ROYE SPEAKS AT MUTUAL FUNDS CONFERENCE
3.25.2002 Paul Roye, Director of the SEC's Division of Investment Management, spoke at the ICI's 2002 Mutual Funds and Investment Management Conference in Orlando, Florida spoke on general themes related to investment company regulation. Topics included the mutual fund industry taking responsibility, maintaining trust, especially in light of Enron, and providing input to the SEC on regulatory changes. He also spoke about efforts to update and modernize its rules through an internal special study that examine the SEC's operations, efficiency, productivity and resources.
Please click http://www.sec.gov/news/speech/spch546.htm to access a copy of the speech.
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CALIFORNIA ADVISER CHARGED WITH FRAUDULENT PERFORMANCE ADVERTISING
3.22.2002 The SEC charged Stan D. Kiefer & Associates (SKA) with engaging in fraudulent advertising. SKA disseminated the false advertisements to clients, prospective clients, and solicitors who referred clients. Solicitors, in turn, distributed this advertising to prospective clients. From July 1997 to December 1999, solicitors referred over 400 clients to SKA.
Stan Kiefer allegedly misrepresented that SKA had an excellent performance history and significant assets under management. The SEC found that the advertisements falsely implied that SKA's performance history reflected actual trading in client accounts and that it had been in business since 1983. SKA and Kiefer did not manage any client assets from 1983 to 1993, and, therefore, did not achieve any performance returns during those years. Kiefer had a relative contact a representative of the solicitors and misrepresent to him that she worked for an auditor who determined that SKA's performance returns were audited and compliant with the Association for Investment Management & Research's Performance Presentation Standards.
The order states that SKA willfully violated, and Kiefer willfully aided and abetted and caused violations of, Sections 206(1) and 206(2) of the Advisers Act. SKA and Mr. Kiefer were censured, ordered to pay a civil fine of $10,000 and required to comply with a number of conditions governing the operation of the business.
Please click http://www.sec.gov/litigation/admin/ia-2023.htm to access a copy of the administrative action.
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GEORGIA ADVISER CHARGED WITH FRAUD
3.21.2002 The United States District Court for the Northern District of Georgia entered orders of permanent injunction and other relief against John Raymond Linney Clain ("Clain") and his investment adviser firm, Saint James Asset Management, Inc. ("St. James"), both of Alpharetta, Georgia. The SEC's complaint states alleges that Clain and Saint James obtained over $960,000 from sixteen clients between January 1998 and October 2000 by misrepresenting that the clients' money would be used to purchase various securities. Without the clients' knowledge or permission, Clain used the money primarily to fund the operations for an Augusta, Georgia company in which Clain had an interest. The complaint also alleged that the defendants' misconduct included providing clients with materially false and misleading periodic account statements.
Please click http://www.sec.gov/litigation/litreleases/lr17429.htm to access a copy of the administrative action.
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INVESTMENT ADVISER PORTFOLIO MANAGER CHARGED WITH MISAPPROPRIATING CLIENT FUNDS
3.21.2002 The SEC charged a portfolio manager with defrauding his clients out of $500,000. The portfolio manager who was formerly associated with two Oregon investment adviser firms.
According to the complaint, the portfolio manager falsely told clients about purported investment opportunities and then deposited the client funds into his personal bank accounts and used those funds for personal expenses. He used clients' funds to pay personal expenses.
Please click http://www.sec.gov/litigation/litreleases/lr17428.htm to access a copy of the administrative action.
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OCIE DIRECTOR SPEAKS ON INVESTMENT ADVISER COMPLIANCE ISSUES
3.21.2002 Lori Richards, Director of the SEC's Office of Compliance Inspections and Examinations (OCIE) spoke at the Mid-Atlantic Securities Forum in Philadelphia, Pennsylvania on March 21, 2002 about a variety of investment adviser compliance issues. She shared her views and philosophy regarding compliance. She emphasized that the SEC expects cooperation and candor in the examination process. Ms. Richards noted the case called In the Matter of Gisela de Leon-Meredith, where a financial institution clearly benefited from cooperating with the SEC. See http://www.sec.gov/litigation/investreport/34-44969.htm.
Please click http://www.sec.gov/news/speech/spch545.htm to access a copy of the speech.
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SEC TO PERFORM A SELF-EXAMINATION OF ITS OPERATIONS
3.20.2002 The SEC will conduct a four-month study of its operations. The study will examine the SEC's efficiency, productivity and resources in an attempt to improve the agency's quality and level of services. The SEC will attempt to determine how much additional staffing will be required in light of events of September 11, 2001, the focus on the accounting industry, and other recent events. The study will be performed by internal staff, as well as outside consultants.
Please click http://www.sec.gov/litigation/litreleases/lr17363.htm to access a copy of the administrative action.
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ADVISER FAILS TO DISCLOSE CONFLICTS OF INTEREST
3.19.2002 A final judgment was entered against Henry Weingarten by a federal district court in New York, who had been charged with failing to disclosing certain conflicts of interest to clients. Mr. Weingarten, according to the SEC complaint, had purchased $75,000 worth of U.N. Dollars stock for his advisory client accounts. He failed to disclose in Part II of his Form ADV that he had been paid 250,000 shares of U.N. Dollars stock to promote the company's securities on Mr. Weingarten's Internet site and in his newsletters.
Mr. Weingarten was also censured by the SEC and ordered to provide prospective clients with a copy of the SEC order for a period of one year.
Please click http://www.sec.gov/litigation/admin/ia-2019.htm to access a copy of the administrative action.
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IARD NOW ACCEPTS INVESTMENT ADVISER REPRESENTATIVE REGISTRATIONS
3.13.2002 Investment adviser representatives located in many states can now file Form U-4s or Form U-4 amendments via the Investment Adviser Registration Depository (IARD). In connection with the electronic filing requirement, Form U-4 has been slightly modified. The new filing requirements are applicable to both joint broker-dealer/investment adviser firms and investment adviser-only firms. The ability to file electronically should make it easier for representatives to be registered in multiple states. The electronic filing fee for each representative is $45 annually.
The IARD already allows advisory firms to file Form ADVs and amendments thereto electronically. It was developed jointly by the SEC and the North American Securities Administrators Association. The NASD operates the system.
Please click http://www.iard.com/bulletin_0302.asp for information about the new filing requirement.
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SEC TO HOLD ROUNDTABLE ON REGULATION FD AND AUDITOR INDEPENDENCE
3.11.2002 The SEC will hold a roundtable discussion in Chicago on April 4 to examine proposals to better protect investors by reforming financial disclosure and auditor oversight. The roundtable will take place at the SEC's Midwest Regional Office, 9th floor, 175 W. Jackson Blvd, Chicago.
Key questions for discussion include:
- What information do investors need to make informed investment decisions?
- How can financial disclosures be made more intelligible?
- What information needs to be communicated more quickly, and how can that be accomplished?
- What structure-governmental body, private organization or other organization can best oversee accounting regulation?
The SEC conducted similar roundtable discussions earlier this month in New York City and Washington, D.C.
Please click http://www.sec.gov/news/headlines/chicagoroundtable.htm to access a copy of the release announcing the roundtable.
CFTC NAMES PATRICK McCARTY GENERAL COUNSEL
3.7.2002 The Commodities Futures Trading Commission (CFTC) appointed Patrick J. McCarty as General Counsel. Mr. McCarty previously served as General Counsel and Executive Vice President of the Managed Funds Association, a trade group that represents the hedge fund industry. Mr. McCarty has also served as Majority Counsel to the Financial Institutions Subcommittee of the House Banking and Financial Services Committee.
Please click http://www.cftc.gov/opa/press02/opa4614-02.htm for a copy of the press release announcing the appointment.
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NEVADA INVESTMENT ADVISERS CHARGED WITH FRAUD
3.7.2002 2002 The SEC filed a complaint in a Nevada federal district court alleging that four investment advisers defrauded their clients. The complaint alleges that the advisers and their personnel raised approximately $8.5 million from 30 clients with the promise that the funds would be invested in offshore trading programs that would generate returns of 4% to 7% a month. According to the complaint, the advisers lost $6 million of the clients' assets by investing in such programs and attempted to conceal the losses by issuing fictitious account statements to clients.
Please click http://www.sec.gov/litigation/litreleases/lr17403.htm to access a copy of the AIMR release.
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INDUSTRY TRADE GROUPS OPPOSE PROPOSED REGULATION OF ENERGY DERIVATIVES
3.6.2002 The International Swaps and Derivatives Association (ISDA) and several other trade associations sent a letter to Senator Diane Feinstein expressing their opposition to a proposed amendment to the Commodities Exchange Act that would re-regulate certain over-the-counter energy derivatives. Senator Feinstein is expected to introduce an amendment that would repeal certain exemptions granted in 2000 that exclude bilateral derivative and multilateral electronic markets for energy commodities from regulation. The proposed amendment is being introduced in response to the collapse of Enron.
Please click http://www.isda.org/speeches/pdf/FeinsteinLetter.pdf for a copy of the letter.
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