UNITED STATES OF AMERICA
In the Matter of
REED E. SLATKIN,
|ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDING, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTION|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative proceeding pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") be instituted against respondent Reed E. Slatkin ("Slatkin").
In anticipation of the institution of this administrative proceeding, Slatkin 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 herein, except that Slatkin admits the jurisdiction of the Commission over him and over the subject matter of this proceeding and the entry of a Judgment of Permanent Injunction and Other Relief Against Defendant Reed E. Slatkin as set forth in paragraph III.C., Slatkin consents to the entry of this Order Instituting Public Administrative Proceeding, Making Findings and Imposing Remedial Sanction ("Order").
Accordingly, IT IS ORDERED that a proceeding pursuant to Section 203(f) of the Advisers Act be, and hereby is, instituted.
On the basis of this Order and Slatkin's Offer, the Commission finds that:
A. Reed E. Slatkin ("Slatkin"), age 52, resides in Santa Barbara, California. Slatkin acted as an unregistered investment adviser from 1985 until April 2001, and was never registered with the Commission as an investment adviser. Slatkin is a co-founder, substantial shareholder and, until he resigned on April 26, 2001, a director of Earthlink, Inc., which is the second largest Internet service provider in the United States and is publicly-traded through Nasdaq. On May 1, 2001, Slatkin filed for Chapter 11 bankruptcy protection.
B. On May 11, 2001, the Commission filed an action against Slatkin in the United States District Court for the Central District of California. The Complaint filed in that action alleges, among other things, that from 1985 to April 2001, Slatkin purportedly managed at least $230 million for over 500 clients through securities trading accounts in Switzerland. The Complaint further alleges that the Swiss trading accounts do not exist and that Slatkin has used the client funds to perpetrate a fraudulent scheme. The Complaint also alleges that Slatkin's fraudulent scheme has recently collapsed, he has been sued by three defrauded investors, and Slatkin has filed Chapter 11 bankruptcy. The Complaint further alleges that, as a result of the foregoing actions, Slatkin violated the investment adviser registration provisions of
Section 203(a) of the Advisers Act, and the antifraud provisions of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act.
C. On June 7, 2001, the United States District Court for the Central District of California entered a Final Judgment of Permanent Injunction and Other Relief Against Defendant Reed E. Slatkin ("Judgment"). The Judgment, among other things, permanently enjoins Slatkin from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 203(a), 206(1) and 206(2) of the Advisers Act. SEC v. Reed E. Slatkin, Civil Action No. CV-01-04283 R (AIJx).
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Slatkin and to impose the sanctions specified in the Offer.
Accordingly, IT IS HEREBY ORDERED, effective immediately, that Slatkin be, and hereby is, barred from association with any investment adviser.
By the Commission.
Jonathan G. Katz
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