UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
INVESTMENT ADVISERS ACT OF 1940
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest to institute a public administrative proceeding pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act") against Joel R. Mogy Investment Counsel, Inc. (the "Adviser") and Joel R. Mogy ("Mogy") (collectively, the "Respondents"). Accordingly, IT IS HEREBY ORDERED that said proceeding be, and hereby is, instituted.
In anticipation of the institution of this proceeding, the Respondents have submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except that the Respondents admit the jurisdiction of the Commission over them and over the subject matter of this proceeding, the Respondents consent to the entry of the findings and remedial sanctions set forth below.
On the basis of this Order and the Respondents' Offer, the Commission finds that:
A. The Adviser is an investment adviser that was formed in 1976 and has been registered with the Commission pursuant to Section 203(c) of the Advisers Act since 1980 (File No. 801-15669). The Adviser has the authority to direct most of its clients' funds and is an "institutional investment manager" within the definition set forth in Section 13(f)(5)(A) of the Exchange Act.
B. Mogy is president and 100% owner of the Adviser.
C. On the last trading day of January 1993, the Adviser, through Mogy, exercised investment discretion with respect to accounts that held in excess of $100 million in publicly traded equity securities described in Exchange Act Rule 13f-1(c) as "Section 13(f) securities." The Adviser's holdings of Section 13(f) securities in discretionary accounts also exceeded $100 million on the last trading day of January for every year from 1994 to 2000. On the last trading day in January 2000, the Adviser's holdings of Section 13(f) securities in discretionary accounts exceeded $700 million.
D. Pursuant to the provisions of Section 13(f) of the Exchange Act and Rule 13f-1 thereunder, the Adviser was obligated to file a Form 13F disclosing its holdings of Section 13(f) securities as of December 31, 1993, within 45 days of December 31, 1993 -- the last day of the calendar year in which it first exercised investment discretion with respect to accounts holding Section 13(f) securities having an aggregate fair market value on the last trading day of any month of at least $100 million.
E. The Adviser also was obligated to file additional Form 13Fs as of the end of the next three calendar quarters of 1994, within 45 days of the end of each such calendar quarter. In addition, once an institutional investment manager is required to make Form 13F filings, that requirement continues until a full calendar year passes in which the institutional investment manager's holdings of Section 13(f) securities are below $100 million on the last trading day of each month. From 1993 to 2000, the Adviser exercised investment discretion over accounts holding Section 13(f) securities in excess of $100 million on the last trading day of at least one month of each year during the period. Thus, from February 1994 (when the initial Form 13F should have been filed) through at least August 2000 (when the Form 13F for the quarter ended June 30, 2000 should have been filed), the Adviser, through Mogy, had a continuous obligation to file Form 13Fs on a quarterly basis. During this period, the Adviser failed to file any Form
13Fs. The Adviser filed its first Form 13F on October 25, 2000 (disclosing its Section 13(f) holdings as of September 30, 2000).
F. Based on the Adviser's failure to file any Form 13Fs from February 1994 to August 2000, despite its obligation to file Form 13Fs on a quarterly basis during such period, the Adviser willfully violated Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder, and Mogy willfully aided and abetted and caused that violation.
G. The Congressional purpose in enacting Section 13(f) of the Exchange Act was "to create a central depository of historical and current data about the investment activities of institutional investment managers." S. Rep. No. 94-75, 94th Cong., 2d Sess. 77-78 (1975). In the instructions to Form 13F, the Commission states:
The purpose of Form 13F is to provide a reporting and disclosure system to collect specific information and to disseminate such information to the public about the holdings of institutional investment managers who exercise investment discretion over certain accounts of equity securities...(generally, exchange traded or NASDAQ-quoted securities) having, in the aggregate, a fair market value of at least $100,000,000. We believe that investors will find Form 13F report information useful in tracking institutional investor holdings in their investments and that issuers, too, will find detail as to institutional investor holdings useful because much of their shareholder list may reflect holdings in "street name" rather than beneficial ownership.
The Adviser's failure to file Form 13Fs frustrated the stated Congressional and Commission purposes of that reporting requirement.
Based upon the foregoing, the Commission deems it appropriate in the public interest to impose the sanctions specified in the Respondents' Offer. In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondents and cooperation afforded the Commission staff.
Accordingly, IT IS HEREBY ORDERED that:
1. the Adviser and Mogy be, and hereby are, censured;
2. the Adviser and Mogy, pursuant to Section 21C of the Exchange Act, shall cease and desist from committing or causing any violation and any future violation of Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder;
3. the Adviser and Mogy shall, within ten days of the date of this Order, each pay a civil penalty in the amount of twelve thousand five hundred dollars ($12,500) to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check, or bank money order; (B) made payable to the Securities and Exchange Commission; (C) transmitted to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Alexandria, Virginia 22312-0003; and (D) submitted under a cover letter that identifies the Adviser and Mogy as Respondents in this proceeding, and sets forth the file number of this proceeding, a copy of which cover letter and money order or check shall be sent to Andrew Petillon, Pacific Regional Office, Securities and Exchange Commission, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036; and
4. the Adviser shall comply with undertakings to:
a. review its practices and procedures for complying with Section 13(f) of the Exchange Act and Rule 13f-1 thereunder;
b. prepare a report that describes the measures it has adopted and intends to adopt to ensure compliance in the future; and
c. submit a copy of such report to the staff of the Commission's Pacific Regional Office within sixty days of the date of this Order.
By the Commission.