SEC no-action letter: Friedman, Billings, Ramsey & Co., Inc. waiver request under Regulation A and Rule 505 of Regulation D

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D C.20549
August 25,2004
Vincent J. Badolato, Esq.
Dezhert LLP
60 State Street
Boston, MA 02109
Re: Friedman, Billings, Ramsey & Co., 1nc.-Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Badolato:
This is in response to your letter dated today, written on behalf of Friedman, Billings, Ramsey & Co., Inc. (the "Firm") and constituting an application for relief under Rule 262 of Regulation A and Rule 505(b)(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@) of the Securities Act; that the Firm is censured pursuant to Section 15@)(4) of the
Securities Exchange Act of 1934; and that the Firm pay a civil money penalty of $125,000 (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@)(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 disqualifjrlng provisions of Regulation A and Rule 505 of Regulation D is hereby granted. Sincerely, gd6'* Chief, Office erald J. Laporte of Small Business Policy *

BOSTON
BRUSSELS
CHARLOTTE
FRANKFURT
HARRISBURG
HARTFORD
LONDON
LUXEMBOURG
MUNICH
NEW YORK
NEWPORT BEACH
PAL0 ALTO
PARIS
PHILADELPHIA
PRINCETON
SAN FRANCISCO
WASHINGTON
@ Decher t I.I.,)
August 25,2004
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
Vincent J. Badolato
Direct Tel: (202) 261-3389
Direct Fax: (202) 261-3333 vincent.badolato@dechert.com Re : In the Matter of Certain Payments for Research; File No. HO-9700 (Friedman, Billings, Ramsey & Co., Inc.) Dear Mr. Laporte:
We submit this letter on behalf of our client Friedman, Billings, Ramsey & Co., Inc. ("FBR), which is a settling respondent in the above-referenced proceeding by the Securities and Exchange Commission (the "Commission") into payments received by FBR that allegedly violated Section 17(b) of the Securities Act of 1933 (the "Securities Act"). FBR requests, pursuant to Rule 262 of Regulation A and Rule 505(b)(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 FBR or any of its affiliates as a result of the entry of the Commission order described below. FBR 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 FBR in connection with the investigation described above. As a result of these discussions, FBR 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, FBR 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 (other than those relating to the Law Offices of Dechert LLP 1775 1 Street, N.W. Washington, DC 20006-2401 Tel: 202.261.3300 Fax: 202.261.3333. www.dechert.com

1
Gerald J. Laporte, Esq.
August 25,2004 jurisdiction of the Commission). Specifically, the Order states that FBR 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. Under that Order, which was issued today, the Commission made findings, without admission or denial by FBR, that it violated Section 17(b) of the Securities Act. The Order censures FBR pursuant to Section 15(b)(4) of the Exchange Act and requires that FBR cease and desist from committing or causing any violations or future violations of Section 17(b) of the Securities Act pursuant to Section 8A of the Securities .Act. The Order also require? that FBR pay a civil money penalty of $125,000 to the United States Treasury. DISCUSSION FBR 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 FBR 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. $5 230.262 and 230.505(b)(2)(iii)(~).' For the following reasons, FBR 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 undr Re gulation A and Rule 505 of Regulation D be denied. 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(b)(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 JafSvay, 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 1 1, 200 1); In the Matter of Certain Market-Making Activities on NASDAQ, S.E.C. No-Action Letter (pub. avail. Jan. 1 1, 1999); Stephens Incorporated, S.E.C. No-Action Letter (pub. avail. Nov. 23, 1998). Dechert LLP - - . . . --.-- -- .-- -....... -.. .. .- ---..

Gerald J. Laporte, Esq.
August 25,2004

1. FBR's conduct to be addressed in the Order does not relate to
   offerings under Regulation A or D.
2. The disqualification of FBR 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 FBR 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 FBR; and (ii) the fact that the Commission staff has negotiated a settlement with FBR 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 FBR 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 FBR and any of its affiliates as a result of the entry of the Order. Please do not hesitate to contact the undersigned at 202-261-3389, if you have any questions regarding this request. Sincerely, cc: William J. Ginivan, Esq. Wallace Tirnrneny, Esq.