SEC alleges that Kendrick dealt munis through Southwest after exceeding campaign contribution limits

By Jennifer Chiou

New York, March 24 - The Securities and Exchange Commission said that it issued an order of cease-and-desist proceedings against John F. Kendrick of Medfield, Mass.

The Division of Enforcement alleged that Kendrick was a registered representative associated with Southwest Securities, Inc., a registered broker-dealer and municipal securities dealer, and that he engaged in municipal securities business with the Commonwealth of Massachusetts and some related state governmental units within two years of breaching campaign contribution maximums.

According to the order, between December 2000 and July 2009, Kendrick was involved in activities that constituted solicitation of municipal securities business from certain issuers on behalf of Southwest and thus was a municipal finance professional under MSRB Rule G-37.

The SEC said that from 2003 to 2008, Kendrick contributed $1,625 to Timothy Cahill, the treasurer of Massachusetts, through seven different checks during two election cycles.

Specifically, the order alleges that on Feb. 8, 2003, March 25, 2004 and June 22, 2005, Kendrick contributed $250 to the treasurer through three different personal checks, for a total of $750, placing his total contributions for the primary election in 2006 above the $250 de minimis exception.

The order went on to cite several other instances in which Kendrick overran the contribution limits.

In addition, according to the SEC order, the treasurer is responsible for, or has the authority to appoint people who are responsible for, the hiring of brokers, dealers or municipal securities dealers for the state and certain governmental units.

Each of the over-contributions triggered a two-year ban on municipal securities business. During these ban periods, Southwest, with Kendrick's knowledge, participated as co-manager for a total of 19 negotiated underwritings by government issuers totaling about $14 billion, the SEC said.

Further, Kendrick made roughly 82 solicitation requests for campaign contributions relating to the fundraiser for the treasurer's campaign committee.

The SEC said that a hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the order are true.

Based on the allegations, the order requires Southwest to:

• Cease and desist from committing or causing any violations and any future violations of MSRB Rule G-37(b) and MSRB Rule G-37(e);

• Pay disgorgement of $348,154 and prejudgment interest of $71,993; and

• Settle an assessed $50,000 civil money penalty.

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