UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 40346 / August 20, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9680 ______________________________ : In the Matter of :ORDER INSTITUTING PROCEEDINGS :PURSUANT TO SECTION 21C OF THE David L. Chandler, :SECURITIES EXCHANGE ACT OF :1934, MAKING FINDINGS AND Respondent. :ORDERING RESPONDENT TO CEASE :AND DESIST : I. The Commission deems it appropriate and in the public interest that proceedings be, and they hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether David L. Chandler ("Chandler") committed or caused violations of Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder, in connection with the purchase of the common stock of Jupiter National, Inc. ("Jupiter National"). II. In anticipation of the institution of these administrative proceedings, Chandler has submitted an Offer of Settlement which the Commission has determined to accept. Under the terms of the Offer of Settlement, Chandler, solely for the purpose of these proceedings 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 matters set forth herein, consents to the issuance of this Order Instituting Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Ordering Respondent to Cease and Desist.[1] III. The Commission makes the following findings: David L. Chandler, 73, was Chairman of the Board of Directors and chief executive officer of Jupiter until it was purchased by Johnston Industries, Inc. in 1996. Chandler was at all relevant times, and is today, the chairman of the board of directors of Johnston Industries. Jupiter National, Inc., which is not a respondent in this matter, was incorporated in the District of Columbia in 1959 and subsequently reincorporated in the State of Delaware. Jupiter's headquarters and principal office were located in Rockville, Maryland. At all relevant times, Jupiter's common stock was registered pursuant to Section 12(b) of the Exchange Act and was traded on the American Stock Exchange. As of September 30, 1995, Jupiter had 1,918,740 shares outstanding. In March 1996, Jupiter merged with Johnston Industries. SUMMARY Chandler, while subject to a Commission cease-and-desist order issued on October 27, 1994 (the "order"), for violations of Sections 13(d) and 16(a) of the Exchange Act, engaged in additional violations of Section 16(a). Subsequent to entry of the order, Chandler, the chairman of the board and chief executive officer of Jupiter National, conducted transactions in Jupiter securities through an account he had opened in the name of his adult daughter. He failed to file timely Forms 4 for these transactions. FACTS In October 1994, the Commission instituted cease-and-desist proceedings against Chandler. Without admitting or denying the Commission's allegations, Chandler consented to the issuance of an order requiring him to cease-and-desist from future violations of Sections 13(d) and 16(a) of the Exchange Act, former Rule 16a-1 and Rules 13d-1, 13d-2, 16a- 2, and 16a-3 thereunder. On August 12, 1994, during the pendency of the staff's prior investigation, Chandler opened an account in the name of his daughter. On December 15, 1994, Chandler purchased, on margin, 5,000 shares of Jupiter stock for approximately $220,000. On December 19, 1994, the shares were placed in his daughter's account. During the first three months of 1995, Chandler sold 2,400[2] of the Jupiter shares in his daughter's account. At the conclusion of that year, the remaining 7,600 shares were transferred to an account in his daughter's name at Merrill Lynch. The shares were then redeemed for $258,172 in cash in conjunction with the merger between Jupiter with Johnston. In March and April 1996, Chandler arranged for Redlaw Industries, Inc. convertible notes to be purchased by his daughter using the proceeds of the redeemed shares. Chandler is a controlling shareholder of Redlaw. Chandler filed no Forms 4 with respect to any of the trans- actions he made in his daughter's account until September 1995. Altogether, Chandler failed to report a total of 14 transactions in Jupiter stock until after his counsel was notified of the staff's investigation. VIOLATIONS OF THE FEDERAL SECURITIES LAWS Section 16(a) of the Exchange Act, and Rules 16a-2 and 16a-3 thereunder, require that beneficial owners of more than ten percent of any class of equity security registered pursuant to Section 12 of the Exchange Act, and the officers and directors of the issuer of any such security ("insiders"), file a statement with the Commission by the effective date of a registration statement filed pursuant to Section 12 of the Exchange Act, or within ten days of becoming such officer, director or beneficial owner, reporting the amount of all equity securities of such issuer of which they are a beneficial owner. Section 16(a) also requires an insider to file with the Commission within ten days after the close of each calendar month, if there has been a change in the insider's ownership of the issuer's equity securities during such month, a statement indicating such changes. The rules enacted pursuant to Section 16(a) provide that an initial statement by an insider is to be made on a Form 3 and subsequent statements of changes in beneficial ownership are to be made on a Form 4 or Form 5. For purposes of determining the number of beneficially owned shares that an insider must report on Forms 3, 4, and 5, Rule 16a-1(a)(2) defines "beneficial owner" to mean "any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the equity securities" at issue. The rule goes on to define "pecuniary interest" as "the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities." Thus, a person is deemed the beneficial owner of securities held in the name of another family member where the person obtains "benefits substantially equivalent to ownership, e.g., application of the income derived from such securities. . . to meet expenses which such person otherwise would meet from other sources. . . ." Rel. No. 34-7793, 31 Fed. Reg. 1005 (January 19, 1966). See also Whiting v. Dow Chemical Co., 523 F.2d 680, 684-89 (2d Cir. 1975); Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir.), cert. denied, 454 U.S. 1031 (1981). Chandler was the beneficial owner of the account he opened in his daughter's name. Chandler controlled the account and benefited from the transactions he conducted through it. Hence, Chandler violated Section 16(a) and Rules 16a-2 and 16a-3 thereunder by failing to timely report changes in his beneficial ownership of Jupiter securities. By violating Section 16(a) of the Exchange Act, Chandler also violated the Commission's cease-and-desist order, issued in October 1994, prohibiting such conduct. Based upon the foregoing, the Commission finds that Chandler committed or caused violations of Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder and that Chandler violated the Commission's prior order. IV. ORDER In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Respondent's Offer of Settlement. Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that Chandler shall cease and desist from committing or causing any violation and any future violation of Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder. By the Commission. Jonathan G. Katz Secretary **FOOTNOTES** [1]: On the same day that this proceeding was instituted, the Commission filed, in the United States District Court for the District of Columbia, the related matter, SEC v. Chandler, Civil Action No. CV-98-02005 (SS). With that complaint, the Commission filed the Consent of David L. Chandler, in which Chandler, without admitting or denying the allegations in the complaint, has consented to the entry of a final judgment ordering him to pay $60,000 as a civil penalty. [2]: A 2 for 1 stock split occurred on December 15, 1994.