IN THE MATTER OF

LLOYD'S; a/k/a the CORPORATION No. 96-30-S

OF LLOYD'S, a.k.a. SOCIETY OF LLOYD'S;

a.k.a. LLOYD'S OF LONDON, ALL PERSONS

IN POSITIONS OF CONTROL OF AND

ALL PERSONS EMPLOYED BY OR OTHERWISE

AFFILIATED WITH THOSE ENTITIES

The Arkansas Securities Department (the "Department") has received information and has in its possession certain evidence which indicates that Lloyd's, the Corporation of Lloyd's, the Society of Lloyd's, Council of Lloyd's, managing Agents, and the Members' Agents (hereafter referred to collectively as "Lloyd's), have violated provisions of the Arkansas Securities Act (the "Act"), which is codified at Ark. Code Ann. § 23-42-101, et seq.

The department has received complaints from investors concerning Lloyd's activities and sale of investments to residents of Arkansas. An ongoing investigation has revealed the following facts:

1. Lloyd's is variously known as, and hold itself out to be, among other designations, Lloyd's, the Corporation of Lloyd's, Society of Lloyd's, Lloyd's of London. Lloyd's has its last known address and place of business at One Lime Street, London, EC3M 7HA, England.

2. Lloyd's is comprised, in part, of a society of persons known as members who provide the capital to underwrite insurance sold at Lloyd's.

3. A member's investment interest at Lloyd's is known as a membership. Lloyd's members place their entire net worth at risk by investing in Lloyd's insurance syndicates. A goal of the members' investments is to receive more money in premiums on the risks accepted on the members' behalf than is paid out on claims.

4. Lloyd's has made memberships available worldwide to individuals, including residents of the state of Arkansas.

5. The Arkansas members have at all times been passive investors who took no part in the day-to-day business operations of Lloyd's. The Arkansas members invested in Lloyd's syndicates by paying a non-refundable entrance fee to Lloyd's paying an annual subscription fee and satisfying the Lloyd's deposit requirement by posting a letter of credit in favor of, and for the benefit of, Lloyd's.

6. In obtaining and renewing memberships and Lloyd's syndicate participations on an annual basis, the Arkansas members were solicited in this state by Lloyd's and/or underwriting agents under Lloyd's control, received correspondence in this state, and executed documents in this state.

7. Lloyd's is not a registered agent or registered broker-dealer in the state of Arkansas as required by the Act.

8. Lloyd's is and has been offering for sale and has sold securities in the state of Arkansas in the form of memberships, syndicate participations and annual renewals of those memberships and syndicate participations. These securities were neither registered nor exempt from registration in the state of Arkansas as required by the Act.

9. This Order is necessary and appropriate in the public interest and for the protection of investors, and consistent with the purposes fairly intended by the policy and provisions of the Act.

1. Lloyd's memberships and annual syndicate participations constitute securities as defined by Ark. Code Ann. §23-42-102.

2. Ark. Code Ann §23-42-501 provides that it is unlawful for any person to offer or sell any security in this state unless it is registered under provisions of the Act or the security or transaction is exempted from registration under §§23-42-503 or 23-42-504 of the Act.

3. Ark. Code Ann §23-42-102 provides that "sell" includes every contract of sale of, contract to sell, or disposition of a security or interest in a security for value, and "offer" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.

4. Ark. Code Ann §23-42-301 provides that it is unlawful for any person to transact business in this state as a broker-dealer or agent unless they are registered.

5. Ark. Code Ann §23-42-209 provides that, whenever it appears to the commissioner, upon sufficient grounds or evidence satisfactory to the Commissioner, that any person has engaged in any act or practice constituting a violation of any provision of the Act, he may summarily order the person to cease and desist from the act or practice.

6. This order does not prevent the Commissioner from seeking such other civil or criminal remedies as may be available under the Act.

It is the opinion of the Commissioner that the Findings of Fact and Conclusions of Law set forth in the preceding paragraphs reasonably support the conclusion that Lloyd's has engaged in conduct which constitutes a violation of the Act and that this Order is appropriate, in the public interest and necessary for the protection of investors in the State of Arkansas.

Wherefore, it is hereby summarily ORDERED that Lloyd's and its officers, directors, employees, representatives, agents, affiliates, successors and assigns CEASE AND DESIST from:

1. Soliciting or accepting individuals or corporations in Arkansas as new members of Lloyd's or offering or selling any security to any existing Arkansas member, except upon actual notice to the Commissioner and pursuant to procedures set forth in Arkansas laws and regulations, or specific procedures for doing so agreed upon hereafter between Lloyd's and the Commissioner, and

2. Drawing upon, or causing to be drawn upon, assets or letters of credit supplied by any Arkansas member, or seeking recourse against other assets of any such Arkansas member, and

3. Transferring any of the Arkansas members' contributions in the hands of Citibank, N.A. whether under the Central Fund United States Trust Fund, or any successor trust fund, except in the ordinary course of business, without giving at least 10 days actual notice as received by the Commissioner.

It is further ORDERED that nothing herein shall be construed to:

1. Interfere with the implementation of Lloyd's plan of Reconstruction and Renewal or the payment of policy holders by (a) restricting in any manner any Lloyd's Premiums Trust Funds or Lloyd's Central Funds maintained for the benefit of policy holders or (b) restricting Lloyd's communications with Arkansas members; or

2. Preclude any Arkansas member who wishes to do so from negotiating and individual settlement with the Lloyd's Financial Recovery Department.

IT IS SO ORDERED.

EXECUTED this 15th day of May, 1996

JOE E. MADDEN, JR.

SECURITIES COMMISSIONER