defendants, Civil Action No. 95-12580 (RCL) (D. Massachusetts, filed November 29, 1995). See Litigation Release No. 14742 (November 30, 1995), 60 SEC Docket 2345, 2543. ==========================================START OF PAGE 3====== Devonshire engaged in continuing fraudulent acts in connection with the offer and sale of $14 million in securities in the form of COPs. According to the Complaint, Gersh misappropriated at least $7,000,000 in investor funds. The Complaint alleged that, as a result of this misappropriation, two COPs issues, with an aggregate principal amount of $3,400,000, defaulted and six additional COPs issues, with an aggregate principal amount of $3,840,000, would also default. 6. The Complaint alleged that, to induce public investors to invest in these COPs, Gersh, BMS and Devonshire marketed the offerings as tax-exempt municipal securities, collateralized by equipment leases entered into by state and local governments. Gersh, BMS and Devonshire allegedly made multiple false statements and omissions of material fact. These included falsely promising that investments were fully-secured by state and municipal obligations, that the defendants would merely pass- through the collateral payments to investors and that a trustee would protect the interests of investors. The Complaint also alleged that the defendants failed to disclose that Gersh exercised control over the trustee, and that they falsely represented that the COPs were issued pursuant to the authority of state or local government agencies. According to the Complaint, Gersh commingled the proceeds of the investments and misappropriated the monies to invest in a variety of personal business ventures. The complaint further alleged that Gersh's failure to use the investor proceeds as represented deprived investors of information material to an assessment of the tax- exempt status of the COPs. 7. On November 18, 1996, without admitting or denying any of the allegations contained in the Complaint, except as to jurisdiction which he admitted, Gersh consented to the entry of a final judgment of permanent injunction and other relief. The Final Judgment was entered by the United States District Court for the District of Massachusetts on March 20, 1997. Pursuant thereto, Gersh is permanently enjoined from violating Section 10(b) of the Exchange Act, Rule 10b-5 thereunder and Section 17(a) of the Securities Act. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement submitted by Gersh and impose the sanction specified in the Offer. ==========================================START OF PAGE 4====== Accordingly, IT IS HEREBY ORDERED that Robert D. Gersh be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company. By the Commission. Jonathan G. Katz Secretary