==========================================START OF PAGE 1====== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 37259 / May 30, 1996 Admin. Proc. File No. 3-8699 ---------------------------------- : In the Matter of : : FIRST JERSEY SECURITIES, INC. : : and : : ROBERT E. BRENNAN : ------------------------------------: OPINION OF THE COMMISSION BROKER-DEALER PROCEEDINGS Broker-Dealer Withdrawal Jurisdiction Where administrative proceeding was filed after effective date of broker-dealer's application for withdrawal from registration, held, proceeding dismissed. APPEARANCES: W. Hunt Dumont, of Robinson, St. John & Wayne, for First Jersey Securities, Inc. Mark Kreitman, for the Division of Enforcement. Appeal filed: August 30, 1995 Briefing completed: October 11, 1995 I. The Division of Enforcement appeals from an order of an administrative law judge which granted, in part, a motion to dismiss for lack of jurisdiction the proceedings against First Jersey Securities, Inc. ("First Jersey") and Robert E. Brennan. At issue in this case is the time at which a Form BDW, Uniform Request for Withdrawal From Broker-Dealer Registration ("Form BDW"), that has been filed with this Commission becomes effective. Our findings are based on an independent review of the record except to the extent that the findings below are not challenged on appeal. ==========================================START OF PAGE 3====== II. On February 22, 1995, First Jersey filed a Form BDW with the NASD. -[1]- On February 24, 1995, the NASD entered this filing into the Central Registration Depository ("CRD"), at which point the information in the filing was electronically available to this Commission. According to this initial CRD entry, First Jersey's Form BDW was accompanied by a financial statement dated January 10, 1995. Form BDW requires a financial statement dated within ten days of the filing of the Form BDW. The NASD had erroneously entered the date of the financial statement and, on March 1, 1995, amended the date of the financial statement to February 24, 1995. To ascertain the true date of the financial statement, our Office of Filings and Information Services ("OFIS") contacted the NASD. On March 8, 1995, the NASD notified OFIS that First Jersey's financial statement was in fact dated February 14, 1995. After an investigation "to ensure that First Jersey had fully disclosed the firm's and its principals' extensive regulatory disciplinary history," OFIS informed First Jersey, on March 30, 1995, that its Form BDW had been accepted by the Commission on March 22, 1995. On May 19, 1995, we issued an Order Instituting Administrative Proceedings against First Jersey. This was 86 days after the Form BDW was filed and 56 days after OFIS had stated that the filing was accepted by this Commission. III. On July 13, 1995, First Jersey filed a motion with this Commission requesting that the proceeding be dismissed for lack of jurisdiction. On July 31, 1995, we issued an order referring First Jersey's motion to the law judge. -[2]- The law judge dismissed the proceedings against First Jersey for lack of jurisdiction, concluding that First Jersey's Form BDW filing was complete on February 24, 1995, which made its withdrawal from broker-dealer registration effective on April 25, 1995. As a ---------FOOTNOTES---------- -[1]- Although First Jersey was still registered as a broker-dealer, it does not appear that, during the events at issue here, First Jersey was involved in broker-dealer activities. In addition, there is no suggestion that First Jersey engaged in such activities or that it held itself out as a broker- dealer after April 24, 1995, which represents the earliest effective date of First Jersey's withdrawal from registration. -[2]- Securities Exchange Act Release No. 36038. ==========================================START OF PAGE 4====== result, the law judge concluded that the proceedings instituted by this Commission on May 19, 1995 against First Jersey were untimely filed. The law judge reached this conclusion because First Jersey was not timely informed by OFIS's customary procedures that First Jersey's filing was deficient. -[3]- The law judge also disagreed with OFIS's position that a BDW filing is deficient if the filing does not include a current financial statement. -[4]- IV. We conclude that the proceeding against First Jersey must be dismissed. -[5]- At issue here is when First Jersey's Form BDW filing became effective. Even though the NASD repeatedly entered an incorrect date for First Jersey's financial statement into the CRD, First Jersey's filing with the NASD was not deficient when filed. We therefore deem the filing date to be the date on which the Form BDW was filed with the NASD. -[6]- Our order instituting proceedings was therefore ---------FOOTNOTES---------- -[3]- According to the law judge, OFIS's standard procedure is to mail a deficiency letter to the filer. In support of this conclusion, the law judge cited language in F.N. Wolf & Co., Admin. Proc. 3-8533, 1995 SEC LEXIS 1097 (May 3, 1995) ("OFIS mailed a letter dated July 26, 1994 to Wolf & Co., by its usual mailing procedure, indicating that Wolf & Co. had not fully cured the deficiencies in its Form BDW. . . ."). -[4]- In the law judge's view, a current financial statement would be required only when a broker- dealer owes money or securities to any customer or broker-dealer. -[5]- The proceeding against Robert Brennan is unaffected by the law judge's decision or this decision. -[6]- See 17 CFR 240.0-3, which states, "The date on which papers are actually received by the Commission shall be the day of filing thereof if all of the requirements with respect to the filing have been complied with. . . ." We emphasize that deficient applications or papers submitted to us are not considered to be filed with this Commission until any deficiencies have been corrected. See F.N. Wolf. ==========================================START OF PAGE 5====== untimely filed with regard to First Jersey. -[7]- ---------FOOTNOTES---------- -[7]- The fact that First Jersey is not registered would not forestall our continuing this proceeding if the firm were in fact acting as a broker or dealer. As we have made clear in the past, Section 15(b) of the Exchange Act does not limit us to proceeding administratively against registered broker-dealers. See, e.g., John Kilpatrick, 48 SEC 481, 487 (1986) (proceeding against person associated with unregistered government securities dealer that came within the statutory definitions of broker and dealer). See also David G. Baird, 43 SEC 815, 817-19 (1968) (proceeding brought under Sections 15(b), 15A, and 19(a)(3) of Exchange Act for engaging in the business of a broker-dealer without registration). Here, there is no evidence that First Jersey held itself out as a broker or dealer at or about the time at issue. ==========================================START OF PAGE 6====== While we sustain the law judge's ruling that the filing was not deficient when filed, we refrain from adopting all of the law judge's conclusions. In particular, we reject the law judge's conclusion that, under Rule 15b6-1 as in effect at the time of the events at issue, some broker-dealers need not file financial statements. -[8]- In addition, we find no evidence that it is OFIS's standard operating procedure to mail a deficiency letter to the filer if the Form BDW does not include a current financial statement. -[9]- Because First Jersey's application to withdraw from registration as a broker-dealer was in fact complete when it was submitted to the NASD, we are constrained to conclude that the filing date of First Jersey's Form BDW was the date on which Form BDW was filed with the NASD, or February 22, 1995, and that the Form BDW was thus effective on April 24, 1995. In light of this, we dismiss the proceeding against First Jersey. An appropriate order shall issue. -[10]- By the Commission (Chairman LEVITT and Commissioners WALLMAN, JOHNSON, and HUNT). ---------FOOTNOTES---------- -[8]- See Securities Exchange Act Release No. 31660, 53 SEC Docket 588 n.14 (December 28, 1992). Form BDW requires broker-dealers that file FOCUS reports to attach a copy of the "Statement of Financial Condition" and "Computation of Net Capital" sections of their FOCUS report. Other broker- dealers must attach a statement of financial condition giving the type and amount of the firm's net worth and assets and liabilities. Id. -[9]- OFIS stated that, to the contrary, when a Form BDW does not contain a current financial statement, OFIS typically notifies the NASD of any deficiency and that the NASD then sends a deficiency letter to the filer. We are also not persuaded by the law judge's citation of F.N. Wolf as evidence of OFIS's standard operating procedure. We interpret the language cited in note 3, supra, as a limited statement that OFIS mailed the deficiency letter to F.N. Wolf & Co. by its usual mailing procedure, not that mailing a deficiency letter constitutes OFIS's usual procedure. -[10]- All of the contentions advanced by the parties have been considered. The contentions are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed in this opinion. ==========================================START OF PAGE 7====== Jonathan G. Katz Secretary UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No. Admin. Proc. File No. 3-8699 : In the Matter of : : FIRST JERSEY SECURITIES, INC. : : and : : ROBERT E. BRENNAN : : ORDER SUSTAINING ORDER OF ADMINISTRATIVE LAW JUDGE On the basis of the Commission's opinion issued this day, it is ORDERED that the administrative proceeding against First Jersey Securities, Inc. be, and it hereby is, dismissed with respect to First Jersey Securities, Inc. By the Commission. Jonathan G. Katz Secretary