*
In the Matter of Frank P. Meadows, III, and The Nottingham Company, Inc. d/b/a The Nottingham Management
Company, Inc., d/b/a TNC, Inc., d/b/a F.P. Meadows & Company, and d/b/a The Nottingham Company, Release
Nos. 34-39034, IC-22813, IA-1660, Admin. Proc. File No. 3-9395 (Sept. 9, 1997).
[9259]
September 23, 1997
TO: ACCOUNTING/TREASURERS COMMITTEE No. 32-97
COMPLIANCE ADVISORY COMMITTEE No. 26-97
SEC RULES MEMBERS No. 72-97
TRANSFER AGENT ADVISORY COMMITTEE No. 48-97
RE: SEC SANCTIONS TRANSFER AGENT AND PRINCIPAL FOR SECURITIES
LAW VIOLATIONS
______________________________________________________________________________
The Securities and Exchange Commission recently sanctioned a registered transfer agent
and its principal for violating various provisions of the Investment Company Act of 1940. The
transfer agent was, at all relevant times, engaged in the business of providing administrative
services, including recordkeeping services, to registered investment companies, including those
involved in the proceeding. The principal was, at all relevant times, the president and
managing director of the transfer agent, a controlling person of the transfer agents parent
company and its pension plan, and an officer and trustee of the investment companies involved
in the proceeding. The Commissions order is summarized below, a copy of which is attached.*
According to the order, the transfer agent falsified a funds accounting records in
connection with money it agreed to reimburse the fund for losses resulting from sales and
redemptions of fund shares that, because of accounting errors made by transfer agent staff
personnel, were based on incorrect net asset value calculations. In addition, the principal
falsified a funds accounting records in connection with the transfer of money from one fund to
pay the expenses of three other funds. Moreover, the principal, on behalf of a pension plan that
he controlled, and of which he was a beneficiary, falsified the accounting records of five funds
in connection with the pension plans failure to timely pay for shares acquired in each of the
funds.
The Commission found, among other things, that the principal and the transfer agent
violated Sections 34(a) and (b) of the Investment Company Act by destroying and falsifying
books and records required to be maintained by Section 31(a) of the Investment Company Act.
In addition, the Commission found that the principal violated Section 37 of the Investment
Company Act by unlawfully converting fund assets for its own use, and that the
2transfer agent violated Section 17(a)(3) of the Investment Company Act by borrowing money
and other property from a fund while acting as principal.
Moreover, the Commission found that the principal and the transfer agent aided and
abetted various provisions of the Investment Company Act, including, among others, Section
22(g), prohibiting the issuance of securities for services and for property other than cash and
securities; Section 17(a)(3), prohibiting an affiliated person of a fund from borrowing money
and other property; and Section 31(a) and Rule 31a-2 thereunder, requiring the preservation of
books and records required to be made pursuant to Rule 31a-1.
Without admitting or denying the Commissions findings, the transfer agent and the
principal agreed to the following sanctions. The transfer agent agreed to cease and desist from
committing or causing any present and future violations of Sections 17(a)(3), 34(a), and 34(b) of
the Investment Company Act, and from causing any present and future violations of Sections
22(g), 31(a), and 31(b) of the Investment Company Act, and Rule 31a-2 thereunder, and pay a
civil money penalty of $15,000. The principal agreed to cease and desist from committing or
causing any present and future violations of Sections 17(a)(3), 34(a), 34(b), and 37 of the
Investment Company Act, and from causing any present and future violations of Sections 22(g),
31(a), and 31(b) of the Investment Company Act, and Rule 31a-2 thereunder, and pay a civil
money penalty of $35,000.
Furthermore, the Commission barred the principal from association with any
investment company, investment adviser, broker, dealer, municipal securities dealer, or
transfer agent, with the right to reapply for reinstatement after eighteen months.
Barry E. Simmons
Assistant Counsel
Attachment (in .pdf format)
Note: Not all recipients of this memo will receive an attachment. If you wish to obtain a copy
of the attachment referred to in this memo, please call the Institute’s Information Resource
Center at (202)326-8304, and ask for this memo’s attachment number: 9259.