In re Kenneth G. Friedrich

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UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 93043 / September 17, 2021 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-20569 
 
 
 
In the Matter of 
 
Kenneth G. Friedrich, 
 
Respondent. 
 
 
 
 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTIONS 15(b), 15B(c) AND 21C OF 
THE SECURITIES EXCHANGE ACT OF 
1934, MAKING FINDINGS, AND 
IMPOSING REMEDIAL SANCTIONS 
AND A CEASE-AND-DESIST ORDER 
 
I. 
 
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) against Kenneth G. Friedrich (“Friedrich” or “Respondent”).   
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over him and the subject matter of these 
proceedings, which are admitted, and except as provided herein in Section V, Respondent consents 
to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to 
Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934 and Section 9(b) of the 
Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a 
Cease-and-Desist Order (“Order”), as set forth below.   
 
 

III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
 
This matter involves improper conduct by Friedrich in connection with RBC Capital 
Markets, LLC’s (“RBC”) purchase and sale of certain new issue municipal bonds from and to 
unregistered brokers known as “flippers.”  Friedrich served as Head of RBC’s Municipal Sales, 
Trading and Syndication group (the “Municipal Group”) from 2010 to June 2016.   
       
RBC’s internal policy for primary offerings required the firm’s syndicate desk, when acting 
as sole underwriter or senior syndicate manager, to allocate bonds according to a “standard 
methodology” that prioritized customer and dealer orders over orders for flippers absent different 
instructions from issuers.  However, between January 2014 and December 2017, the syndicate desk 
did not always follow the standard methodology, instead sometimes filling orders for flippers ahead 
and instead of institutional customer and dealer orders when orders exceeded the bonds available.  
In connection with one November 2015 offering where the issuer directed a retail order period, the 
syndicate desk also allocated some bonds to two flippers ahead and instead of retail customers 
although the flippers did not meet the issuer’s retail eligibility criteria.  From at least January 2014 
to June 2016, Friedrich was aware that the syndicate desk did not always follow the standard 
methodology and he permitted the underwriters on the syndicate desk to fill orders for flippers 
ahead and instead of customer and dealer orders.  He also participated in the decision to allocate 
bonds to flippers in the November 2015 offering.   
 
Between January 2014 and December 2017, RBC also used flippers to circumvent issuer 
priority instructions and receive higher priority for its dealer orders in some instances when RBC 
was not a participating underwriter in the offering.  From at least January 2014 to June 2016, 
Friedrich permitted RBC traders to place orders for new issue bonds with flippers.  He was aware 
that the flippers sometimes placed purported “customer” orders with the underwriters and, when 
allocated bonds, sold the bonds to RBC.   
 
As a result of this conduct, Friedrich violated Section 15B(c)(1) of the Exchange Act and 
Municipal Securities Rulemaking Board (“MSRB”) Rules G-11(k) and G-17.  He also violated 
MSRB Rule G-27, and failed reasonably to supervise within the meaning of Section 15(b)(4)(E) 
of the Exchange Act, with a view to preventing and detecting violations of MSRB Rules G-11(k) 
and G-17 by a certain registered representative. 
 
Respondent 
  
1. Kenneth G. Friedrich, age 57, resides in New York, New York.  From January 
1999 to June 2016, Friedrich was a registered representative associated with RBC.  From 2007 to 
                                                             
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 
person or entity in this or any other proceeding. 
 

2010, he served as Head of RBC’s sales desk in the Municipal Group and, from 2010 to June 2016, 
he served as Head of the Municipal Group.   
 
Relevant Entities 
 
2. RBC Capital Markets, LLC, incorporated in Minnesota with a principal place of 
business in New York, New York, is registered with the Commission as a broker-dealer, 
municipal securities dealer, investment adviser and municipal advisor.   
 
3. RMR Asset Management Company (“RMR”), was a California corporation 
with a principal place of business in Chula Vista, California.  RMR primarily bought and sold 
new issue bonds.  RMR was not registered with the Commission.  The Commission filed an 
enforcement action against RMR and its associates in August 2018.
2
  
  
4. Core Performance Management, LLC (“CPM”) was a Florida limited liability 
company located in Boca Raton, Florida that was dissolved on July 27, 2016.  CPM primarily 
bought and sold new issue municipal bonds.  CPM was not registered with the Commission.  The 
Commission filed an enforcement action against CPM and its associates in August 2018.
3
 
 
Background on Municipal Underwriting Process 
 
5. Municipalities often raise money by issuing bonds that are sold to the public 
through an underwriting process.  In what is known as a “negotiated” offering, the municipal 
issuer chooses a broker-dealer to act either as sole underwriter or as the senior manager of an 
underwriting syndicate.  An underwriting syndicate is a group of broker-dealers that join together 
to purchase new issue bonds from the issuer to distribute the bonds to the public.   
 
6. Negotiated offerings of new issue municipal bonds are conducted according to 
certain rules, including the “priority of orders,” which establishes the sequence in which bonds 
will be allocated to specific types of orders.  Issuer priority rules typically assign retail customer 
orders the highest priority in the bond allocation process.  Issuers generally prioritize customer 
orders ahead of orders for broker-dealers seeking bonds for their own inventory, and as a result 
such orders are often not filled.   
 
 
 
                                                             
2
 SEC v. RMR Asset Management Company, et al., 18-CV-01895-AJB-JMA (S.D. Cal. filed Aug. 14, 2018) 
(partially settled action against RMR and 13 associated individuals for acting as unregistered brokers and, as to 10 of 
them, for engaging in fraudulent practices in connection with flipping new issue municipal bonds).  In August 2020, 
the U.S. District Court for the Southern District of California granted summary judgment to the SEC, finding that 
the three non-settling RMR associates acted as unregistered brokers in violation of Section 15(a) of the Exchange 
Act when they engaged in thousands of securities transactions for RMR.  
3
 SEC v. Core Performance Management, LLC, et al., 18-CV-81081-BB (S.D. Fla., filed Aug. 14, 2018) (settled 
action against CPM and five associated individuals for acting as unregistered brokers and for engaging in fraudulent 
practices in connection with flipping new issue municipal bonds). 

RBC’s Standard Methodology for Allocating Bonds in Primary Offerings 
 
7. Between January 2014 and December 2017, RBC had a written internal policy 
(the “Policy”) relating to new issue municipal bond offerings.  The Policy established procedures 
that RBC’s syndicate desk was to follow when RBC was acting as sole underwriter or senior 
syndicate manager.  In the absence of different priority instructions from issuers, flippers were to 
receive the lowest priority.  Specifically, the Policy required RBC’s syndicate desk to adhere to a 
“standard methodology,” and prioritize orders and allocate bonds as follows: 
 
● 1
st
 priority: Orders for Customers 
● 2
nd
 priority: Orders for [RBC’s] own account, [RBC] related accounts or [RBC] 
affiliated accounts (or syndicate member’s own, related or affiliated accounts, if 
applicable) 
● 3
rd
 priority: Orders for Broker-Dealers other than [RBC] and syndicate members 
● 4
th
 priority: Any other orders 
 
8. The Policy defined “Customer” orders entitled to first priority under the standard 
methodology to “generally include all orders received by or on behalf of an individual or 
institution other than 2
nd
, 3
rd
 and 4
th
 priority.”  Orders that had last, or fourth, priority were 
defined as “[any] other orders, including orders such as those submitted by a customer who, in 
the reasonable belief of [RBC] plans to purchase the securities and immediately resell such 
securities at higher prices (known as a “flipper”) or instances in which [RBC] is unable to 
reasonably authenticate the status or qualification of an order during a retail order period directed 
by an Issuer.” 
 
9. Pursuant to the Policy, in advance of each negotiated offering where RBC’s 
syndicate desk acted as sole underwriter or senior syndicate manager, RBC provided issuers a 
written notice titled “Notice of Priority of Orders from and Allocations to Investors” (the 
“Notices”).  The Notices described the standard methodology, and they stated that RBC would 
“deviate from such priority only when deemed by [RBC] to be in the best interests of the 
syndicate or unless the Issuer otherwise consents.” 
 
10. The Policy further required RBC’s syndicate desk to document any and all 
deviations from established priority provisions, as well as the reasons for the deviations, and to 
keep that documentation and any issuer instructions in the firm’s underwriting files. 
 
Friedrich Permitted the Improper Allocation of New Issue Bonds to Flippers 
 
11. In 2008, Friedrich, as Head of Sales, appointed a single institutional salesperson 
to cover certain of RBC’s accounts for RMR, CPM and their affiliates (collectively, “the 
flippers”).  As a result of this structure, all of RBC’s municipal bond transactions with flippers 
were coordinated through the salesperson responsible for covering the flippers’ accounts.     
 
12. When serving as sole underwriter or senior syndicate manager, RBC’s syndicate 
desk did not always adhere to the standard methodology in the Policy and the Notices, in the 
absence of different priority instructions from issuers.  Instead, on at least 41 occasions when 

orders exceeded the new issue bonds available, the syndicate desk prioritized orders for flippers 
over orders for institutional customer and dealer orders.  As a result, the flippers orders’ 
“crowded out” institutional customer and/or dealer orders which should have been filled first.  
Further, RBC’s syndicate desk failed to document these deviations from the standard 
methodology or the reasons for them.  Friedrich knew that the syndicate desk did not always 
follow the standard methodology in the absence of different instructions from issuers, and he 
permitted the Head of the RBC syndicate desk (the “Syndicate Manager”) and the other 
underwriters on the syndicate desk to sometimes allocate bonds to the flippers ahead and instead of 
customers and dealers.  
 
13. For example, in March 2016, RBC served as senior manager for a negotiated 
offering of municipal bonds in the total principal amount of $62.2 million.  In connection with 
the offering, the salesperson who Friedrich assigned to cover the flipper accounts submitted four 
orders for three different bond maturities on behalf of RMR and two CPM affiliates.  Orders for 
the three bond maturities exceeded the available bonds by between 19% and 77%.  Despite this, 
RBC’s syndicate desk allocated a combined $1.1 million in the three bond maturities to RMR 
and the CPM affiliates.  As a result, approximately $7.9 million in institutional customer orders 
and approximately $7.8 million in dealer orders were not filled. 
 
14. In one offering during the relevant period, the syndicate desk also allocated 
oversubscribed bonds to the flippers ahead and instead of retail customers in contravention of the 
issuer’s priority instructions.  In November 2015, RBC acted as senior syndicate manager for a 
negotiated offering of municipal bonds in the total principal amount of $626.8 million.  The 
issuer directed that a retail order period be held in which first priority was to be given to retail 
customer orders.  Shortly before the retail order period closed, the salesperson who Friedrich 
assigned to cover the flippers submitted two orders for RMR and an order for a CPM affiliate to 
the syndicate desk.  The salesperson falsely certified that the orders met the issuer’s retail 
eligibility criteria and affirmed their eligibility by providing zip codes that were not associated 
with the flippers’ locations.  Friedrich and the Syndicate Manager participated in the decision to 
allocate bonds to the flippers in this offering.  Although Friedrich and the Syndicate Manager, 
who directly managed the offering, were aware that the flippers were not retail customers and 
that the flippers did not meet the issuer’s retail eligibility criteria, the syndicate desk allocated 
$500,000 in bonds of one maturity to RMR and $1,000,000 and $250,000 in bonds of another 
maturity to RMR and the CPM affiliate, respectively.  As a result, retail orders from other buyers 
for these maturities were not filled.   
  
15. Friedrich permitted the syndicate desk to deviate from the standard methodology 
because he understood that RBC benefitted from its relationships with the flippers, who often 
purchased new issue bonds from RBC in deals where there were not enough other buyers for the 
bonds.   
  
Friedrich Permitted the Improper Purchase of New Issue Bonds from Flippers 
16. When acquiring new issue municipal bonds for inventory, broker-dealers are 
required to submit dealer orders directly to the underwriters offering the bonds.  From at least 
January 2014 to June 2016, Friedrich permitted RBC traders to use flippers to circumvent this 
requirement and obtain higher priority for RBC’s orders in offerings in which the firm was not a 

participating underwriter.  When RBC’s trading desk wanted new issue bonds for inventory, the 
traders directed the salesperson Friedrich assigned to cover the flippers to place indications of 
interest in purchasing the bonds with the flippers.  Friedrich was aware that the flippers 
sometimes attempted to fill the indications they received from RBC by placing customer orders, 
which had higher priority than dealer orders, with the underwriters.  He also was aware that, 
when the flippers obtained bonds from the underwriters, they immediately sold or “flipped” the 
bonds to RBC.  Between January 2014 and December 2017, RBC improperly obtained bonds for 
inventory from flippers on at least 87 occasions.             
 
Friedrich Failed Reasonably to Supervise the Syndicate Manager 
17. Between January 2014 and June 2016, Friedrich was the first-level supervisor of 
RBC’s Syndicate Manager.  Friedrich was responsible for the Syndicate Manager’s compliance 
with the standard methodology in the Policy.  The Syndicate Manager did not always comply 
with the standard methodology and, at times, improperly prioritized orders for new issue bonds 
for the flippers ahead of institutional customer and dealer orders.  As discussed above, in 
connection with a November 2015 offering, the Syndicate Manager also failed to follow the 
issuer’s priority instructions and allocated bonds to fill “retail” orders for the flippers that were 
submitted to RBC’s syndicate desk during the retail order period when he knew that the flippers’ 
orders did not meet the issuer’s retail eligibility criteria.  The Syndicate Manager thereby 
violated Section 15B(c)(1) of the Exchange Act and MSRB Rules G-11(k) and G-17.     
 
Legal Discussion 
Friedrich Violated MSRB Rule G-17 
18. MSRB Rule G-17 provides that, in the conduct of its municipal securities 
business, every broker, dealer, municipal securities dealer, and municipal advisor shall deal fairly 
with all persons and shall not engage in any deceptive, dishonest, or unfair practice.  Negligence 
is sufficient to establish a violation of MSRB Rule G-17; no finding of scienter is required.  See 
Wheat, First Securities, Inc., Exch. Act Release No. 48378, 2003 WL 21990950, at *10 (Aug. 
20, 2003). 
 
19. As discussed above, Friedrich permitted the syndicate desk to sometimes fill 
orders for the flippers ahead and instead of institutional customer and dealer orders in 
contravention of the standard methodology in the Policy and the Notices.  In one offering, he 
participated in the decision to improperly designate and fill flipper orders as retail orders when 
he knew the flippers’ orders did not meet the issuer’s retail eligibility criteria for the offering.   
 
20. In addition, Friedrich permitted RBC traders to circumvent issuer priority 
instructions of certain new issue bond offerings by placing orders with the flippers for RBC’s 
inventory when he was aware that the flippers would sometimes place higher priority customer 
orders for RBC. 
 

21. By this conduct, Friedrich willfully
4
 violated MSRB Rule G-17.  
 
Friedrich Violated MSRB Rule G-11(k) 
 
22. MSRB Rule G-11(k) provides that each broker, dealer, or municipal 
securities dealer that submits an order during a retail order period to the senior syndicate 
manager or sole underwriter, as applicable, shall provide in writing the following information 
relating to each order designated as retail submitted during a retail order period: (i) whether 
the order is from a customer that meets the issuer’s eligibility criteria for participation in the 
retail order period; (ii) whether the order is one for which a customer is already conditionally 
committed; (iii) whether the broker, dealer, or municipal securities dealer has received more 
than one order from such retail customer for a security for which the same CUSIP number has 
been assigned; (iv) any identifying information required by the issuer, or the senior syndicate 
manager on the issuer’s behalf, in connection with such retail order (but not including 
customer names or social security numbers); and (v) the par amount of the order.
5
  
 
23. As discussed above, in connection with a November 2015 offering, Friedrich 
participated in the decision to allocate bonds to fill three “retail” orders for the flippers that 
were submitted to RBC’s syndicate desk, which was serving as senior syndicate manager, 
during the retail order period.  Friedrich was aware that the salesperson he assigned to cover 
the flippers falsely certified that the orders met the issuers’ retail eligibility criteria and 
included zip codes affirming their purported eligibility that were not associated with the 
flippers.  Friedrich was aware that the flippers’ orders did not meet the issuer’s retail 
eligibility criteria.     
 
24. By this conduct, Friedrich willfully violated MSRB Rule G-11(k). 
 
Friedrich Failed Reasonably to Supervise the Syndicate Manager 
 
25. Section 15(b)(6)(A)(i) of the Exchange Act incorporates by reference Section 
15(b)(4)(E) and provides for the imposition of sanctions against any individuals associated with a 
broker or dealer who fail reasonably to supervise others.  Such individuals may be held liable for 
failing to reasonably supervise those subject to their supervision when they ignore red flags, even if 
the firm does not have specific procedures to address the misconduct.  See, e.g., Bridge, Exch. Act 
Release No. 60736, 2009 WL 3100582, at *16-18 (Sept. 29, 2009) (Commission Opinion) (direct 
supervisor failed reasonably to supervise where he was “fully aware of, and complicit in,” 
misconduct, even though firm did not have policies or procedures to address the misconduct). 
 
 
                                                             
4
 “Willfully,” for purposes of imposing relief under Sections 15(b) and 15B of the Exchange Act “means no more 
than that the person charged with the duty knows what he is doing.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 
2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). 
5
 Rule G-11(k) further provides that the senior syndicate manager may rely on the information furnished by each 
broker, dealer, or municipal securities dealer that provided the information required by (i) - (v) unless the senior 
syndicate manager knows, or has reason to know, that the information is not true, accurate, or complete. 

26. MSRB Rule G-27(a) obligates brokers, dealers, and municipal securities dealers 
to “supervise the conduct of the municipal securities activities of the [firm] and its associated 
persons to ensure compliance with [MSRB] rules and the applicable provisions of the [Exchange] 
Act and rules thereunder.”  MSRB Rule G-27(b) obligates brokers, dealers, and municipal 
securities dealers to establish and maintain a system to supervise the municipal securities 
activities of each associated person that is reasonably designed to achieve compliance with 
applicable securities laws, regulations and MSRB rules. 
  
27. As discussed above, the Syndicate Manager violated Section 15B(c)(1) of the 
Exchange Act and MSRB Rules G-11(k) and G-17 by allocating bonds to orders for flippers 
ahead and instead of Customer and dealer orders in contravention of the Policy and Notices in 
the absence of different issuer instructions.  The Syndicate Manager also allocated bonds to retail 
orders submitted to the syndicate desk on behalf of the flippers when he knew that the orders did 
not meet the issuer’s retail eligibility criteria.  Although Friedrich was aware that the Syndicate 
Manager was engaging in this misconduct, he did not take any action as his direct supervisor to 
prevent the misconduct.    
 
28. As a result, Friedrich failed reasonably to supervise the Syndicate Manager, within 
the meaning of Section 15(b)(4)(E) of the Exchange Act, with a view to preventing and detecting 
the Syndicate Manager’s violations of MSRB Rules G-11(k) and G-17, and willfully violated 
MSRB Rule G-27. 
 
Friedrich Violated Section 15B(c)(1) of the Exchange Act 
 
29. Section 15B(c)(1) of the Exchange Act prohibits a broker, dealer or municipal 
securities dealer from effecting interstate transactions in, or inducing or attempting to induce the 
purchase or sale of, any municipal security in contravention of any rule of the MSRB.  
 
30. As a result of the negligent conduct described above and his willful violations of 
MSRB Rules G-11(k), G-17 and G-27, Friedrich willfully violated Section 15B(c)(1) of the 
Exchange Act. 
 
IV. 
On the basis of the foregoing, the Commission deems it appropriate, in the public interest, 
to impose the sanctions agreed to in Respondent’s Offer. 
 
Accordingly, pursuant to Sections 15(b), 15B(c), and 21C of the Exchange Act, it is 
hereby ORDERED that: 
 
A. Friedrich cease and desist from committing or causing any violations and any 
future violations of Section 15B(c)(1) of the Exchange Act. 
 
B. Friedrich is censured. 
 
C. Friedrich shall be, and hereby is, subject to the following limitations on 
activities for six months, commencing immediately upon the entry of this Order: 

 
Friedrich shall not act in a supervisory capacity with any broker, dealer, investment 
adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally 
recognized statistical rating organization for the time period specified above; and 
 
Friedrich shall not offer, purchase, or sell negotiated new issue municipal securities 
on behalf of (1) any broker, dealer, investment adviser, or municipal securities 
dealers, or (2) any customer or client of any broker, dealer, investment adviser, or 
municipal securities dealer, for the time period specified above. 
D. Friedrich shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $30,000 to the Securities and Exchange Commission, of which a total 
of $9,000 shall be transferred to the MSRB in accordance with Section 15B(c)(9)(A) of the 
Exchange Act, and of which the remaining $21,000 shall be transferred to the general fund of 
the United States Treasury in accordance with Section 21F(g)(3) of the Exchange Act.  If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 
 
E. Payments must be made in one of the following ways: 
 
(1) Respondent may transmit payments electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon 
request; 
 
(2) Respondent may make direct payment from a bank account via 
Pay.gov through the SEC website at 
http://www.sec.gov/about/offices/ofm.htm; or 
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to: 
 
Enterprise Services Center Accounts Receivable Branch HQ Bldg.,  
Room 181, AMZ-341 6500 South MacArthur Boulevard, Oklahoma  
City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter 
identifying RBC as a Respondent in these proceedings and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Assistant 
Regional Director Kevin B. Currid, Division of Enforcement, Securities and Exchange 
Commission, 33 Arch Street, 24
th
 Floor, Boston, MA 02110. 
 
F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
be treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action.  Respondent shall not argue that it is entitled to, nor shall Respondent benefit by, offset or 
reduction of any award of compensatory damages by the amount of any part of Respondent’s 
payment of a civil penalty in this action (“Penalty Offset”).  If the court in any Related Investor 

Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a 
final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the 
amount of the Penalty Offset to the Securities and Exchange Commission.  Such a payment shall 
not be deemed an additional civil penalty and shall not be deemed to change the amount of the 
civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor  
Action” means a private damages action brought against Respondent by or on behalf of one or 
more investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
V. 
 
It is further Ordered that, solely for purposes of exceptions to discharge set forth in 
Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and 
admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil 
penalty or other amounts due by Respondent under this Order or any other judgment, order, 
consent order, decree or settlement agreement entered in connection with this proceeding, is a 
debt for the violation by Respondent of the federal securities laws or any regulation or order 
issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. 
§523(a)(19). 
 
By the Commission. 
 
 
 
      Vanessa A. Countryman 
      Secretary 
 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 93043 / September 17, 2021 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-20569 

 

 

 

In the Matter of 

 

Kenneth G. Friedrich, 

 

Respondent. 

 

 

 

 

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTIONS 15(b), 15B(c) AND 21C OF 

THE SECURITIES EXCHANGE ACT OF 

1934, MAKING FINDINGS, AND 

IMPOSING REMEDIAL SANCTIONS 

AND A CEASE-AND-DESIST ORDER 

 

I. 

 

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934 

(“Exchange Act”) against Kenneth G. Friedrich (“Friedrich” or “Respondent”).   

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over him and the subject matter of these 

proceedings, which are admitted, and except as provided herein in Section V, Respondent consents 

to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to 

Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934 and Section 9(b) of the 

Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a 

Cease-and-Desist Order (“Order”), as set forth below.   

 

 



III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 
 

This matter involves improper conduct by Friedrich in connection with RBC Capital 

Markets, LLC’s (“RBC”) purchase and sale of certain new issue municipal bonds from and to 

unregistered brokers known as “flippers.”  Friedrich served as Head of RBC’s Municipal Sales, 

Trading and Syndication group (the “Municipal Group”) from 2010 to June 2016.   

       

RBC’s internal policy for primary offerings required the firm’s syndicate desk, when acting 

as sole underwriter or senior syndicate manager, to allocate bonds according to a “standard 

methodology” that prioritized customer and dealer orders over orders for flippers absent different 

instructions from issuers.  However, between January 2014 and December 2017, the syndicate desk 

did not always follow the standard methodology, instead sometimes filling orders for flippers ahead 

and instead of institutional customer and dealer orders when orders exceeded the bonds available.  

In connection with one November 2015 offering where the issuer directed a retail order period, the 

syndicate desk also allocated some bonds to two flippers ahead and instead of retail customers 

although the flippers did not meet the issuer’s retail eligibility criteria.  From at least January 2014 

to June 2016, Friedrich was aware that the syndicate desk did not always follow the standard 

methodology and he permitted the underwriters on the syndicate desk to fill orders for flippers 

ahead and instead of customer and dealer orders.  He also participated in the decision to allocate 

bonds to flippers in the November 2015 offering.   

 

Between January 2014 and December 2017, RBC also used flippers to circumvent issuer 

priority instructions and receive higher priority for its dealer orders in some instances when RBC 

was not a participating underwriter in the offering.  From at least January 2014 to June 2016, 

Friedrich permitted RBC traders to place orders for new issue bonds with flippers.  He was aware 

that the flippers sometimes placed purported “customer” orders with the underwriters and, when 

allocated bonds, sold the bonds to RBC.   

 

As a result of this conduct, Friedrich violated Section 15B(c)(1) of the Exchange Act and 

Municipal Securities Rulemaking Board (“MSRB”) Rules G-11(k) and G-17.  He also violated 

MSRB Rule G-27, and failed reasonably to supervise within the meaning of Section 15(b)(4)(E) 

of the Exchange Act, with a view to preventing and detecting violations of MSRB Rules G-11(k) 

and G-17 by a certain registered representative. 

 

Respondent 

  

1. Kenneth G. Friedrich, age 57, resides in New York, New York.  From January 

1999 to June 2016, Friedrich was a registered representative associated with RBC.  From 2007 to 

                                                             
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 

person or entity in this or any other proceeding. 

 



2010, he served as Head of RBC’s sales desk in the Municipal Group and, from 2010 to June 2016, 

he served as Head of the Municipal Group.   

 

Relevant Entities 

 

2. RBC Capital Markets, LLC, incorporated in Minnesota with a principal place of 

business in New York, New York, is registered with the Commission as a broker-dealer, 

municipal securities dealer, investment adviser and municipal advisor.   

 

3. RMR Asset Management Company (“RMR”), was a California corporation 

with a principal place of business in Chula Vista, California.  RMR primarily bought and sold 

new issue bonds.  RMR was not registered with the Commission.  The Commission filed an 

enforcement action against RMR and its associates in August 2018.2  

  

4. Core Performance Management, LLC (“CPM”) was a Florida limited liability 

company located in Boca Raton, Florida that was dissolved on July 27, 2016.  CPM primarily 

bought and sold new issue municipal bonds.  CPM was not registered with the Commission.  The 

Commission filed an enforcement action against CPM and its associates in August 2018.3 

 

Background on Municipal Underwriting Process 

 

5. Municipalities often raise money by issuing bonds that are sold to the public 

through an underwriting process.  In what is known as a “negotiated” offering, the municipal 

issuer chooses a broker-dealer to act either as sole underwriter or as the senior manager of an 

underwriting syndicate.  An underwriting syndicate is a group of broker-dealers that join together 

to purchase new issue bonds from the issuer to distribute the bonds to the public.   

 

6. Negotiated offerings of new issue municipal bonds are conducted according to 

certain rules, including the “priority of orders,” which establishes the sequence in which bonds 

will be allocated to specific types of orders.  Issuer priority rules typically assign retail customer 

orders the highest priority in the bond allocation process.  Issuers generally prioritize customer 

orders ahead of orders for broker-dealers seeking bonds for their own inventory, and as a result 

such orders are often not filled.   

 

 

 

                                                             
2 SEC v. RMR Asset Management Company, et al., 18-CV-01895-AJB-JMA (S.D. Cal. filed Aug. 14, 2018) 

(partially settled action against RMR and 13 associated individuals for acting as unregistered brokers and, as to 10 of 

them, for engaging in fraudulent practices in connection with flipping new issue municipal bonds).  In August 2020, 

the U.S. District Court for the Southern District of California granted summary judgment to the SEC, finding that 

the three non-settling RMR associates acted as unregistered brokers in violation of Section 15(a) of the Exchange 

Act when they engaged in thousands of securities transactions for RMR.  

3 SEC v. Core Performance Management, LLC, et al., 18-CV-81081-BB (S.D. Fla., filed Aug. 14, 2018) (settled 

action against CPM and five associated individuals for acting as unregistered brokers and for engaging in fraudulent 

practices in connection with flipping new issue municipal bonds). 



RBC’s Standard Methodology for Allocating Bonds in Primary Offerings 

 

7. Between January 2014 and December 2017, RBC had a written internal policy 

(the “Policy”) relating to new issue municipal bond offerings.  The Policy established procedures 

that RBC’s syndicate desk was to follow when RBC was acting as sole underwriter or senior 

syndicate manager.  In the absence of different priority instructions from issuers, flippers were to 

receive the lowest priority.  Specifically, the Policy required RBC’s syndicate desk to adhere to a 

“standard methodology,” and prioritize orders and allocate bonds as follows: 

 

● 1st priority: Orders for Customers 

● 2nd priority: Orders for [RBC’s] own account, [RBC] related accounts or [RBC] 

affiliated accounts (or syndicate member’s own, related or affiliated accounts, if 

applicable) 

● 3rd priority: Orders for Broker-Dealers other than [RBC] and syndicate members 

● 4th priority: Any other orders 

 

8. The Policy defined “Customer” orders entitled to first priority under the standard 

methodology to “generally include all orders received by or on behalf of an individual or 

institution other than 2nd, 3rd and 4th priority.”  Orders that had last, or fourth, priority were 

defined as “[any] other orders, including orders such as those submitted by a customer who, in 

the reasonable belief of [RBC] plans to purchase the securities and immediately resell such 

securities at higher prices (known as a “flipper”) or instances in which [RBC] is unable to 

reasonably authenticate the status or qualification of an order during a retail order period directed 

by an Issuer.” 

 

9. Pursuant to the Policy, in advance of each negotiated offering where RBC’s 

syndicate desk acted as sole underwriter or senior syndicate manager, RBC provided issuers a 

written notice titled “Notice of Priority of Orders from and Allocations to Investors” (the 

“Notices”).  The Notices described the standard methodology, and they stated that RBC would 

“deviate from such priority only when deemed by [RBC] to be in the best interests of the 

syndicate or unless the Issuer otherwise consents.” 

 

10. The Policy further required RBC’s syndicate desk to document any and all 

deviations from established priority provisions, as well as the reasons for the deviations, and to 

keep that documentation and any issuer instructions in the firm’s underwriting files. 

 

Friedrich Permitted the Improper Allocation of New Issue Bonds to Flippers 

 

11. In 2008, Friedrich, as Head of Sales, appointed a single institutional salesperson 

to cover certain of RBC’s accounts for RMR, CPM and their affiliates (collectively, “the 

flippers”).  As a result of this structure, all of RBC’s municipal bond transactions with flippers 

were coordinated through the salesperson responsible for covering the flippers’ accounts.     

 

12. When serving as sole underwriter or senior syndicate manager, RBC’s syndicate 

desk did not always adhere to the standard methodology in the Policy and the Notices, in the 

absence of different priority instructions from issuers.  Instead, on at least 41 occasions when 



orders exceeded the new issue bonds available, the syndicate desk prioritized orders for flippers 

over orders for institutional customer and dealer orders.  As a result, the flippers orders’ 

“crowded out” institutional customer and/or dealer orders which should have been filled first.  

Further, RBC’s syndicate desk failed to document these deviations from the standard 

methodology or the reasons for them.  Friedrich knew that the syndicate desk did not always 

follow the standard methodology in the absence of different instructions from issuers, and he 

permitted the Head of the RBC syndicate desk (the “Syndicate Manager”) and the other 

underwriters on the syndicate desk to sometimes allocate bonds to the flippers ahead and instead of 

customers and dealers.  

 

13. For example, in March 2016, RBC served as senior manager for a negotiated 

offering of municipal bonds in the total principal amount of $62.2 million.  In connection with 

the offering, the salesperson who Friedrich assigned to cover the flipper accounts submitted four 

orders for three different bond maturities on behalf of RMR and two CPM affiliates.  Orders for 

the three bond maturities exceeded the available bonds by between 19% and 77%.  Despite this, 

RBC’s syndicate desk allocated a combined $1.1 million in the three bond maturities to RMR 

and the CPM affiliates.  As a result, approximately $7.9 million in institutional customer orders 

and approximately $7.8 million in dealer orders were not filled. 

 

14. In one offering during the relevant period, the syndicate desk also allocated 

oversubscribed bonds to the flippers ahead and instead of retail customers in contravention of the 

issuer’s priority instructions.  In November 2015, RBC acted as senior syndicate manager for a 

negotiated offering of municipal bonds in the total principal amount of $626.8 million.  The 

issuer directed that a retail order period be held in which first priority was to be given to retail 

customer orders.  Shortly before the retail order period closed, the salesperson who Friedrich 

assigned to cover the flippers submitted two orders for RMR and an order for a CPM affiliate to 

the syndicate desk.  The salesperson falsely certified that the orders met the issuer’s retail 

eligibility criteria and affirmed their eligibility by providing zip codes that were not associated 

with the flippers’ locations.  Friedrich and the Syndicate Manager participated in the decision to 

allocate bonds to the flippers in this offering.  Although Friedrich and the Syndicate Manager, 

who directly managed the offering, were aware that the flippers were not retail customers and 

that the flippers did not meet the issuer’s retail eligibility criteria, the syndicate desk allocated 

$500,000 in bonds of one maturity to RMR and $1,000,000 and $250,000 in bonds of another 

maturity to RMR and the CPM affiliate, respectively.  As a result, retail orders from other buyers 

for these maturities were not filled.   

  

15. Friedrich permitted the syndicate desk to deviate from the standard methodology 

because he understood that RBC benefitted from its relationships with the flippers, who often 

purchased new issue bonds from RBC in deals where there were not enough other buyers for the 

bonds.   

  

Friedrich Permitted the Improper Purchase of New Issue Bonds from Flippers 

16. When acquiring new issue municipal bonds for inventory, broker-dealers are 

required to submit dealer orders directly to the underwriters offering the bonds.  From at least 

January 2014 to June 2016, Friedrich permitted RBC traders to use flippers to circumvent this 

requirement and obtain higher priority for RBC’s orders in offerings in which the firm was not a 



participating underwriter.  When RBC’s trading desk wanted new issue bonds for inventory, the 

traders directed the salesperson Friedrich assigned to cover the flippers to place indications of 

interest in purchasing the bonds with the flippers.  Friedrich was aware that the flippers 

sometimes attempted to fill the indications they received from RBC by placing customer orders, 

which had higher priority than dealer orders, with the underwriters.  He also was aware that, 

when the flippers obtained bonds from the underwriters, they immediately sold or “flipped” the 

bonds to RBC.  Between January 2014 and December 2017, RBC improperly obtained bonds for 

inventory from flippers on at least 87 occasions.             

 

Friedrich Failed Reasonably to Supervise the Syndicate Manager 

17. Between January 2014 and June 2016, Friedrich was the first-level supervisor of 

RBC’s Syndicate Manager.  Friedrich was responsible for the Syndicate Manager’s compliance 

with the standard methodology in the Policy.  The Syndicate Manager did not always comply 

with the standard methodology and, at times, improperly prioritized orders for new issue bonds 

for the flippers ahead of institutional customer and dealer orders.  As discussed above, in 

connection with a November 2015 offering, the Syndicate Manager also failed to follow the 

issuer’s priority instructions and allocated bonds to fill “retail” orders for the flippers that were 

submitted to RBC’s syndicate desk during the retail order period when he knew that the flippers’ 

orders did not meet the issuer’s retail eligibility criteria.  The Syndicate Manager thereby 

violated Section 15B(c)(1) of the Exchange Act and MSRB Rules G-11(k) and G-17.     

 

Legal Discussion 

Friedrich Violated MSRB Rule G-17 

18. MSRB Rule G-17 provides that, in the conduct of its municipal securities 

business, every broker, dealer, municipal securities dealer, and municipal advisor shall deal fairly 

with all persons and shall not engage in any deceptive, dishonest, or unfair practice.  Negligence 

is sufficient to establish a violation of MSRB Rule G-17; no finding of scienter is required.  See 

Wheat, First Securities, Inc., Exch. Act Release No. 48378, 2003 WL 21990950, at *10 (Aug. 

20, 2003). 

 

19. As discussed above, Friedrich permitted the syndicate desk to sometimes fill 

orders for the flippers ahead and instead of institutional customer and dealer orders in 

contravention of the standard methodology in the Policy and the Notices.  In one offering, he 

participated in the decision to improperly designate and fill flipper orders as retail orders when 

he knew the flippers’ orders did not meet the issuer’s retail eligibility criteria for the offering.   

 

20. In addition, Friedrich permitted RBC traders to circumvent issuer priority 

instructions of certain new issue bond offerings by placing orders with the flippers for RBC’s 

inventory when he was aware that the flippers would sometimes place higher priority customer 

orders for RBC. 

 



21. By this conduct, Friedrich willfully4 violated MSRB Rule G-17.  

 

Friedrich Violated MSRB Rule G-11(k) 

 

22. MSRB Rule G-11(k) provides that each broker, dealer, or municipal 

securities dealer that submits an order during a retail order period to the senior syndicate 

manager or sole underwriter, as applicable, shall provide in writing the following information 

relating to each order designated as retail submitted during a retail order period: (i) whether 

the order is from a customer that meets the issuer’s eligibility criteria for participation in the 

retail order period; (ii) whether the order is one for which a customer is already conditionally 

committed; (iii) whether the broker, dealer, or municipal securities dealer has received more 

than one order from such retail customer for a security for which the same CUSIP number has 

been assigned; (iv) any identifying information required by the issuer, or the senior syndicate 

manager on the issuer’s behalf, in connection with such retail order (but not including 

customer names or social security numbers); and (v) the par amount of the order.5  

 

23. As discussed above, in connection with a November 2015 offering, Friedrich 

participated in the decision to allocate bonds to fill three “retail” orders for the flippers that 

were submitted to RBC’s syndicate desk, which was serving as senior syndicate manager, 

during the retail order period.  Friedrich was aware that the salesperson he assigned to cover 

the flippers falsely certified that the orders met the issuers’ retail eligibility criteria and 

included zip codes affirming their purported eligibility that were not associated with the 

flippers.  Friedrich was aware that the flippers’ orders did not meet the issuer’s retail 

eligibility criteria.     

 

24. By this conduct, Friedrich willfully violated MSRB Rule G-11(k). 

 

Friedrich Failed Reasonably to Supervise the Syndicate Manager 

 

25. Section 15(b)(6)(A)(i) of the Exchange Act incorporates by reference Section 

15(b)(4)(E) and provides for the imposition of sanctions against any individuals associated with a 

broker or dealer who fail reasonably to supervise others.  Such individuals may be held liable for 

failing to reasonably supervise those subject to their supervision when they ignore red flags, even if 

the firm does not have specific procedures to address the misconduct.  See, e.g., Bridge, Exch. Act 

Release No. 60736, 2009 WL 3100582, at *16-18 (Sept. 29, 2009) (Commission Opinion) (direct 

supervisor failed reasonably to supervise where he was “fully aware of, and complicit in,” 

misconduct, even though firm did not have policies or procedures to address the misconduct). 

 

 

                                                             
4 “Willfully,” for purposes of imposing relief under Sections 15(b) and 15B of the Exchange Act “means no more 

than that the person charged with the duty knows what he is doing.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 

2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). 

5 Rule G-11(k) further provides that the senior syndicate manager may rely on the information furnished by each 

broker, dealer, or municipal securities dealer that provided the information required by (i) - (v) unless the senior 

syndicate manager knows, or has reason to know, that the information is not true, accurate, or complete. 



26. MSRB Rule G-27(a) obligates brokers, dealers, and municipal securities dealers 

to “supervise the conduct of the municipal securities activities of the [firm] and its associated 

persons to ensure compliance with [MSRB] rules and the applicable provisions of the [Exchange] 

Act and rules thereunder.”  MSRB Rule G-27(b) obligates brokers, dealers, and municipal 

securities dealers to establish and maintain a system to supervise the municipal securities 

activities of each associated person that is reasonably designed to achieve compliance with 

applicable securities laws, regulations and MSRB rules. 

  

27. As discussed above, the Syndicate Manager violated Section 15B(c)(1) of the 

Exchange Act and MSRB Rules G-11(k) and G-17 by allocating bonds to orders for flippers 

ahead and instead of Customer and dealer orders in contravention of the Policy and Notices in 

the absence of different issuer instructions.  The Syndicate Manager also allocated bonds to retail 

orders submitted to the syndicate desk on behalf of the flippers when he knew that the orders did 

not meet the issuer’s retail eligibility criteria.  Although Friedrich was aware that the Syndicate 

Manager was engaging in this misconduct, he did not take any action as his direct supervisor to 

prevent the misconduct.    

 

28. As a result, Friedrich failed reasonably to supervise the Syndicate Manager, within 

the meaning of Section 15(b)(4)(E) of the Exchange Act, with a view to preventing and detecting 

the Syndicate Manager’s violations of MSRB Rules G-11(k) and G-17, and willfully violated 

MSRB Rule G-27. 

 

Friedrich Violated Section 15B(c)(1) of the Exchange Act 

 

29. Section 15B(c)(1) of the Exchange Act prohibits a broker, dealer or municipal 

securities dealer from effecting interstate transactions in, or inducing or attempting to induce the 

purchase or sale of, any municipal security in contravention of any rule of the MSRB.  

 

30. As a result of the negligent conduct described above and his willful violations of 

MSRB Rules G-11(k), G-17 and G-27, Friedrich willfully violated Section 15B(c)(1) of the 

Exchange Act. 

 

IV. 

On the basis of the foregoing, the Commission deems it appropriate, in the public interest, 

to impose the sanctions agreed to in Respondent’s Offer. 

 

Accordingly, pursuant to Sections 15(b), 15B(c), and 21C of the Exchange Act, it is 

hereby ORDERED that: 

 

A. Friedrich cease and desist from committing or causing any violations and any 

future violations of Section 15B(c)(1) of the Exchange Act. 

 

B. Friedrich is censured. 

 

C. Friedrich shall be, and hereby is, subject to the following limitations on 

activities for six months, commencing immediately upon the entry of this Order: 



 

Friedrich shall not act in a supervisory capacity with any broker, dealer, investment 

adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally 

recognized statistical rating organization for the time period specified above; and 

 

Friedrich shall not offer, purchase, or sell negotiated new issue municipal securities 

on behalf of (1) any broker, dealer, investment adviser, or municipal securities 

dealers, or (2) any customer or client of any broker, dealer, investment adviser, or 

municipal securities dealer, for the time period specified above. 

D. Friedrich shall, within 10 days of the entry of this Order, pay a civil money 

penalty in the amount of $30,000 to the Securities and Exchange Commission, of which a total 

of $9,000 shall be transferred to the MSRB in accordance with Section 15B(c)(9)(A) of the 

Exchange Act, and of which the remaining $21,000 shall be transferred to the general fund of 

the United States Treasury in accordance with Section 21F(g)(3) of the Exchange Act.  If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 

 

E. Payments must be made in one of the following ways: 

 

(1) Respondent may transmit payments electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request; 

 

(2) Respondent may make direct payment from a bank account via 

Pay.gov through the SEC website at 

http://www.sec.gov/about/offices/ofm.htm; or 
 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

 

Enterprise Services Center Accounts Receivable Branch HQ Bldg.,  

Room 181, AMZ-341 6500 South MacArthur Boulevard, Oklahoma  

City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter 

identifying RBC as a Respondent in these proceedings and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Assistant 

Regional Director Kevin B. Currid, Division of Enforcement, Securities and Exchange 

Commission, 33 Arch Street, 24th Floor, Boston, MA 02110. 

 

F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 

be treated as penalties paid to the government for all purposes, including all tax purposes.  To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action.  Respondent shall not argue that it is entitled to, nor shall Respondent benefit by, offset or 

reduction of any award of compensatory damages by the amount of any part of Respondent’s 

payment of a civil penalty in this action (“Penalty Offset”).  If the court in any Related Investor 

http://www.sec.gov/about/offices/ofm.htm


Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a 

final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the 

amount of the Penalty Offset to the Securities and Exchange Commission.  Such a payment shall 

not be deemed an additional civil penalty and shall not be deemed to change the amount of the 

civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor  

Action” means a private damages action brought against Respondent by or on behalf of one or 

more investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding. 

 

V. 

 

It is further Ordered that, solely for purposes of exceptions to discharge set forth in 

Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and 

admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil 

penalty or other amounts due by Respondent under this Order or any other judgment, order, 

consent order, decree or settlement agreement entered in connection with this proceeding, is a 

debt for the violation by Respondent of the federal securities laws or any regulation or order 

issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. 

§523(a)(19). 

 

By the Commission. 

 

 

 
      Vanessa A. Countryman 

      Secretary