==========================================START OF PAGE 1====== UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 37764 / September 30, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9134 ________________________ : In the Matter of : ORDER INSTITUTING PUBLIC : PROCEEDINGS, MAKING RICHARD J. LINE, : FINDINGS AND IMPOSING REMEDIAL : SANCTIONS Respondent. : _______________________ : I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that administrative proceedings be instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") against Richard J. Line ("Line"). In anticipation of the institution of these proceedings, Line 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 in which the Commission is a party, and without admitting or denying the findings contained herein, except for those set forth in subparagraphs II.A. and II.G. below, which are admitted, Line by his Offer consents to the findings and imposition of the sanctions contained in this Order Instituting Public Proceedings, Making Findings and Imposing Remedial Sanctions ("Order"). Accordingly, IT IS ORDERED that proceedings against Line be, and hereby are, instituted. II. On the basis of this Order and the Offer submitted by Line, the Commission finds-[1]- that A. From August 1991 to September 1994, and January 1995 through February 1995, Line was employed as a registered representative with Copeland Equities, Inc., a broker-dealer registered with the Commission since 1976. B. From August 1991 through February 1995, Line willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act") in that he, in the offer or sale of securities, by the use of the means or instruments of transportation or communication in interstate commerce, or by the use of the mails, directly or indirectly, employed devices, schemes or artifices to defraud; obtained money and property by means of untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in transactions, practices or courses of business which would and did operate as a fraud and deceit upon the purchasers of such securities. C. As part of the conduct described in subparagraph II.B. above: 1. Between August 1991 and February 1995, Line engaged in a scheme to defraud investors of approximately $2 million by misappropriating customer funds which were entrusted to him for the purchase of securities. 2. Line operated a college financial aid planning business which he marketed primarily to parents of college-bound children. Through this business, Line promised parents of college-bound students that he would assist them in temporarily hiding family assets from college financial aid offices, thereby enabling parents to secure more financial aid for their children than they would otherwise be entitled to receive. 3. Line obtained many of his prospective customers for his college financial aid planning business through contacts he made during the course of his work for Copeland. As part of Line's duties while ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Line's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding. ==========================================START OF PAGE 2====== employed by Copeland, he contacted and established relationships with school teachers, many of whom he solicited for his college financial aid planning business. Line obtained additional clients through advertisements in local newspapers. 4. Line persuaded investors to transfer to him cash from savings accounts and proceeds from the liquidation of mutual funds shares. Line also convinced many investors to refinance their home mortgages, and to transfer the excess loan proceeds to him. Line referred to these transferred assets as "non-admitted assets." 5. Line represented to investors that he would invest their non-admitted assets in various securities, including U.S. Treasury notes, mutual funds shares and collateralized mortgage obligations. Line promised further that upon their child's graduation from college, he would return all non- admitted assets, together with interest calculated at above-market rates. 6. Line further created the appearance of having purchased securities by reassuring investors that their non-admitted assets had been invested in bona fide securities. In addition, Line fabricated account statements which falsely recited that securities had been purchased on behalf of certain investors. 7. In fact, Line did not buy securities with investor monies as he represented. Rather, he misappropriated approximately $2 million of investor money to pay for personal expenses. D. Between August 1991 through February 1995, Line willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that he, in connection with the purchase or sale of securities, by the use of any means or instrumentalities of interstate commerce or of the mails, or of any facility of any national securities exchange, directly or indirectly, employed devices, schemes or artifices to defraud; made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or engaged in acts, practices or courses of business which would and did operate as a fraud or deceit upon any person, as more fully described in subparagraphs II.C.(1)-(7) above. E. Based on the conduct described above in subparagraphs ==========================================START OF PAGE 3====== II.C.(1)-(7), Line, during the period between August 1991 to February 1995, willfully violated Section 15(a) of the Exchange Act in that, without registering with the Commission pursuant to Section 15(b) of the Exchange Act, Line made use of the mails or means or instrumentalities of interstate commerce to effect interstate transactions in, or to induce or attempt to induce the purchase or sale of, securities other than exempted securities or commercial paper, bankers' acceptances, or commercial bills. F. Based on the conduct described above in subparagraphs II.C.(1)-(7), Line, during the period between August 1991 to February 1995, willfully violated Section 15(c) of the Exchange Act and Rule 15c1-2 thereunder, in that, using the mails or means or instrumentalities of interstate commerce, Line effected transactions in, or induced or attempted to induce the purchase and sale of, securities other than exempted securities or commercial paper, bankers' acceptances, or commercial bills, otherwise than on a national securities exchange of which he was a member, by means of manipulative, deceptive, or other fraudulent devices or contrivances. G. On August 2, 1996, Line was enjoined, pursuant to his consent, from future violations of Section 17(a) of the Securities Act, Sections 10(b), 15(a)(1) and 15(c) of the Exchange Act and Rules 10b-5 and 15c1-2 thereunder. SEC v. Richard J. Line, Civ. Act. No. 96-CV-5319 (E.D.P.A.). III. On the basis of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Line and impose the sanctions specified therein. Accordingly, IT IS HEREBY ORDERED THAT Line be, and hereby is: Barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company. By the Commission. Jonathan G.Katz Secretary ==========================================START OF PAGE 4======