SEC PERMANENTLY BARS INVESTMENT ADVISER WHO ALLEGEDLY DEFRAUDED ITS LOCAL GOVERNMENT CLIENTS OF $100 MILLION

June 17, 1992 TO: INVESTMENT ADVISER MEMBERS NO. 28-92 INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 20-92 RE: SEC PERMANENTLY BARS INVESTMENT ADVISER WHO ALLEGEDLY DEFRAUDED ITS LOCAL GOVERNMENT CLIENTS OF $100 MILLION __________________________________________________________ As we previously informed you, the SEC obtained a permanent injunction against an investment adviser and its president and sole officer, director and shareholder (the "Respondent") who allegedly defrauded the adviser’s clients, most of which were small municipalities, of approximately $100 million. (See Memorandum to Investment Adviser Members No. 6-92 and Investment Adviser Associate Members No. 5-92, dated February 24, 1992.) On June 9, the SEC permanently barred the Respondent from association with any broker, dealer, investment company, investment adviser or municipal securities dealer. The Respondent, without admitting or denying any of the allegations in the SEC’s complaint and supplemental papers (except for certain procedural items), agreed to the entry of the Order imposing the sanctions. The SEC’s complaint and supplemental papers allege, among other things, that the Respondent, while in control of the adviser, defrauded clients by: (1) falsifying account statements to inflate the value of client accounts; (2) unlawfully transferring money and securities among client accounts; and (3) overcharging clients for securities purchased on their behalf. The SEC’s complaint and supplemental papers further allege that the adviser is unable to account for more than $100 million of client funds. A copy of the SEC’s Order is attached. Amy B.R. Lancellotta Associate Counsel Attachment