UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No. 3-15014

In the Matter of

JP TURNER & COMPANY,

LLC, and WILLIAM L. MELLO

Respondents.

PROPOSED PLAN OF DISTRIBUTION

1.

Purpose and Background. The Division of Enforcement submits this

Proposed Plan of Distribution (“Plan”) to the United States Securities and Exchange

Commission (“Commission”) pursuant to Rule 1101 of the Commission’s Rules on Fair

Fund and Disgorgement Plans (“Rules”).1 This Plan proposes a distribution of certain

funds collected by the Commission in this proceeding for the benefit of affected

customers that were harmed when their accounts were churned by three registered

representatives employed by JP Turner & Company, LLC (“JP Turner”) from January 1,

2008, through December 31, 2009.

On September 10, 2012, the Commission entered an Order Instituting

Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of

1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and

Imposing Remedial Sanctions (“Order”) against JP Turner and its former president,

William L. Mello (collectively, “Respondents”).2

The Order stated that Respondents failed reasonably to supervise three registered

representatives who churned affected customers’ accounts for the purpose of generating

commission business by engaging in excessive trading in disregard of the affected

customers’ investment objectives and financial needs. According to the Order, JP Turner

reaped approximately $845,000 in commissions, fees, and margin interest as a result of

the registered representatives’ churning.

1

2

17 C.F.R. § 201.1101.

Exchange Act Rel. No. 67808 (Sept. 10, 2012).

In anticipation of the institution of the proceedings, Respondents submitted Offers

of Settlement, which the Commission accepted. Pursuant to the Order, JP Turner paid

disgorgement of $200,000, prejudgment interest of $16,051, and a civil money penalty in

the amount of $200,000, and William L. Mello paid a civil money penalty in the amount

of $45,000 for a combined payment of $461,051. The penalties paid are to be transferred

to the United States Treasury. The remaining amount, $216,051, constitutes the fund

available for distribution (the “Distribution Fund”). The Distribution Fund is subject to

the continuing jurisdiction and control of the Commission and the Distribution Fund is

currently on deposit in a Commission designated non-interest bearing account at the

United States Department of Treasury (“U.S. Treasury”). This Plan is subject to approval

by the Commission, and the Commission retains jurisdiction over the implementation of

this Plan.

Under this Plan, the Distribution Fund, less any reserve for taxes, fees or other

expenses of administering this Plan (the “Net Distribution Fund”), will be available for

distribution to Eligible Customers as defined in paragraph 4 of this Plan.

2.

Fund Administrator. Nichola L. Timmons, Assistant Director of

Distributions, Logistics and Services in the Commission’s Division of Enforcement, is

proposed to act as the administrator of the Distribution Fund (“Fund Administrator”). As

a Commission employee, the Fund Administrator will receive no compensation from the

Distribution Fund for her services in administering the Distribution Fund. In accordance

with Rule 1105(c) of the Commission’s Rules, 17 C.F.R. § 201.1105(c), no bond is

required since the Fund Administrator is a Commission employee. In carrying out her

duties, the Fund Administrator may be assisted by other Commission staff acting under

her supervision.

The Fund Administrator will, among other things: oversee the administration of

the Distribution Fund; obtain mailing information for Eligible Customers, distribute

money from the assets of the Distribution Fund in accordance with this Plan, resolve

disputes, distribute the Distribution Fund to Eligible Customers, prepare a final

accounting with assistance from the Tax Administrator as defined in paragraph 3 of this

Plan, and provide the Tax Administrator with funds to pay tax liabilities and tax

compliance fees and costs, pursuant to the Omnibus Order Directing the Appointment of

Tax Administrator in Administrative Proceedings that Establish Distribution Funds

(Exchange Act Rel. No. 68683 (Jan. 17, 2013)).

3.

Tax Administrator. The Commission has appointed Damasco and

Associates, LLP as the Tax Administrator (“Tax Administrator”) of the Distribution Fund

(Exchange Act Rel. No. 67958 (Oct. 2, 2012)). The Fund Administrator will cooperate

with the Tax Administrator in providing information necessary to accomplish the income

tax compliance and any other work ordered to the Tax Administrator by the Commission.

The Tax Administrator will be compensated for reasonable costs and expenses from the

Distribution Fund in accordance with its 2011-2012 Engagement Letter Agreement with

the Commission, and tax obligations will be paid out of the Distribution Fund.

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4.

Specification of Eligible Distribution Fund Recipients. The Fund

Administrator will make distributions from the Net Distribution Fund to those JP Turner

customers that have been harmed by the conduct described in the Order (individually,

each an “Eligible Customer” and collectively, the “Eligible Customers”). A customer

will be deemed harmed only if that customer suffered a net harm by virtue of the conduct

described in the Order and as calculated pursuant to paragraph 7 of this Plan.3

5.

No claims-made process. The Distribution Fund is not being distributed

according to a claims-made process, so the procedures for providing notice and for

making and approving claims are not applicable.

6.

Qualified Settlement Fund. The Distribution Fund constitutes a Qualified

Settlement Fund (“QSF”) under Section 468B(g) of the Internal Revenue Code, 26

U.S.C. § 468B(g), and related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5.

7.

Methodology for Determining Distribution Amounts. The Fund

Administrator will determine the amount to be distributed to each Eligible Customer in

the following manner. First, the Fund Administrator will determine, for each affected

customer, using brokerage statements and other information collected by the Commission

staff, the total amount of commissions, fees, and margin interest that each affected

customer was charged as a result of the churning described in the Order (“Gross Harm

Amount”).

Second, for each affected customer, the Fund Administrator will determine a net

harm amount suffered by virtue of the conduct described in the Order (“Net Harm

Amount”). The Net Harm Amount is defined as the affected customer’s Gross Harm

Amount, less any monies the affected customer received as settlements, insurance, or

other payments in connection with the conduct at issue in this matter from Respondents,

or any other third party.

Because the total of all Eligible Customers’ Net Harm Amounts is less than the

approximate amount of the Net Distribution Fund, the Fund Administrator anticipates the

Distribution Fund will be able to pay each Eligible Customer the Net Harm Amount, plus

the time value of money. The Fund Administrator will then calculate the present value of

each affected customer’s Net Harm Amount by adjusting the customer’s harm amounts

for the time value of money.4 Each affected customer with a Present Value of Net Harm

Amount that is greater than $100 is an Eligible Customer for purposes of receiving a

3

The Commission staff is aware of approximately seven (7) JP Turner customers who were harmed by the

conduct described in the Order. However, since some of these customers have already been fully

reimbursed for their harm, they do not meet the definition of an Eligible Customer for purposes of this

Plan. As a result of the smaller pool of Eligible Customers, it is anticipated that all Eligible Customers will

be fully reimbursed for their harm (the commissions, fees, and margin interest that each affected customer

was charged as a result of the churning).

4

The present value calculation applies interest to the harm amount and compounds quarterly from the date

of the harm through December 31, 2014 using the Federal quarterly short-term interest rate, as determined

by the Internal Revenue Service for each calendar quarter.

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distribution pursuant to this Plan. An Eligible Customer’s payment from the Distribution

Fund will not exceed his or her Present Value Net Harm Amount.

In the view of the Fund Administrator, this methodology constitutes a fair and

reasonable allocation of the Distribution Fund. Based on this methodology, it is

anticipated that there will be one distribution to the Eligible Customers, which will take

place as outlined in paragraph 9 of this Plan, with each Eligible Customer’s Distribution

Amount equal to his or her Present Value of Net Harm Amount. Based on this

methodology, the individual Net Harm Amounts and Distribution Amounts for Eligible

Customers are as follows:

Eligible

Customer

Eligible

Customer #1

Eligible

Customer #2

Eligible

Customer #3

Total

Net Harm

Amount

Time

Value of

Money on

Net Harm

Amount

Distribution

Amount

None

$90,684

$1,903

$92,587

$35,706

None

$35,706

$715

$36,421

$53,080

None

$53,080

$2,464

$55,544

$179,470

$0

$179,470

$5,082

$184,552

Gross

Harm

Amount

Third

Party

Payment

Received

$90,684

8.

Procedures for Locating and Notifying Eligible Customers. On the basis

of information obtained by the Commission staff based on review and analysis of

applicable records, the Fund Administrator will identify the Eligible Customers. Within

sixty (60) days of the Commission’s approval of this Plan, the Fund Administrator will

send each Eligible Customer a notice by United States Postal Service regarding the

Commission’s approval of this Plan, and a check for each customer’s Distribution Fund

payment, and, including as appropriate, a statement characterizing the distribution, a link

to this Plan on the Commission’s website and instructions for requesting a copy of this

Plan, a Net Harm Amount calculation and a preliminary Gross Distribution Amount, a

description of the tax information reporting and other related tax matters, the procedure

for the distribution as set forth in this Plan, and the name of the Fund Administrator to

contact with questions regarding the distribution (“Plan Notice”).5 The Fund

Administrator will coordinate with the Tax Administrator to request information from

each Eligible Customer that is needed to accomplish the distribution in accordance with

applicable tax requirements relating to the Distribution Fund.

5

Information obtained from JP Turner may be provided to the Fund Administrator for purposes of

contacting investors.

4

If a Plan Notice and Distribution Fund payment are returned as undeliverable, the

Fund Administrator will make all reasonable efforts to ascertain an Eligible Customer’s

correct address. The Fund Administrator will then resend the Plan Notice and

Distribution Fund payment to the Eligible Customer’s new address within thirty (30) days

of receipt of the returned Plan Notice and distribution check. If the Plan Notice and

Distribution Fund payment are returned again, and the Fund Administrator, despite all

reasonable efforts, is unable to find an Eligible Customer’s correct address, the Eligible

Customer’s payment will be deemed undistributed funds to be handled as described in

paragraph 16.

9.

Distribution Timing. The Fund Administrator will use her best efforts to

start the distribution within sixty (60) days of this Plan’s approval.

10.

Bureau of the Fiscal Service; Validation and Approval of Disbursement of

the Distribution Fund. The Distribution Fund disbursement to Eligible Customers will be

implemented by the Commission and disbursed through the U.S. Treasury’s Bureau of

the Fiscal Service (“BFS”), which will mail checks or electronically transfer funds to

each payee as instructed by the Fund Administrator. The Fund Administrator will

compile the payee information and prepare a payment file in a Commission-approved

format for submission to the Commission to make the disbursements through BFS.

Pursuant to Rule 1101(b)(6), the Fund Administrator will obtain an order from the

Commission to disburse the Distribution Fund.

The Fund Administrator will work with BFS to obtain information about

uncashed checks, any returned items due to non-delivery, insufficient addresses, and/or

other deficiencies. The Fund Administrator is responsible for researching and reconciling

errors and reissuing payments when possible. The Fund Administrator also is responsible

for accounting for all payments. Checks issued by BFS will state on their face that they

are valid for one year. If any checks issued are not cashed within the one year time

period, the Fund Administrator will work with BFS to identify all uncashed checks.

In the event that there are uncashed checks, the Fund Administrator will determine the

extent to which under the circumstances in this distribution it would be appropriate and

feasible to make additional efforts to contact investors holding such checks. Following

the conclusion of any efforts by the Fund Administrator to locate any such investors,

remaining uncashed checks will be deemed undistributed funds to be handled as

described in paragraph 16 of this Plan.

11.

Accountings. When all funds have been disbursed except for the residual

described in paragraph 16 of this Plan, the Fund Administrator will submit a final

accounting pursuant to Rule 1105(f) for the approval of the Commission prior to the

discharge of the Fund Administrator. Since the funds are being held in a Commission

designated account at the U.S. Treasury, and Commission staff is proposed as the Fund

Administrator, no interim accountings will be made.

12.

Expenses of Administration. Fees and other expenses of administering this

Plan will be paid from the Distribution Fund.

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13.

Amendments and Procedural Deadline Extensions. The Fund

Administrator will take reasonable and appropriate steps to distribute the Distribution

Fund according to this Plan. If there are any changes to the Plan that are determined to

be material, Commission approval is required prior to implementation by amending this

Plan, which may be done upon the motion of any party, the Fund Administrator, or upon

the Commission’s own motion. Immaterial changes may be made by the Fund

Administrator. For good cause shown, the Fund Administrator may extend any of the

procedural dates set forth in this Plan.

14.

Procedure for the Receipt of Additional Funds. No additional funds are

expected to be received for this matter so this Plan does not provide for a procedure for

such funds.

15.

Procedures for Disputing Amounts Received. Disputes will be limited to

calculations of disbursement amounts to Eligible Customers. Within thirty (30) days of

the date that an Eligible Customer’s disbursement is made, the Fund Administrator must

receive a written communication detailing the dispute along with any supporting

documentation. The Fund Administrator will investigate the dispute, and such

investigation will include a review of the written dispute as well as any supporting

documentation. Within thirty (30) days of receipt of the written dispute, the Fund

Administrator will notify the Eligible Customer of her resolution of the dispute, which

will be final. This procedure will be set forth in the Plan Notice.

16.

Disposition of Undistributed Funds. A residual account within the

Distribution Fund will be established for any amounts remaining after the final

disbursement to Eligible Customers from the Distribution Fund. The residual account

may include funds reserved for future taxes and related expenses, distributions from

checks that have not been cashed, from checks that were not delivered or from funds

returned to the Commission, tax refunds for overpayment or for waiver of IRS penalties.

All funds remaining in the residual account will be transferred to the U.S. Treasury after

the final accounting is approved by the Commission.

17.

Final Accounting and Discharge of the Fund Administrator. Following the

final disbursement from the Distribution Fund to Eligible Customers, the Fund

Administrator will make arrangements for the final payment of taxes and Tax

Administrator fees and will submit a final accounting to the Commission. When the

Commission has approved the final accounting, staff will seek an order from the

Commission: (1) to transfer the remaining residual amounts to the U.S. Treasury; and (2)

to discharge the Fund Administrator.

18.

Notice of Proposed Plan and Opportunity for Comment. The Notice of

the Proposed Plan of Distribution and Opportunity for Comment (“Notice”) will be

published in the SEC Docket and on the Commission’s website at http://www.sec.gov.

Any person or entity wishing to comment on this Plan must do so in writing by

submitting their comments within thirty (30) days of publication of the Notice (i) to the

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Office of the Secretary, United States Securities and Exchange Commission, 100 F

Street, NE, Washington, DC 20549-1090; (ii) by using the Commission’s Internet

comment form (www.sec.gov/litigation/admin.shtml); or (iii) by sending an email to rulecomments@sec.gov. Comments submitted by email or via the Commission’s website

should include “Administrative Proceeding File Number 3-15014” in the subject line.

Comments received will be available to the public. Thus, persons should only submit

information that they wish to make publicly available.

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