UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 34-40922 / January 11, 1999 ADMINISTRATIVE PROCEEDING File No. 3-9803 ______________________________ : In the Matter of : ORDER MAKING FINDINGS : AND IMPOSING SANCTIONS CERTAIN MARKET MAKING : AS TO RAYMOND JAMES & ACTIVITIES ON NASDAQ : ASSOCIATES, INC., : THOMAS J. DUDENHOEFER : AND TIMOTHY J. KANE ______________________________: I. In the accompanying Orders Instituting Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Findings of the Commission ("Order Instituting Proceedings"), the Securities and Exchange Commission ("Commission") instituted these public administrative proceedings against Raymond James & Associates, Inc., Thomas J. Dudenhoefer, Timothy J. Kane, and other firms and individuals. Contemporaneously, Raymond James & Associates, Inc., Thomas J. Dudenhoefer and Timothy J. Kane ("Respondents") have submitted Offers of Settlement ("Offers") in anticipation of the institution of these proceedings, which the Commission has determined to accept. In their Offers, Respondents, solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, prior to a hearing pursuant to the Commission’s Rules of Practice, and without admitting or denying the findings herein, except for the findings of Section II.A., which are admitted, have consented to the entry of the Order Instituting Proceedings and this Order Making Findings and Imposing Sanctions as to Raymond James & Associates, Inc., Thomas J. Dudenhoefer and Timothy J. Kane (which are hereinafter referred to as the "Orders"). The Commission has determined that it is appropriate and in the public interest to accept the Respondents’ Offers and accordingly is issuing this Order. II. On the basis of the Orders and Respondents’ Offers, the Commission finds[1] the following: A. Respondents Raymond James & Associates, Inc., a Florida corporation, is registered with the Commission as a broker- dealer pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"). At all relevant times, Raymond James & Associates, Inc., made markets in a number of securities traded in the Nasdaq market. Raymond James & Associates, Inc.'s principal place of business during the relevant time period was St. Petersburg, Florida. Raymond James & Associates, Inc., traded Nasdaq stocks for its own accounts and for the accounts of institutional and retail investors. At all times relevant herein, Raymond James & Associates, Inc. was a member of the National Association of Securities Dealers, Inc. ("NASD"), a national securities association registered with the Commission under Section 15A of the Exchange Act. Thomas J. Dudenhoefer , age 39, resides in Largo, Florida and, at all relevant times, was a Nasdaq trader at Raymond James & Associates, Inc. As a Nasdaq trader, Thomas J. Dudenhoefer was responsible for making markets in securities traded on the Nasdaq Stock Market. Timothy J. Kane, age 37, resides in Treasure Island, Florida and, at all relevant times, was a Nasdaq trader at Raymond James & Associates, Inc. As a Nasdaq trader, Timothy J. Kane was responsible for making markets in securities traded on the Nasdaq Stock Market. B. Factual Summary In connection with its activities as a Nasdaq market maker, Raymond James & Associates, Inc., Thomas J. Dudenhoefer and Timothy J. Kane engaged in the following activities, as more fully described in the applicable sections of the accompanying Order Instituting Proceedings, in the following securities and on the following dates. 1. The Fraudulent Coordination of Quote Movements Raymond James & Associates, Inc., engaged in, or caused, the coordinated entry of quotations on Nasdaq in violation of Sections 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder, in one or more of the respects described in Section II.C.1. of the Order Instituting Proceedings in a market making transaction or a related series of market making transactions in: a. the stock of Checkmate Electronics Inc. ("CMEL") on May 27, 1994; b. the stock of Players International, Inc. ("PLAY") on September 20 1994, aided and abetted by its trader Thomas J. Dudenhoefer; and c. the stock of Danka Business Systems PLC ADR ("DANKY") on September 23, 1994, aided and abetted by its trader Thomas J. Dudenhoefer. 2. Undisclosed Arrangements to Coordinate Quotations Raymond James & Associates, Inc. entered, or caused to be entered, in the Nasdaq market fictitious quotations in one or more respects described in Section II.C.2. of the Order Instituting Proceedings in violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Station Casinos, Inc. ("STCI") on September 21, 1994, aided and abetted by its trader Thomas J. Dudenhoefer; b. the stock of MTL, Inc. ("MTLI") on September 22, 1994, aided and abetted by its trader Thomas J. Dudenhoefer; c. the stock of Ladd Furniture, Inc. ("LADF") on October 24, 1994; and d. the stock of Bally Gaming International, Inc. ("BGII") on October 27, 1994, aided and abetted by its trader Timothy J. Kane. 3. Other Market Maker Misconduct Raymond James & Associates, Inc. engaged in, or caused, other manipulative conduct in the manner described in Section II.C.4. of the Order Instituting Proceedings in connection with making markets in: a. the stock of Equity Corp. ("ECII") on October 19, 1994, aided and abetted by its trader Timothy J. Kane. 4. Best Execution Violations Raymond James & Associates, Inc. failed, or caused the failure, to provide best execution in the handling of customer orders in one or more of the respects described in Section II.C.5. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Tech Data Corp. ("TECD") on October 27, 1994, aided and abetted by its trader Timothy J. Kane. In addition, on October 28, 1994, Raymond James & Associates Inc., aided and abetted by its Nasdaq trader, Thomas J. Dudenhoefer, failed to provide best execution for a customer order to sell the common stock of Players International, Inc. ("PLAY") in that it purchased the customer’s stock at a price below the inside bid price in order to compensate the customer’s registered representative with an undisclosed amount of sales credit. 5. Failure to Keep Accurate Books and Records Raymond James & Associates, Inc. failed to keep and maintain accurate books and records in one or more of the respects described in Section II.C.7. of the Order Instituting Proceedings in violation of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Astec Industries Inc. ("ASTE") in three violations on September 20, 1994; b. the stock of MTL Inc., ("MTLI") on September 22, 1994; c. the stock of Equity Corp. ("ECII") on October 19, 1994; d. the stock of Tech Data Corp. ("TECD") in two violations on October 27, 1994; and e. the stock of Players International, Inc. ("PLAY") on October 28, 1994. **FOOTNOTES** [1]: The findings herein are solely for the purpose of these proceedings, and are not binding on any person not a respondent in these proceedings. 1 6. Failure to Reasonably Supervise Nasdaq Trading Raymond James & Associates, Inc. failed reasonably to supervise its Nasdaq market making activities with a view to preventing future violations within the meaning of Section 15(b)(4)(E) of the Exchange Act, in one or more of the respects described in Section II.C.8.a. and b. of the Order Instituting Proceedings, and in the other following respects: a. In 1994, Respondent Raymond James & Associates, Inc. failed to promulgate, maintain and enforce adequate policies and procedures to prevent violations of the rules and regulations governing the accurate and timely reporting of transactions. Raymond James & Associates, Inc. did not have any written policy regarding trade reporting and did not have adequate procedures to monitor for compliance with the trade reporting rules. 7. Unlawful Profits and Other Gains While engaged in certain of the improper activities described above, Raymond James & Associates, Inc. obtained unlawful profits and gains, which, together with interest, total $7,431. III. By reason of the foregoing, Raymond James & Associates, Inc. willfully violated Sections 15(c)(1) and (2), and 17(a) of the Exchange Act, and Rules 15c1-2, 15c2-7, and 17a-3 thereunder, and failed reasonably to supervise its Nasdaq trading personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act. Thomas J. Dudenhoefer and Timothy J. Kane willfully aided and abetted and caused violations of Sections 15(c)(1) and 15(c)(2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder. IV. In view of the foregoing and Respondents’ Offers, IT IS HEREBY ORDERED, pursuant to Sections 15(b) and 21C of the Exchange Act, that: 1. Raymond James & Associates, Inc. shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2), and 17(a) of the Exchange Act, and Rules 15c1-2, 15c2-7, and 17a-3 thereunder; 2. Raymond James & Associates, Inc. shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $400,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand- delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Raymond James & Associates, Inc. as a Respondent in these proceedings and provides the caption and file number for these proceedings; with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check, to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 3. Raymond James & Associates, Inc. shall, within 10 business days of written notice from the Commission staff or the Independent Consultant (as defined below), pay disgorgement in the amount of $7,431 pursuant to Section 21C(e) of the Exchange Act; 4. Raymond James & Associates, Inc. shall, within 90 days of the date of the entry of this Order, provide to the independent consultant appointed by the Commission in connection with these proceedings (the "Independent Consultant") a description of its policies, procedures and practices relating to prevention or detection of the types of improper conduct involving Raymond James & Associates, Inc. described in Section II of this Order. Within such time as the Commission directs, the Independent Consultant shall review such policies, procedures and practices with a view to determining if they would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving Raymond James & Associates, Inc. described in Section II of this Order. Raymond James & Associates, Inc. shall cooperate with the Independent Consultant’s review of Raymond James & Associates, Inc.’s policies, procedures and practices, and shall, among other things, provide such further information as the Independent Consultant reasonably requests or that Raymond James & Associates, Inc. deems relevant to the Independent Consultant’s review, provided, however, that Raymond James & Associates, Inc. need not provide any information to which it asserts a valid claim of the attorney-client privilege. The Independent Consultant shall maintain the confidentiality of all materials provided by Raymond James & Associates, Inc. and shall not provide the materials to any person, provided, however, that such materials may be provided to the Commission or its staff. If the Independent Consultant concludes that Raymond James & Associates, Inc.’s policies, procedures and practices, as presented, would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving Raymond James & Associates, Inc. described in Section II of this Order, the Independent Consultant shall inform Raymond James & Associates, Inc. of this conclusion in writing, and his or her responsibilities with respect to Raymond James & Associates, Inc. shall conclude. If the Independent Consultant cannot conclude that Raymond James & Associates, Inc.’s policies, procedures and practices meet the aforesaid standard, he or she may recommend changes in or additions to Raymond James & Associates, Inc.’s policies, procedures or practices for the purpose of improving their ability to meet the aforesaid standard. Raymond James & Associates, Inc. shall implement all such recommended changes or additions in a timely manner, but in any event no later than three months after receiving the recommendations of the Independent Consultant or such other reasonable time as determined by the Independent Consultant; provided, however, if Raymond James & Associates, Inc. believes that a change or addition to its policies, procedures and practices recommended by the Independent Consultant is unduly burdensome or unreasonable, it may: (a) propose an equally effective alternative to the Independent Consultant, and, with the Independent Consultant’s approval, implement that alternative in lieu of the Independent Consultant’s recommended change or addition; or (b) petition the Commission, with notice to the Independent Consultant and the Division of Enforcement, for relief from the recommendation of the Independent Consultant. Within three months of receiving recommendations of the Independent Consultant for changes in or additions to its policies, procedures and practices, Raymond James & Associates, Inc. shall report in writing to the Independent Consultant with respect to the implementation of the recommendations and/or any equally effective alternatives approved by the Independent Consultant. If Raymond James & Associates, Inc.’s report on implementation is without qualification and states that said recommendations and/or alternatives have been fully and effectively implemented, the Independent Consultant’s responsibilities with respect to Raymond James & Associates, Inc. shall conclude. If Raymond James & Associates, Inc.’s report on implementation is qualified, or in any respect indicates that implementation is not full and effective, Raymond James & Associates, Inc. shall cooperate with all further efforts of the Independent Consultant to ensure that said recommendations and/or alternatives are fully and effectively implemented. When the Independent Consultant concludes that Raymond James & Associates, Inc. has fully and effectively implemented said recommendations and/or alternatives, he or she shall inform Raymond James & Associates, Inc. in writing of this conclusion and his or her responsibilities with respect to Raymond James & Associates, Inc. shall conclude. The fees and expenses of the Independent Consultant arising from his or her review of the policies, procedures and practices of Raymond James & Associates, Inc. and the other respondent firms subject to the Independent Consultant’s review shall be prorated evenly among such firms, and in such prorated amounts, be paid by each such firm, provided however, that if the Independent Consultant recommends changes or additions to Raymond James & Associates, Inc.’s policies, procedures or practices, the fees and expenses of the Independent Consultant relating to the making and implementation of those recommendations and/or any alternatives approved by the Independent Consultant, and any disagreements relating thereto, shall be paid by Raymond James & Associates, Inc.; 5. Thomas J. Dudenhoefer shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 6. Thomas J. Dudenhoefer shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $40,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Thomas J. Dudenhoefer as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 7. Thomas J. Dudenhoefer be suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of ten weeks, effective one day after the date of this Order. Thomas J. Dudenhoefer shall provide to the Commission, within 10 days after the end of the ten week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 8. Timothy J. Kane shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 9. Timothy J. Kane shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $25,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Timothy J. Kane as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; and 10. Timothy J. Kane be suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of seven weeks, effective one day after the date of this Order. Timothy J. Kane shall provide to the Commission, within 10 days after the end of the seven week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section. By the Commission. Jonathan G. Katz Secretary 2