INVESTMENT ADVISERS ACT OF 1940
RELEASE NO. 1977 / September 27, 2001
INVESTMENT COMPANY ACT OF 1940
RELEASE NO. 25195 / September 27, 2001
File No. 3-10594
ADMINISTRATIVE PROCEEDING INSTITUTED AGAINST MERRIMAC ADVISORS COMPANY AND FREDRIC J. FRENCH
On September 27, 2001, the Commission instituted public administrative and cease-and-desist proceedings pursuant to Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 (Advisers Act) and Section 9(b) of the Investment Company Act of 1940 against Fredric J. French (French) and Merrimac Advisors Company (Merrimac) of Albuquerque, New Mexico. Merrimac is a registered investment adviser, and French is the principal of Merrimac. In an Order Instituting Proceedings (Order), the Division of Enforcement alleges that French and Merrimac misrepresented Merrimac's performance history to clients and potential clients of Merrimac.
The Division alleges that, from 1997 through 1998, French and Merrimac provided clients and potential clients false information claiming that Merrimac had a five-year performance history of generating annual returns over 20%, and also overstating the number of Merrimac's clients and amount of client funds under management. As a result, the Order alleges that Merrimac willfully violated Sections 204, 206(1), 206(2) and 206(4) of the Advisers Act and Rules 204-2(a)(16) and 206(4)-1(a)(5) thereunder, that French willfully violated Sections 206(1) and 206(2) of the Advisers Act and that he caused and willfully aided and abetted Merrimac's violations.
A hearing will be held before an administrative law judge to determine whether the allegations in the Order are true and, if so, whether cease-and-desist orders, civil penalties or any other sanctions are appropriate against Merrimac and French.