UNITED STATES OF AMERICA
In the Matter of
MERRILL LYNCH, PIERCE
|ORDER UNDER RULE 602(e) OF THE SECURITIES ACT OF 1933 GRANTING A WAIVER OF THE DISQUALIFICATION PROVISION OF RULES 602(b)(4) AND 602(c)(2)|
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") has submitted a letter, dated April 4, 2003, requesting a waiver of the disqualification from the exemption from registration under Regulation E arising from the settlement with the Commission of a civil injunctive proceeding and arising from any related injunction entered by a U.S. state or territorial court addressing the same activities as the settled injunctive proceeding.
On April 28, 2003, the Commission filed a civil injunctive complaint against Merrill Lynch in the United States District Court for the Southern District of New York alleging that Merrill Lynch violated Section 15(c)(1) of the Securities Exchange Act of 1934 ("Exchange Act"), Rule 15c1-2 thereunder, Section 15(c)(2) of the Exchange Act, NASD Inc. ("NASD") Conduct Rules 2110, 2210(d)(1), 2210(d)(2), and 3010, and New York Stock Exchange ("NYSE") Rules 342, 401, 472, and 476.
Merrill Lynch filed a "Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated" in which it agreed, without admitting or denying the allegations of the Commission's complaint, to the entry of a Final Judgment against it. Among other things, the Final Judgment permanently enjoins Merrill Lynch from violating Section 15(c)(1) of the Exchange Act, Rule 15c1-2 thereunder, Section 15(c)(2) of the Exchange Act, NASD Conduct Rules 2110, 2210, 2210, and 3010, and NYSE Rules 342, 401, 472, and 476, orders Merrill Lynch to pay $100,000,000 in penalties and interest, and requires Merrill Lynch to comply with certain undertakings.
Rule 602(b)(4) makes the Regulation E exemption unavailable to an issuer if, among other things, such issuer or any of its affiliates is subject to any "order, judgment, or decree of any court of competent jurisdiction, entered within five years prior to the filing of such [Regulation E] notification, temporarily or permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of securities." Rule 602(c)(2) also makes the exemption unavailable to an issuer if, among other things, any underwriter of the securities to be issued is "temporarily or permanently restrained or enjoined by any court from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or arising out of such person's conduct as an underwriter, broker, dealer or investment adviser." Rule 602(e) provides, however, that the disqualification "shall not apply . . . if the Commission determines, upon a showing of good cause, that it is not necessary under the circumstances that the exemption be denied."
Based on the representations set forth in Merrill Lynch's April 4, 2003 request, the Commission has determined that, pursuant to Rule 602(e), a showing of good cause has been made and that it is not necessary under the circumstances that the exemption be denied as a result of the Final Judgment or as a result of any related injunction entered by a U.S. state or territorial court addressing the same activities as the settled injunctive proceeding.
Accordingly, IT IS ORDERED, pursuant to Rule 602(e) under the Securities Act of 1933 ("Securities Act"), that a waiver of the disqualification provision of Rules 602(b)(4) and 602(c)(2) under the Securities Act resulting from the entry of the Final Judgment is hereby granted.
By the Commission.
Jonathan G. Katz
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