SEC no-action letter: Janney Montgomery Scott LLC waiver of Regulation A and Regulation D disqualifications

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGT-ON. D.C 20549
August 25,200k
Christian R. Bartholomew, Esq.
Morgan, Lewis & Bockius LLP
5300 Wachovia Financial Center
200 South Biscayne Boulevard
Miami, FL 33131-2339
Re: Janney Montgomery Scott LLC-Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Bartholomew:
This is in response to your letter dated today, written on behalf of Janney Montgomery Scott LLC (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 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 2 1C 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 $875,000; 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@)(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. Sincerely, aef, Office of Small Business Policy

. i Morgan, Lewis & Bockius LIP
5300 Wachovia Financial Center Morgan Lewis
200 South Biscayne Boulevard
Miami, FL 33 13 1-2339 COUNSELORS AT LAW
Tel: 305.4! 5.3000
Fax: 305.41 5.3001 www.morganlewis.com
Christian R. Bartholomew
305.415.3400 cbartholomew@morganlewis.com
August g,2004
VIA FACSIMILE & FEDERAL EXPRESS
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 3502
Washington, D.C. 20549-03 10
Re: In the Matter ofcertain Payments for Research, SEC File No. HO-9700 (Janney Montgomery Scott LLC) Dear Mr. Laporte:
We submit this letter on behalf of our client Janney Montgomery Scott LLC ("Janney"), which is a settling respondent in the above-referenced proceeding by the Securities and Exchange Commission (the "Commission") into payments received by Janney that allegedly violated
Section 17(b) of the Securities Act of 1933 (the "Securities Act").
Janney requests, pursuant to Rule 262 of Regulation A and Rule 505@)(2)(iii)(C) of Regulation D of the Commission promulgated under the Securities Act, a waiver of any disqualification fiom exemptions under Regulation A and Rule 505 of Regulation D that may be applicable to Janney or any of its affiliates as a result of the entry of the Commission order described below. Janney 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.

4
Morgan Lewis
Gerald J. Laporte, Esq. COUNSELORS AT LAW
~u~ust 52004
BACKGROUND
The Staff of the Division of Enforcement has engaged in settlement discussions with Janney in connection with the investigation described above. As a result of these discussions, Janney has submitted an Offer of Settlement. In this Offer of Settlement, solely for the purpose of the above-referenced proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, Janney has consented to the entry by the Commission of an Order Instituting Proceedings, Making Findings and Imposing Sanctions (the "Order"), pursuant to Section 8A of the Securities Act and Section 15(b)(4) of the Securities Exchange Act of 1934 (the "Exchange Act"), without admitting or denying the matters set forth therein (other than those relating to the jurisdiction of the Commission). Specifically, the Order states that Janney 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 Janney, that it violated Section 17(b) of the Securities Act and Section 17(a)(l) of the Exchange Act and Rule 17a-4 thereunder. Specifically, the Order states that Janney received payments in consideration for publishing research reports without disclosing such payments in the reports, and that Janney failed to preserve internal electronic mail communications. Additionally, the Order requires, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that Janney cease and desist fiom committing or causing any violations or future violations of the referenced provisions, pay a civil money penalty of $875,000 to the United States Treasury, and comply with the undertakings specified in the Order. DISCUSSION Janney understands that entry of the Order may disqualify it and its affiliated entities fiom 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 Janney 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

Morgan Leuns
Gerald J. Laporte, Esq. COUNSELORS AT LAW
August 25,2004 exemption disqualifications upon a showing of good cause that such disqualifications are not necessary under the circumstances. See 17 C.F.R. §§ 230.262 and 230.505(b)(2)(iii)(~).~ For the following reasons, Janney 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. Janney's conduct to be addressed in the Order does not relate to offerings under
   Regulation A or D;
2. The disqualification of Janney 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 Janney and its affiliates in connection with transactions that rely on these exemptions; and
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 Janney; and (ii) the fact that the Commission staff has negotiated a settlement with Janney and reached a satisfactory conclusion to this matter that includes a cease and desist order, together with the payment of a civil money penalty and compliance with undertakings. In light of the foregoing, we believe that disqualification is not necessary, and is not in the public interest or for the protection of investors, and that Janney has shown good cause that relief should be granted. Accordingly, we respectfblly urge the Commission, and the Division of Corporation Finance pursuant to delegated authority, to waive the disqualification provisions in Regulation A and D to the extent that they may be applicable to Janney or any of its affiliates as a result of the entry of the Order. - 11 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 (charges including Section 17(b) of the Securities Act); US. Bancorp Piper Jafray, Inc., S.E.C. No-Action Letter (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 11,200 1); In the Matter of Certain Market-Making Activities on NASDAQ, S.E.C. No-Action Letter (pub. avail. Jan. 11, 1999); Stephens Incoporated, S.E.C. No-Action Letter (pub. avail. Nov. 23, 1998).

Morgan Lewis
COUNSELORS AT LAW
Gerald J. Laporte, Esq.
August g,2004
Please do not hesitate to contact me if you have any questions regarding this request. c: Howard B. Scherer, Esq. Yuri Zelinsky, Esq.