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SEC ADMINISTRATIVE PROCEEDING
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EXTRACTED KEY WORDS
EXCHANGE FAHNESTOCK EXCHANGE ACT ORDER ALLEGES WENDELL JEFFREY LEE SECURITIES SUPERVISE EXCHANGE COMMISSION CEASE-AND-DESIST PROCEEDINGS BROKERAGE PENNSYLVANIA JENKINTOWN OFFICE CUSTOMER ACCOUNTS SUPERVISORY PROCEDURES WILLIAM PURSUANT COMMONWEALTH VIOLATIONS WIRE TRANSFERS CASH INADEQUATE WARNING INDICATING EXISTENCE FRAUDULENT SCHEME PROVISIONS THEREUNDER DEFICIENT SUPERVISORY PROCEDURES COMMISSION SUBPOENAS |
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 37754 / September 30, 1996
Administrative Proceeding
File No. 3-9122
ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS INSTITUTED
FAHNESTOCK AND CO., INC. AND WILLIAM R. BIERLIN, JR.
The Securities and Exchange Commission has instituted public
administrative and cease-and-desist proceedings against
Fahnestock and Co., Inc. ("Fahnestock"), a registered broker-
dealer, and William E. Bierlin, Jr. ("Bierlin") pursuant to
Sections 15(b), 19(h) and 21C of the Securities Exchange Act of
1934 ("Exchange Act").
The Commission's Order alleges that Fahnestock and Bierlin
failed to reasonably supervise Wendell Jeffrey Lee, a registered
representative formerly associated with the Jenkintown,
Pennsylvania branch office of W.H. Newbold's Son & Co., a
division of Fahnestock. Specifically, the Order alleges that
Fahnestock and Bierlin, the branch manager of the Jenkintown
office, failed reasonably to supervise Lee in connection with his
misappropriation of $262,000 from the brokerage accounts of two
Newbold's customers. Commonwealth of Pennsylvania v. Wendell
Jeffrey Lee, Docket Nos. 1319-95 and 1478-95, Court of Common
Pleas, Montgomery County, Pennsylvania; SEC v. Wendell Jeffrey
Lee, 2:95-CV-6088.) (See also Exchange Act Release No. 14659
(Sep. 28, 1995)).
The Order further alleges, among other things, that Bierlin
failed to follow existing supervisory procedures and that
Fahnestock's policies and procedures regarding checks drawn on
customer accounts and wire transfers of cash from customer
accounts either were not followed or were inadequate to detect
and prevent the kind of activity engaged in by Lee. Furthermore,
both Fahnestock and Bierlin failed to respond reasonably to clear
warning signs indicating the existence of Lee's fraudulent
scheme.
The Order also alleges that Fahnestock willfully violated
the record keeping provisions of Section 17(a) of the Exchange
Act and Rules 17a-3 and 17a-4 thereunder and that Bierlin aided
and abetted and caused those violations. Specifically, the Order
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