UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 38877 / July 28, 1997
INVESTMENT COMPANY ACT OF 1940
RELEASE NO. 22766 / July 28, 1997
ADMINISTRATIVE PROCEEDING
File No. 3-9181
ДДДДДДДДДДДДДДДДДДДДДДДДДДДДДї
і
In the Matter of і
і
і ORDER MAKING FINDINGS
EDWARD D. JONES & CO., і AND ORDERING RESPONDENT
DONALD E. WALTER, і DONALD E. WALTER TO
STEVEN T. ROBERTS, і CEASE AND DESIST
RONALD L. GORGEN, and і
CHARLES R. LARIMORE, і
Respondents. і
ДДДДДДДДДДДДДДДДДДДДДДДДДДДДДЩ
I.
On November 6, 1996, the Commission deemed it appropriate and in the
public interest to institute administrative and cease-and-desist
proceedings pursuant to Sections 15(b) and 19(h) of the Securities Exchange
Act of 1934 and Sections 9(b) and 9(f) of the Investment Company Act of
1940 (Investment Company Act) against Edward Jones (formerly Edward D.
Jones & Co.)(Jones & Co.) and instituted cease-and-desist proceedings
against Respondent Donald E. Walter (Walter), among others.
In response to the institution of the cease-and-desist proceedings
against him, Respondent Walter has submitted an Offer of Settlement (Offer)
which the Commission has determined to accept. Solely for the purpose of
these proceedings and any other proceeding brought by or on behalf of the
Commission or to which the Commission is a party, and without admitting or
denying the findings herein, except for those set forth in Section II.1.,
2. and 3. below, which are admitted, Respondent Walter consents to the
entry of this Order Making Findings and Ordering Respondent Donald E.
Walter to Cease and Desist (Order).
II.
On the basis of this Order and the Respondent's Offer, the Commission
makes the following findings:<(1)>
1. Jones & Co. is a broker-dealer registered with the Commission
pursuant to Section 15 of the Securities Exchange Act of 1934.
2. Walter, an attorney, has been associated with Jones & Co. since
1980, and has been the Director of Compliance of Jones & Co. since 1984.
3. Since 1989, Jones & Co. has maintained a secondary market for the
units of three Unit Investment Trusts - the Insured Tax-Free Income Trust,
the Central Equity Trust and the 21st Century Trust (collectively, the
UITs). Each of these UITs was a registered investment company under
Section 8 of the Investment Company Act, and was sponsored by Unison
Investment Trusts Ltd., an affiliate of Jones & Co.
4. As part of its activities in maintaining a secondary market in
the UIT units, Jones & Co. offered to repurchase the units from the
investing public at the UIT unit's net asset value (NAV).
5. According to the UITs' prospectuses, Jones & Co. would purchase
the units at the same price at which the units could be redeemed, which was
the units' NAV. Investors were also informed via the UITs' prospectuses
that Jones & Co. could profit in the secondary market "in the amount of any
difference between the price at which such Units were purchased and the
price at which such Units were resold" or redeemed. Investors were not
informed that Jones & Co. could charge a commission in purchasing the units
from the investors.
6. Beginning in January 1990, Jones & Co. began allowing its
registered representatives to charge a commission for purchasing the UIT
units from customers in certain circumstances. From January 1990 until
March 1993, in approximately 50% of the transactions involving a repurchase
of the UIT units, Jones & Co. charged a commission. On average, the
commission was approximately six-tenths of one percent of the bid price for
the UIT.
7. As a result of charging these commissions, Jones & Co. profited
by approximately $120,000.
8. From 1990 until at least 1993, Walter, among others, was
responsible for Jones & Co.'s decision to allow its registered
representatives to begin charging commissions for the repurchase of UIT
units from customers.
<(1)> The findings herein are made pursuant to Respondent
Walter's Offer and are not binding on any other person or entity
named as a respondent in this or any other proceeding.
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9. As Compliance Director, Walter reviewed and approved the language
authorizing the commissions which was ultimately
incorporated into Jones & Co.'s registered representative compensation
manual.
10. From January 1990 until March 1993, Jones & Co. willfully
violated Rule 22c-1, promulgated pursuant to Section 22(c) of the
Investment Company Act, in that it, while designated in the UITs'
prospectuses as authorized to consummate transactions in the UITs' units,
and while principal underwriter of and dealer in the UITs' units,
repurchased such units at a price other than the current NAV which was next
computed after receipt of orders to sell such units. As part of such
conduct, Jones & Co. charged commissions in certain repurchase transactions
as described above.
11. Walter, among others, caused Jones & Co.'s violations of Rule
22c-1 due to acts or omissions he knew or should have known would
contribute to Jones & Co.'s violations. Specifically, Walter, among others,
notwithstanding the terms of the UITs' prospectuses, authorized Jones &
Co.'s registered representatives to charge commissions in the repurchase of
the UIT units.
12. In September 1996, Jones & Co. began the process of refunding the
commission, plus interest, to all investors who were charged such a
commission in the repurchase transactions at issue. Jones & Co. paid out
$198,111.26, inclusive of interest, in repayment to the affected investors.
III.
Accordingly, IT IS ORDERED:
1. That Walter shall cease and desist from causing any violation,
and causing any future violation, of Rule 22c-1 promulgated under Section
22(c) of the Investment Company Act.
By the Commission.
Jonathan G. Katz
Secretary
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