U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 45600 / March 20, 2002

INVESTMENT ADVISERS ACT OF 1940
Release No. 2020 / March 20, 2002

ADMINISTRATIVE PROCEEDING
File No. 3-10455


In the Matter of

Jeremiah J. Hegarty
and Michael P. Hegarty,

Respondents.


:
:
:
:
:
:
:

ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940

I.

The Securities and Exchange Commission ("Commission") on April 17, 2001 instituted public administrative proceedings pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Jeremiah J. Hegarty ("J. Hegarty") and pursuant to Sections 15(b) and 19(h) of the Exchange Act against Michael P. Hegarty ("M. Hegarty").

II.

Respondents J. Hegarty and M. Hegarty have submitted Offers of Settlement ("Offers") to the Commission, which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. § 201.100 et. seq., and without admitting or denying the findings contained in this order, except as to the jurisdiction of the Commission over them and over the subject matter of these proceedings, and the entry of the permanent injunction set forth in paragraphs III.B.(1), (2) and (3) below, which they admit, Respondents J. Hegarty and M. Hegarty consent to the entry of the findings and the imposition of the remedial sanctions set forth below.

III.

On the basis of this Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 and the Offers submitted by the Respondents, the Commission finds that:

A. Settling Respondents

1. J. Hegarty, age 43, of Osterville, Massachusetts, was, at all relevant times, associated with an investment adviser registered with the Commission. From May 1991 through December 1992, J. Hegarty was a registered representative at a broker-dealer registered with the Commission.

2. M. Hegarty, age 35, of North Easton, Massachusetts, was a registered representative from April 1991 through December 1992 at a broker-dealer registered with the Commission.

B. Injunction Entered Against Respondents

1. The Commission filed a complaint in the U.S. District Court for the District of Massachusetts on November 25, 1996, seeking injunctions and other relief against J. Hegarty, M. Hegarty and Hyannis Trading Advisors, Inc., based on various alleged violations of the antifraud and other provisions of the federal securities laws.1 The case was tried in November and December 1999.

2. On August 22, 2000, the Court entered a final judgment against J. Hegarty and M. Hegarty, in which it found that in the Fall of 1992, the Hegartys defrauded Hyannis Trading's clients when they lost nearly all of the $6.5 million in client funds under management, and left many clients in deficit positions. The Court found that the Hegartys failed to disclose that they had lost the ability to calculate account balances and other fundamental account information, consequently, the Hegartys abandoned the risk-limiting trading techniques that they had represented to clients by dramatically increasing the frequency, size and risk of the options trades in client accounts. The Court also found that J. Hegarty made trades that were unsuitable for one customer, and that Hyannis Trading's marketing brochure contained materially misleading statements regarding J. Hegarty's past trading performance. Finally, the Court found that Hyannis Trading, aided and abetted by J. Hegarty, collected illegal performance fees.

3. The Court permanently enjoined J. Hegarty from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 205, 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder; and enjoined M. Hegarty from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. The court also ordered J. Hegarty to pay a civil penalty in the amount of $125,000, and M. Hegarty to disgorge brokerage commissions paid to him on Hyannis Trading's clients' trades during the period of the fraud, in the amount of $92,998. SEC v. Jeremiah J. Hegarty and Michael Hegarty, Civil Action No. 96-12367-RCL (Aug. 22, 2000).

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offers submitted by Respondents J. Hegarty and M. Hegarty, and to impose the sanctions agreed to in the Offers.

Accordingly, IT IS ORDERED that, effective immediately, Respondent J. Hegarty be, and hereby is, barred from association with any investment adviser and any broker or dealer, with the right to reapply for association after five years to the appropriate self-regulatory organization, or if there is none, to the Commission.

IT IS FURTHER ORDERED that, effective immediately, Respondent M. Hegarty be, and hereby is, barred from association with any broker or dealer, with the right to reapply for association after five years to the appropriate self-regulatory organization, or if there is none, to the Commission.

By the Commission.

Jonathan G. Katz
Secretary

Footnote

1 The court dismissed the claims against Hyannis Trading because the company was dissolved at the time of the trial, which commenced in November 1999.

http://www.sec.gov/litigation/admin/34-45600.htm


Modified: 03/20/2002