United States of America
before the
Securities and Exchange Commission

Securities Exchange Act of 1934
Release No. 34-47255 / January 24, 2003

Administrative Proceeding
File No. 3-10739

I.

An Order Instituting Public Administrative and Cease-and-Desist Proceedings against Harvest Financial Corporation, Frank D. Ruscetti and Robert A. Papariella ("OIP") was issued by the Securities and Exchange Commission ("Commission") on March 25, 2002. In these proceedings instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondent Frank D. Ruscetti ("Ruscetti") has submitted an Offer of Settlement which the Commission has determined to accept. Further, the Commission now deems it appropriate to issue an Amended Order Instituting Cease-and-Desist Proceeding Pursuant to Section 21C of the Exchange Act ("Amended Order") against Harvest Financial Corporation ("Harvest"). The cease-and-desist proceeding being instituted against Harvest in the Amended Order is in addition to the pending administrative proceeding instituted against Harvest in the OIP. In anticipation of the issuance of the Amended Order, Harvest has submitted an Offer of Settlement, which the Commission has determined to accept.

Accordingly, IT IS ORDERED that a proceeding pursuant to Section 21C of the Exchange Act be, and hereby is, instituted against Harvest.

II.

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 them and the subject matter of these proceedings, which are admitted, Harvest and Ruscetti consent to the entry of this Amended Order Instituting Cease-And-Desist Proceeding Pursuant to Section 21C of the Securities Exchange Act of 1934 as to Harvest Financial Corporation and Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order") pursuant to Sections 15(b) and 21C of the Exchange Act as set forth below.

III.

On the basis of this Order, Harvest's Offer of Settlement and Ruscetti's Offer of Settlement, the Commission finds that:

A. The Respondents and Related Person

1. Respondent Harvest is a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act. It is a Pennsylvania corporation located in Pittsburgh, Pennsylvania, and has been registered as a broker-dealer since 1981. Harvest has no branch offices, and employed approximately 20 registered representatives, including 12 independent contractors, during the relevant time period. Harvest is a member of the National Association of Securities Dealers, Inc.

2. Respondent Ruscetti, age 53, is the president and treasurer of Harvest, where he also acts as a registered representative. Also, Ruscetti has been a registered principal of Harvest since 1984. Ruscetti supervised registered representatives at Harvest during the relevant time period, including Robert A. Papariella ("Papariella"), and was responsible for Harvest's supervisory policies and procedures. Ruscetti lives in Pittsburgh, Pennsylvania.

3. Papariella was employed as a registered representative at Harvest from May 1999 through March 2001. Papariella, age 53, was permitted to resign from Harvest. Papariella had been permitted to resign from two previous employers in 1992 and 1999. Papariella resigned in 1999 because of four customer complaints. Papariella is currently not associated with a broker-dealer.

B. Introduction

1. This matter arises from Papariella's recommendation and execution of an unsuitable investment strategy that involved frequent, aggressive trading in four customer accounts while he was employed at Harvest, and his churning of those four accounts in willful violation of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from Harvest's and Ruscetti's failure reasonably to supervise Papariella with a view to preventing violations of these provisions. Harvest also violated Section 17(a) of the Exchange Act and Rule 17a-4 thereunder for failing to properly preserve certain books and records.

2. From approximately August 1999 through February 2001, Papariella disregarded the conservative investment objectives of four customers at Harvest, and instead recommended an unsuitable, aggressive trading strategy which he executed in their accounts. He also misrepresented or omitted to disclose to them the risks inherent in this strategy. Furthermore, Papariella churned those four customer accounts. Papariella advanced his own interests to the detriment of his customers and generated gross commissions totaling $132,655 from his fraudulent trading activity in these accounts.

3. Ruscetti failed adequately to respond to indications of problems with Papariella's trading activity in customer accounts, including the suitability of his trading strategy for these four customers' investment objectives, the frequency of the trading, and the level of commissions charged to the customers' accounts. Further, Harvest lacked adequate supervisory and compliance procedures, including procedures regarding delineation of supervisory responsibilities, and monitoring and reviewing trading activity by registered representatives. Harvest and Ruscetti failed reasonably to supervise Papariella.

C. Churning and Unsuitable Trading by Papariella

1. Beginning in at least August 1999 and continuing through February 2001, Papariella engaged in a scheme to defraud investors by recommending and executing an unsuitable investment strategy in four customer accounts at Harvest in contradiction of the customers' conservative objectives, and by churning the securities in those accounts. Papariella knew or was reckless in not knowing that he had recommended and executed securities transactions in his customers' accounts that were unsuitable and contrary to the customers' conservative investment objectives and their best interests. Furthermore, Papariella knew or was reckless in not knowing that he churned the securities in those customer accounts for the purpose of advancing his own interests by generating additional commissions for himself. Papariella controlled the activity in these four customer accounts either through oral discretionary authority given by the customer, or through de facto control exercised by Papariella by taking advantage of the customers' lack of investment experience and their trust in his investment recommendations, judgment and honesty.

2. To assist him in servicing his customers' accounts, Papariella employed a staff of approximately four people, whom Papariella collectively called "the Papariella Group." Papariella was aware of and controlled the activities of the Papariella Group. He knew about their contacts with customers and their actions regarding customer accounts because he directed such contacts or actions.

3. As to four customer accounts, Papariella failed to determine their suitability for his investment strategy, traded in their accounts in violation of their investment objectives, and altered the investment objective section of the securities account agreement of three customers. Papariella's excessive and unsuitable transactions in these four customer accounts, without proper authority, resulted in high, annualized turnover ratios and high commission to equity ratios.

D. Ruscetti's Supervisory Responsibilities for Papariella

1. Ruscetti was president and treasurer of Harvest, and the sole supervisor of registered representatives when Papariella was hired by the firm in May 1999. Ruscetti was responsible for monitoring the activities of Papariella, and was the only individual with the clear authority to hire, fire, or discipline the registered representatives.

2. As Harvest's president, Ruscetti was responsible for formulating Harvest's supervisory policies and procedures, and approved updates and changes to Harvest's policies and procedures manual. Ruscetti failed to establish adequate procedures, or a system for applying such procedures, which were reasonably designed to prevent or detect violations of the federal securities laws, as described herein.

E. Ruscetti Failed to Respond Appropriately to Indications of Problems with Papariella

1. During Papariella's employment at Harvest, Ruscetti was alerted to various indications of problems concerning Papariella, yet did not meaningfully respond to those warnings.

2. Shortly after Papariella's employment at Harvest, his customer accounts exhibited a large number of solicited transactions and a high amount of commissions paid. In September 1999, Harvest began receiving from its clearing firm account billing summaries, which included the number of trades in an account by month and the amount of commissions paid for those trades. Ruscetti tracked Papariella's 18-20 most actively traded customer accounts by creating a spreadsheet which noted the commissions paid for the year, the equity value by month, the gain or loss in the account, and the percentage of Papariella's total commissions generated by the account. Despite Ruscetti's tracking of account activity, and the indications of the high amount of commissions paid by Papariella's customers, Ruscetti did not adequately question the suitability of any of Papariella's solicited transactions in these accounts, or their total effect, or the possibility that Papariella had obtained discretionary authority from his customers to execute the transactions.

3. Ruscetti sent an activity letter to certain Papariella customers on March 3, 2000, and asked those customers to reassess their investment objectives. In response to that activity letter, one of Papariella's customers complained, in writing, about the frequency of trading in her account and the amount of commissions paid. This customer also noted that her conservative investment objectives had not changed. After speaking with this customer, Ruscetti directed Papariella to cease execution of active trading in this customer's account. Ruscetti did not review this customer's securities account agreement, or did not notice that the investment objectives section of that agreement indicated that she had conservative investment objectives. Ruscetti took no further steps to review the suitability of Papariella's active trading in this customer's account.

4. Ruscetti subsequently failed to adequately monitor Papariella's trading activities in this customer's account after March 2000. Beginning in November 2000, Harvest received from its clearing firm monthly active account reports that detailed for each account the number of trades per month for the previous year, commissions per month for the previous year, monthly equity, losses, turnover ratios, and commission to equity ratios. Despite the availability of these reports, his awareness of information in those reports from Harvest's compliance officer, and his continued use of his personal tracking system, Ruscetti failed to stop increased trading activity in this customer's account beginning in September 2000.

5. Ruscetti tracked the commissions paid and account equity for 18-20 of Papariella's most active customer accounts from July 1999 through February 2001. Although Ruscetti was aware that Papariella resigned from his previous employer in 1999 because of four customer complaints, Ruscetti failed to recognize the significance of the amounts of commissions paid and changes in account equity or take adequate action to determine the suitability of active trading by Papariella in those accounts.

6. Ruscetti failed to adequately review or recognize the significance of information, such as turnover ratios and commission to equity ratios, calculated for Harvest by its clearing firm and available to him in simple form on the monthly active account reports, for any of Papariella's customer accounts. Ruscetti failed to take adequate action to determine the suitability of Papariella's trading in his customer accounts when the monthly active account reports reflected high, annualized turnover ratios and high commission to equity ratios.

7. Based upon the above, Ruscetti failed reasonably to supervise Papariella within the meaning of Section 15(b)(4)(E) of the Exchange Act with a view to preventing the violations described above.

F. Harvest's Deficient Supervisory Policies and Procedures

1. Harvest failed reasonably to supervise Papariella with a view to preventing and detecting violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder because it failed to establish procedures, or a system for applying such procedures, which were reasonably designed to prevent or detect violations of the federal securities laws.

2. During the relevant time period, Harvest's procedures did not allocate responsibility for specific supervisory duties among the firm's principals. In practice, Ruscetti had supervisory authority over all registered representatives at Harvest. Although Ruscetti attempted to delegate supervisory responsibility for the registered representatives to Harvest's compliance officer in October 2000, Ruscetti retained supervisory authority and made all decisions regarding hiring, firing, reprimanding, or disciplining the registered representatives.

3. During the relevant time period, Harvest's procedures did not adequately describe the duties, roles or responsibilities of Harvest's principals. Harvest's written procedures did not address the review of monthly activity reports, new securities account agreements, or customer monthly account statements, and Harvest had no written procedures for contacting customers to ensure their suitability for trading activity in their accounts. In practice, Harvest did not employ specific procedures designed to monitor trading activity in customer accounts or to review documentation and trading information to verify the suitability of investments for Harvest customers.

G. Books and Records Violations

1. During the relevant time period, Harvest did not have adequate written procedures concerning the retention of correspondence by the firm. Preservation of correspondence, either accurate copies of correspondence sent or originals of correspondence received, is not addressed in Harvest's procedures manual, and correspondence is not actually preserved in any specified manner. Preservation of information pertinent to customer accounts also is not specified in Harvest's procedures manual, and pertinent information is not actually preserved in any specified manner.

2. Harvest willfully violated the books and records requirements applicable to broker-dealers pursuant to Section 17(a) of the Exchange Act and Rule 17a-4 thereunder. Harvest failed to preserve customer responses to activity letters sent in March 2000 and certain monthly account statements provided by its clearing firm.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Harvest's Offer of Settlement and Ruscetti's Offer of Settlement.

ACCORDINGLY, IT IS ORDERED :

A. Pursuant to Section 15(b) of the Exchange Act, Ruscetti shall be suspended from
association with any broker or dealer for a period of three months.

B. Ruscetti shall provide to the Commission, within 10 days after the three month prohibition described above, an affidavit that he has complied fully with the sanctions described in Section IV.A above.

C. Pursuant to Section 15(b) of the Exchange Act, Ruscetti shall be suspended from a
supervisory capacity with any broker or dealer for a period of twelve months.

D. Ruscetti shall provide to the Commission, within 10 days after the twelve month prohibition described above, an affidavit that he has complied fully with the sanctions described in Sections IV.C above.

E. Ruscetti shall, within 30 days of the entry of this Order, pay a civil money
penalty in the amount of $15,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Frank D. Ruscetti as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Joy Gaines Thompson, Acting District Administrator, Philadelphia District Office, Securities and Exchange Commission, The Curtis Center, Suite 1120E, 601 Walnut Street, Philadelphia, Pennsylvania 19106.

F. Harvest is hereby censured.

G. Pursuant to Section 21C of the Exchange Act, Harvest shall cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Exchange Act and Rule 17a-4 promulgated thereunder.

H. Harvest shall, within 30 days of the entry of this Order, pay a civil money penalty in the amount of $ 25,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Harvest Financial Corporation as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Joy Gaines Thompson, Acting District Administrator, Philadelphia District Office, Securities and Exchange Commission, The Curtis Center, Suite 1120E, 601 Walnut Street, Philadelphia, Pennsylvania 19106.

I. Harvest shall comply with its undertakings as follows:

1. Harvest shall retain, within 30 days of the date of entry of the Order, the services of an Independent Consultant not unacceptable to the staff of the Philadelphia District Office of the Commission (the "Commission Staff"). Harvest or its affiliate exclusively shall bear the Independent Consultant's compensation and expenses. Harvest shall direct the Independent Consultant to conduct a comprehensive review of Harvest's supervisory, compliance, and other policies and procedures designed to prevent and detect federal securities law violations of the nature involved in this matter, and recommend, at a minimum, policies and procedures that address each of the deficiencies identified in Section III of the Order and an effective system for both implementing such policies and procedures and maintaining records that evidence compliance with such policies and procedures. Harvest shall cooperate fully with the Independent Consultant and shall provide the Independent Consultant with access to its files, books, records, and personnel as reasonably requested for the review.

2. At the conclusion of the review, which in no event shall be more than 120 days after the date of entry of the Order, Harvest shall direct the Independent Consultant to submit to Harvest and to the Commission Staff an Initial Report. The Initial Report shall address, at a minimum, the adequacy of Harvest's policies and procedures to detect and prevent federal securities law violations of the nature involved in this matter, as well as the adequacy of Harvest's supervisory system, and shall include a description of the review performed, the conclusions reached, and the Independent Consultant's recommendations for policies and procedures to address each of the deficiencies identified in Section III of the Order (as well as any other deficiencies found during the course of the review), an effective system for implementing the recommended policies and procedures and an effective system for establishing and maintaining written records that evidence compliance with the recommended policies and procedures.

3. Within 150 days after the date of entry of the Order, Harvest shall in writing advise the Independent Consultant and the Commission Staff of the recommendations from the Initial Report that it has determined to accept and the recommendations that it considers to be unnecessary or inappropriate. With respect to any recommendation that Harvest considers unnecessary or inappropriate, Harvest shall propose in writing an alternative policy, procedure or system designed to achieve the same objective or purpose.

4. With respect to any recommendation with which Harvest and the Independent Consultant do not agree, Harvest shall attempt in good faith to reach an agreement with the Independent Consultant within 180 days of the date of entry of the Order. In the event the Independent Consultant and Harvest are unable to agree on an alternative proposal not unacceptable to the Commission staff, Harvest shall abide by the recommendation of the Independent Consultant.

5. Within 195 days of the date of entry of the Order, Harvest shall in writing advise the Independent Consultant and the Commission Staff of the recommendations and proposals that it is adopting.

6. Harvest shall direct the Independent Consultant to complete the aforementioned review and submit a written Final Report thereon to Harvest and to the Commission Staff within 225 days after the date of entry of the Order. Harvest shall direct the Independent Consultant to include in the Final Report a recitation of the efforts the Independent Consultant undertook to review Harvest's supervisory functions, compliance mechanisms, and other policies and procedures, and shall, at a minimum, detail (i) the Independent Consultant's recommendations addressing separately each of the deficiencies identified in Section III of the Order (as well as any other deficiencies found during the course of the review), (ii) the Independent Consultant's recommendations addressing Harvest's system for implementing each of the recommended policies and procedures, (iii) the Independent Consultant's recommendations addressing Harvest's system for establishing and maintaining written records that evidence compliance with each of the recommended policies and procedures, and (iv) a reasonable time period or time periods, not to exceed one year from the date of entry of the Order, for Harvest to implement each of those recommendations. Harvest shall also direct the Independent Consultant to include in the Final Report a description of how Harvest proposes to implement those recommendations and proposals within the time periods set forth in the Final Report.

7. Harvest shall take all necessary and appropriate steps to adopt and implement all recommendations and proposals contained in the Independent Consultant's Final Report.

8. No later than fifteen months after the date of entry of the Order, Harvest shall direct the Independent Consultant to conduct a follow-up review of Harvest's efforts to implement each of the recommendations contained in the Independent Consultant's Final Report, and Harvest shall direct the Independent Consultant to submit a follow-up report to the Commission staff no later than seventeen months after the date of entry of the Order. Harvest shall direct the Independent Consultant to include in the follow-up report the details of Harvest's efforts to implement each of the recommendations contained in the Final Report, and shall separately state whether Harvest has fully complied with each of the recommendations in the Final Report.

9. For good cause shown, and upon receipt of a timely application from the Independent Consultant or Harvest, the Commission's staff may extend any of the procedural dates set forth above.

10. To ensure the independence of the Independent Consultant, Harvest: (i) shall not have the authority to terminate the Independent Consultant, without the prior written approval of the staff of the Division of Enforcement; (ii) shall compensate the Independent Consultant, and persons engaged to assist the Independent Consultant, for services rendered pursuant to the Order at their reasonable and customary rates; (iii) shall not be in and shall not have an attorney-client relationship with the Independent Consultant and shall not seek to invoke the attorney-client or any other doctrine or privilege to prevent the Independent Consultant from transmitting any information, reports, or documents to the Commission or its staff.

11. To further ensure the independence of the Independent Consultant, for the period of the engagement and for a period of two years from completion of the engagement, Harvest shall direct the Independent Consultant not enter into any employment, consultant, attorney-client, auditing or other professional relationship with Harvest, or any of its present or former affiliates, directors, officers, employees, or agents acting in their capacity. Any firm with which the Independent Consultant is affiliated or of which he or she is a member, and any person engaged to assist the Independent Consultant in performance of his or her duties under the Order shall not, without prior written consent of the Commission staff, enter into any employment, consultant, attorney-client, auditing or other professional relationship with Harvest, or any of its present or former affiliates, directors, officers, employees, or agents acting in their capacity as such for the period of the engagement and for a period of two years after the engagement.

By the Commission.

Jonathan G. Katz
Secretary

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