Wendell D. Belden

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 47859 / May 14, 2003

Adm. Proc. File No. 3-10888

ORDER SUSTAINING DISCIPLINARY ACTION TAKEN BY REGISTERED SECURITIES ASSOCIATION

On the basis of the Commission's opinion issued this day, it is

ORDERED that the disciplinary action taken by the National Association of Securities Dealers, Inc. against Wendell D. Belden, and the Association's assessment of costs, be, and they hereby are, sustained.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes

¹ Rule 2110 requires the observance of "high standards of commercial honor and just and equitable principles of trade." Rule 2310 requires that, in recommending the purchase or sale of any security to a customer, a member must have reasonable grounds for believing that the recommendation is suitable for that customer based on the facts, if any, disclosed by the customer as to his other securities holdings and the customer's financial situation and needs.

² The NASD also assessed costs.

³ Book purchased the following amounts in the following funds:

⁴ Four Seasons received a fee of two percent of the account value per year for its management of the account but did not receive commissions for the sale of the mutual fund shares.

⁵ The annual operating charges included management fees, custodial fees, and so-called 12b-1 fees. Rule 12b-1 under the Investment Company Act of 1940, 17 C.F.R. § 270.12b-1, permits an investment company to use its funds to distribute securities if the shareholders and a majority of the board, including a majority of the independent directors, adopt a written plan of distribution that complies with the rule.

⁶ Both the MFS Class B shares and the Van Kampen Class B shares would convert into MFS and Van Kampen Class A shares, respectively, after eight years.

⁷ In fact, in June or July 2000, Van Kampen terminated its relationship with Four Seasons and Belden's clients wereforced out of Van Kampen funds for that reason.

⁸ Book died before the NASD hearing.

⁹ James B. Chase , Securities Exchange Act Rel. No. 47476 (Mar. 10, 2003), 7_ SEC Docket ____, ____; J. Stephen Stout , Exchange Act Rel. No. 43410 (Oct. 4, 2000), 73 SEC Docket 1441, 1460; Maximo Justo Guevara , Exchange Act Rel. No. 42793 (May 18, 2000), 72 S.E.C. Docket 1281, 1287, petition for review denied , No. 00-1681 (3d Cir. Sept. 30, 2002).

¹⁰ See , e.g. , Jack H. Stein , Exchange Act Rel. No. 47355 (Feb. 10, 2003), 7_ SEC Docket ____, ____; Daniel Richard Howard , Exchange Act Rel. No. 46269 (July 26, 2002), 78 SEC Docket 427, 430; John M. Reynolds , 50 S.E.C. 805, 809 (1992).

¹¹ Stein , 7_ SEC Docket at ____; Howard , 78 SEC Docket at 430; Gordon Scott Venters , 51 S.E.C. 292, 295 n.8 (1993).

¹² Belden notes that Kadagian testified that, if Book had invested all his funds in a single mutual fund, the mutual fund company automatically would have converted the investment into Class A shares. From this testimony, Belden argues that the "only credible evidence is that [Belden] asked Mr. Kadagian for an alternative and presented both alternatives to" Book. However, the record shows that Belden presented only recommendations involving Class B shares.

¹³ See , e.g. , NASD Notice to Members 95-80 (Sept. 1995) (reminding members that, in determining whether a fund is suitable for an investor, a member should consider the fund's expense ratio and sales charges as well as its investment objectives). The NASD issued a release to its members specifically advising against recommending that large investors purchase Class B shares because of the lower sales charges and discounts that are frequently available to the purchasers of Class A shares. Suitability Issues for Multi-Class Mutual Funds , NASD Regulatory and Compliance Alert (Summer 2000) ("[M]embers generally should not recommend Class B or C shares to investors who seek to purchase in large amounts and who would incur significantly lower sales charges for Class A share purchases due to the availability of breakpoints, rights of accumulation, or letters of intent.").

¹⁴ See Robert L. Den Herder , 53 S.E.C. 329, 331-32 (1997); Kenneth C. Krull , 53 S.E.C. 1101, 1110-11 (1998) (the respondent "ignored his fundamental obligation of fair dealing by . . . plac[ing] his own interests in garnering commissions above those of his customers"), aff'd , 248 F.3d 907 (9th Cir. 2001). As we have previously observed, "where a broker-dealer or representative is aware of large amounts of money being invested in a mutual fund over a relatively short period of time, . . . it is incumbent upon them to obtain the lowest possible price for the customer [and a] failure to do so results not only in the customer being deprived of a benefit to which he or she is entitled, but also in the broker-dealer and representative receiving increased commissions at the customer's expense." Harold R. Fenocchio , 46 S.E.C. 279, 282 (1976).

¹⁵ Chase , 7_ SEC Docket at ____ n.28; Guevara , 72 SEC Docket at ____; Larry Ira Klein , 52 S.E.C. 1030, 1031 (1996); Clinton Hugh Holland, Jr. , 52 S.E.C. 562, 566 n.20 (1995), aff'd , 105 F.3d 665 (9th Cir. 1997) (Table).

¹⁶ 15 U.S.C. § 78s(e)(2).

¹⁷ Id . Belden does not claim, and the record does not show, that the NASD's action imposed an undue burden on competition.

¹⁸ Michael Flannigan , Exchange Act Rel. No. 47142 (Jan. 8, 2003), 7_ SEC Docket ____, ____; Donald R. Gates , Exchange Act Rel. No. 41777 (Aug. 23, 1999), 70 SEC Docket 1228, 1236.

¹⁹ These sanctions are within the NASD Sanction Guidelines. The NASD Sanction Guideline for unsuitable recommendations recommends a fine of $2,500 to $75,000 and a suspension of 10 business days to one year (up to 2 years or a bar in egregious cases). NASD Sanctions Guidelines (2001 ed.) at 99. The Guideline recommends that the NASD increase the amount of the fine by adding the amount of a respondent's financial benefit or require respondent to offer rescission to the injured customers. Id . at n.2.

²⁰ Even if Belden had no disciplinary history, we believe that Belden's conduct merits the sanctions imposed by the NASD.

²¹ Krull , 53 S.E.C. at 1109-10; Charles E. French , 52 S.E.C. 858, 864 (1996).

²² Toney L. Reed , 51 S.E.C. 1009, 1014 (1994).

²³ Compare SEC v. First Jersey Sec., Inc. , 101 F.3d 1450, 1474-75 (2d Cir. 1996), quoting , SEC v. Patel , 61 F.3d 137, 139 (2d Cir. 1995) (disgorgement "need only be a reasonable approximation of profits causally connected to the violation").

We note that, under Section 19(e)(2) of the Securities Exchange Act of 1934, 15 U.S.C. § 78s(e)(2), we may not increase sanctions imposed by a self-regulatory organization.

²⁴ We have considered all of the arguments advanced by the parties. We reject or sustain them to the extent that they are inconsistent or in accord with the views expressed in this opinion.