UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date (Date of earliest event reported) March 6, 1996
PIPER JAFFRAY COMPANIES INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-7421 41-1233380
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
Piper Jaffray Tower, 222 South 9th Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 342-6000
Exhibit Index located at Page 4.
<PAGE>
Item 5. Other Events.
On March 6, 1996, Piper Jaffray Companies Inc. (the "Company") announced that
its two major subsidiaries, Piper Jaffray Inc. (Piper Jaffray) and Piper Capital
Management Incorporated (Piper Capital), reached agreements with the National
Association of Securities Dealers (NASD) and the Minnesota Department of
Commerce (DOC) related to their joint investigations of the Company's marketing
and sale of the Institutional Government Income Portfolio Fund (PJIGX).
The Company entered into an agreement of waiver and consent with the NASD and a
consent order with the DOC and have agreed to the following:
Piper Jaffray will be censured by and pay a fine of $1.25 million to the
NASD. The Company has also agreed to retain a consultant to complete a review of
Piper Jaffray's practices and written procedures and to adopt the reasonable
recommendations of the consultant. Upon completion of this review and actions
taken in support of the review the NASD will waive $250,000 of the fine.
Piper Jaffray and Piper Capital will be censured by the DOC. In addition,
both Piper Jaffray and Piper Capital will each pay a fine of $150,000 and they
will jointly pay $100,000 to the DOC to cover the costs of its investigation.
The Company will also provide two charitable contributions totalling $250,000.
The DOC further requires that Piper Jaffray and Piper Capital each retain an
independent consultant to complete a review of Piper Jaffray's and Piper
Capital's practices and written procedures and to adopt the reasonable
recommendations of the consultant(s).
The Company will pay the fines to the NASD and the DOC, make the contributions
and reimburse the DOC for investigation costs within 30 days. These payments
will not have a material impact on the Company's consolidated financial
statements.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99 (a) Press release dated March 6, 1996.
99 (b) Letter of Acceptance, Waiver and Consent between the National
Association of Securities Dealers, Inc. and Piper Jaffray Inc.
and Notice of Acceptance, Waiver and Consent dated March 4, 1996.
99 (c) Statement by Respondent from Piper Jaffray Inc. to the National
Association of Securities Dealers, Inc. dated February 14, 1996.
99 (d) Consent Order among the Minnesota Commissioner of Commerce, Piper
Jaffray Inc. and Piper Capital Management Incorporated
dated March 6, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIPER JAFFRAY COMPANIES INC.
/s/ Deborah K. Roesler
DEBORAH K. ROESLER
Chief Financial Officer and Managing Director
Dated March 6, 1996
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Form of Filing
99 (a) Press release dated March 6, 1996. (electronic
transmission)
99 (b) Letter of Acceptance, Waiver and Consent between (electronic
the National Association of Securities Dealers, transmission)
Inc. and Piper Jaffray Inc. and Notice of Acceptance,
Waiver and Consent dated March 4, 1996.
99 (c) Statement by Respondent from Piper Jaffray Inc. to (electronic
the National Association of Securities Dealers, transmission)
Inc. dated February 14, 1996.
99 (d) Consent Order among the Minnesota Commissioner of (electronic
Commerce, Piper Jaffray Inc. and Piper Capital transmission)
Management Incorporated dated March 6, 1996.
<PAGE>
EXHIBIT 99 (a)
FOR IMMEDIATE RELEASE
Contact: Marie Uhrich
612-342-6583
PIPER JAFFRAY AND PIPER CAPITAL REACH AGREEMENT WITH MINNESOTA DEPARTMENT OF
COMMERCE AND NASD ON MUTUAL FUND INVESTIGATIONS
MINNEAPOLIS - March 6, 1996 - Piper Jaffray Companies Inc. (NYSE: PJC) today
announced that its two major subsidiaries have reached agreements with the
Minnesota Department of Commerce (DOC) and the National Association of
Securities Dealers (NASD) related to the marketing and sale of the Institutional
Government Income Portfolio (PJIGX).
The NASD and DOC worked together on their investigations and today announced
that they collectively have assessed the company $1.9 million, comprised of
fines, charitable contributions and reimbursement for investigation costs. As
has been its practice during its long history in the industry, Piper Jaffray
Companies cooperated fully with both regulators and will comply with the
requirements of the agreements while neither admitting to nor denying the
regulators' findings.
"This is an important and expected step in the process of resolving issues
related to the Institutional Government Income," said Addison L. Piper,
chairman and CEO of Piper Jaffray Companies Inc. "We continue to focus on
serving our clients' best interests while working to improve our processes
and procedures."
The Company plans to pay the fines levied by the regulators and to make the
charitable contributions and payment for costs of the investigations required by
the DOC over the next 30 days. These payments are not expected to have a
material impact on the Company's consolidated financial statements.
The Company has taken several actions related to PJIGX, including the
settlement, in less than one year, of a proposed class action brought on behalf
of PJIGX fund shareholders. The resulting $67 million settlement was accepted by
99.5 percent of the class members.
In consultation with outside experts, the following voluntary actions also have
been taken to ensure that the Company employs the best possible practices and
procedures on behalf of its clients in the future:
Piper Jaffray Companies has established a Risk Management Committee to
review procedures on a comprehensive group-wide basis, including risk
identification, monitoring and control issues. This risk management effort will
be led by Gordon Knudsvig, formerly treasurer of Cargill Inc., who joined Piper
Jaffray Companies in February.
Piper Capital engaged an external law firm that performed a compliance
audit and made recommendations regarding Piper Capital's practices and
procedures.
Piper Capital retained an external consultant, Andrew Davidson &
Associates, to perform a thorough risk analysis of all of its fund portfolios
and advisory accounts.
Piper Capital has redesigned its portfolio oversight procedures through a
new two-tiered committee process involving, among other things, quarterly
reviews of all Piper Capital funds and advisory accounts.
Piper Capital has hired a new general counsel, Susan Miley, and has
reinforced its mutual fund advertising review procedures by requiring a review
of all materials by Piper Jaffray Inc. compliance staff.
The company established the Piper Institute, which will consolidate
training and development activities throughout the company, including compliance
training.
Piper Jaffray Companies Inc. was founded in 1895 and has built a reputation as
one of the nation's premier full-service investment companies. Piper Jaffray
Companies is the parent company of Piper Jaffray Inc., an investment firm with
78 retail sales offices in 17 Midwest, Mountain, Southwest and Pacific Coast
states and capital markets offices in 15 cities. Other subsidiaries include
Piper Capital Management Incorporated, a money management company with
approximately $9 billion under management; and Piper Trust Company, a provider
of trust services to individuals and institutions. Piper Jaffray Inc. is a
member of the New York Stock Exchange and other major stock exchanges. For more
information about Piper Jaffray Companies, visit our home page on the Internet
at http://www.piperjaffray.com/.
<PAGE>
EXHIBIT 99 (b)
National Association of Securities Dealers, Inc.
NOTICE OF ACCEPTANCE
OF
ACCEPTANCE, WAIVER AND CONSENT
Complaint No. C04960008
Date: March 4, 1996
TO: Name and Address of Respondent(s):
Piper Jaffray Inc.
Attention: Andrew S. Duff, President
222 South Ninth Street
Minneapolis, Minnesota 55402
FROM: District Business Conduct Committee
for District No. 4
120 West 12th Street, Suite 900
Kansas City, Missouri 64105
Please be advised that your submission of the above-referenced Acceptance,
Waiver and Consent ("AWC") has been reviewed and accepted by the District
Business Conduct Committee for District No. 4 and the National Business Conduct
Committee. A copy of the final AWC is attached.
You will be notified shortly by our Compliance Department about where to
remit any payments. Questions concerning payments should be directed to the
Compliance Department at (202) 728-8221.
/s/ Jack Rosenfield
Jack Rosenfield
Vice President and District Director
cc: George F. McGunnigle, Esq.
Gary G. Lynch, Esq.
<PAGE>
National Association of Securities Dealers, Inc.
District Business Conduct Committee for District No. 4
120 West 12th Street, Suite 900
Kansas City, Missouri 64105
LETTER OF ACCEPTANCE, WAIVER AND CONSENT NO. C04960008
RE: Piper Jaffray Inc.
222 South Ninth Street
Minneapolis, Minnesota 55402
Broker Dealer No. 665
Committee Members:
Piper Jaffray Inc. ("Respondent" or "the Firm") submits this Letter of
Acceptance, Waiver and Consent ("AWC") to the National Association of Securities
Dealers, Inc. ("Association") to propose a settlement of the alleged rule
violations described below. This AWC is submitted to resolve this proceeding and
on the condition that, if accepted, the Association will not bring any future
actions against the Respondent based on the same alleged violations.
Respondent understands that signing this AWC is a voluntary action and
that it will not resolve this matter unless and until it has been reviewed and
accepted by both the District Business Conduct Committee for District No. 4
("District Committee") and the National Business Conduct Committee which must
determine if it is appropriate in view of the facts and allegations involved.
Respondent also understands that if either of those Committees decides not to
accept this AWC, it will not be used against Respondent in any way. Respondent
also understands that if this AWC is accepted by both Committees, it will become
part of Respondent's permanent disciplinary record, and may be considered in any
future actions brought by the Association against Respondent.
Respondent understands that its business and disciplinary history may be
factors which the Committees consider in deciding whether to accept this AWC.
The business and disciplinary history of Respondent are as follows:
Piper Jaffray Inc., formerly known as Piper, Jaffray and Hopwood
Incorporated, has been a registered broker-dealer and a member of the
Association since 1936. Its principal offices are located at 222 South Ninth
Street, Minneapolis, Minnesota 55402. The Firm currently employs over 1000
registered representatives who are located in the main office and in 78 branch
offices. The Firm is registered in 50 states and in the District of Columbia.
During the past five years, the Firm has been named in two previous
actions alleging supervisory violations. In 1991, the Firm was censured and
fined $25,000 by the New York Stock Exchange for failure to supervise a branch
manager. In 1992, the Firm was censured and fined $35,000 by the Association for
failure to supervise a registered representative.
I. WAIVER OF PROCEDURAL RIGHTS
Respondent is advised of, and specifically and voluntarily waives, the
following rights which are granted by the Association's Code of Procedure:
A. To have a Complaint filed identifying the violations alleged in
this matter;
B. To be notified of the Complaint and have the opportunity to
answer the allegations in writing;
C. To defend against the allegations in a hearing before the
District Committee and to be represented by an attorney in the
hearing;
D. To have a written record of the hearing made and a written
decision issued by the District Committee; and
E. To appeal any such decision to the National Business Conduct
Committee, then to the Securities and Exchange Commission and
to a United States Court of Appeals.
Respondent further waives any provision of the Code of Procedure or other
rules which may be interpreted as prohibiting any Association staff member from
advising the District Committee or the National Business Conduct Committee in
their decisions as to whether to accept this AWC.
II. ACCEPTANCE AND CONSENT
Respondent hereby accepts and consents, without admitting or denying the
findings herein, and solely for the purpose of this proceeding and any other
action in which the Association is a party, and not as a basis for estoppel in
any other proceeding, to the entry of findings by the Association of the
following facts and violations:
A. BACKGROUND
1. Piper Jaffray Inc., a member of the Association since 1936, is a
wholly owned subsidiary of Piper Jaffray Companies Inc., a
publicly traded company. Piper Capital Management, Incorporated
("PCM" or the "Adviser"), a registered investment adviser, is
also wholly owned by Piper Jaffray Companies, Inc. and is an
affiliate of Piper Jaffray Inc.
2. At all times relevant, Piper Jaffray Inc. acted as the principal
distributor of the shares of the Piper Funds Inc. Institutional
Government Income Portfolio ("the Fund"), and PCM was the adviser
to the Fund.1 as with other load mutual funds, the Firm and its
registered representatives received payments and compensation
pursuant to a distribution plan, established under Rule 12b-1 of
the Investment Company Act of 1940, and through sales charges as
disclosed in the prospectus for the Fund. The Fund was initiated
in 1988 and its stated investment objective at all times was high
current income consistent with capital preservation. At all times
relevant, the minimum investment in the Fund was $25,000. The
Fund held net assets of approximately $18,000,000 at the end of
its 1988 fiscal year. The Fund grew significantly and at February
1994, the Fund held approximately $900,000,000 in net assets.
B. PORTFOLIO CHANGES IN THE FUND AND THE PERFORMANCE OF THE FUND
1. The Fund's composition initially consisted almost exclusively
of U.S. Treasury notes and government agency mortgage
pass-through securities.
2. In 1990, the Fund began to invest in collateralized mortgage
obligations ("CMOs"), and during 1991, the Fund began to invest
in certain mortgage-backed derivative products. From 1991 through
at least early 1994, the Fund purchased tranches of CMOs and
stripped securities, including interest only securities ("IOs"),
inverse IOs, principal only securities ("POs"), inverse floaters,
and accrual or Z-bonds (hereinafter collectively referred to as
"mortgage-backed derivative securities"). In certain instances,
these mortgage-backed derivative securities may generate high
yield, may be volatile and highly sensitive to interest rate
changes, may be thinly traded, and may be subject to prepayment,
extension and call risk. For example, purchasers of IOs are
entitled only to the interest generated by the underlying
mortgages. As interest rates fall, and prepayment speeds
increase, the owner the right to receive the principal payments
due on the underlying mortgages. When interest rates increase,
and mortgage prepayments decline, these securities extend and
their value decreases. Inverse floaters give the owner the right
to receive interest pursuant to a formula. The coupon interest
rate on these securities moves in the opposite direction of a
specified index, and includes a multiplier. The owner of an
accrual or Z-tranche bond generally does not receive any cash
payments of principal or interest until all tranches preceding it
are retired. Interest accretes on the Z-tranche, being added to
principal, and is compounded through the accretion period.
3. Holdings of the portfolio and the purchase of securities on a
forward commitment and sale forward basis, as described below,
were set forth in Fund annual and semi-annual reports, delivered
to shareholders and available, upon request, to potential
investors. These holdings were as follows. By March 1992, over
26% of the market value of the Fund's investment securities, (40%
of total net assets), was invested in mortgage-backed derivative
securities. Thereafter, the Fund continued to increase its
investment in mortgage-backed derivative securities. By September
1992, over 44% of the market value of the Fund's portfolio, (68%
of total net assets), was invested in mortgage-backed derivative
securities, and by September 1993, investments in mortgage-backed
derivative securities climbed to 51% of the market value of the
portfolio (77% of total net assets). By December 1993, and March
1994, total investments in mortgage-backed derivative securities
reached a high of 57% and 54%, respectively, of the market value
of the Fund's total portfolio. In addition to these investments
in mortgage-backed derivative securities, as defined above, the
Fund continued to invest in other CMOs, and on March 31 and
September 30, 1992, as well as on March 31, 1993, the portfolio
held no U.S. Treasury securities. While the Fund increased its
investments in mortgage-backed derivative securities, at the same
time, it purchased securities on a when issued or forward
commitment basis, and entered into sale forward (or dollar roll
transactions). In a when issued or forward commitment
transaction, the price of the security is fixed at the time the
commitment is made, but delivery and payment can take place up to
two or three months later. While the Fund is not obligated to pay
for these securities until this future settlement date (the Fund
custodian holds segregated assets with a market value equal to
the amount of the purchase commitments), during this period, the
securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value. In connection
with these forward commitments, the Fund entered into sale
forward transactions, essentially rolling over these purchase
commitments for a fee. While the use of such leverage and the
receipt of related fees increased the Fund's return, it also
increased the volatility and risk of the Fund. During 1991
through March 1994, the leverage on the Fund ranged from 33% to
38%, as measured by the market value of total portfolio holdings,
and the market value of securities purchased on a forward
commitment basis.
4. The Fund's increased investment in mortgage-backed derivative
securities and its use of forward commitment and sale forward
transactions increased the Fund's return and its risk. The Fund's
portfolio managers believed that their diversification among
mortgage-backed derivative securities, cash flow management, and
other techniques enabled them to manage these risks, although
events in 1994 proved otherwise. The Fund held a Number 1
performance ranking in its category of Short-Term U.S. Government
Funds during the years 1991 through 1993, and during the period
January through November 1992, the Fund outperformed the second
ranking fund by over 500 basis points. For the year ending March
31, 1993, the Fund's total return reached 21.72%, while its
government fund category average, as noted in the Fund's sales
literature, was only 9.10%. For the year ending September 30,
1993, the Fund's total return, as reflected in the Fund's sales
literature, was 17.04%, as compared to a total return of 8.02%
for its chosen benchmark of an index of three to five year
treasury securities, for the same period.
5. During early 1994, interest rates increased substantially and the
market for certain mortgage-backed derivative securities
experienced significant disruptions. During the period September
1993 through May 1994, the Fund's net asset value decreased by
over 30%.
C. MARKETING OF THE FUND
1. At all times relevant, Fund shares were recommended and sold
by registered representatives of Piper Jaffray Inc. to the
Firm's customers. Fund shares were also sold by other dealers.
2. The Fund's initial sales literature and internal documents, which
the firm began distributing in 1988 to its registered
representatives and clients, described the low volatility and
safety of the Fund.
3. From inception of the Fund, the Fund has been permitted to
invest in securities which are issued or guaranteed as to the
payment of principal and interest by the U.S. government, or
its agencies or instrumentalities, including mortgage-related
securities. CMOs and mortgage-backed derivative securities may
be guaranteed as to the payment of principal and interest by
the U.S. government or its agencies and instrumentalities.
4. In January 1992, the Fund's prospectus was changed to expressly
provide for the purchase of CMOs and mortgage-backed derivative
securities, and to describe the characteristics of
mortgage-backed derivative securities. The Fund had purchased
such securities during late 1990 and 1991. Holdings of the Fund
were listed in annual and semi-annual reports and summarized in
other Fund documents. During 1992, certain sales literature for
the Fund was modified and stated that the Fund had moderate
volatility.
5. While certain steps were taken and documents were available as
described in paragraph 4 above, the Firm failed to ensure that
communications with the public, including advertising and sales
literature, information provided to registered representatives,
and the recommendations and sales made by such registered
representatives provided adequate disclosure of the changing
nature, risk and volatility of the Fund. During the relevant
period, the Firm made sales to customers who, relying on their
registered representatives, were not adequately informed of the
characteristics, nature and risks of the Fund and had no sound
basis upon which to adequately compare the Fund to other funds.
6. During the period 1991 through mid 1994, the Firm, through its
registered representatives, made oral and written recommendations
and sales to customers which emphasized the No. 1 performance
ranking of the Fund, the triple A credit rating of the Fund, the
fact that the Fund held government guaranteed securities, and the
purported safe and conservative nature of the Fund, while failing
to state facts material to such investors concerning the
characteristics, risks and safety of the Fund, specifically that
the increased holdings in mortgage-backed derivative securities
and the use of leverage, increased the risk as well as the return
of the Fund.
7. During the relevant period, the Firm, through its registered
representatives, made recommendations and sales of the Fund to
individual customers for whom such sales were unsuitable, and
failed to make appropriate determinations that investments in the
Fund were suitable for such investors in light of the
individual's age, financial status, investment experience and
investment goals. For example, certain investors were
unsophisticated, had little or no financial acumen, were seeking
safety, were risk-averse, were of advanced age, or had other
personal circumstances which made the fund an inappropriate
investment. Some customers invested all or virtually all of their
liquid assets in the Fund, based on representations that it was a
safe investment.
8. During the relevant period, internal reports available to senior
managers of the Firm stated that while derivative securities
increased return, they were also volatile and increased risks. In
fact, during the relevant period, this Fund consistently and
significantly outperformed others in its category, as described
in paragraph B.4 above. Several national publications, including,
for example, Morningstar reports, and Forbes and Worth magazines,
during the relevant period, also discussed the Fund's extensive
use of mortgage-backed derivative securities and their potential
risks. Senior managers received annual and semi-annual reports
detailing the holdings of the Fund, and had access to internal
reports which showed that the Fund did not hold any of the same
securities which made up the chosen benchmark. The Firm's senior
managers were ultimately responsible for the deficiencies in
supervisory and compliance procedures, including the lack of
adequate procedures to ensure that all customers received
appropriate disclosure regarding the changing nature of the Fund.
D. ADVERTISING AND FIRM PROCEDURES
1. During the period 1991 through 1994, the Firm distributed and
used sales literature and advertising which failed to meet the
standards set forth in the Association's rules. For example,
sales literature compared the Fund's performance to a chosen
benchmark of 3 to 5 year treasuries, and indicated a one year
return over the benchmark of as much as 900 basis points
(September 1993). However, such sales literature failed to
identify the material differences between the composition of the
Fund's portfolio and these instruments, specifically that the
Fund did not hold fixed short term treasury securities similar to
those in the benchmark; that, principally due to the types of
securities and investment techniques, the Fund's potential
volatility, while not adequately appreciated at the time by the
portfolio managers, was greater than that of the benchmark; and
that a major portion of the Fund's holdings were affected by
prepayment speeds and subject to extension, unlike those
securities contained in the benchmark which were of a fixed term.
In addition, certain advertising did not meet the Association
rules, in that it did not present a sound basis for evaluation of
the Fund to the audience to which the communications were
directed. See, e.g., Exhibit A.
2. In connection with this matter, while a registered principal
reviewed certain sales literature, the Firm failed to ensure that
in all instances sales literature was approved by a registered
principal and that the individual was supervised within the
broker-dealer structure. The Firm also failed to maintain
separate files and evidence of that review.
3. The Firm failed to establish, maintain and enforce reasonable
supervisory procedures to ensure adherence to NASD rules noted in
this matter. For example, the Firm failed to have adequate
written supervisory procedures which clearly identified the
responsibilities and procedures for the sale of the Fund, the
supervisory structure, and designated principal for each
registered individual, including individuals who performed
functions at both PCM and the Firm.
E. ACTIONS TAKEN BY THE FIRM
1. In a class action lawsuit, shareholders of the Fund alleged
losses of over $120 million dollars for the class period July 1,
1991 through May 9, 1994. Pursuant to a settlement of this
action, and as set forth in Exhibit B, the Firm and its
affiliates have agreed to make restitution to shareholders of the
Fund of approximately $67 million dollars.
2. In addition, the Firm and its affiliate, PCM, have committed
approximately $1.7 million dollars in steps to improve its
supervisory and compliance procedures, including the addition of
new compliance positions at the broker-dealer, the creation of a
system-wide training program, the Piper Institute, and other
remedial steps.
III. SANCTIONS
Respondent Piper Jaffray Inc., without admitting or denying the findings
set forth above, and solely for the purpose of this proceeding and any
other action in which the Association is a party, and not as a basis for
estoppel in any other proceeding, hereby accepts and consents to:
A. The Association's entry of findings consistent with Section II
above, and to findings that such conduct constitutes violations by
Respondent Piper Jaffray Inc. of Article III, Sections 1, 2, 27 and
35 of the Association's Rules of Fair Practice, which require the
Firm to observe high standards of commercial honor and just and
equitable principles of trade, to ensure that recommendations and
sales are suitable for the customer, to establish, maintain and
enforce adequate written supervisory procedures and to comply with
the Association's standards regarding communications with the
public; and
B. The Association imposing, at a maximum, sanctions against
Respondent Piper Jaffray Inc. as follows:
Censure
A fine in the amount of $1,250,000. $1,000,000 of that amount is
to be paid to the Association within 30 days of notification of
acceptance of this AWC by the National Business Conduct Committee
(such date hereinafter referred to as the "Effective Date"). The
remaining $250,000 shall be paid to the Association within 60
days of submission of the report to the District Business Conduct
Committee, as set forth in 3(ii) below, provided, however, that
the payment of the remaining $250,000 of such fine shall be
waived upon a satisfactory showing to the Association that fees
paid to the Consultant, and costs incurred directly in connection
with implementation of the Consultant's recommendations, as
described below, meet or exceed $250,000. In the event the fees
paid to the Consultant and costs incurred directly in connection
with implementation of the Consultant's recommendations do not
reach $250,000, upon a satisfactory showing to the Association,
the remaining $250,000 to be paid shall be offset by the
aggregate amount actually paid for the Consultant's fee or in
costs incurred directly in connection with implementation of the
Consultant's recommendation.
The Firm shall comply with the following undertakings:
(1) The Firm shall retain an Independent Consultant not
unacceptable to the Association ("Consultant") within 45
days of the Effective Date; unless otherwise extended by
agreement with the staff. The Firm shall pay all
reasonable fees and expenses of the Consultant;
(2) Consultant shall, within 180 days of the Effective Date,
unless otherwise extended by agreement among the Firm, the
Consultant and the Association staff, complete a review of
the Firm's practices and its written procedures, make
recommendations based upon that review, prepare a written
report detailing its recommendations, ("Consultant's
Report"), and deliver such report to the Firm and the
Association. Such review shall include, but not be limited
to, the following areas: (a) practices and procedures
regarding the Firm's review and distribution of sales
literature, broker-only information, scripts, visuals,
presentations and other information distributed to brokers or
customers, or used during presentations to brokers or
customers, relating to mutual funds managed by PCM; (b)
practices and procedures regarding the requirements that a
registered principal of the Firm approve sales literature,
and that evidence of such approval be maintained, including
the training and supervision of such registered principal;
(c) practices and procedures regarding the Firm's review of
the sale by the Firm's registered representatives of mutual
funds managed by PCM, including the periodic training of
registered representatives, the Firm's "due diligence"
process regarding such funds, and its process to continually
update the registered representatives regarding the portfolio
composition of such mutual funds and the nature and risk of
the funds, to assure appropriate oral and written disclosure
to clients; (d) practices and procedures regarding the review
of correspondence relating to the recommendation or sale of
mutual funds managed by PCM; (e) practices and procedures
regarding written suitability standards for the
recommendation and sale of mutual funds managed by PCM, and
the process of making suitability determinations; (f)
practices and procedures regarding the supervision of
registered representatives' sale of mutual funds managed by
PCM, including specific supervisory responsibilities for the
review of correspondence, the review of suitability
determinations, and the authority and responsibility of
branch, regional and other sales managers; (g) practices and
procedures regarding the role of the broker-dealer's legal
department and the broker-dealer's compliance department with
regard to sales practices and advertising for mutual funds
managed by PCM; and (h) practices and procedures regarding
the appropriate registration of individuals and the
designation of principals as set forth in the Association's
rules.
(3) Except as provided below with respect to any recommendation
deemed unduly burdensome by the Firm, (i) all policies,
procedures and practices recommended by the Consultant shall
be adopted and implemented by the Firm, through appropriate
revisions to its supervisory and compliance manuals or
otherwise, and (ii) the Consultant Report shall be submitted
to the District Business Conduct Committee within 60 days of
its issuance, along with a written report by the Firm
regarding the implementation of such recommendations,
including the status of any recommendations deemed unduly
burdensome as provided below. Such reports shall be submitted
to the District Business Conduct Committee as part of the
non-public files of this matter. If the Firm determines that
a specific recommendation is unduly burdensome, then the Firm
shall take the following steps: (a) The Firm shall submit
such recommendation, and its reasons for failure to implement
such recommendation, and any alternative recommendation to
its Audit Committee; (b) The Audit Committee shall review the
recommendation, any suggested alternative, and determine
whether the failure to implement the Consultant's
recommendation is appropriate, and whether the alternative
recommendation achieves the same objective as the Consultant
Report's recommendation, and provide a written summary of its
findings (the "Audit Committee Report"); (c) The Audit
Committee Report and the Consultant's Report shall be
presented to the District Business Conduct Committee which
shall, after review of such reports and, in its sole
discretion, determine whether the failure to implement any
recommendation of the Consultant and the implementation of an
alternative procedure is acceptable.
IV. OTHER MATTERS
A. Respondent has attached as Exhibit B a statement for consideration
by the Committees in determining whether to accept this AWC. Such
statement may not deny the existence of findings and violations, or
make any other statement inconsistent with this AWC.
B. Respondent understands that the Association will make a
public announcement of this matter as the Association may
deem appropriate which shall be consistent with the
Resolution of the Board of Governors, NASD Manual Paragraph
2301. Respondent also understands that this matter will be
available through the Association's public disclosure program
in response to public inquiries or requests for information
about the Firm's disciplinary record.
C. Respondent agrees to pay the monetary sanctions imposed on
or before the dates set forth above.
D. Respondent certifies that the Officer named below
(hereinafter "Officer") is an officer and agent of the
Respondent and is duly authorized to enter into this AWC.
Respondent and the Officer certify that the Officer has read
and understands all of the provisions of this AWC, that he
has had a full opportunity to ask questions about it, and
that no offer, threat inducement or promise of any kind has
been made to induce the Respondent or its duly authorized
Officer to submit this AWC.
Respectfully submitted,
/s/ Andrew S. Duff 2/12/96
Andrew Duff Date
President, Piper Jaffray Inc.
/s/ Gary Lynch 2/14/96
Gary Lynch, Esquire Date
Counsel for Piper Jaffray Inc.
/s/ George McGunnigle 2/13/96
George McGunnigle Date
Counsel for Piper Jaffray Inc.
Accepted by the Association on 3/4/96
Date
/s/ Jack Rosenfield
Jack Rosenfield
Vice President and Director,
District No. 4
- --------
1 This AWC relates to the activities of the broker-dealer in its sale of the
Piper Funds Inc. Institutional Government Income Portfolio, and does not apply
to any other fund managed or advised by PCM or to any other private account
managed or advised by PCM. The entry of findings by the Association is made with
regard to the named Respondent only and not to any person or entity not a party
to the AWC.
<PAGE>
EXHIBIT 99 (c)
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
- ----------------------------------------
IN THE MATTER OF PIPER JAFFRAY INC.
- ----------------------------------------
STATEMENT BY RESPONDENT
Respondent Piper Jaffray Inc. ("Respondent") has submitted a
Letter of Acceptance, Waiver and Consent dated February 13, 1996 (the "AWC")
to the National Association of Securities Dealers, Inc. (the "Association")
to resolve a proceeding by the Association. Pursuant to Section IV.A. of the
AWC, Respondent submits this statement for consideration by the District
Business Conduct Committee for District No. 4 and the National Business
Conduct Committee (the "Committees").1
The AWC concerns Respondent's activities as distributor of the
Piper Funds Inc. Institutional Government Income Portfolio (the "Fund"). The
Fund was managed by Piper Capital Management Inc. ("PCM" or the "Adviser").
The Association in the AWC finds that statements by Respondent, made through
registered representatives, and certain advertising and sales literature fell
short of the Association's standards.2
As the AWC notes, the Fund experienced major losses in connection
with unprecedented market turmoil in the spring of 1994. At that time, interest
rate increases initiated by the Federal Reserve Board triggered severe
dislocations in the market for mortgage-backed derivative securities.3 Without
admitting or denying the deficiencies found by the Association, it must be
emphasized that Respondent and its affiliates and their employees -- including
the Fund's portfolio managers and Respondent's senior managers -- did not
foresee the unprecedented market events of the spring of 1994 and their impact
on the Fund. There can be no question that at all times the actions of
Respondent with respect to the Fund were taken in utmost good faith.
Respondent submits that the Committee should further consider that
Respondent and its affiliates have committed approximately $1.7 million to a
variety of voluntary measures to refine their procedures. These steps are wholly
apart from the detailed review by an independent consultant to be retained by
Respondent as provided in the AWC. For example, PCM has redesigned its portfolio
oversight procedures through a new two-tiered committee process involving, among
other things, quarterly reviews of all PCM funds. The Adviser has also already
engaged an outside law firm to perform a compliance audit and make
recommendations regarding its practices and procedures. Further, PCM retained an
outside consultant to perform a thorough risk analysis of all of its fund
portfolios. The Adviser has established a separate position of and retained a
new General Counsel, and it has reinforced its mutual fund advertising review
procedures by requiring review of all materials by a licensed principal at
Respondent. The parent company of Respondent, Piper Jaffray Companies Inc., is
establishing a Risk Management Committee to review procedures on a comprehensive
group-wide basis, including risk identification, monitoring and control issues.
Piper Jaffray Companies has also announced plans to create the Piper Institute,
an entity that will consolidate training and development activities throughout
the Piper group of companies, including compliance training.
Apart from these and other procedural measures, Piper Jaffray
Companies Inc. and its affiliates (the "Piper Group") moved quickly to
compensate Fund investors by settling within less than a year a putative class
action brought on behalf of purchasers of shares in the Fund between July 1,
1991 and May 9, 1994. Notwithstanding its vigorous denial of liability for the
claims alleged in the complaint, in February 1995, the Piper Group announced
that it would pay Fund shareholders up to $70 million. On July 31, 1995, Chief
U.S. District Judge Paul A. Magnuson, the judge presiding over the shareholder
suit, stated that he "commend[ed] [the Piper Group] as an entity for coming to
grips with this litigation." (Transcript of Civil Motion Proceedings at 53, In
re: Piper Funds, Inc. Institutional Government Income Portfolio, Civ. No.
3-94-587 (July 31, 1995)). By Order filed January 12, 1996, Judge Magnuson
approved Piper's settlement of the class action as fair and adequate to all
class members. Over 99.5% of the over 8300 class members have chosen not to
opt-out of the settlement.4
Without admitting or denying the deficiencies found in the AWC,
Respondent would emphasize the written disclosures that were made regarding the
composition and investment strategies of the Fund. This is not a case in which
material facts were intentionally withheld from anyone. The mortgage-backed
derivatives and other securities holdings of the Fund and its investment
strategies were disclosed in annual and semi-annual reports delivered to
shareholders and available to potential investors. These reports and other
communications with shareholders also provided more general disclosure with
respect to the risks of the Fund and, in particular, the potential for loss of
principal on an investment in the Fund.
The Fund was managed by an experienced team headed by Worth
Bruntjen, a recognized mortgage-backed securities expert with more than 26 years
of investment experience. Even before he began managing the Fund in 1988,
Bruntjen had built a strong reputation on his use of techniques to manage and
control the inherent risks of mortgage-backed securities. At least until early
1994, the Fund, as well as other funds managed by Bruntjen, had been well served
by these techniques for many years.5 The Fund's portfolio managers firmly
believed that their methods would continue to enable the Fund to achieve marked
success in meeting its investment objective. Respondent's senior managers relied
in good faith on the long-term, demonstrated ability of these managers to
control the risks of mortgage-backed derivative securities through a variety of
sophisticated techniques and strategies.
Finally, as expressly provided in the AWC, Respondent does not admit
or deny any of the findings in the AWC. In addition, Respondent consents to the
Association's entry of the findings in the AWC and to the Association imposing
the sanctions described in the AWC solely for the purpose of this proceeding and
any other action in which the Association is a party, and not as a basis for
estoppel or bar in any other proceeding (including but not limited to
litigations, arbitrations and judicial or quasi-judicial proceedings), or as an
admission by Respondent or any of its present or former employees. The AWC does
not specify any particular sale or recommendation to any particular customer;
for this reason, under the rules of evidence the AWC will not have any
evidentiary relevance to the individual claims of any specific customer of
Respondent.
Respectfully submitted,
/s/ Andrew S. Duff
Andrew Duff
President, Piper Jaffray Inc.
February 14, 1996
- --------
1 As provided for in Section IV.A., Respondent may not in this
statement deny the existence of the AWC's findings and violations, or make any
other statement which is deemed inconsistent with the AWC.
2 The AWC does not make findings with respect to any specific customers among
the Fund's over 8000 investors.
3 In the words of The Wall Street Journal, the mortgage-backed
derivatives market became a "bloodbath" (The Wall Street Journal, May 20, 1994).
4 The $70 million settlement offered to the class represents an overall recovery
to the alleged class of approximately 50% of all Loss (as defined by the
settlement agreement).
In a related, unsettled class action against the Fund's accountants, Judge
Magnuson has found that the class period for investor plaintiffs should end as
of April 12, 1994, as opposed to the May 9, 1994 cut-off accepted solely for
purposes of settlement in the action against the Piper group. If limited to the
April 12 cut-off ordered by Judge Magnuson in the related action, the $70
million settlement would represent an overall recovery to the alleged class of
over 100% of all aggregate Loss.
In settling the class action, the Piper group of companies admitted neither
liability nor the validity of the formula used by plaintiffs to calculate Loss.
5 Described in the financial press as a "mortgage-backed securities wizard,"
Bruntjen joined PCM in 1988 after successfully managing mortgage-backed funds at
another established investment-management firm, Alliance Capital (see Investment
Advisor, 11/93). In a December 1992 report on a non-proprietary fund that had
followed Bruntjen from Alliance Capital to PCM, Morningstar commented that the
fund had "certainly picked a winner" in identifying Bruntjen. The report went on
to observe that "Bruntjen has made his name by blending [mortgage derivatives]
so that their inherent risks wash each other out" and that "Bruntjen's talent as
a mortgage manager is no secret." (Morningstar Report, 12/11/92). In March 1994,
Morningstar designated Bruntjen a runner-up for its Closed-End Fund Manager of
the Year Award (see Morningstar Closed-End Funds, Vol. 10, No. 7).
<PAGE>
EXHIBIT 99 (d)
STATE OF MINNESOTA
COMMISSIONER OF COMMERCE
In the Matter of the
Securities Broker-Dealer CONSENT ORDER
License of Piper Jaffray Inc.,
CRD Number 665, and the
Investment Adviser License of
Piper Capital Management Incorporated,
License Number IA 377.
TO: Piper Jaffray Inc.
222 South Ninth Street
Minneapolis, MN 55402-3804
Piper Capital Management Incorporated
222 South Ninth Street
Minneapolis, MN 55402-3804
Commissioner of Commerce David B. Gruenes (hereinafter "Commissioner")
has determined as follows:
1. The Commissioner has advised Piper Jaffray Inc. (hereinafter
referred to as PJI) and Piper Capital Management Incorporated (hereinafter
referred to as PCM) (hereinafter referred together as "Respondents") that he
is prepared to commence formal action pursuant to Minn. Stat. S45.027, subd.
7 (1994).
2. The Commissioner alleges that Respondents failed reasonably to
supervise their respective agents, employees, and/or investment adviser
representatives in connection with the marketing of the Piper Funds Inc.
Institutional Government Income Portfolio and such failure to supervise by
Respondents is a violation of Minn. Stat. S80A.07, subd. 1 (10) (1994).
3. Respondents deny that they have failed in any way to supervise
their agents, employees, and/or investment adviser representatives, or
otherwise committed any violation of Minn. Stat. S80A.07, subd. 1(10)(1994).
Respondents assert that they are entering into this Consent Order for the
sole purpose of resolving this matter without further delay, expense and
diversion of the time and energies of their officers and employees.
Respondents have agreed to informal disposition of this matter without a
hearing as provided under Minn. Stat. S 14.59 (1994) and Minn. Rules pt.
1400.5900 (1993).
4. This Consent Order resolves any and all claims by the Commissioner
arising out of the activities of Respondents and their officers prior to the
date of the signing of this order which have or could result in the Commissioner
alleging failure on the part of Respondents to supervise their agents or
employees in connection with the offer and sale of mutual funds managed by
Respondent PCM. Both the Commissioner and the Respondents agree that this order
represents an informal settlement and that there has been no hearing, findings
of fact or conclusions of law with respect to the allegations of the
Commissioner.
5. The Commissioner hereby determines that Respondents entering into this
Consent Order will not preclude or disqualify Respondent PJI from acting as a
broker-dealer or Respondent PCM from acting as an investment adviser pursuant to
the laws and regulations of the State of Minnesota.
6. Respondents acknowledge that they have been advised of their rights to
a hearing in this matter, to present argument to the Commissioner and to appeal
from any adverse determination after a hearing, and Respondents hereby expressly
waive those rights. Respondents further acknowledge that they have been
represented by legal counsel throughout these proceedings.
7. Respondents will, as a result of the Commissioner's willingness to
resolve this matter informally, donate, upon execution of this Order:
(a) $200,000 to the Minnesota Food Bank Network; and
(b) $50,000 to the Business Economics Education Foundation, on behalf
of the Stock Market Game(TM)
and shall provide the Commissioner with evidence of such payments.
8. Respondents agree that their total contributions pursuant to
this agreement shall be in addition to any amounts ordinarily and customarily
contributed by Respondents and any of their corporate affiliates for any
charitable purposes. Neither Respondents nor any corporate affiliate may reduce
or eliminate any charitable contribution which would otherwise be made in order
to totally or partially offset the amounts contributed pursuant to this Order.
9. The following Order is in the public interest.
NOW, THEREFORE, IT IS HEREBY ORDERED, pursuant to Minn. Stat.
S~80A.07, subd. 1(1994), that Respondent PJI is censured;
IT IS FURTHER ORDERED, pursuant to Minn. Stat. S~80A.07, subd. 1
(1994), that Respondent PCM is censured;
IT IS FURTHER ORDERED, pursuant to Minn. Stat. S45.027, subd.~6~(1994), that
Respondent PJI shall pay to the State of Minnesota a civil penalty of
$150,000;
IT IS FURTHER ORDERED, pursuant to Minn. Stat. S45.027, subd. 6
(1994), that Respondent PCM shall pay to the State of Minnesota a civil
penalty of $150,000;
IT IS FURTHER ORDERED that Respondents, jointly and severally, shall pay
to the State of Minnesota costs of the Department of Commerce investigation of
this matter in the amount of $100,000;
IT IS FURTHER ORDERED that Respondents shall comply with the following
undertakings:
(1) PJI shall retain (if not already retained) an Independent Consultant
not unacceptable to the Commissioner ("Consultant") within 90 days
of the date hereof unless otherwise extended by agreement with the
staff of the Commissioner. PJI shall pay all reasonable fees and
expenses of the Consultant;
(2) Consultant shall, within 270 days of the date hereof, unless
otherwise extended by agreement among PJI, the Consultant and the
staff of the Commissioner, complete a review of PJI's practices and
its written procedures, make recommendations based upon that review,
prepare a written report detailing its recommendations, ("PJI
Consultant's Report"), and deliver such report to PJI. Such review
shall include, but not be limited to the following areas:
(a) practices and procedures regarding PJI's review and
distribution of sales literature, broker-only information,
scripts, visuals, presentations and other information
distributed to brokers or customers, or used during
presentations to brokers or customers, relating to mutual
funds managed by PCM;
(b) practices and procedures regarding the requirements that a
registered principal of PJI approve sales literature relating
to mutual funds managed by PCM, and that evidence of such
approval be maintained, including the training and supervision
of such registered principal;
(c) practices and procedures regarding PJI's review of the sale
of mutual funds managed by PCM by PJI's registered
representatives, including the periodic training of
registered representatives, PJI's "due diligence" process
regarding such funds, and its process to continually update
the registered representatives regarding the portfolio
composition of such funds and the nature and risk of the
funds, to assure appropriate oral and written disclosure to
clients;
(d) practices and procedures regarding the review and written
endorsement of correspondence relating to the recommendation
or sale of mutual funds managed by PCM;
(e) practices and procedures regarding written suitability
standards for the recommendation and sale of mutual funds
managed by PCM, and the process of making suitability
determinations;
(f) practices and procedures regarding the supervision of
registered representatives' sale of mutual funds managed by
PCM, including specific supervisory responsibilities for the
review and written endorsement of correspondence, the review
of suitability determinations, and the authority and
responsibility of branch, regional and other sales managers;
(g) practices and procedures regarding the role of PJI's legal
department and PJI's compliance department with regard to
sales practices and advertising for mutual funds managed by
PCM; and
(h) practices and procedures regarding the appropriate
registration of individuals and the designation of principals
as set forth in the rules of the National Association of
Securities Dealers.
(3) Except as provided below with respect to any recommendation deemed
unduly burdensome by PJI, (i)all policies, procedures and practices
recommended by the Consultant shall be adopted and implemented by
PJI, through appropriate revisions to its supervisory and compliance
manuals or otherwise, and (ii) the PJI Consultant's Report shall be
made available to the Commissioner within 60 days of its issuance,
along with a written report by PJI regarding the implementation of
such recommendations, including the status of any recommendations
deemed unduly burdensome as provided below. The Commissioner shall
have unlimited access to all such reports including the PJI
Consultant's Report during normal business hours. PJI shall use its
best effort to assure that the Consultant's recommendations are
implemented to the extent reasonably possible within one year
following the date upon which the Commissioner has executed this
Consent Order. If PJI determines that a specific recommendation is
unduly burdensome, then PJI shall take the following steps:
(a) PJI shall submit such recommendation, and its reasons for
failure to implement such recommendation, and any
alternative recommendation to its Audit Committee;
(b) The Audit Committee shall review the recommendation, any
suggested alternative, and determine whether the failure to
implement the Consultant's recommendation is appropriate, and
whether the alternative recommendation achieves the same
objective as the PJI Consultant's Report's recommendation, and
provide a written summary of its findings ("the Audit
Committee Report");
(c) The Audit Committee Report and the PJI Consultant's Report
shall be made available to the Commissioner who shall, after
review of such reports and, in his sole discretion, determine
whether the failure to implement any recommendation of the
Consultant and the implementation of an alternative procedure
is acceptable.
(4) PCM shall retain (if not already retained) an Independent Consultant
not unacceptable to the Commissioner ("Consultant") within 90 days
of the date hereof unless otherwise extended by agreement with the
staff of the Commissioner. PCM shall pay all reasonable fees and
expenses of the Consultant;
(5) Consultant shall, within 270 days of the date hereof, unless
otherwise extended by agreement among PCM, the Consultant and the
staff of the Commissioner, complete a review of PCM's practices ant
its written procedures, make recommendations based upon that review,
prepare a written report detailing its recommendations, ("PCM
Consultant's Report"), and deliver such report to PCM. Such review
shall include, but not be limited to PCM's role, if any, in the
following areas:
(a) practices and procedures regarding PCM's review and
distribution of sales literature, broker-only information,
scripts, visuals, presentations and other information
distributed to brokers or customers, or used during
presentations to brokers or customers, relating to mutual
funds managed by PCM;
(b) practices and procedures regarding the requirements that a
registered principal of PJI, working as an employee of PCM,
approve sales literature relating to mutual funds managed by
PCM, and that evidence of such approval be maintained,
including the training and supervision of such registered
principal;
(c) practices and procedures regarding PCM's review of the sale
of mutual funds managed by PCM, including the periodic
training of registered representatives of PJI, PCM's "due
diligence" process regarding proprietary funds, and its
process to continually update registered representatives
regarding the portfolio composition of such mutual funds
and the nature and risk of the funds, to assure appropriate
oral and written disclosure to clients;
(d) practices and procedures regarding the review and written
endorsement of correspondence relating to the recommendation
or sale of mutual funds managed by PCM;
(e) practices and procedures regarding written suitability
standards for the recommendation and sale of mutual funds
managed by PCM, and the process of making suitability
determinations;
(f) practices and procedures regarding the supervision of the sale
of mutual funds managed by PCM, including specific supervisory
responsibilities for the review and written endorsement of
correspondence, and the review of suitability determinations;
(g) practices and procedures regarding the role of PCM's legal
department and PCM's compliance department with regard to
sales practices and advertising for mutual funds managed by
PCM; and
(h) practices and procedures regarding the appropriate
registration of individuals and the designation of principals
as set forth in the Rules of the National Association of
Securities Dealers.
(6) Except as provided below with respect to any recommendation deemed
unduly burdensome by PCM, (i) all policies, procedures and practices
recommended by the Consultant shall be adopted and implemented by
PJI, through appropriate revisions to its supervisory and compliance
manuals or otherwise, and (ii) the PCM Consultant's Report shall be
made available to the Commissioner simultaneously with the PJI
Consultant's Report, along with a written report by PCM regarding
the implementation of such recommendations, including the status of
any recommendations deemed unduly burdensome as provided below. The
Commissioner shall have unlimited access to all such reports
including the PCM Consultant's Report during normal business hours.
PCM shall use its best effort to assure that the Consultant's
recommendations are implemented to the extent reasonably possible
within one year following the date upon which the Commissioner has
executed this Consent Order. If PCM determines that a specific
recommendation is unduly burdensome, then PCM shall take the
following steps:
(a) PCM shall submit such recommendation, and its reasons for
failure to implement such recommendation, and any
alternative recommendation to its Audit Committee;
(b) The Audit Committee shall review the recommendation, any
suggested alternative, and determine whether the failure to
implement the Consultant's recommendation is appropriate, and
whether the alternative recommendation achieves the same
objective as the PCM Consultant's Report's recommendation, and
provide a written summary of its findings (the "Audit
Committee Report");
(c) The Audit Committee Report and the PCM Consultant's Report
shall be made available to the Commissioner who shall, after
review of such reports and, in his sole discretion, determine
whether the failure to implement any recommendation of the
Consultant and the implementation of an alternative procedure
is acceptable.
IT IS FURTHER ORDERED that Respondent PJI shall designate an employee of
the Compliance Department to be responsible specifically for state compliance
and Respondent PJI shall notify all states of the identity of that employee;
IT IS FURTHER ORDERED that Respondents shall be prohibited permanently
from entering into any civil or other settlement with clients or employees which
would prohibit or limit disclosure to regulatory authorities; and,
IT IS FURTHER ORDERED that Respondent PJI will update a registered
representative's license history with the Department by filing a Form U-4 or
Form U-5 within 30 days of the occurrence of an applicable event, and in
compliance with the customer complaint question of Form U-4 and its reporting
requirements, as amended, including but not limited to the reporting of customer
complaints (as the term "complaint" is defined in Minn. Rule pt. 2875.1510
(1993)) in which the customer alleges damages of $10,000 or more, fraud
(including but not limited to fraudulent or deceptive acts as defined by Minn.
Rule pt. 2875.1050 (1993)), or wrongful taking of property. Further, all
licensed agents of PJI employed by PCM shall update, if not already disclosed,
their Form U-4 to reflect such employment.
This Order shall be effective upon signature of the Commissioner.
Dated: March 6, 1996 By: /s/ David B. Gruenes
DAVID B. GRUENES
Commissioner of Commerce
133 East Seventh Street
Saint Paul, Minnesota 55101
Telephone: (612) 296-2594
<PAGE>
CONSENT TO ENTRY OF ORDER
The undersigned, acting on behalf of Piper Jaffray Inc., states that he
has read the foregoing Consent Order; that he knows and fully understands its
contents and effect; that he is authorized to execute this Consent to Entry of
Order on behalf of Piper Jaffray Inc.; that he has been advised of Piper Jaffray
Inc.'s right to a hearing; that Piper Jaffray Inc. has been represented by legal
counsel in this matter; and, Piper Jaffray Inc. consents to entry of this Order
by the Commissioner of Commerce. It is further expressly understood that this
Order constitutes the entire settlement agreement between the parties hereto,
there being no other promises or agreements, either expressed or implied.
Piper Jaffray Inc.
By:/s/ Andrew S. Duff
ANDREW S. DUFF
Its President
STATE OF MINNESOTA )
) ss
COUNTY OF Hennepin )
Acknowledged before me this
27th day of February , 1996.
/s/ Leslie A. Johnson
Notary Public
<PAGE>
CONSENT TO ENTRY OF ORDER
The undersigned, acting on behalf of Piper Capital Management
Incorporated, states that he has read the foregoing Consent Order; that he knows
and fully understands its contents and effect; that he is authorized to execute
this Consent to Entry of Order on behalf of Piper Capital Management
Incorporated; that he has been advised of Piper Capital Management
Incorporated's right to a hearing; that Piper Capital Management Incorporated
has been represented by legal counsel in this matter; and, Piper Capital
Management Incorporated consents to entry of this Order by the Commissioner of
Commerce. It is further expressly understood that this Order constitutes the
entire settlement agreement between the parties hereto, there being no other
promises or agreements, either expressed or implied.
Piper Capital Management Incorporated
By: /s/William H. Ellis
WILLIAM H. ELLIS
Its President
STATE OF MINNESOTA )
) ss
COUNTY OF Hennepin )
Acknowledged before me this
27th day of February , 1996.
/s/ Janice A. Hennings
Notary Public
