UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Investment Advisers Act of 1940
Release No. 2026 / April 1, 2002
File No. 3-10746
In the Matter of
THOMAS J. KEARNS,
| ORDER INSTITUTING PUBLIC
PURSUANT TO SECTION 203(f)
OF THE INVESTMENT ADVISERS ACT
OF 1940, MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Thomas J. Kearns ("Kearns").
In anticipation of the institution of this proceeding, Kearns has submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined to accept. Solely for the purposes 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 those contained in paragraphs II.A-E, and the jurisdiction of the Commission over himself and the subject matter of these proceedings, which are all admitted, Kearns consents to the issuance of this Order Instituting Proceedings, Making Findings, and Imposing Remedial Sanctions ("Order"), and to the entry of the findings set forth below.
On the basis of this Order and the Offer submitted by Kearns, the Commission finds that:
- Kearns and Kearns Financial Services, Inc. ("KFS") were engaged in the investment advisory business and made use of the mails and other means and instrumentalities of interstate commerce in connection with their business as investment advisers.
- Kearns was the sole shareholder, director and president of KFS and controlled KFS.
- On June 20, 2001, in United States v. Thomas J. Kearns, et al., Case No. 3:01-CR-0105-M, the United States District Court for the Northern District of Texas entered a judgment of conviction against Kearns based on his plea of guilty to a charge of fraud under the Advisers Act;
- On April 19, 2001, in Securities and Exchange Commission v. Thomas J. Kearns, et al., Case No. 3:00-CV-1358-M, the United States District Court for the Northern District of Texas entered a final judgment permanently enjoining KFS from violating Sections 206(1) and (2) of the Advisers Act; and
- On March 20, 2002, in Securities and Exchange Commission v. Thomas J. Kearns, et al., Case No. 3:00-CV-1358-M, an action in which the Commission had alleged that Kearns had operated a fraudulent scheme where he acted as an investment advisor and entered into contracts that permitted him to manage and invest his clients' funds, that Kearns had induced his clients to liquidate existing investments, including annuities with insurance companies and to place their funds with him to invest in securities and that Kearns falsely represented to clients that their funds would be in safe investments that would provide a return of at least 9% to 10% annually even though Kearns was not registered as an investment adviser either with the Commission or with the Texas State Securities Board and did not invest clients' funds as represented, the United States District Court for the Northern District of Texas entered a final judgment permanently enjoining Kearns from violating Sections 206(1) and (2) of the Advisers Act.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions that are set forth in the Offer submitted by Kearns.
Accordingly, IT IS ORDERED THAT Kearns is barred from association with any investment adviser.
By the Commission.
Jonathan G. Katz