SEC Division of Corporation Finance no-action letter: Adams Harkness, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTOP4 D C 20549
August 25,2004
Andrew F. Viles, Esq.
Adarns Harkness, Inc.
60 State Street
Boston, MA 02109
Re: Adam Harkness, Inc.-Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Viles This is in response to your letter dated today, written on behalf of Adam Harkness, Inc. (the "Firm") and constituting an application for relief under Rule 262 of Regulation A and Rule 505@)(2)(iii)(C) of Regulation D under the Securities Act of 1933. You requested relief from disqualifications from exemptions available under Regulation A and Rule 505 of Regulation D that may arise by virtue of the entry of an order dated today by the Securities and Exchange Commission ordering, pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, that the Firm cease and desist from committing or causing any violations and any future violations of Section 17(b) of the Securities Act and Section 17(a) of the Exchange Act and Rule 17a-4 promulgated thereunder; that the Firm is censured pursuant to Section 15(b)(4) of the Exchange Act; that the Firm pay a civil money penalty of $575,000; and that the Firm comply with the undertakings set forth in the order (the "Order"). For purposes of this letter, we have assumed as facts the representations set forth in your letter and the findings necessary to support the Order. We also have assumed that the Firm will comply with the Order. On the basis of your letter, I have determined that you have made a showing of good cause under Rule 262 and Rule 505(b)(2)(iii)(C) that it is not necessary under the circumstances to deny the exemptions available under Regulation A and Rule 505 of Regulation D by reason of the entry of the Order. Accordingly, pursuant to delegated authority, and without necessarily agreeing that the requested relief is necessary, the relief described above from the disqualifying provisions of Regulation A and Rule 505 of Regulation D is hereby granted. Sincerelv. ?&Q* G ald J. Laporte ye Chief, Office of Small Business Policy

@ Adarns Harkness
August 25,2004
VIA FACSIMILE AND OVERNIGHT DELIVERY
Gerald J. Laporte, Esq.
Chief, Office of Small Business Policy
Division of Corporation Finance
U.S. Securities and Exchange Commission
450 Fifth Street, N.W., Room 3501
Washington, D.C. 20549-03 10
Re: In the Matter of Certain Payments for Research; File No. HO-9 700 Adarns Harkness, Inc. (ma Adarns, Harkness & Hill, Inc.) Dear Mr. Laporte:
We submit this letter on behalf of our client Adams Harkness, Inc. (Ma Adams, Harkness & Hill, Inc.) ("Adams Harkness"), which is a settling respondent in the above-referenced proceeding by the Securities and Exchange Commission (the "Commission") into payments received by Adams Harkness that allegedly violated Section 17(b) of the Securities Act of 1933 (the "Securities Act"). Adarns Harkness requests, pursuant to Rule 262 of Regulation A and Rule 505@)(2)(iii)(C) of Regulation D, promulgated under the Securities Act, a waiver of any disqualification from exemptions under Regulation A and Rule 505 of Regulation D that may be applicable to Adams Harkness or any of its affiliates as a result of the entry of the Commission order described below. Adams Harkness requests that these waivers be granted effective upon entry of such order by the Commission. It is our understanding that the Staff of the Division of Enforcement does not object to the grant of the requested waiver. BACKGROUND The Staff of the Division of Enforcement has engaged in settlement discussions with Adams Harkness in connection with the investigation described above. As a result of these discussions, Adarns Harkness has submitted an Offer of Settlement. In this Offer of Settlement, solely for the purpose of the above￾captioned proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, Adams Harkness has consented to the entry of an Order Instituting Proceedings, Making Findings and Imposing Sanctions (the "Order"), without admitting or denying the matters set forth therein

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Gerald J. Laporte, Esq.
August 25,2004
(other than those relating to the jurisdiction of the Commission). Spcifically, the Order states that Adams Harkness published and circulated communications in the form of research reports that described a security for consideration without disclosing the prospective receipt of such consideration or the amount thereof. The Order further states that Adams Harkness failed to adequately preserve business￾related internal e-mail for three years. Under that Order, which was issued today, the Commission made findings, without admission or denial by Adams Harkness, that it violated Section 17@) of the Securities Act and Section 17(a)(l) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 17a-4 thereunder. The Order censures Adams Harkness pursuant to Section 15@)(4) of the Exchange Act and requires, pursuant to Section 8A of the Securities Act and Section 21 C of the Exchange Act, that Adarns Harkness cease and desist from committing or causing any violations or futue violations of Section 17(b) of the Securities Act and Section 17(a) of the Exchange Act and Rule 17a-4 promulgated thereunder. The Order also requires that Adams Harkness pay a civil money penalty of $575,000 to the United States Treasury. DISCUSSION Adams Harkness understands that the entry of the Order may disqualify it and its affiliated entities from participating in certain offerings otherwise exempt under Regulation A and Rule 505 of Regulation D promulgated under the Securities Act, insofar as the Order may be deemed to cause Adams Harkness to be subject to an order of the Commission pursuant to Section 15(b) of the Exchange Act. The Commission has the authority to waive the Regulation A and Rule 505 of Regulation D exemption disqualifications upon a showing of good cause that such disqualifications are not necessary under the circumstances. See 17 C.F.R. 5s
230.262 and 230.505@)(2)(iii)(~).'
We note in support of this request that the Commission has in other instances granted relief under Rule 262 of Regulation A and Rule 505@)(2)(iii)(C) of Regulation D for similar reasons. See, e.g., UBS Securities, LLC, S.E.C. No-Action Letter (pub. avail. October 3 1, 2003) (charges including Section 17(b) of the Securities Act); US. Bancorp Piper Jaflray, Inc., S.E.C. No-Action Letter (pub. avail. October 3 1,2003) (charges including Section 17(b) of the Securities Act). See also Credit Suisse First Boston Corporation, S.E.C. No-Action Letter (pub, avail. Jan. 29,2002); Dain Rauscher, Incorporated, S.E.C. No-Action Letter (pub. avail. Sept. 27,2001); Legg Mason Wood Walker, Incorporated, S.E.C. No-Action Letter (pub. avail. June 11,2001); In the Matter of Certain Market-Making Activities on NASDAQ, S.E.C. No-Action Letter (pub. avail. Jan. 11, 1999); Stephens Incorporated, S.E.C. No-Action Letter (pub. avail. Nov. 23, 1 998).

Gerald J. Laporte, Esq.
August 25,2004
Fx the following reasons, Adarns Harkness requests that the Commission waive any disqualifying effect that the Order may have on it, or any of its affiliates, based on a determination that it is not necessary under the circumstances that such exemption under Regulation A and Rule 505 of Regulation D be denied.

1. Adams Harkness's conduct to be addressed in the Order does not
   relate to offerings under Regulation A or D.
2. The disqualification of Adams Harkness from the exemptions
   available under Regulation A and Rule 505 of Regulation D would, we believe, have an adverse impact on third parties that have retained Adams Harkness and its affiliates in connection with transactions that rely on these exemptions.
3. The disqualifications would be unduly and disproportionately severe
   given: (i) the lack of any relationship between the violations addressed in the Order and any Regulation A or D related activity conducted by Adams Harkness; and (ii) the fact that the Commission staff has negotiated a settlement with Adam Harkness and reached a satisfactory conclusion to this matter that includes a cease and desist order, together with a censure and the payment of a civil money penalty. In light of the foregoing, we believe that disqualification is not necessary in the public interest or for the protection of investors, and that Adams Harkness has shown good cause that relief should be granted. Accordingly, we respectfully urge the Commission, and the Division of Corporation Finance pursuant to delegated authority, to waive the disqualification provisions in Regulation A and Regulation D to the extent that they may be applicable to Adams Harkness and any of its affiliates as a result of the entry of the Order. Please do not hesitate to contact the undersigned at (617) 371-3715, if you have any questions regarding this request. General Counsel