United States Securities and Exchange Commission
Investment Advisers Act of 1940
Release No. 2061 / September 23, 2002
File No. 3-10895
Administrative and Cease-and-Desist Proceedings Instituted Against Oxford Capital Management, Inc. and John G. Danz, Jr.
The United States Securities and Exchange Commission (Commission) announced that it has instituted public administrative and cease-and-desist proceedings against Oxford Capital Management, Inc. (Oxford), an investment adviser, and its president and majority shareholder, John G. Danz, Jr. (Danz). Oxford, located in Towson, Maryland, has been registered with the Commission since 1983.
In the Order Instituting Public Administrative and Cease-and-Desist Proceedings (Order), the Division of Enforcement (the Division) alleges that from approximately June 1998 through at least May 2001, Oxford through Danz, repeatedly submitted false and inflated performance results and the amount of assets in Oxford's Enhanced Equity (Equity) composite to various third parties, including clients and prospective clients, and also failed to correct false and inflated figures submitted to Danz for review by various reporting services. In particular, the Division alleges that during this time frame, Danz inflated the Equity composite's performance figures for the years 1991 through 1997, thereby fraudulently raising the Equity composite's long-term returns. As a consequence of these inflated figures, third party reporting services inaccurately portrayed Oxford as a highly ranked investment adviser that provided superior investment results for its advisory clients. Moreover, Oxford was unable to demonstrate how its advertised performance claims were calculated, and failed to maintain a variety of required books and records, including internal working papers or other records that would substantiate its advertised performance claims.
The Division alleges that Oxford and Danz failed to use previously audited performance figures and amount of assets managed when submitting long-term quarterly performance results of, and amount of assets managed in, Oxford's Equity composite to clients, prospective clients, reporting services, brokers, and consultants. Based on the false information provided by Oxford and Danz, the reporting service Nelson Investment Manager Database ranked Oxford's Equity composite among its Top 20 Money Managers for the periods ended December 31, 1998, December 31, 1999, June 30, 2000, and September 30, 2001. For example, Oxford's 40-quarter annualized return for the Equity composite as of June 30, 2000 was portrayed as 23.39% when, in fact, the actual return was only 15.68%, which would not have qualified the Equity composite for a Top 20 ranking. In addition, based on the false information provided by Oxford and Danz to Nelson, Nelson inaccurately reported that Oxford had $65 million of assets in the Equity composite as of December 31, 1999, when in fact, only $22 million of assets were in the composite at the time. Oxford distributed these materially inaccurate rankings to a variety of potential investors. Oxford utilized the false and misleading rankings in marketing brochures and to advertise its services in various newspapers, including the Baltimore Business Journal and the Baltimore Sun.
In addition, the Division alleges that Oxford, through Danz, supplied The Mobius Group, another reporting service, with false and misleading performance results of its Equity composite. As a result, Mobius distributed a Manager Fact Sheet about Oxford that contained false and misleading performance figures for the period ended December 31, 2000 and overstated figures for the amount of assets in the Equity composite for the years 1996 through 1999. For example, the Manager Fact Sheet stated that in 1996, Oxford's Equity composite had a 34.5% return with $51 million in assets, when it only had a 23.03% return with $10 million in assets. In early 2000, Oxford, through Danz, also provided false and misleading performance figures to a third reporting service, Effron Enterprises, Inc. The performance figures were similar to those submitted to Nelson and Mobius and were materially inflated in comparison to the audited numbers.
The Division also alleges that Oxford, through Danz, provided various brokers and consultants with materially false and misleading performance figures. These inflated performance figures were similar to those Oxford and Danz provided to the reporting services. For example, Danz distributed a marketing brochure to a representative of a broker who has custody of several of Oxford's client accounts. The brochure touted Oxford's above-average results, indicating that Oxford's Equity composite out-performed or matched the market. The brochure also contained several materially inaccurate Nelson publication reprints.
Based upon the above-described conduct, the Division alleges that Oxford willfully violated and Danz caused and willfully aided and abetted Oxford's violations of Sections 204, 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rules 204-2(a)(7), (11), (16), and 206(4)-1(a)(5) thereunder.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the respondents an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.