SEC Division of Corporation Finance no-action letter: Friedman, Billings, Ramsey & Co., Inc.

Dtvtttol{ oF conPoh Ttoit FtHAflcG
UHITETT ST'ATEq
EEGU RITI ES AHT} EXGHAfrICE EOhIMISSI$N
WASI{IHGTQH, D.C:r, eOE4e
AHM
January 16,2007
Vincent J. Badolatq Esq.
Dechert LLP lTVSlStreet, N.Idt/. tffashingtonn DC 2ry;2401 . ,,, , Re: In the Mntter of Frledmtn,'Eillings, Rrmsey & Co," Inc.*Weiver Reque$ under Regulation A and RuleSt)S of Reguhtion D' Dear Mr. Badolats:
This is in response to your letter dated January 16, 2007, written on behalf of Friedman, Billings, Ramsey & Co., Inc. f'FBR ), and const{uting an application for relief under Rule 262 of Regulation A and Rule 505@[2XiiiXC) of Regulation D under the Securities Act of 1933. You requested relicf from disqualifications from exernptions available under Regulation A and Rule 505 of Regulation D that nray have arisen bylvirtue of the entry of a Final Judgment dated December 22,2006, by the United States Dishict Cour-t,fnr the Djsfiict of Columbia in SEC v. Friedrnan. BillinEs. R"arnsev & Co.. [nc., Civil No. CI6-2160 (the "Final Judgryent"), Arrd the issuance of SEC Release 34-55105, an order dflted January 12,2A07 und-er Section t5{bX4) of the Securities Exchange Act of 1934 against FBR, by the Securities and Excbflqge Comrnission in Administrative Proceeding File No. 3-12538 (the'lftder"). The Final Judgagnt ordets disgorgement, imposes civit penaltieso and p€tfilarrently enjoins FBR from violetions of $ections 5 and 17(a) of the Sec-urities Act of 1933 and Sections lO(b) and 15(f-) of the $ecuritim Exchangc Act of 1934 and Rule l0b-5 thereunder. The Order censures FBR and erder,e FBR to co.mply with certain undertakings. For purposes of this letter, we have assumed as facts the representations set forth in your letter and the findings supporting enky of the Final Judgment and Order against FBR. We have alss assurned that FBR has complied and will c-ontinue to comply with the Final Judgr,nent and Order. On thE basis of your letter, I have deteturined that FBR has made a shorving;of good L under Rr"rle 26? and Rule sOs(bXzXiiiXC) that it is not necessary under the eircwnstances to deny the exemptions available under Regulatiot A asd- Rule 505 of Regulation D by reason of entryof the Final Judgment and ftder against F'BR. ,Ac,cordingly, pursuant to delegated authority, FBR is granted relief from any diqqualifications fisrn exemBtions otherwise availahle under Regulation A and Rule 505 of Regulation D that may have arisen as a result of entry of the Final Judgment and Order against it. Gef,ald J. Laporte Very tnrly yours, Chief, Office of $mall Business Policy

Dechert
LLP
1?75 f'$trssl. N.W.
Wafi*t'urgtqn, D.C. ?000F4401
+1'?04 ?S{ 3300 MEin
+1 202,,f61 3333 Fax nwndeetrert.com
Jffusry 16,2007 vn+ !+nu- DELI,VERY
Gerald J. I.eporte, Esq.
Chiefl Otris€ of Srnall Business Policy
Divisionr of Cqlporation Finance
U.S. $eourities and Exchange Commission
100 F Steeq N.8., Mail Stop 3628
Washington, D.C. 20549
VilCSIIT J. SADOLATO l&rcsnt.tadol8toeds(fi €rt;cortr +{ r?02 l$1 8+Eg Dked +t e02 961 3t189 Fax Re: /n tln:l[-atter otFriedmqt, Billings, Rarysel & Co,,Inc. Dear Mr. Laporte:
We submit this letter on behalf of our olient Friedman, Billings, Ramsey & Co., Inc. (IFBR") in conneption with thq,adminisruive andjudieial orders re#lting,frorn the abore￾refereirced investigation. FBR is a settling reryortdent in,tl,tnt investlgatiron by the Securities and Exchange Commission (the Comrnissioni'), whieh involved + Private Invpstment in puhlic ftquify (PIPE ) offering for CompupyRe Corporalion ("Compupyne"), where FBR served as the placement agent in October 2001. FBR requests, pur.suant to Rule 262 of Regulatiorr A and Rule 505(bX2Xiii[C) of Regulation.D, prprnulgated under the $epurities Act of 1933 (the o'$eeurities Act"), a waiver of ny disqualification from exemptiono urrder Regulation A and Rul.e 505 of Regulation D that may be applicable to FBR or f,ny of its affrliates as a result of the enlry of the adminishative and judicial orders dessribod below. It is our understanding ttql the $taffqf the Division of Enforcement does not o-bject to the granting of the requested waivor. BACKGROUF{I} FBR engaged in settlernent discussions with the Staffof the SEC's Division of Enforcemenl along with the Staff of NASD's Depqftment of Mnrket Regulation, in eonnection with the SEC's and NASD's investigations of the CompuDyne PIPE oftring in October 2001. As a result of thsse disurssions, FBR grbrnitted an Offer of Seulement (tlre 'Offer-). ln the Offer, solely for the purpose of the pqceedfurgs, and any other proceedings brought by or on beha-if of the Commission or NASD" or to whigh thp Commission or NA-SD is a party, FSn conseurted tothe enffy of an Order lnstitrrting Prooeedings, Making Findings and tmposing $anctions (fts "OIP'), an injunction entered in fhe District Court for th Disqict of Cslumbia (the "lnjunction'1), and an Acceptance,'IrVaiver and Consent{:'AWc} issqed by NASD, l Eo8tdrt Charlotte Harrieburg ilertforo NewYork NewjrsftB€acll FaloAfto Philadalphia Princ€tofl $anFrandscb WashingtonDC Brussels Frarfurt Lofdon Lux€mborrg Munich Paris

Dechert
LLP
Gerald J. L4porte, Esq.
Januaty 16,2007
Page 2 l
witrout admitring or denying the matkrs or allegations set forft drerpin (other drftr those rclating to tlre jurisdiction of'flrp Commission afldNAS.D) FBR corrsented to dro enty of tk trnjunotian without admitt-ing or denying drc alhgntions in the Commission's Complaint (the *Cornplainf) (qrcepf as to.iurisdiction) waived findirys of fact afld conclusions of law; and waived any right to appaal frorn file trnjrrnction. The Commission alleged in the Cornplaint that, in connection with the CompuDyne PIPE offering FBR failed to establish, maintain,and enforce polioies and procedures reasonably designed to prevent the rnisuse of material, rr,onpublic information, engaged in insider trading and condu+ted unrogistered sales of sscwities. The Injunction pelmanently restrains and enjoins FBR ffid its agents, ssflrants! ernployees, pnd attorneys, from violating Sections 5 and l7(a) of Sre Securities Act and Sections l;O(b) and lS(f) of thE Securities Exchange Act of 1934 (the Exchange Act') and Rule l0b-5 promulgated therzunder. The Injurrction also requires FBR &,Co. to pay disgorgEment plus prejudgment interest in addition to civil pennlties in an nggregate amount of approxirnately $3.7 million. FBR consented to the entry of the OIP withoutadmitting or denying the findings therein, except as to the Comrnission'sjurisdiation and the findings with regard to tfie enky of the Injunctisn. [n the OIP, entered on anu- y 12,,2AA7, the Cornmission found that the lr$unction was entered hy consent oniDecernher 22;,2006, p€rrnanently enloining FBR.thorn violating $ections 5 and l7(a) of the,$,oauritiee Act of 1933 and $,ections l0(b) and:1fi(f-) of the Exchange Act and Rule l0b-5 promulgated thereunder, in the civil action entithd Secrlrities and Exchanee Commission v. Frk:.dman. Billinss. Ramsev & Co.,Inc.. et al.. Civil Action Number l:06CV02160, in the Untted $tates Distist Court'for the DistriCt of Colurnbia, which was admitted. The OtrP ordered thflt FBR ba censursd and that FBR comply with the undertakings enumerated therein. The AWC rnade findings, without admissian or denial by Fts& tlnt it violated Section l(b) of the Exchange Act and Rule l0F5 thereunder, Section lS(f) of ttre'Exclrange Act, Sestion l7(a} of the Securities Act, Section 5 ofthe SecuritiesActand certain NASD rules. FBR paid a $4 million fine in corurectisn with the NASD proceeding. DISCUS$ION FBR understands that th" "t y of the Order and of dre Injunction rnay disquatiff it and its affiliated entities from participflting in certain offerings otherwiee exempt under Regulation A and Rule 505 of Regulation D promulgated undCr the Securities Act, insofar as FBR'is enjoined from causing any future violations of the securities laws. the Commission has the authority to waive the Regulation A and Rule 505 of Regulation D exernption disqualifications upon a showing of good cause that such disqualifiEatiqns are not ne€essary under the circumstances. $ee l7 C.F.R. $ 230.262 and 230.505{bX?XiiiXC};
For the following reasons, FBR.:requesh thar the Commission waive any disquallfying effect thnt the Order or Iniunction mpy have on it, or any of ,its affiliates, based pn a determination that it is not n€cessary under the circulnshmes that such exernption urder Regulation A and Rule 505 of Regulathn D hs dsilid.

Dechert
LLP
Ger4ld J. Iporte, Esq.
Jflnuary 16, ?007
Pge 3
FBR's alleged condust does not relate to offerings under Regulation A or , D; The individlrats alleged to have been involved in dre conduet underlying the allegations in the Complnint aro no longer employed by FBR or its , affrliates; FBR has wrdprtaken significant remedial measures to address concerns raised in tlre Complaint, including th€ retention of an independart oonsulting firm to review alrd make reconlmondations regnrding thelpoticie$r procedures and practices to prevent dre rnisuse of material nonpublic information. FBR slso retained an outside law firm to review and make recommendations regrurding the policies, procedures and practices to preventhe misuse of material nonpublic inforrnation, nnd FBR implemented rpconrnrenddious nude by its conzultalts and hired additionnl employees to enhance its conrpliance group; FBR shell retain, within 30 days from the date of the enry of the Order, the services of an independent consultant not unacoeptable to the Cotrynission's staffto conduct a compelnnsive review snd prepare a writen report regording FBR's policies, procedwes and practices to pnevent the rnisuse of u-rateriel rronpublic information. FBR shall requirg ttre indnnBndent consilltant ta issue and deliver to FFR and the Commis$iotr's s1afftre initial rcporq which must includ€ a descripion of the review performed the conclu+ions reached, and the independent consultantos recommendutlqn$ as to how FBR should improve, modifi or suppkment its policies ard proc$ures to prevent the misuse of materialnonpublii inf,ormation iF orderto berin complianie with Section l5(f) ofthe Exchange A,ct; FBR shatl adopt all recornmendations made by the independent consultant proviM,,however, that FBR need not adopt those tpqo-mntQttdations it considers to be unduly burdensortre, impractieal sr costly: tlfith rygard to those recomrnendations, FBRrshall propose in wrlting:an nlkrnative policy or procedure desrgned to achieve,the s+me objective or purpose ando as to any recommendations on which FBR and the indepepdent consutta,nt do not agree, such parties shall anempt in gpod faith to reach an agrcgrffint. [n the event no ] agreenrcntrls reached* FBR shflll abide by the determinfltion of the indepqn&nt consultant. Widlin six months after the issuance of the initial reporf FBR shall provide to the Commissionrs staffan sffidavit attesting to its implementation of the rectrnrnonddions and sefiing fuh the dedails of its implementation of th,recomrtrendqtions; Within one year at+r the issuance of the initial repor{ FBR Srall require flre indnpendent cornultant to rcview FBR's policies, pr,ocedures and practices ts preventhe rnisuse of,materiel nonpublic information,r&Ird to dplivCr'to FBR and Sre Commissionls stffa final written reporr mrAlfirg fnR s adoption, l implernentation, maintenarrce and enforoernent of the p+lrcies; procedures and t. J. 4, 5. 6.

Dechert
LLP
Gerald J. I"aporte, Esq.
Jannary 16,2W7
Page 4'
practices contaird in tre inldal'report snd thn gftat-iveness of tho-sp poJioipq r ptocedures zurd practices;
7. Tlra disqualification of FBR frotn the e:rempions available under
Regulation A and Rule 505 of Regulation D would, we believe, havEs$ r ' adverse impact on third partios that have retined" or mfly retaino FSR and ,, its affiliates irt oonnection with hansactions,that rely or these exemptions; L The disqu,alifications wcul$hatn a disproportionate irnpact upon ttrc hreinoss ", of FBR given that'FBR (l) is aa{oirred from future violations of the pertirrent securities law provlsions; (?) is ceruured; and (3) paid disgorgement ard penalties of approximately $3.7 million; I and .
9. The disqualifiaatipns,wquld:bc unduly and di+proptrlionately sever.e given:
(i) the labk of any relationship bptwoan the violstions addfessed in the Order and any Regulation A or D related activrty conducted by FBR or its affrliates, and (ii)tlre fact thatthe Enforc+ment Staffand NASD Staff,have negotiated a settlemett:with FBR and reached a satisfactory eonclusion to this, matter drat will include an iqiunction and the payrnent of civil rnoney r, I .,,. , . , , I ,t :i ,:. . . In light of the foregoing, we btftpvs tfult digqtralific$on is not neoessary furthe , pqotection of,investors nor in the puhlic intere'sil,e$d that FBR -hs shwn goodls.fluse thflt relief should be granted. Accordingiy, we respgctfully urge the Cornmission, ard the Division of Corporation Finance pur$uant to delegated authprify, to wnive tfie disqtralificarion provisions in Regukrtion A and Regulation D to the extentthat they may be applicable to FBR and any of its affilifltes as a r€sult of the enty of the Order, or fqjunction. In addition, FBRagfeed to certain sanctlons as pdrt of {t$, ion:,of ths NAS$ proceedings, including the payment of a $4 million fiw:, l

Dechert
LLP
Gcrflld J. Lapofie, Esq.
January lS,2007
Pae+ 5
Please do not hesitate to contact he undersignd a1207,"261-3389, if you h*ve any questions regarding this request. Elaine C. Greenberg, Esq.- U.S. $ecurities and Exchange Comrnission Patricia A. Trujillo, Esq.- U,$. Securities and Exchange Comrnissiori William Ginivan, Esq.- Friedman, Billings Ramsey & Co., Inc. Wallace I.. Timmeny, Esq.- Dechert LLP Dennis J. I-awson; Esq.- DEchert LLP ''.,r, iii i 1"[ ]'ili