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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940
Release No. 2282 / August 26, 2004

INVESTMENT COMPANY ACT OF 1940
Release No. 26580 / August 26, 2004

Admin. Proc. File No. 3-11612


In the Matter of

Audrey L. Buchner

Respondent.



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ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940 AND SECTIONS 9(b) AND 9(f) OF THE INVESTMENT COMPANY ACT OF 1940

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") and Sections 9(b) and 9(f) of the Investment Company Act of 1940 ("Investment Company Act") against Audrey L. Buchner ("Buchner" or "Respondent").

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over her and the subject matter of these proceedings, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the Investment Company Act of 1940 ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds that:

Nature of Proceeding

1. This proceeding stems from trading in public company equity securities in accounts in which Respondent Buchner had an interest while she was the private equity analyst at Van Wagoner Capital Management, Inc. ("VWCM" or "the Adviser"), the registered investment adviser for a family of mutual funds (the "Funds").

2. From mid-2000 through the end of 2001, Buchner, through accounts in which she had an interest, made hundreds of transactions in the same public equity securities that the Funds were then trading. The vast majority of those trades were in the same securities then owned by the Funds. In making the trades, Buchner had access to the Funds' non-public, current information about the Funds' portfolio. Buchner then omitted the prohibited trades from quarterly and annual reports she submitted to the Funds.

3. By her conduct, Buchner violated Section 17(j) of the Investment Company Act and Rule 17j-1(b) thereunder, which prohibit the making of any untrue statement of material fact to the Funds, or the omission of a material fact. Buchner also violated Rule 17j-1(d) under the Investment Company Act, which requires persons with access to the Funds' trading information to report their trading in the same securities.

Respondent

4. Respondent Audrey L. Buchner formerly was the private equity analyst for VWCM, a San Francisco, California investment adviser registered with the Commission and the Adviser to the Funds. From 1997 through 2003, Buchner worked at VWCM, except from August 1998 through August 1999, when she left VWCM to work for another company in the industry. Buchner, 31, is a resident of Wilmette, Illinois.

Facts

5. During 2000 and 2001, Respondent Buchner was the private equity analyst for the Funds. She had daily access and intra-day access to the Funds' holdings and their purchases and sales of publicly traded securities. The Funds reported their portfolio holdings to their shareholders only twice a year in semi-annual reports, and those semi-annual reports showed the Funds' portfolio holdings as of six weeks earlier. Buchner also received messages, often daily, from the public equity analysts at the Adviser summarizing information, including "First Call" or "morning call" summaries from other analysts, about public equity securities, many of which the Funds held or might contemplate buying or selling.

6. From July 2000 through at least December 2001, hundreds of transactions in public equity securities were made through the personal brokerage accounts in which Buchner had an interest, and the trading for which she either influenced or controlled. The vast majority of those securities transactions were in the same securities that the Funds also held. Buchner also regularly forwarded to the other person who influenced or controlled the accounts the daily messages from VWCM's public equity analysts summarizing information, including "First Call" or "morning call" summaries from other analysts, about public equity securities, many of which the Funds held or might contemplate buying or selling.

7. Pursuant to the Commission's rules, Buchner was required to report quarterly any transactions she made in public equity securities (among other transactions). She was also required by the Commission's rules to submit an annual report of her transactions in such securities during the year. In addition, the Funds and their Adviser, VWCM, shared a Code of Ethics that applied to each of the employees of the Adviser who had access to information about the Funds' holdings and their purchases and sales of securities. The Code of Ethics further restricted when and how such employees could make transactions in public equity securities, and Buchner believed that she was effectively prohibited by the Code of Ethics from trading public equity securities.

8. Despite the hundreds of transactions made during 2000 and 2001 in these accounts, Buchner omitted these transactions from the quarterly and annual reports she submitted to the Funds. Although required by the Commission's rules and by the Funds' Code of Ethics to report her public securities transactions over which she had direct or indirect influence or control, Buchner drew a line through or wrote "none" in the quarterly and annual reports to indicate that she had no reportable trades.

Legal Discussion

9. Section 17(j) of the Investment Company Act prohibits persons affiliated with mutual funds from engaging in any acts, practices, or courses of business in connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by the fund, in contravention of the Commission's rules adopted to prevent fraud. Rule 17j-1(b) makes it unlawful for any affiliated person to employ any device, scheme, or artifice to defraud the fund, to make material misrepresentations or omissions to the fund, to engage in acts or practices that operate as a fraud or deceit on the fund, or to engage in manipulative practices with respect to the fund. Rule 17j-1(d) further requires that persons employed by an investment adviser who have access to a fund's portfolio of must timely submit reports regarding the persons' personal trading in securities.

10. As a result of the conduct described above, Buchner willfully1 violated Section 17(j) of the Investment Company Act and Rule 17j-1(b) thereunder. With access to important information about the Funds' trading, Buchner made, but did not disclose, hundreds of transactions in public securities the Funds held or acquired. Her submission of reports to the Funds that omitted these trades concealed the large overlap in trading in the accounts with trading by the Funds in the same securities during all of 2001 and during more than five months in 2000, and therefore constituted omissions or misstatements of material fact to the Funds.

11. As a result of the above conduct, Buchner also willfully violated Rule 17j-1(d) by failing to timely report the hundreds of transactions in equity securities that she was required to report.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest and for the protection of investors to impose the sanctions agreed to in Respondent Buchner's Offer.

Accordingly, it is hereby ORDERED:

A. Pursuant to Section 9(f) of the Investment Company Act, that Respondent Buchner cease and desist from committing or causing any violations and any future violations of Section 17(j) of the Investment Company Act or Rules 17j-1(b) and 17j-1(d) promulgated thereunder;

B. Respondent Buchner shall, within 90 days of the entry of this Order, pay a civil money penalty in the amount of $35,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; (D) paid as follows: $10,000 within 30 days of the entry of this Order, an additional $10,000 within 60 days of the entry of this Order, and the final $15,000 within 90 days of the entry of this Order; and (E) submitted under cover letter that identifies Buchner as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Helane L. Morrison, San Francisco District Office, Securities and Exchange Commission, 44 Montgomery Street, Suite 1100, San Francisco, CA 94104.

By the Commission.

Jonathan G. Katz
Secretary


Endnotes


http://www.sec.gov/litigation/admin/ia-2282.htm


Modified: 08/26/2004