UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 34-40910 / January 11, 1999 ADMINISTRATIVE PROCEEDING File No. 3-9803 ___________________________________ : In the Matter of : ORDER MAKING FINDINGS : AND IMPOSING CERTAIN MARKET MAKING : SANCTIONS AS TO ACTIVITIES ON NASDAQ : J.P. MORGAN : SECURITIES, INC., : DONALD A. : DUNWORTH, MARK A. : GALLAGHER AND : DAVID J. MOTTES ___________________________________: I. In the accompanying Order Instituting Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Findings of the Commission ("Order Instituting Proceedings"), the Securities and Exchange Commission ("Commission") instituted these public administrative proceedings against J.P. Morgan Securities, Inc. ("J.P. Morgan"), Donald A. Dunworth, Mark A. Gallagher and David J. Mottes, and other firms and individuals. Contemporaneously, J.P. Morgan, Donald A. Dunworth, Mark A. Gallagher and David J. Mottes ("Respondents") have submitted Offers of Settlement ("Offers") in anticipation of the institution of these proceedings, which the Commission has determined to accept. In their Offers, Respondents, solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, prior to a hearing pursuant to the Commission’s Rules of Practice, and without admitting or denying the findings herein, except for the findings of Section II.A., which are admitted, have consented to the entry of the Order Instituting Proceedings and this Order Making Findings and Imposing Sanctions as to J.P. Morgan, Donald A. Dunworth, Mark A. Gallagher and David J. Mottes (which are hereinafter referred to as the "Orders"). The Commission has determined that it is appropriate and in the public interest to accept the Respondents’ Offers and accordingly is issuing this Order. II. On the basis of the Orders and Respondents’ Offers, the Commission finds[1] the following: A. Respondents J.P. Morgan, a Delaware corporation, is registered with the Commission as a broker-dealer pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"). At all relevant times, J.P. Morgan made markets in a number of securities traded in the Nasdaq market. J.P. Morgan's principal place of business during the relevant time period was New York, New York. J.P. Morgan traded Nasdaq stocks for its own accounts and for the accounts of institutional and retail investors. At all times relevant herein, J.P. Morgan was a member of the National Association of Securities Dealers, Inc. ("NASD"), a national securities association registered with the Commission under Section 15A of the Exchange Act. Donald A. Dunworth, age 42, resides in Upper Montclair, New Jersey and, at all relevant times, was a Nasdaq trader at J.P. Morgan. As a Nasdaq trader, Donald A. Dunworth was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Mark A. Gallagher, age 34, resides in Mineola, New York and, at all relevant times, was a Nasdaq trader at J.P. Morgan. As a Nasdaq trader, Mark A. Gallagher was responsible for making markets in certain securities traded on the Nasdaq Stock Market. David J. Mottes, age 37, resides in West Islip, New York and, at all relevant times, was a Nasdaq trader at J.P. Morgan. As a Nasdaq trader, David J. Mottes was responsible for making markets in certain securities traded on the Nasdaq Stock Market. B. Factual Summary In connection with its activities as a Nasdaq market maker, J.P. Morgan, Donald A. Dunworth, Mark A. Gallagher and David J. Mottes engaged in the following activities, as more fully described in the applicable sections of the accompanying Order Instituting Proceedings, in the following securities and on the following dates. 1. The Fraudulent Coordination of Quote Movements J.P. Morgan engaged in, or caused, the coordinated entry of quotations on Nasdaq in violation of Sections 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder, in one or more of the respects described in Section II.C.1. of the Order Instituting Proceedings in a market making transaction or a related series of market making transactions in: a. the stock of Flagstar Companies Inc. ("FLST") on April 28, 1994, aided and abetted by its trader Donald A. Dunworth; b. the stock of Tele Communications Inc. - Class A ("TCOMA") on June 7, 1994, aided and abetted by its trader Donald A. Dunworth; c. the stock of Centocor Inc. ("CNTO") on September 20, 1994, aided and abetted by its trader Donald A. Dunworth; d. the stock of Novell Inc. ("NOVL") on October 11, 1994, aided and abetted by its trader Donald A. Dunworth; e. the stock of Marshall & Ilsley ("MRIS") on July 29, 1994, aided and abetted by its trader Mark A. Gallagher; f. the stock of Charming Shoppes Inc. ("CHRS") on August 19, 1994, aided and abetted by its trader Mark A. Gallagher; g. the stock of Lin Broadcasting Corp. ("LINB") on August 18, 1994, aided and abetted by its trader Mark A. Gallagher; h. the stock of Cambridge Technology Partners Inc. ("CATP") on May 25, 1994, aided and abetted by its trader David J. Mottes; and i. the stock of Cambridge Technology Partners Inc. ("CATP") on June 30, 1994, aided and abetted by its trader David J. Mottes. 2. Undisclosed Arrangements to Coordinate Quotations J.P. Morgan entered, or caused to be entered, in the Nasdaq market fictitious quotations in one or more respects described in Section II.C.2. of the Order Instituting Proceedings in violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Nextal Communications Inc. - Class A ("CALL") on April 7, 1994, aided and abetted by its trader Donald A. Dunworth; b. the stock of Perrigo Co. ("PRGO") on May 11, 1994, aided and abetted by its trader Donald A. Dunworth; c. the stock of Amgen Inc. ("AMGN") on June 22, 1994, aided and abetted by its trader Donald A. Dunworth; d. the stock of Apple Computer Inc. ("AAPL") on August 2, 1994, aided and abetted by its trader Donald A. Dunworth; e. the stock of Gilead Sciences Inc. ("GILD") on August 22, 1994, aided and abetted by its trader Donald A. Dunworth; f. the stock of Tele Communications Inc. - Class A ("TCOMA") on September 16, 1994, aided and abetted by its trader Donald A. Dunworth; g. the stock of Novell Inc. ("NOVL") on October 5, 1994, aided and abetted by its trader Donald A. Dunworth; h. the stock of Novell Inc. ("NOVL") on October 24, 1994, aided and abetted by its trader Donald A. Dunworth; i. the stock of Oracle Systems Corp. ("ORCL") on May 11, 1994, aided and abetted by its trader Mark A. Gallagher; j. the stock of Oracle Systems Corp. ("ORCL") on August 30, 1994, aided and abetted by its trader Mark A. Gallagher; k. the stock of Oracle Systems Corp. ("ORCL") on September 15, 1994, aided and abetted by its trader Mark A. Gallagher; l. the stock of Simpson Manufacturing Co. ("SMCO") on October 11, 1994, aided and abetted by its trader Mark A. Gallagher; m. the stock of Cambridge Technology Partners Inc. ("CATP") on May 24, 1994, aided and abetted by its trader David J. Mottes; n. the stock of Cambridge Technology Partners Inc. ("CATP") on May 25, 1994, aided and abetted by its trader David J. Mottes; o. the stock of Cambridge Technology Partners Inc. ("CATP") on June 30, 1994, aided and abetted by its trader David J. Mottes; and p. the stock of Acclaim Entertainment ("AKLM") on August 17, 1994, aided and abetted by its trader David J. Mottes. 3. Intentional Delaying of Trade Reports J.P. Morgan engaged in, or caused, a manipulation by delaying trade reporting in one or more of the respects described in Section II.C.3. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Simpson Manufacturing Co. ("SMCO") on August 2, 1994, aided and abetted by its trader Mark A. Gallagher; b. the stock of Simpson Manufacturing Co. ("SMCO") on October 5, 1994; and c. the stock of Cambridge Technology Partners Inc. ("CATP") on August 9, 1994, aided and abetted by its trader David J. Mottes. 4. Other Market Maker Misconduct J.P. Morgan engaged in, or caused, other manipulative conduct in one or more of the respects described in Section II.C.4. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Novell Inc. ("NOVL") on October 13, 1994, aided and abetted by its trader Donald A. Dunworth. 5. Best Execution Violations J.P. Morgan failed, or caused the failure, to provide best execution in the handling of customer orders in one or more of the respects described in Section II.C.5. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of First Security Corp. ("FSCO") on April 7, 1994, aided and abetted by its trader Donald A. Dunworth; b. the stock of Mid Ocean Ltd. ("MOCNF") on August 30, 1994, aided and abetted by its trader Donald A. Dunworth; and c. the stock of American Management Systems ("AMSY") on May 11, 1994, aided and abetted by its trader Mark A. Gallagher. 6. Failure to Honor Quotations J.P. Morgan failed to honor its quotations in one or more of the respects described in Section II.C.6. of the Order Instituting Proceedings in violation of Section 11A(c) of the Exchange Act and Rule 11Ac1-1 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of The AES Corp. ("AESC") on October 5, 1994, aided and abetted by its trader Donald A. Dunworth. 7. Failure to Keep Accurate Books and Records J.P. Morgan failed to keep and maintain accurate books and records in one or more of the respects described in Section II.C.7. of the Order Instituting Proceedings in violation of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder, in a market making transaction or related series of market making transactions in: **FOOTNOTES** [1]: The findings herein are solely for the purpose of these proceedings, and are not binding on any person not a respondent in these proceedings. 1 a. the stock of Cambridge Technology Partners Inc. ("CATP") on May 24, 1994; b. the stock of Cambridge Technology Partners Inc. ("CATP") in two violations on August 9, 1994; c. the stock of Amgen Inc. ("AMGN") on June 22, 1994; d. the stock of Mid Ocean Ltd. ("MOCNF") on August 30, 1994; e. the stock of Simpson Manufacturing Co. ("SMCO") on August 2, 1994; f. the stock of Simpson Manufacturing Co. ("SMCO") on October 5, 1994; g. the stock of The AES Corp. ("AESC") in two violations on October 5, 1994; h. the stock of West One Bancorp ("WEST") on June 7, 1994; and i. the stock of Acclaim Entertainment ("AKLM") on August 17, 1994. 8. Section 15(f) Violation The investigation revealed a deficiency in the procedures established by respondent J.P. Morgan to prevent the misuse of material, nonpublic information. As a multi- service investment bank, J.P. Morgan provided Nasdaq-listed clients with underwriting and other investment banking services, while also making markets in their securities. In order to prevent the misuse of material, nonpublic information, J.P. Morgan’s applicable policies and procedures provided that, whenever a trader received "material nonpublic information" from an investment banker, the trader and investment banker inform the Compliance Department of the transference of the nonpublic information. The procedure called for the trader and investment banker involved, in the first instance, to decide whether or not the information was material. This procedure was flawed, because the determination of whether or not information is material--and in effect, the determination of whether or not the trader could continue trading--was placed in the hands of persons who lacked expertise in the applicable legal principles, and in the case of the trader, the supervised person who had a potential pecuniary interest in the outcome of the determination. Such a procedure created the potential for uninformed decisionmaking and misuse of material nonpublic information. The flaws in the procedure are illustrated by the following incident. On May 10, 1994, Perrigo Company ("Perrigo") announced negative financial expectations. This announcement caused a drop that day in the price of its stock of approximately 30 percent. Concerned by this market reaction, Perrigo asked J.P. Morgan, with which it had a pre-existing investment banking relationship, for advice as to what it might do to enhance the price of its stock. J.P. Morgan initially suggested a stock buyback program by Perrigo and its management. Perrigo and J.P. Morgan scheduled a meeting for the next day, May 11, 1994, at J.P. Morgan’s offices in New York. Before the opening of the Nasdaq market on May 11, 1994, a J.P. Morgan investment banker and other senior personnel had a conversation with the Nasdaq trader at J.P. Morgan who was responsible for making markets in Perrigo stock, in which the trader expressed his views as to how to deal with the Perrigo situation. The trader raised the possibility of a stock buyback and was informed by the investment banker that J.P. Morgan was then in the process of analyzing a stock buyback. During the morning of May 11, 1994, the trader began accumulating a significant quantity of Perrigo stock. The trader accumulated approximately 100,000 shares believing that an announcement of a buyback would likely have a positive impact on Perrigo’s stock price. None of his supervisors and none of J.P. Morgan’s compliance personnel were aware that the trader was accumulating this position that day. Neither the trader nor the investment banker and other J.P Morgan personnel involved believed that they had to inform Compliance of the trader’s knowledge because they did not believe the nonpublic information he had received about the analysis of a buyback to be material. Under J.P. Morgan’s then existing procedures, notification of Compliance was therefore not necessary. Subsequent to May 11, 1994, Perrigo did not proceed with a buyback and the trader did not profit from his involvement in and knowledge of the consideration of a buyback. The trader sold his position on May 12 and 13, 1994. Nevertheless, the fact that he was able to accumulate approximately 100,000 shares of Perrigo stock under these circumstances without the knowledge or approval of any supervisor or the Compliance Department reflects a deficiency in J.P. Morgan’s then existing policies and procedures. In the ordinary course of business, the activities of a broker-dealer’s investment bankers on behalf of a client should not be revealed to its traders. Investment bankers may, however, legitimately consult with a trader or involve him in their activities on behalf of a client, when necessary, to obtain his expertise and advice with respect to the market and market conditions. In such circumstances, however, the potential for abuse of nonpublic information is significantly heightened because the trader could learn of confidential matters that may significantly affect the price of the relevant securities. In the situation at hand, compliance or legal personnel should have been contacted when the trader met with the investment banker and other personnel, to evaluate whether or not he could continue to trade Perrigo stock in light of the nonpublic information he learned. It was inadequate for J.P. Morgan’s procedures to defer this evaluation until the trader or one of the J.P. Morgan’s investment bankers or other personnel involved in the matter concluded that the trader had "material" nonpublic information.[2] Whenever a trader is given nonpublic information concerning an investment banking engagement, the trader’s continued ability to transact in the relevant securities should be evaluated by compliance personnel or legal counsel with appropriate training and knowledge. This does not mean that a trader must necessarily cease to trade the relevant security upon receiving the information. That determination depends on the facts and circumstances of the particular situation. Consultation with Compliance or legal counsel is especially important in circumstances such as those in question. Perrigo had asked J.P. Morgan for advice about how to respond to its declining stock price and in particular about a potential stock buyback program. There was great potential for rapid corporate decisions and actions, even within a single trading day, that could have materially affected the price of Perrigo’s stock. Compliance personnel or legal counsel confronted with such a situation, in the exercise of prudence, would have been able to evaluate the materiality of information provided to the trader, based on the facts at that time, and to assess the materiality of the trader’s knowledge based on potential developments in the future. In view of the foregoing, J.P. Morgan violated Section 15(f) of the Exchange Act.[3] 9. Failure to Reasonably Supervise Nasdaq Trading J.P. Morgan failed reasonably to supervise its Nasdaq market making activities with a view to preventing future violations within the meaning of Section 15(b)(4)(E) of the Exchange Act, in one or more of the respects described in Section II.C.8.a. and b. of the Order Instituting Proceedings, and in the other following respects: a. Respondent J.P. Morgan in 1994 failed to promulgate, maintain and enforce policies and procedures concerning the potential for manipulation of the market by delaying the submission of trade reports; b. Respondent J.P. Morgan in 1994 failed to promulgate, maintain and enforce policies and procedures regarding a market maker’s obligation of best execution of customer orders; and c. Respondent J.P. Morgan’s policies and procedures in 1994 regarding a market maker’s obligation to honor its quotes were inadequate, in that its compliance manual merely stated in summary fashion that traders were required to trade at their displayed quotes; the absence of more detailed guidance led to incorrect understandings of the exceptions to the firm quote rule. Donald A. Dunworth failed reasonably to supervise Nasdaq market making activities with a view to preventing future violations, in the manner described in Section II.C.9.a. and b. of the Order Instituting Proceedings, and in the other following respects: a. Respondent Donald A. Dunworth in 1994 failed to to promulgate, maintain and enforce policies and procedures concerning the potential for manipulation of the market by delaying the submission of trade reports. **FOOTNOTES** [2]: This is not to say that all contacts between a trader and investment banking and other personnel need to be brought to the attention of the Compliance Department. The discussion herein is focused on the circumstance in which a trader is given nonpublic information relating to an ongoing investment banking engagement. [3]: The fact that neither the trader nor J.P. Morgan is charged with insider trading in violation of the antifraud provisions does not affect the Section 15(f) charge. Section 15(f) by its terms requires reasonable policies and procedures, and an underlying insider trading violation is not a predicate to a Section 15(f) charge. See In the Matter of Gabelli & Company, Inc. and Gamco Investors, Inc., 58 S.E.C. Docket 443 (Rel. Nos. 34-35057 and IA-1457, Dec. 8, 1994). 2 10. Unlawful Profits and Other Gains While engaged in certain of the improper activities described above, J.P. Morgan obtained unlawful profits and gains, which, together with interest, total $42,218.00. III. By reason of the foregoing, J.P. Morgan willfully violated Sections 11A(c), 15(c)(1) and (2), 15(f) and 17(a) of the Exchange Act, and Rules 11Ac1-1, 15c1-2, 15c2-7, and 17a-3 thereunder, and failed reasonably to supervise its Nasdaq trading personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act. Donald A. Dunworth willfully aided and abetted and caused violations of Section 11A(c), 15(c)(1) and (2) of the Exchange Act and Rules 11Ac1-1, 15c1-2 and 15c2-7 thereunder, and failed reasonably to supervise Nasdaq trading personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act. Mark A. Gallagher willfully aided and abetted and caused violations of Section 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder. David J. Mottes willfully aided and abetted and caused violations of Section 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder. IV. In view of the foregoing and Respondents’ Offers, IT IS HEREBY ORDERED, pursuant to Sections 15(b) and 21C of the Exchange Act, that: 1. J.P. Morgan shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 11A(c), 15(c)(1) and (2), 15(f) and 17(a) of the Exchange Act, and Rules 11Ac1-1, 15c1-2, 15c2-7, and 17a-3 thereunder; 2. J.P. Morgan shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $1,275,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies J.P. Morgan as a Respondent in these proceedings and provides the caption and file number for these proceedings; with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check, to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 3. J.P. Morgan shall, within 10 business days of written notice from the Commission staff or the Independent Consultant (as defined below), pay disgorgement in the amount of $42,218.00 pursuant to Section 21C(e) of the Exchange Act; 4. J.P. Morgan shall, within 90 days of the date of the entry of this Order, provide to the independent consultant appointed by the Commission in connection with these proceedings (the "Independent Consultant") a description of its policies, procedures and practices relating to prevention or detection of the types of improper conduct involving J.P. Morgan described in Section II of this Order. Within such time as the Commission directs, the Independent Consultant shall review such policies, procedures and practices with a view to determining if they would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving J.P. Morgan described in Section II of this Order. J.P. Morgan shall cooperate with the Independent Consultant’s review of J.P. Morgan’s policies, procedures and practices, and shall, among other things, provide such further information as the Independent Consultant reasonably requests or that J.P. Morgan deems relevant to the Independent Consultant’s review, provided, however, that J.P. Morgan need not provide any information to which it asserts a valid claim of the attorney-client privilege. The Independent Consultant shall maintain the confidentiality of all materials provided by J.P. Morgan and shall not provide the materials to any person, provided, however, that such materials may be provided to the Commission or its staff. If the Independent Consultant concludes that J.P. Morgan’s policies, procedures and practices, as presented, would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving J.P. Morgan described in Section II of this Order, the Independent Consultant shall inform J.P. Morgan of this conclusion in writing, and his or her responsibilities with respect to J.P. Morgan shall conclude. If the Independent Consultant cannot conclude that J.P. Morgan’s policies, procedures and practices meet the aforesaid standard, he or she may recommend changes in or additions to J.P. Morgan’s policies, procedures or practices for the purpose of improving their ability to meet the aforesaid standard. J.P. Morgan shall implement all such recommended changes or additions in a timely manner, but in any event no later than three months after receiving the recommendations of the Independent Consultant or such other reasonable time as determined by the Independent Consultant; provided, however, if J.P. Morgan believes that a change or addition to its policies, procedures and practices recommended by the Independent Consultant is unduly burdensome or unreasonable, it may: (a) propose an equally effective alternative to the Independent Consultant, and, with the Independent Consultant’s approval, implement that alternative in lieu of the Independent Consultant’s recommended change or addition; or (b) petition the Commission, with notice to the Independent Consultant and the Division of Enforcement, for relief from the recommendation of the Independent Consultant. Within three months of receiving recommendations of the Independent Consultant for changes in or additions to its policies, procedures and practices, J.P. Morgan shall report in writing to the Independent Consultant with respect to the implementation of the recommendations and/or any equally effective alternatives approved by the Independent Consultant. If J.P. Morgan’s report on implementation is without qualification and states that said recommendations and/or alternatives have been fully and effectively implemented, the Independent Consultant’s responsibilities with respect to J.P. Morgan shall conclude. If J.P. Morgan’s report on implementation is qualified, or in any respect indicates that implementation is not full and effective, J.P. Morgan shall cooperate with all further efforts of the Independent Consultant to ensure that said recommendations and/or alternatives are fully and effectively implemented. When the Independent Consultant concludes that J.P. Morgan has fully and effectively implemented said recommendations and/or alternatives, he or she shall inform J.P. Morgan in writing of this conclusion and his or her responsibilities with respect to J.P. Morgan shall conclude. The fees and expenses of the Independent Consultant arising from his or her review of the policies, procedures and practices of J.P. Morgan and the other respondent firms subject to the Independent Consultant’s review shall be prorated evenly among such firms, and in such prorated amounts, be paid by each such firm, provided however, that if the Independent Consultant recommends changes or additions to J.P. Morgan’s policies, procedures or practices, the fees and expenses of the Independent Consultant relating to the making and implementation of those recommendations and/or any alternatives approved by the Independent Consultant, and any disagreements relating thereto, shall be paid by J.P. Morgan. 5. Donald A. Dunworth shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 11A(c), 15(c)(1) and (2) of the Exchange Act, and Rules 11Ac1-1, 15c1-2, and 15c2-7 thereunder; 6. Donald A. Dunworth shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $110,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Donald A. Dunworth as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 7. Donald A. Dunworth be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of 6 1/2 months, effective 15 weeks and one day after the date of this Order; and Donald A. Dunworth shall provide to the Commission, within 10 days after the end of the 6 1/2 month suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 8. Mark A. Gallagher shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2)of the Exchange Act, and Rules 15c1-2 and 15c2-7thereunder; 9. Mark A. Gallagher shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $65,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Mark A. Gallagher as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 10. Mark A. Gallagher be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of 15 weeks, effective one day after the date of this Order; and Mark A. Gallagher shall provide to the Commission, within 10 days after the end of the 15 week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 11. David J. Mottes shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 12. David J. Mottes shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $50,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies David J. Mottes as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 13. David J. Mottes be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of 12 weeks, effective one day after the date of this Order; and David J. Mottes shall provide to the Commission, within 10 days after the end of the 12 week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section. By the Commission. Jonathan G. Katz Secretary 3