U.S. SECURITIES AND EXCHANGE COMMISSION
INVESTMENT ADVISERS ACT OF 1940
Release No. 2057 / September 17, 2002
File No. 3-10891
PUBLIC PROCEEDINGS INSTITUTED AGAINST JOHN RAYMOND LINNEY CLAIN
On September 17, 2002, the Commission issued an Order Instituting Public Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Order") against John Raymond Linney Clain ("Clain") of Alpharetta, Georgia based on the entry of an Order of Permanent Injunction and Other Relief enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Order of Permanent Injunction and Other Relief directed that Clain shall pay disgorgement, prejudgment interest thereon, and a civil penalty in amounts to be resolved upon motion of the Commission at a later date. The Order of Permanent Injunction and Other Relief also provided that for purposes of disgorgement, prejudgment interest and the civil penalty, the allegations of the Commission's complaint shall be deemed to be true, and Clain may not, by way of defense, contend that disgorgement, prejudgment interest and the civil penalty should not be imposed. SEC v. Saint James Asset Management, Inc. and John Raymond Linney Clain, et al., Case No. 1:02-CV-0426-RLV (N.D.Ga.).
The Commission's complaint alleged that between January 1998 and October 2000, Clain was an investment adviser and was associated with an investment adviser, and misappropriated approximately $965,400 from sixteen clients of Saint James Asset Management, Inc. ("Saint James"). Clain procured the funds by representing that he would use the funds to purchase securities for the clients. In reality, Clain used $110,000 to buy two cars and a diamond ring and the remaining funds to pay business and personal expenses, including monthly mortgage payments on his house. Clain concealed his conduct by giving his clients account statements, stock certificates and other documents that falsely indicated that Saint James had purchased securities on their behalf.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Clain an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.