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SECURITIES ACT OF 1933 Release No. 7252 / January 9, 1996 
SECURITIES EXCHANGE ACT OF 1934 Release No. 36696 / January 9,
1996

ADMINISTRATIVE PROCEEDING FILE NO. 3-8919

ADMINISTRATIVE PROCEEDINGS AND CEASE AND DESIST PROCEEDINGS
INSTITUTED AGAINST ORLANDO JOSEPH JETT; ADMINISTRATIVE
PROCEEDINGS INSTITUTED AGAINST MELVIN MULLIN.

     The Commission announced that it instituted public
administrative and cease-and- desist proceedings against Orlando
Joseph Jett ("Jett"), and instituted public administrative
proceedings against Melvin Mullin ("Mullin"), pursuant to Section
8A of the Securities Act of 1933 ("Securities Act") and Sections
15(b), 19(h) and 21C of the Securities Exchange Act of 1934
("Exchange Act").

     The Order for Proceedings alleges that, during the period
from approximately July 1991 until approximately April 1994,
respondent Jett violated the antifraud provisions and caused
violations by the broker-dealer with which he was associated of
the books and records provisions of the federal securities laws. 
The Order for Proceedings further alleges that, from
approximately July 1991 until approximately February 1993, Mullin
failed reasonably to supervise Jett with a view to preventing
Jett's violations of the federal securities laws.  From
approximately July 1991 until approximately April 1994, Jett
traded U.S. Treasury bonds and the zero coupon components of U.S.
Treasury bonds issued pursuant to the Treasury's program of
"Separate Trading of Registered Interest and Principal of
Securities" ("STRIPS"), on behalf of the registered broker-
dealer.  In connection with the implementation of Jett's trading
strategies, Jett entered instructions on the broker-dealer's
systems for the exchange of treasury bonds and their zero coupon
components with the Federal Reserve Bank of New York ("Fed") in
transactions known as strips and reconstitutions.  The broker-
dealer's trading and accounting systems treated these
instructions, if entered to settle more than one business day
forward, as actual trades that generated profits and losses
("P&L").  Jett utilized this anomaly in the broker-dealer's
trading and accounting systems to generate the appearance of
profitable trading and to conceal actual trading losses.  By
entering strip and reconstitution instructions and representing
them as real trades, Jett caused the broker-dealer to incorrectly
generate order tickets, the data from which was then recorded on
the broker-dealer's books and records.  Jett's misuse of strip
and reconstitution instructions caused the broker-dealer's
balance sheet, transaction journals and general ledgers to be
inaccurate.  

     The Order for Proceedings further alleges that Jett
misrepresented and omitted to state material facts in the offer,
purchase or sale of U.S. Government Bonds and their zero coupon
component STRIPS on behalf of the broker-dealer, by, for example:
falsely stating to the broker-dealer's employees that his trading
profits were generated from arbitrage and market making
activities; and daily confirming, or directing a subordinate to
confirm, the accuracy of his P&L to the broker-dealer's
accountants.  Moreover, Jett's use of strip and reconstitution
instructions created the appearance of large trading profits,
when, in fact, Jett was continually losing large amounts of
money.  During 1992, Jett generated approximately $41 million of
fictitious profits, which concealed a total of approximately $7

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million of actual trading losses.  During 1993, Jett generated
approximately $196 million of fictitious profits, which concealed
a total of approximately $45 million of actual losses.  During
the first quarter of 1994, Jett generated a total of
approximately $111 million of fictitious profits, which concealed
actual trading losses of approximately $31 million.  

     The Order for Proceedings also alleges that, from
approximately July 1991 through approximately February 1993,
Mullin, as Jett's direct supervisor, failed reasonably to
supervise Jett with a view to preventing Jett's violations of the
federal securities laws, in that Mullin did not monitor Jett's
trading in sufficient detail to prevent and detect Jett's
violations of the federal securities laws.  For example: Mullin
limited his review of Jett's trading to summary reports of Jett's
P&L, net trade date inventory and risk; Mullin did not review
Jett's order tickets, the sources of Jett's P&L, the settlement
dates for Jett's transactions or the counterparties with whom
Jett transacted business; and Mullin failed to investigate Jett's
increasing profits, which, for, 1992, were approximately 100%
greater than Kidder's best ever profits from trading STRIPS.

     A hearing will be scheduled to take evidence on the
allegations made by the Division of Enforcement and to afford the
respondents an opportunity to present any defenses.  The purpose
of the hearing is to determine whether the allegations are true
and, if so, what remedial action, if any, is appropriate; whether
a cease-and-desist order should issue against Jett; whether
disgorgement should be ordered against Jett, including reasonable
interest; and whether civil penalties should be imposed on the
parties.

     The Commission wishes to acknowledge the cooperation of the
New York Stock Exchange in the investigation of this matter.