UNITED STATES OF AMERICA
|In the Matter of
TIMOTHY J. LYONS,
|ORDER INSTITUTING PUBLIC
PROCEEDING PURSUANT TO
SECTION 203(f) OF THE
INVESTMENT ADVISERS ACT
OF 1940, MAKING FINDINGS
AND IMPOSING REMEDIAL
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute a public administrative proceeding pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Timothy J. Lyons ("Lyons").
Accordingly, IT IS HEREBY ORDERED that said proceeding be, and hereby is, instituted.
In anticipation of the institution of this proceeding, Lyons has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained in this Order, except that Respondent admits the jurisdiction of the Commission over him and over the subject matter of this proceeding and admits the entry of the judgment of permanent injunction set forth in paragraph III.C., Respondent consents to the entry of this Order Instituting Public Administrative Proceeding Pursuant To Section 203(f) Of The Investment Advisers Act Of 1940, Making Findings And Imposing Remedial Sanctions ("Order").
On the basis of this Order and Respondent's Offer, the Commission finds that:
A. Timothy J. Lyons ("Lyons"), age 50, resides in Scottsdale, Arizona. From 1985 through July 1993, Lyons was head trader at a registered investment adviser firm, Nicholas-Applegate Capital Management ("NACM"). From 1991 through July 1993, Lyons was the portfolio manager of NACM's Employee Plan. In August 1993, Lyons left NACM and formed Lyons Capital Partners ("LCP"), another registered investment adviser firm. From August 1993 to July 1995 Lyons was LCP's head trader and portfolio manager.
B. On August 12, 1998, the Commission filed an action against Lyons in the United States District Court for the Southern District of California. The Complaint filed in that action alleges, among other things, that from 1991 through July 1995 Lyons fraudulently allocated profitable stock trades to his personal accounts at the expense of client accounts while he was a trader and portfolio manager at NACM and LCP. It is further alleged that by allocating profitable trades to his personal accounts rather than to his clients' accounts, Lyons generated net profits for himself of approximately $929,601.30. Moreover, in furtherance of this scheme, while at NACM, the Complaint further alleges that Lyons failed to report completely and accurately his personal trading to NACM, rendering NACM's books and records inaccurate, and many of Lyons' fraudulent allocations undetectable. The Complaint further alleges that, as a result of the foregoing actions, Lyons violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") [15 U.S.C. §§ 80b-6(1) and 80b-6(2)], and aided and abetted NACM's violations of the books and records provisions of Section 204 of the Advisers Act [15 U.S.C. § 80b-4] and Rule 204-2(a)(12) thereunder [15 U.S.C. § 80b-4(a)(12)].
C. On June 13, 2000, the United States District Court for the Southern District of California entered a Final Judgment of Permanent Injunction and Other Relief ("Judgment") against Lyons. The Judgment permanently enjoins Lyons from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 204 of the Advisers Act and Rule 204-2(a)(12) thereunder. SEC v. Timothy J. Lyons, Civil Action No. 98 CV 1471TW (RBB) (S.D. Cal.).
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Lyons and to impose the remedial sanctions specified in Respondent's Offer.
Accordingly, IT IS HEREBY ORDERED that Respondent Lyons be, and hereby is, barred from associating with any investment adviser.
By the Commission.
Jonathan G. Katz
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