SEC Division of Corporation Finance no-action letter: First Southwest Company

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHtNGTON, D.C. 20549
Dlvtatox oF
CORPOEATIOX FINANCE May 27,2008
Paul S. Maco, Esq.
Vinson & Elkins LLP
The Willard Office Building
1455 Permsylvania Avenue, NW, Suite 600
Washinglon" DC 20002- 1008
Re: In the Matter of First Southwest Company, Administrative Proceeding FiIe No. 3-13046-Waiver Request under Regulation A and Rule 505 ot Regulation D Dear Mr- Maco:
This is in response to your letter dated today, written on behalfofFirst Southwest Company ("First Southwest") and constituting an application for reliefunder Rute 262 of Regulation A and Rule 505(bX2XiiD(C) of Regulation D under the Securities Act of 1933 ("securities Act'). You requested relief from disqualifications from exemptions available under Regulation A and Rule 505 that may have arisen by virtue ofthe order entered today by the Securities and Exchange Commission under
Section l5(b) ofthe securities Exchange Act of 1934 ("Exchange Act") in In the Matter of First
Southwest Company, Release No. 33-8919 (the "Order"). The Order also was issued urder Section 8A of the Securities Act- It censured First Southwest and ordered First Southwest to cease and desist fiom committing or causing any violations and any future violations of section l7(a)(2) of the Securities Act, pay a $150,000 penalty, make certain disclosures regarding its auction rate securities practices and procedures, and cause its chiefexecutive officer or general counsel to certify to the staff ofthe Commission that First Southwest has implemented procedures reasonably designed to prevent and detect failures by it to conduct auction rate securities auctions in accordance with the auction procedures so disclosed. For purposes ofthis letter, we have assumed as lacts the representationset forth in your letter and the findings supporting entry of the Order- We also have assume<l that First Southwest will comply with the Order. on the basis ofyour lefteq I have determined that you have made showings ofgood cause under Rule 262 and Rule 505(bX2XiiD(C) that it is not necessary under the circumstances to deny the exemptions available under Regulation A:urd Rule 505 of Regulation D by reason of entry of the Order. Accordingly, pursuant to delegated authority, First Southwest is granted relief from any disqualihcations from exemptions otherwise available under Regulation A and Rule 505 olRezulation D that may have arisen as a result of entry o f the Order. Very truly yours, C""A x Xhe C/nld l.t;lport{ f Chief, Office of Small tsusincss Policy

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Psrrl S. Maco Pmaco@velawcom
Tel aO2.639.6705 Fax 2o2 879-8905
May 21,2008
Gerald J. LaPorte, Esq.
Chie{ Office of Small Business Policy
Division of Enforcernent
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549 -3 628
Re: Auction Rate Securities Practices (File No' HO-09954) Dear Mr. LaPorte:
We are writing on behalf of our client, First Southwest Company C'FSC")| in connection with the settlement of the above-referenced matter arising out ofan investigation by thc Securities and Exchange commission (the "commission") into certain auction rate securities practices at FSC and several other broker-dealers' FSC below requests, pursuanto Rule 262 of Regulation A and Rule 505(b)(2xiit(c) ofRegulationDoftheCommissionpromulgatedunderSecuritiesActof1933(the ..SecuritiesAct''),awaiverofanydisqualificationfromexemptionsunderRegulationAand Rule 505 of Regulation D that may be applicable to FSC and any of its affrliates as a result of the entry of tlie Settlement Order dated May 27,2008' We understand that only the commission or an individual commission employee to whom appropriate authority has been delegated in accordance with l? c.F.R. $ 200.30-i may grant this waiver request. FSC also requests that these waivers be granted effective upon entry of the settlement order. It is our understanding that the Division of Enforcement does not object to the grant ofthe requested waivers by the Division ofCorporation Flnance￾Bv Courier and Electronic Mail ' FSC is a wholly owned subsidiary of First Southwest Holdings, hc, a privately held corporation fSC is a registered broker:dealer engaged, tluough itself or its affiliates, in a full-service securiti€s business. including bui not limited to retail aod instrtutioial sales, investrnent balking services, investrnent advisory services. financial advisory services, trading, and clearing. Vin6on & Elkins LLP Anorneys at Lau, Abu Dhati Austan El€qing Oalias Dubai Hong Kcnq Houslon London Moscow N6,! Yoa Shanghar Tokyo washington The Willard Oftice Builditp, 1455 Pennsylvania Avenue NW, Suile 600 Washinglon, DC 20004'100€ Tel 202.639.6500 Fax 202.S9 6604 vAYw.vslaw.corit

V&L May27.NB Page2
BACKGROUND
The Division of Enforcernent and FSC have agreed to settle th€ above-referenced matter, in connection with which FSC has submitted to the Commission an offer of settlement in which, for the purpose of this proceeding it consents to the entry ofan order by the Commission (the "Settlement Order') without admitting or denying the matters set forth in the Order (except as to the jurisdiction of the Commission and the subject matter of the proceeding). In the Settlernent Order, the Commission makes findings, without admission or denial by FSC (apart from jurisdiction), that FSC violated Section l7(a)(2) of the Securities Act in connection with certain practices relating to auction-rate securities. Based on these findings, the Settlement Order requires FSC (l) to cease and desist ftom committing or causing any current or future violations of Section l7(a)(2) of the Securities Act, (2) to pay a civil money penalty of $150,000, (3) to make certain disclosures regarding its material auction practices and procedures described in Section IV.D. of the Settlement Order, and (4) not later than 6 months after the date of the Settlement Order, unless otherwise extended by the staffofthe Commission for good cause showr! have its chief executive officer or general counsel certify in writing to the_ staff of the Commission thal FSC has implemented procedures that are reasonably designed to prevent and detect failures by FSC to conduct the auction process in accordance with the auction procedures disclosed in the disclosure documents and any supplemental disclosures and that FSC is in compliance with Section IV.D. of the Settlernent Order. DISCUSSION FSC understands that the entry ofthe Settlernent Order could disqualify FSC and its other affiliated entities fiom participating in certain offerings otherwise exempt under Regulation A and Rule 505 of Rcgulation D promulgated under the Securities Acl, insofar as the Settlement Order may be deemed to cause FSC to be subject to an order of the Commission entered pursuant to section l5(b), l5B(a), or 158(c) of the Securities Exchange Act. The Commission has the authority to waive the Regulation A and Rule 505 of Regulation D exemption disqualifications upon a showing of good cause that such disqualifications are not necessary under the circumstances. See l7 C.F.R. g$ 230.262 and 230.505(bX2XiiiXC), FSC requests rhar the Commission waive any disqualifuing effects that the settlement order may have under Regulation A and Rule 505 of Regulation D with respect to FSC or its other affiliates on the following grounds:

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1. FSC's conduct addressed in the Settlement Order does not relate to offerinqs
   under Regulation A or D.
2. FSC will implernent certain procedures described in Section IV.D. of the
   Settlement Order in a marlner reasonably desigred to ensure compliance with the regulatory requirements that are the subject of the Settlement Order.
3. The disqualification of FSC, a broker-dealer, from the exernptions under
   Regulation A and Rule 505 of Regulation D would, we believe, have an adverse impact on third parties that have retained FSC and its other affiliates in connection with transactions that rely on these exemptions.
4. As required by Section IV.E. of the Settlement Order, FSC's chief executive
   officer or general counsel will certifu to the Commission, no later than 6 months after the Settlement Order, that FSC has implemented procedures that are reasonably designed to prevent and detect failures by FSC to conduct the auction process in accordance with the auction procedures disclosed in the disclosure documents and any supplemental disclosures and that FSC is in compliance with Section IV.D. of the Settlement Order.
5. The disqualification of FSC liom the exernptions available under Regulation A
   and Rule 505 of Regulation D would be unduly and disproportionately severe, given that the Commission staff has negotiated a settlement with FSC and reached a satisfactory conclusion to this matter that will require FSC to pay $150,000 in settlement ofthe matters addressed in the Settlernent Order and will require FSC's chief executive offrcer or the general counsel to certify that FSC has implemented procedures tlat are reasonably desigred to prevent and detect any failures by FSC to conduct the auction process in accordance to the disclosed process. ln light of the foregoing we believe that disqualification is not necessary, in the public interest or for the protection of investors, and that FSC has shown good cause that relief should be granted- Accordingly, we respectfully request the Commission, pursuant to P.ule 262 of Regulation A and Rule 505OX2XiiiXC) of Regulation D, to waive, effective upon entry ofthe Settlement Order or any related disqualifying order, judgrnent, or decree of a U.S. state or territorial court based on the same facts and addressing the same conduct as is addressed in the Settlement Order, the disqualification provisions in Regulation A and Rule

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505 of Reg,lation D to the extent that may be appricable to FSC and any of its other affrliates as a result of the entry ofthe Settlement Order and any such order, judgrnent, or decree.2 Ifyou have any questions conceming this request, please feel free to call me￾S incerely, % / pauts.Va6,o r Rcgularion we.note in A suppon of this request that the commission has in other insrances g"nred rehefundsr Rule 262 f Boston and Rule sostutizxir:xc) of Reguration o r.i ri-ii"r l"^"" s. see, e.g., credir sutsse First corporation' s.E.c- No-Action Lrtt€r No-Acrion {p;b. avait. o"i. :i,li[i, rra, Rausc]ter, [ncorporated, s,E-c. Lener (pub. avail. sepi. zl., zooti; bgg a*ri ;t Lir"irtt"r. Incorporared, s.E,c. No-Actior !€tl€r (pub avair. Jun. tt, zoot)', t, tn" u"ttu "fEiii, (pub. ut,+i-urftrg n"rv,7i?,r, s.E.c. No-Actjon Letref arziJ. Jan. ll, 1999); -tr€p& ens Incorport et),s.E.c. No-Action r.ti"i 1put. u""ir. Nov. 2i. r99g).