MGSI Securities, Inc., Bradford A. Orosey, Larry J. Bagwell, Connie L. Bally, Joseph O. Fallin, and James W. Ogg; William J. Cowan, Administrative Law Judge

UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION

Securities Act of 1933
Release No. 7686 / May 25, 1999

Securities Exchange Act of 1934
Release No. 41444 / May 25, 1999

Administrative Proceeding
File No. 3-9702

I.

The Securities and Exchange Commission ("Commission") instituted public administrative and cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondent Bradford A. Orosey ("Orosey") on September 10, 1998.

II.

Respondent Orosey has submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings herein, except as to the jurisdiction of the Commission over Respondent and over the subject matter of this proceeding and as to Section IV.A., which is admitted, Respondent Orosey by his Offer consents to the entry of findings and remedial sanctions set forth below.

III.

On the basis of this Order Making Findings and Imposing Remedial Sanctions ("Order") and the Offer submitted by Respondent Orosey the Commission finds [ The findings herein are not binding on anyone other than Orosey.] that:

IV.

A. At all relevant times, Bradford A. Orosey ("Orosey") was a registered representative associated with MGSI Securities, Inc. ("MGSI"), a registered broker-dealer and, prior to that, with another registered broker-dealer. Orosey is not currently employed in the securities industry.

B. At all relevant times, Orosey serviced an account for Escambia County, Florida ("Escambia"), to which he sold CMOs.

C. CMOs are a type of mortgage-backed derivative security. CMOs are created by pooling individual mortgages and dividing the cash flows of principal and interest into various classes or tranches which pay principal and interest cash flows from the mortgage pool to investors. The timing and amount of payments of principal and interest for various tranches have varying degrees of sensitivity to fluctuations in interest rates. Due to their sensitivity to changes in interest rates, certain risks are generally associated with an investment in CMOs, including market, extension, prepayment and liquidity risks, among others.

D. The CMOs sold by Orosey to Escambia were Support Class Inverse Floaters ("Inverse Floaters") and Principal Onlys ("POs"), the value of which plummeted when interest rates rose throughout 1994. Inverse Floaters and POs are some of the riskiest and most volatile tranches of CMOs, and investments in these tranches involve a great deal of market, extension, and liquidity risks.

E. From February 1993 to April 1994, Orosey, in connection with the purchase and sale of securities to Escambia, namely CMOs, omitted to state material facts necessary to make the positive statements he made regarding projected performance not misleading. Orosey described the investments he was selling to Escambia as a "Fannie Mae" or "Freddie Mac." This description was misleading in light of his failure to disclose the type of securities (i.e., Inverse Floaters and POs). Orosey's description of the investments was also misleading in light of his failure to disclose that the investments were subject to dramatic fluctuations in duration, yield and market value as interest rates changed. In his solicitations, Orosey provided misleading information about the expected performance of the CMOs by using figures based on unrealistic assumptions that portrayed the securities in a favorable light. Orosey also used misleading yield tables and "PSA" speeds (which refers to the rate of prepayments on a pool of mortgages) and failed to fluctuate the coupon rate to present an accurate and realistic picture of the future potential yields of the CMOs he sold. In certain instances, Orosey furnished documentation to Escambia which misrepresented that the yields on the securities could not drop below a certain level, when, in fact, the yields could have, and actually did, go much lower. On other occasions, Orosey provided information which failed to indicate any possibility of significantly lower yields and failed to disclose important information that would have revealed how the securities he offered would perform. In addition, in subsequent communications, Orosey also misrepresented the current yield and performance of the securities he had already sold to Escambia. As a result of Orosey's fraudulent misrepresentations and omissions, Escambia was fraudulently induced to stock its investment portfolio with numerous high risk CMOs which incurred a significant decline in value.

F. As a result of the conduct described above, Orosey committed or caused violations of, and willfully violated, Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

G. Respondent Orosey has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement plus prejudgment interest or a civil money penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Orosey and has determined that Orosey does not have the financial ability to pay disgorgement of $134,111 plus prejudgment interest or a civil money penalty.

In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Orosey and impose the remedial sanctions specified therein.

Accordingly, IT IS ORDERED that Orosey be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, with a right to reapply for association after five years to the appropriate self-regulatory organization, or if there is none to the Commission;

IT IS FURTHER ORDERED that Orosey shall cease and desist from committing or causing any violation or any future violation of Sections 17(a)(1), 17(a)(2) or 17(a)(3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;

IT IS FURTHER ORDERED that Orosey shall be liable for and pay disgorgement of $134,111 plus prejudgment interest, but that the payment of such amount be waived and a civil money penalty will not be imposed against Orosey, based on Orosey's demonstrated financial inability to pay; and

IT IS FURTHER ORDERED that the Division of Enforcement ("Division") may, at any time following entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondent provided accurate and complete financial information at the time such representations were made; (2) determine the amount of disgorgement and prejudgment interest to be imposed; (3) determine the amount of civil penalty to be imposed; and (4) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Respondent's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by the Respondent was fraudulent, misleading, inaccurate or incomplete in any material respect and whether additional remedies should be imposed. Respondent may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.

By the Commission.

Jonathan G. Katz

Secretary