SECURITIES ACT OF 1933
Release No. 7723 / August 12, 1999
SECURITIES EXCHANGE ACT OF 1934
Release No. 41734 / Auygust 12, 1999
File No. 3-9970
|In the Matter of
|ORDER INSTITUTING A PUBLIC
PROCEEDING PURSUANT TO
SECTION 8A OF THE SECURITIES ACT OF
1933 AND SECTION 21C OF THE
SECURITIES EXCHANGE ACT OF 1934,
MAKING FINDINGS, AND IMPOSING A
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative proceeding be, and hereby is, instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Jeffrey Feld ("Feld").
In anticipation of the institution of this proceeding, Feld has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding, and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Feld, without admitting or denying the findings contained in this Order Instituting a Public Proceeding Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order"), except that Feld admits that the Commission has jurisdiction over him and over the subject matter of this proceeding, consents to the entry of this Order.
On the basis of this Order and the Offer, the Commission finds that:1
Feld was a vice president at Pacific Matrix Financial Group, Inc. ("Pacific Matrix"), a finder of investments for municipal bond proceeds, from 1987 until December 1992.
2. Other Relevant Entity
Stifel, Nicolaus & Company, Inc. ("Stifel") is a broker-dealer headquartered in St. Louis, Missouri.
3. Feld Obtained Non-Competitive Bids in the Sisters of St. Mary's Transaction
In November 1992, the Sisters of St. Mary's Health Care Obligated Group ("SSM") was the beneficiary of four simultaneous issues of conduit bonds by four separate issuers: the Illinois Health Facilities Authority; the Health and Educational Facilities Authority of the State of Missouri; Dillon County, South Carolina; and the Wisconsin Health and Educational Facilities Authority.2 The aggregate principal amount of bonds issued was approximately $265 million.
Stifel was a co-managing underwriter for the transaction. Stifel recommended that SSM invest the bond proceeds in a forward purchase agreement ("forward").3 Although bond counsel required that SSM obtain three competitive bids for the forward, Feld assisted Stifel in ensuring Sakura Global Capital, Inc.'s ("Sakura") selection as the forward provider by obtaining two non-competitive bids while Sakura submitted its winning bid directly to Stifel. Although Sakura paid an undisclosed brokerage fee of $100,000 to Stifel in connection with the forward, neither Pacific Matrix nor Feld received any payments.
B. Legal Discussion
Section 8A of the Securities Act and Section 21C of the Exchange Act authorize the Commission to enter a cease-and-desist order against an individual that the Commission finds caused a violation of the federal securities laws because of an act or omission the person knew or should have known would contribute to such violation. Stifel's bid-rigging and failure to disclose to SSM the payment from Sakura jeopardized the tax-exempt status of the bonds. Therefore, Stifel violated Section 17(a) of the Securities Act, Sections 10(b) and 15B(c)(1) of the Exchange Act and Rule 10b-5 thereunder, and Rule G-17 of the Municipal Securities Rulemaking Board ("MSRB"). Feld caused Stifel's violations by providing Stifel with non-competitive bids for the forward in the SSM transaction.
By engaging in such deceptive conduct, Feld undermined the integrity of the SSM transaction and created an uneven playing field which jeopardized the tax-exempt status of the bonds. This conduct corrupted the municipal bond marketplace and inhibited the prospective bond purchasers' ability to make a reasoned and fully informed investment decision.
Based on the foregoing, the Commission finds that Feld caused Stifel's violations of Section 17(a) of the Securities Act, Sections 10(b) and 15B(c)(1) of the Exchange Act and Rule 10b-5 thereunder, and Rule G-17 of the MSRB.
ACCORDINGLY, IT IS HEREBY ORDERED that:
Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Feld cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act, Sections 10(b) and 15B(c)(1) of the Exchange Act and Rule 10b-5 thereunder, and Rule G-17 of the MSRB;
By the Commission.
Jonathan G. Katz
|1||The findings in this Order are made pursuant to Feld's Offer and are not binding on any other person or entity in this or any other proceeding.|
|2||A conduit bond is a municipal security issued by a municipal issuer for the benefit of a private corporation or other entity that ultimately is obligated to repay the bonds.|
|3||In a forward, a financial institution ("forward provider") and the escrow trustee under the escrow deposit agreement for the refunded municipal securities enter into an agreement that gives the forward provider the option of providing Treasury securities at certain future dates to the escrow trustee in exchange for moneys then on deposit and available in the escrow account. The Treasury securities that are delivered must not have a maturity value less than the amount needed to pay principal and interest on the refunded bonds and must not have a maturity date which is later than the payment date for the principal or interest on the refunded municipal bonds. In exchange for the issuer directing the escrow trustee to enter into the forward, the forward provider will make a payment to the issuer, frequently in the form of an up-front payment.|