SEC Division of Corporation Finance no-action letter: Prudential Equity Group, LLC

UNITED STATES
SECURITIES AND EXCHANGE COMMiSSlON
WASHINGTON, D.C.20549
DIVISION OF
CORPORATION FINANCE
August 25,2004
Harry J. Weiss, Esq.
Wilmer Cutler Pickering Hale and Don LLP
2445 M Street, N.W.
Washington, D.C. 20037
Re: Prudential Equity Group, LLC-Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Weiss:
This is in response to your letter dated today, written on behalf of Prudential Equity Group, LLC (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 fiom 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, that the Firm cease and desist fiom committing or causing any violations and any future violations of
Section 17(b) of the Securities Act; that the Firm is censured pursuant to Section 15(b)(4) of the
Securities Exchange Act of 1934; and that the Firm pay a civil money penalty of $375,000 (the "Order"). For purposes of this letter, we have assumed as facts the representations set forth in your letter and the fmdings 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 fiom the disqualifying provisions of Regulation A and Rule 505 of Regulation D is hereby granted. Sincerely,

• ~kraldJ. Laporte
  Chief, Office of Small Business Policy

'L
WILMER CUTLER PICKERING
HALE ANDDORRuP
Hary J. Weiss
2445 M STREET NW August 25,2004 WASHINGTON. DC 20037

• l 202 663 6993
  +I 202 663 6363 fax hany.weis~lmei+ale.corn
  Via Facsimile and U.S. Mail
  Gerald J. Laporte, Esquire
  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, SEC File No. HO-09700 (Prudential Equity Group, LLC, f/k/a Prudential Securities Incorporated) Dear Mr. Laporte:
  We submit this letter on behalf of our client Prudential Equity Group, UC, f/Ma/ Prudential Securities Incorporated ("PEG), which is a settling respondent in the above￾referenced proceeding by the Securities and Exchange Commission (the "Commission") into payments received by PEG that allegedly violated Section 17(b)of the Securities Act of 1933 (the "Securities Act"). PEG requests, pursuant to Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D of the Commission 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 PEG or any of its affiliates as a result of the entry of the Commission order described below. PEG 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 PEG in connection with the investigation described above. As a result of these discussions, PEG 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, PEG has consented to the entry of an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing

1
Gerald J. Laporte, Esq.
August 25,2004
Remedial Sanctions and a Cease-and-Desist Order (the "Order"), without admitting or denying the matters set forth therein (other than those relating to the jurisdiction of the Commission). Specifically, the Order states that PEG received payments in consideration for publishing research reports without disclosing such payments in the reports. Under that Order, which was issued today, the Commission made findings, without admission or denial by PEG, that it violated Section 17(b) of the Securities Act. Additionally, the Order requires that PEG cease and desist from committing or causing any violations or future violations of the referenced provision and pay a civil money penalty of $375,000 to the United States Treasury. DISCUSSION PEG 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 PEG 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. 88 230.262 and 230.505(b)(2)(iii)(C). ' For the following reasons, PEG 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. PEG'S conduct to be addressed in the Order does not relate to offerings under
   Regulation A or D.
2. The disqualification of PEG from the exemptions available under Regulation A
   and Rule 505 of Regulation D would, we believe, have an unduly adverse impact on third parties that have retained PEG and its affiliates in connection with transactions that rely on these exemptions. 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, UC, S.E.C. No-Action Letter (pub. avail. Oct. 31,2003) (charges including Section 17(b) of the Securities Act); U.S. Bancorp Piper JafSray, Inc., S.E.C. No-Action Letter (pub. avail. Oct. 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 Maner 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, 1998).

I Gerald J. Laporte, Esq.
August 25,2004
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 PEG; and (ii) the fact that the Commission staff has negotiated a settlement with PEG 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 PEG 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 PEG or any of its affiliates as a result of the entry of the Order. Please do not hesitate to contact the undersigned at (202) 663-6993 if you have any questions regarding this request. Sincerely yours, cc: Stephen J. Shine, Esquire David Buchalter, Esquire Felicia Smith, Esquire