UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940
Release No. 1798 / April 22, 1999

ADMINISTRATIVE PROCEEDING
File No. 3-9881

:
In the Matter of : ORDER INSTITUTING PUBLIC
: PROCEEDINGS, MAKING
WREN HAROLD HART, : FINDINGS AND IMPOSING
: REMEDIAL SANCTIONS
Respondent. :
:

The Securities and Exchange Commission ("Commission") deems
it appropriate and in the public interest that public
administrative proceedings be, and hereby are, instituted
pursuant to Sections 203(f) of the Investment Advisers Act of
1940 ("Advisers Act") against Wren Harold Hart ("Hart").

II.

In anticipation of the institution of these administrative
proceedings, Hart has submitted an Offer of Settlement ("Offer")
to the Commission, which the Commission has determined to accept.
Solely for the purpose of these proceedings and any other
proceedings brought by or on behalf of the Commission, or to
which the Commission is a party, and without admitting or denying
the findings contained herein, except with respect to paragraph
III.A. below, which is admitted, Hart consents to the issuance of
this Order Instituting Proceedings, Making Findings and Imposing
Remedial Sanctions ("Order"), and to the entry of the findings
and the imposition of the remedial sanctions and penalties set
forth below.

III.

The Commission finds the following:[1]

BACKGROUND

A. Hart, age 76, is a resident of Weatherford, Texas.
Hart, individually and doing business as Financial Management
Services ("FMS"), was a registered investment adviser with the
Commission (File No. 801-12648) from 1977 to 1997. Hart’s son-
in-law was the only other employee of FMS, and was subject to
Hart’s supervision. On May 27, 1997, Hart filed a Form ADV-T
with the Commission representing that as of the date of filing,
the assets under his management were less than $25 million. As a
result, Hart was no longer required to be registered with the
Commission. On July 8, 1997, Hart’s investment adviser
registration was effectively withdrawn with the Commission.
Further, in December 1997, Hart’s investment adviser registration
was withdrawn with the State of Texas.

B. Between January 1994 and October 1997, FMS managed the
assets of approximately 50 clients totaling approximately $6.8
million. FMS charged an annual management fee of up to one
percent on assets valued at up to $50,000 and half of a percent
on assets exceeding this amount.

UNDERLYING VIOLATIVE CONDUCT

C. As set forth in paragraphs D, E, and F, herein, from
approximately October 1993 through October 1997, Hart’s son-in-
law willfully violated Section 17(a) of the Securities Act of
1933 ("Securities Act") and Section 10(b) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder,
and willfully aided and abetted violations of Sections 206(l),
206(2) and 204 of the Advisers Act and Rules 204-2(a) (3), (7)
and (9), thereunder.

D. In four separate transactions between October 1993 and
November 1996, Hart’s son-in-law misappropriated a total of
$155,000 from two FMS clients. In October 1993, the son-in-law
fraudulently induced a client to give him a blank check in the
amount of $65,000 based on his misrepresentation that he would
invest the funds in a mutual fund. Instead, the son-in-law
deposited the check into a personal account. In January 1995,
the son-in-law also withdrew $20,000 from the same FMS client
without the client’s authority. In June and August 1996, the
son-in-law fraudulently caused a brokerage firm to issue two
checks to another FMS client in the amounts of $50,000 and
$20,000, respectively. The son-in-law forged the client’s
signature on each check and deposited them into a personal
checking account.

E. From in or about the first quarter of 1994 through
October 1997, Hart’s son-in-law made false and misleading
statements to clients regarding the values of their investments.
During this period, the son-in-law provided clients with FMS
account statements, usually quarterly, that materially overstated
the values of their FMS accounts. Over 30 clients received FMS
account statements which collectively overstated the values in
their accounts by approximately $807,000. In addition, the son-
in-law provided certain clients with altered mutual fund company
statements which contained false account values. The
overstatements caused FMS to receive excess management fees and
caused the performance figures in the clients’ accounts to be
materially overstated. [2]

F. As a result of the son-in-law’s misconduct, FMS failed
to make and keep true, accurate and current books and records
required to be maintained by investment advisers. Specifically,
as a result of the son-in-law’s misconduct, FMS did not keep a
memorandum of each order to purchase or sell shares in mutual
funds, FMS failed to keep mutual fund statements for certain
client accounts, and FMS did not maintain the required mutual
fund documents for some clients that permitted trading on their
behalf.

HART’S FAILURE REASONABLY TO SUPERVISE

G. During the period set forth above, Hart failed
reasonably to supervise, within the meaning of Section 203(e)(6)
of the Advisers Act, his son-in-law with a view toward preventing
violations of Section 17(a) of the Securities Act and Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, and aiding
and abetting violations of Sections 206(l), 206(2) and 204 of the
Advisers Act and Rules 204-2(a) (3), (7) and (9), thereunder.
As the registered investment adviser, Hart was responsible for
supervising his son-in-law.

H. Hart received several complaints from FMS clients
regarding the son-in-law’s activities. For example, in November
1996, an FMS client complained to Hart that the son-in-law had
misappropriated a total of $85,000 from his FMS account.
Moreover, during 1996 and 1997, certain clients complained to
Hart concerning the inflated values on their FMS account
statements. Despite receiving these complaints, Hart conducted
no meaningful follow-up with respect to the activities of his
son-in-law. Hart failed to compare or reconcile the FMS account
statements with the underlying brokerage account statements for
each FMS client to determine if the value of their accounts had
also been overstated. Hart also failed to conduct any review or
make inquiries to determine if his son-in-law had misappropriated
funds from any other FMS clients. Moreover, Hart continued to
allow his son-in-law to prepare false and misleading FMS account
statements and to have access to client funds.

**FOOTNOTES**

[1]: The findings herein are made pursuant to the Offer of Settlement
submitted by Hart and are not binding on any other person or entity named as a
respondent in this or any other proceeding.

[2]: Since the Commission staff began its investigation into this matter, Hart
has paid FMS clients approximately $540,000 as compensation for the
overstatements. Hart has also paid approximately $135,000 to the clients
whose funds were misappropriated by Hart’s son-in-law.

IV.

In view of the foregoing, the Commission deems it
appropriate and in the public interest to impose the sanctions
and penalties specified by Hart in his Offer.

Accordingly, IT IS ORDERED THAT:

A. Hart is suspended from association with any investment
adviser for a period of three months effective the second Monday
following the entry of this Order.

B. Hart is suspended from acting in any supervisory or
proprietary capacity with any investment adviser for a period of
nine months immediately following the period of his suspension
from association. Hart shall provide to the Commission, within
10 days after the end of the nine month suspension period, an
affidavit that he has complied with the terms of the suspensions.

C. Hart shall, within 10 days of the entry of this Order,
pay a civil money penalty in the amount of $10,000 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 U.S. Securities and
Exchange Commission; (c) hand-delivered or mailed to the
Comptroller, Securities and Exchange Commission, Operations
Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312;
and (d) submitted under cover letter which identifies Hart as a
Respondent in these proceedings, the file number of these
proceedings, a copy of which cover letter and money order or
check shall be sent to Harold F. Degenhardt, District
Administrator, Securities and Exchange Commission, 801 Cherry
Street, 19th Floor, Fort Worth, Texas 76102.

By the Commission.

Jonathan G. Katz
Secretary