UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 38337 / February 26, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9260 ______________________________ : In the Matter of : ORDER INSTITUTING PUBLIC : PROCEEDINGS, MAKING SELHEIMER & CO. and : FINDINGS AND IMPOSING PERRY A. SELHEIMER, : REMEDIAL SANCTIONS : Respondents. : ______________________________: I. The 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 Selheimer & Co. ("S&C"), a broker- dealer registered with the Commission, and Perry A. Selheimer ("Selheimer"), a registered representative, general partner and Financial and Operations Principal of S&C. In anticipation of the institution of these proceedings, S&C and Selheimer have submitted Offers of Settlement which the Commission has determined to accept. Solely for purposes of this proceeding and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, without admitting or denying the findings contained herein, except for those set forth in Subparagraphs II.A. and II.B., below, which are admitted, S&C and Selheimer consent to the findings and the imposition of the remedial sanctions set forth below. Accordingly, IT IS ORDERED that proceedings against S&C and Selheimer be, and hereby are, instituted. ==========================================START OF PAGE 2====== II. On the basis of this Order Instituting Public Proceedings, Making Findings and Imposing Remedial Sanctions, and the Offers of Settlement submitted by S&C and Selheimer, the Commission finds that: A. At all times relevant to this proceeding, S&C was a broker-dealer located in Ambler, Pennsylvania. S&C is a Pennsylvania partnership and has been registered with the Commission as a broker-dealer since September 1967. B. At all times relevant to this proceeding, Selheimer was a registered representative, general partner and Financial and Operations Principal at S&C. C. From approximately January 1989 through December 1994, S&C and Selheimer willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act") in that they, in the offer and sale of securities, by the use of the means and instruments of transportation and communication in interstate commerce, and by the use of the mails, directly and indirectly, employed devices, schemes and artifices to defraud; obtained money and property by means of untrue statements of material fact and omitted to state material facts necessary to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in transactions, practices and courses of business which would and did operate as a fraud and deceit upon the purchasers of such securities. 1. As part of the conduct described above, Selheimer, through S&C, engaged in a scheme through which he misappropriated approximately $1.6 million from ten S&C customers. Selheimer induced the customers, some of whom were elderly and living on fixed incomes, to deliver their securities to S&C, where, he claimed, they would be held in safekeeping and recorded on the firm's books and records in order to satisfy net capital requirements. Selheimer offered different customers various incentives to induce them to deliver their securities to S&C or to persuade them to keep their securities at S&C. He represented to seven customers that, in addition to passing through the dividends or interest generated by their securities, S&C would pay them a guaranteed annual rate of return of six to ten percent. He represented to the other three customers that they would receive certain brokerage services at a reduced rate or free of charge, in addition to the interest on their underlying securities. ==========================================START OF PAGE 3====== 2. Once the securities were delivered to S&C, Selheimer liquidated them, as needed, and used the majority of the proceeds to pay business expenses, including the interest and dividend payments to S&C customers. In addition to liquidating customer securities, as the financial condition of S&C deteriorated, Selheimer, on at least two occasions, misappropriated cash tendered by customers specifically for the purchase of securities. In order to conceal the fraudulent scheme, Selheimer sent customers fabricated documents and made verbal misrepresentations and omissions to them. D. From approximately January 1989 through December 1994, S&C and Selheimer willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that they, in connection with the purchase and sale of securities, by the use of the means and instrumentalities of interstate commerce, and by the use of the mails, directly and indirectly, employed devices, schemes and artifices to defraud; made 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 acts, practices and courses of business which would and did operate as a fraud and deceit upon the purchasers of such securities, as more fully described in Subparagraphs C.1. and C.2. above. E. From approximately January 1989 through December 1994, S&C willfully violated Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, by making use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security otherwise than on a national securities exchange of which it is a member by means of any manipulative, deceptive, or other fraudulent devices or contrivances, as more fully described in Subparagraphs C.1. and C.2. above. F. In September 1994, S&C willfully violated Section 15(c)(3) of the Exchange Act and Rule 15c3-1 thereunder, by making use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security in contravention of the net capital requirements for brokers and dealers, in violation of Section 15(c)(3) of the Exchange Act and Rule 15c3-1 thereunder. By falsely recording customer assets as those of S&C and failing to make a corresponding entry to reflect the liability owed to these customers, Selheimer overstated S&C's assets. As a ==========================================START OF PAGE 4====== result, the firm was not in compliance with its minimum net capital requirement of $50,000 when it executed a securities transaction in September 1994. G. From approximately January 1989 through December 1994, S&C willfully violated Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-4 thereunder, by failing to make, keep and preserve for prescribed periods, the records required by such section and the rules thereunder, which set forth requirements concerning records required to be made, kept and preserved by members of national securities exchanges, brokers and dealers. S&C failed to make and keep current a general ledger and purchase and sales blotter. S&C inaccurately reflected customer securities as those of S&C on its general ledger. In addition, S&C's blotter did not designate from whom securities were received nor did it reflect when customer securities were sold. Furthermore, S&C did not preserve these records for a period of not less than six years. III. On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offers of Settlement submitted by S&C and Selheimer. Accordingly, IT IS HEREBY ORDERED that: Selheimer is barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company; and S&C's registration is revoked. By the Commission. Jonathan G. Katz Secretary