Securities Act of 1933
Release No. 8342 / December 10, 2003
Securities Exchange Act of 1934
Release No. 48899 / December 10, 2003
Investment Advisers Act of 1940
Release No. 2198 / December 10, 2003
Administrative Proceeding
File No. 3-9042
In the Matter of IMS/CPAs & ASSOCIATES, Respondents. |
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NOTICE OF PROPOSED PLAN FOR THE DISTRIBUTION OF DISGORGED FUNDS AND OPPORTUNITY FOR COMMENT BY NON-PARTIES |
Notice is given, pursuant to Rule 612 of the Rules of Practice of the Securities and Exchange Commission, 17 C.F.R. § 201.612, that the Division of Enforcement has filed its proposed Plan for the Distribution of Disgorged Funds ("Distribution Plan") in the above matter with the Securities and Exchange Commission (the "Commission").
OPPORTUNITY TO COMMENT
Pursuant to this notice, all interested parties are advised that the Distribution Plan may be obtained by submitting a written request to James A. Howell, Securities and Exchange Commission, 44 Montgomery Street, 11th Floor, San Francisco, California 94104. Further, all persons desiring to comment on the Distribution Plan may submit their views, in writing, no later than January 9, 2004 to the Office of the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
THE PROPOSED PLAN OF DISTRIBUTION
On November 5, 2001, on review of an initial decision of an Administrative Law Judge, the Commission found that Respondents IMS/CPAs & Associates ("IMS"), Vernon T. Hall, Stanley E. Hargrave, and Jerome B. Vernazza willfully violated Section 17(a) of the Securities Act of 1933,Section 10(b) of the Securities Exchange Act of 1934and Rule 10b-5 thereunder. The Commission also found that IMS willfully violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") and that Vernazza, Hall, and Hargrave willfully aided and abetted and also were causes of these violations. In addition, the Commission found that Vernazza engaged in a primary violation of Sections 206(1) and 206(2) as a registered investment adviser. The Commission also found that Vernazza and IMS willfully violated Section 204 of the Advisers Act and Rule 204-3 thereunder, and that Hall and Hargrave willfully aided and abetted and also caused these violations. Finally, the Commission found that IMS, Vernazza, and Hargrave willfully violated Section 207 of the Advisers Act.
The Commission ordered that the investment adviser registration of IMS be suspended for six months; and that Hall, Hargrave, and Vernazza be suspended from association with an investment adviser for six months. The Commission also ordered that Respondents cease and desist from committing or causing any violations and any future violations of the provisions they were found to have violated; and that Respondents disgorge $75,032.78 (minus the amount Vernazza previously refunded to clients) plus interest from August 1, 1996. On November 3, 2003, the Commission issued an Order Making Sanctions Effective, which, among other things, ordered that Respondents jointly and severally pay disgorgement in the amount of $70,023.14, plus $48,210.30 in prejudgment interest. Respondents have paid this amount and the funds have been deposited into a trust account pending distribution.
The Distribution Plan provides that 28 advisory clients of IMS whose investment generated a "cap fee" to Hall and Vernazza and thus were harmed by Respondents' violations. These advisory clients shall receive distribution of the disgorgement fund, including prejudgment and postjudgment interest, in proportion to (1) their respective average monthly balance of the funds invested in the Permanent Portfolio Family of Funds from June 1992 through July 1996, and (2) the relative contribution to the cap fee paid to Hall and Vernazza. The Distribution Plan further provides that attorney Sheldon M. Jaffe will act as administrator of the plan and that his fees, if any, will be paid by Respondents, not from the disgorgement funds.
For the Commission, by its Secretary, pursuant to delegated authority.
Margaret H. McFarland
Deputy Secretary