SECURITIES AND EXCHANGE COMMISSION
                                   Washington, D.C.

          SECURITIES EXCHANGE ACT OF 1934
          Rel. No.  40629 / November 3, 1998

          Admin. Proc. File No. 3-9378
         

                                                       :
          In the Matter of the Application of          :
                                                       :
                WARREN  R. SCHREIBER                   :
                 430 Chestnut Drive                    :
            East Hills, New York  11576                :
                                                       :
       For Review of Disciplinary Action Taken by      :
                                                       :
    NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.   :

          OPINION OF THE COMMISSION

REGISTERED SECURITIES ASSOCIATION -- REVIEW OF DISCIPLINARY PROCEEDINGS

Remand for Clarification of Basis for Credibility Findings

No deference could be given to the initial fact-finder's very general
credibility findings where the fact-finder's decision does not reflect
whether the fact-finder, in making these findings, considered a substantial
amount of record evidence that appears to contradict them.  Held, sanctions
vacated and proceeding remanded for clarification of the basis for fact-
finder's credibility findings.

          APPEARANCES:

          Anthony W. Djinis and Paul J. Bazil, of Pickard & Djinis, for
          Warren R. Schreiber.

          Alden S. Adkins and Norman Sue, Jr., for NASD Regulation, Inc.

          Appeal filed:August 27, 1997
          Last brief filed:  January 6, 1998

                                         I.

          Warren R. Schreiber, formerly a registered securities principal
          and a general securities representative at Castleton-Rhodes, Inc.
          ("Castleton"), a member of the National Association of Securities
          Dealers, Inc. ("NASD"), appeals from NASD disciplinary action.
          The NASD found that, in the last quarter of 1989, Schreiber
          violated Article III, Sections 1, 13, and 18 of the NASD's Rules
          of Fair Practice ("NASD Rules"); [1] Schedule E of the NASD's By-
          Laws; [2] and Section 10(b) of the Securities Exchange Act of
          1934 ("Exchange Act") [3] and Rule 10b-5 thereunder [4].
          Specifically, the NASD determined that Schreiber knowingly (1)
          participated in the unregistered distribution of common stock and
          warrants of Merlin Baines, Inc. ("Merlin"), a blind pool
          corporation, [5] (2) employed manipulative and deceptive
          practices in connection with the acquisition of the stock and
          warrants to obtain control of Merlin and manipulate the price of
          the stock, (3) recommended and effected the purchase of Merlin
          stock while in possession of material, nonpublic information, (4)
          engaged in securities transactions with or on behalf of customers
          without disclosing that Castleton and Merlin were under common
          control, and (5) engaged in an improper distribution of equity
          securities issued by an affiliate of Castleton.

          The NASD censured Schreiber, fined him $100,000, barred him from
          associating with any NASD member in any capacity, and assessed
          Schreiber hearing costs of $23,054.46 jointly and severally with
          Castleton, and appeal costs of $750.  To the extent we make
          findings in this matter, we base them on an independent review of
          the record.

                                         II.

          Throughout this proceeding, Schreiber has maintained that he did
          not engage in the violative conduct at issue.  Before us
          Schreiber asserts that the NASD's case against him is based on "a
          credibility struggle between Mr. Schreiber and his accuser, Jules
          Lipow."  Schreiber further asserts that the Market Surveillance
          Committee ("MSC"), the initial fact-finder here, "improperly
          failed to evaluate the reliability, probative value and fairness
          of use of the numerous eyewitnesses whose testimony (either by
          affidavit or by investigative testimony) is plainly in the record
          in this case," and that this testimony corroborates his own
          testimony and contradicts Lipow's.  While we, in conducting our
          de novo review of a record on appeal, accord considerable weight
          and deference to the credibility determinations of the initial
          decision-maker when such determinations are based on hearing the
          witnesses' testimony and observing their demeanor, [6] we do not
          accept them blindly.  We have stated, for example, that where the
          record contains "substantial evidence" providing a basis for
          disregarding a credibility determination we will do so. [7]  For
          the reasons discussed below, we cannot defer to the MSC's
          credibility "findings" regarding Lipow and Schreiber because the
          decision does not reveal whether the NASD, in making those
          findings, took into account all of the evidence that appears in
          this record. [8]  We accordingly remand for clarification of the
          basis for these findings.

          **FOOTNOTES**

[1]: Article III, Section 1 of the NASD Rules requires that members
"observe high standards of commercial honor and just and equitable
principles of trade."  Article III, Section 13 requires that members
disclose control relationships with issuers of securities to their
customers before entering into any contract for the purchase or sale of
such securities.  Article III, Section 18 provides that "[n]o member shall
effect any transaction in, or induce the purchase or sale of, any security
by means of any manipulative, deceptive or other fraudulent device or
contrivance."  Article III, Sections 1, 13, and 18 have been renumbered,
respectively, as NASD Conduct Rules 2110, 2240 and 2120.

[2]: Schedule E of the NASD's By-Laws provides that no member may
participate in a public distribution of securities of a company "if the
member and/or its associated persons, parent or affiliates have a conflict
of interest with the company, [    ] except in accordance with this
Schedule."  Schedule E of the NASD's By-Laws has been renumbered as NASD
Conduct Rule 2720.

[3]: 15 U.S.C. 78j(b)

[4]: 17 C.F.R. 240.10b-5

[5]: A blind pool corporation does not have current operations.  It is
organized to evaluate and effectuate mergers with or acquisitions of other
companies (or acquisitions of assets) that are as yet unidentified.  See,
e.g., Robert A. Amato, 51 S.E.C. 316, 317 n.5 (1993), aff'd, 18 F.3d 1281
(5th Cir. 1994), cert. denied, 513 U.S. 928 (1995).

[6]: Jonathan Garrett Ornstein, 51 S.E.C. 135, 137 (1992).

[7]: Anthony Tricarico, 51 S.E.C 457, 460 (1993), and cases there cited.

[8]: Compare Mark James Hankoff, 50 S.E.C. 1009, 1012 (1992)(in evaluating
reliability of hearsay evidence, possible bias of declarant, contradictory
direct testimony, and corroborative evidence, among other matters, must be
considered).

                                         III.

           A.  The MSC relied principally on Lipow's testimony in making
          its findings against Schreiber.  Its acceptance of Lipow's
          version of events as they related to Schreiber is prefaced by the
          general statement that "[t]he Committee believes that Lipow's
          testimony generally was credible as it related to the substantial
          roles played by Schreiber, Cahill and Lipow."  While a
          generalized finding of credibility may well be sufficient in some
          instances, in this case the MSC decision did not address a
          substantial amount of evidence that appears to contradict the
          finding that Lipow was credible.

          As an initial matter, the record casts some doubt on the
          reliability of Lipow's testimony.  The MSC does not address in
          its decision Lipow's admitted drug use during the time of the
          Merlin transactions or whether it considered any impact such drug
          use might have had on Lipow's ability to recollect events.
          Additionally, the MSC's decision does not address the hearing
          panel's apparent frustration with the quality of Lipow's
          testimony.  During Lipow's cross-examination the hearing panel
          chairman observed that Lipow's "memory seems to increase at
          certain times during certain questions . . . ."  Subsequently,
          that same panelist commented to the NASD staff witness who
          testified after Lipow, "[a]fter Mr. Lipow's testimony, I do
          appreciate Ms. Armour's exacting testimony, it's been a
          pleasure."

          Further, the MSC's decision does not explain its determination to
          accept Lipow's version of events with regard to Schreiber's
          involvement in the Merlin transactions but not to credit Lipow
          concerning the extent of involvement of another respondent,
          Hershall Krasnow.  In the face of both what Lipow represented
          were contemporaneous notes reflecting Krasnow's allegedly central
          role and Lipow's direct testimony about Krasnow's role, the MSC
          found that there was "insufficient evidence to implicate Krasnow
          as a knowing participant in the illegal distribution" of Merlin
          securities. [9]

          B.  Similarly, the MSC's finding that Schreiber was not credible
          is also quite general.  The decision states conclusorily: "The
          Committee did not find Schreiber's denials or his testimony in
          general to be credible."  We cannot discern from the decision
          whether this "finding" took into account the sizable number of
          affidavits Schreiber submitted into evidence that corroborate
          Schreiber's testimony -- and contradict Lipow's -- on key points.
          The NBCC decision, as well, omits reference to these affidavits.
          [10]

          The NASD had the opportunity to clarify this issue, but did not
          take it.  Prior to the NBCC hearing in this matter, Schreiber
          filed a motion for remand to the MSC.  Schreiber contended that
          the MSC had failed "to consider the affidavit testimonies of
          numerous witnesses," and requested that the proceeding be
          remanded so that the MSC could reconsider its decision "in light
          of all of the relevant evidence admitted before the Committee."
          Schreiber further requested that, in the event this motion was
          denied, he be permitted to adduce before the NBCC at an extended
          hearing Cahill's testimony.  The NBCC refused Schreiber's
          requests.  One of the reasons the NBCC cited for its refusal to
          hear the proffered testimony of Cahill, who the NBCC described as
          being "in the lead" in the Merlin scheme, was that counsel for
          Schreiber was not timely in his request to adduce additional
          evidence.  From the record it appears, however, that the request
          was a timely one made in accordance with the NASD Code of
          Procedure. [11]

                                         IV.

          Because the initial fact-finder's opinion in this matter includes
          only general credibility findings and does not discuss the
          substantial amount of record evidence that appears to contradict
          these findings, we cannot reasonably defer to them.  Accordingly,
          we vacate the sanctions imposed and remand this proceeding to the
          NASD for explicit discussion of the issues we

          **FOOTNOTES**

[9]: The MSC decision also does not address Lipow's demeanor during the
hearing or any bias Lipow might have had against Schreiber that would bear
upon his credibility, yet Schreiber and Lipow exhibited open animosity
toward each other at the MSC hearing.

[10]: The NASD staff, in an opposition to Schreiber's request that we stay
his sanction pending our review in this matter, characterized the
affidavits at issue as "extra-record affidavits of peripheral individuals
whose hearsay statements prove nothing actually exculpatory, . . . or who,
as co-conspirators capable of the most serious frauds, deserve no credence
whatsoever . . . ."  The NASD staff further advised us that the affiants'
"post-proceeding statements are not part of the record for consideration in
this action."  Contrary to these contentions, the affidavits were accepted
into evidence on Schreiber's motion at the MSC hearing and each is part of
the record in this matter.

[11]: NASD Code of Procedure Article III, Section 3(a) (renumbered as
Section 9312(a)) requires that a request to adduce additional evidence must
be made no later than 10 days prior to the date of the NBCC hearing.
Schreiber's Motion to Adduce Additional Evidence was dated February 14,
1996 and the hearing took place on July 9, 1996.

          have addressed here.  In ordering the remand, we express no view
          on either the NASD's ultimate credibility determinations or the
          outcome of this proceeding.

          An appropriate order will issue. [12]

          By the Commission (Chairman LEVITT and Commissioners JOHNSON,
          HUNT, CAREY and UNGER).

          Jonathan G. Katz
          Secretary

          **FOOTNOTES**

[12]: All of the arguments advanced by the parties have been considered.
They are rejected or sustained to the extent that they are inconsistent or
in accord with the views expressed herein.

                          SECURITIES AND EXCHANGE COMMISSION
                                   Washington, D.C.

          SECURITIES EXCHANGE ACT OF 1934
          Rel. No.  40629 / November 3, 1998

          Admin. Proc. File No. 3-9378
          -----------------------------------------------------------------

                                                        :
                 In the Matter of the Application of    :
                                                        :           
                       WARREN R. SCHREIBER              :
                       430 Chestnut Drive               :
                      East Hills, NY  11576             :
                                                        :
For Review of Disciplinary Action Taken by the          :
                                                        :
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.        :
                                                        :

          ORDER REMANDING DISCIPLINARY PROCEEDING

          On the basis of the Commission's opinion issued this day, it is

          ORDERED that the sanctions imposed by the National Association of
          Securities Dealers, Inc. against Warren R. Schreiber in this
          proceeding be, and they hereby are vacated, and it is further

          ORDERED that this proceeding be, and it hereby is, remanded to
          the National Association of Securities Dealers, Inc. for further
          proceedings in accordance with that opinion.

          By the Commission.

          Jonathan G. Katz
          Secretary