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 컴컴컴컴컴컴컴컴컴컴컴컴컴컴커 � In the Matter of � � � ORDER MAKING FINDINGS EDWARD D. JONES & CO., � AND ORDERING RESPONDENT DONALD E. WALTER, � DONALD E. WALTER TO STEVEN T. ROBERTS, � CEASE AND DESIST RONALD L. GORGEN, and � CHARLES R. LARIMORE, � Respondents. � 컴컴컴컴컴컴컴컴컴컴컴컴컴컴켸 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. ======END OF PAGE 2====== 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 ======END OF PAGE 3======