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. 47574 / March 26, 2003

INVESTMENT ADVISERS ACT OF 1940
Release No. 2118 / March 26, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-11074


In the Matter of

JAMES REUBEN BURTON, JR.

Respondent.


:
:
:
:
:

ORDER INSTITUTING A PUBLIC PROCEEDING PURSUANT TO SECTION 15(b)(6) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative proceeding be instituted pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against James Reuben Burton, Jr. ("Burton").

II.

In anticipation of the institution of this proceeding, Burton has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for purposes of this proceeding and any other proceeding brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over Burton and the subject matter of this proceeding, and the findings contained in paragraph III.B. below, which are admitted, Burton consents to the entry of this Order Instituting A Public Proceeding Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions ("Order"), as set forth below.

III.

On the basis of this Order and Burton's Offer, the Commission finds that:

A. From about May 2000 to June 2001, Linville Group, LLC ("Linville") and Burton acted as brokers within the meaning of Section 3(a)(4) of the Exchange Act, Linville acted as an investment adviser within the meaning of Section 202(a)(11) of the Advisers Act, Burton acted as a person associated with a broker within the meaning of Section 15(b) of the Exchange Act, and Burton acted as a person associated with an investment adviser within the meaning of Sections 202(a)(17) and 203(f) of the Advisers Act in connection with his activities as Founder, President and Chief Investment Strategist of Linville.

B. On February 6, 2002, the United States Attorney's Office for the Western District of North Carolina filed a Bill of Information against Burton for the crimes of securities fraud, mail fraud, and money laundering. On February 8, 2002, in an action before the United States District Court for the Western District of North Carolina, Charlotte Division, Burton pled guilty to and was convicted of three counts of mail fraud, one count of money laundering and one count of securities fraud.

C. According to the Bill of Information and Plea Agreement upon which his conviction was based, Burton, as the Founder, President and Chief Investment Strategist of Linville, engaged in the following conduct:

    From June 1, 2000 through June 30, 2001, Burton illegally sold public securities through the Linville Long-Term Growth Fund and the Linville Short-Term Fund ("the Linville Funds") and obtained over three million dollars in investor funds. Burton controlled Linville's banking and brokerage accounts and misappropriated monies received from Linville's investors by making personal and non-business purchases with these funds in violation of the Securities Act of 1933, the Exchange Act, the Investment Company Act of 1940 and the Advisers Act.

  1. As part of this illegal scheme, Burton made fraudulent statements regarding: the rates of return for the Linville Funds that he managed and controlled; his experience and qualifications to manage these funds; the amounts of money investors earned on their investments in the Linville Funds; and the legal status of the Linville Funds. Burton created and provided many Linville investors with IRS Form 1099s that contained false and misleading information regarding interest earnings and federal withholdings. Some of these forms reflected annual return rates exceeding 2,000% for 1999. Burton also provided Linville investors monthly investment account statements that contained false and misleading information, including inflated earnings. He did this so that investors would not know that their investments had earned less than the promised rates of return, that Burton had misused investor funds or that he had used funds received from new investors to pay withdrawal requests from existing investors--transactions indicative of a Ponzi scheme.

  2. In addition, Burton misrepresented to investors and potential investors, among other things, that he had a Series 7 license and a principal's license to sell securities; Linville was a "fully licensed financial institution" and received approximately $12 million from investors; and that Linville had purchased the brokerage firm IC Financial.

D. Burton's federal conviction is an offense specified in Section 15(b)(6)(A) of the Exchange Act and Section 203(f) of the Advisers Act.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Burton's Offer.

Accordingly, IT IS HEREBY ORDERED that, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, James Reuben Burton, Jr. be, and hereby is, barred from association with any broker, dealer or investment adviser.

For the Commission, by its Secretary, pursuant to delegated authority.

Jonathan G. Katz
Secretary


http://www.sec.gov/litigation/admin/34-47574.htm


Modified: 03/27/2003