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mutual funds, persons designated in such issuers’ prospectuses as authorized to consummate transactions in any such security, their principal underwriters, or dealers in the funds’ securities, to sell and redeem fund shares at a price based on the current NAV next computed after receipt of an order to buy or redeem. World Markets, by virtue of dealer agreements with the mutual funds, was a dealer within the meaning of Rule 22c-1. World Markets, through RRs in Broker Doe’s team, accepted and executed trades after the close of the United States equity markets at a price other than the current NAV which was next computed after receipt of a tender of such security for redemption or of an order to purchase or sell such security. As a result of the conduct described above, World Markets willfully violated Rule 22c-1 under the Investment Company Act.

54.

As a result of the conduct described above, World Markets willfully violated

Section 7(c) of the Exchange Act and Regulation T promulgated by the Federal Reserve Board,

which prohibits the unlawful extension of credit to customers. Regulation T governs the extension of credit by broker-dealers. Regulation T also prohibits broker-dealers from willfully arranging the extension of credit that violates the limitations set forth in Regulation U. World Markets violated

Regulation T because Broker Doe and his team “arranged” for CIHI to extend credit to World Markets’ customers that violated Regulation U.

55.

As a result of the conduct described above, World Markets willfully violated

Section 11(d) of the Exchange Act, which prohibits any broker-dealer from effecting a transaction in which it has, among other things, arranged for the direct or indirect extension of credit on any security (other than an exempted security) which was a part of a new issue in the distribution of which it participated as a member of a selling syndicate or group within 30 days prior to the transaction. Because open-ended mutual fund shares are continuously in distribution, they are considered a “new issue.” Rule 11d1-2 permits a broker-dealer to extend, maintain, or arrange for the extension or maintenance of credit on mutual fund shares if the customer has owned the securities for at least thirty days. Thus, in order for a broker-dealer’s arranging for the extension of credit in connection with the purchase of mutual fund shares to be proper, the shares must have been held by the buyer for thirty days prior to the extension of credit. World Markets, while acting as a broker-dealer, arranged for the extension of credit to customers that had held the subject mutual fund shares for less than 30 days prior to the credit extension (indeed, the mutual funds shares were not purchased through World Markets until after the extension of credit). In so doing,

World Markets violated Section 11(d)(1) of the Exchange Act.

56.

As a result of the conduct described above, World Markets willfully violated

Section 17(a) of the Exchange Act and Rule 17a-3 thereunder, which require registered brokers

and dealers to make and keep current specified books and records. World Markets could not locate trading spreadsheets that a certain customer sent in 2002. World Markets treated these spreadsheets as order tickets under Rule 17a-3(a)(6). Whether executed or not, these spreadsheets

were books and records that World Markets, as a broker-dealer, was required to maintain. Thus, World Markets’ failure to make and keep current order tickets violated Rule 17a-3.

E.

Respondents Remedial Efforts

14

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