U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 20936 / March 9, 2009
Securities and Exchange Commission v. Locke Capital Management, Inc. and Leila C. Jenkins, Civil Action No. 09-CV-100-WES (D.R.I.)
SEC FILES FRAUD ACTION AGAINST INVESTMENT ADVISER LOCKE CAPITAL MANAGEMENT, INC. AND ITS OWNER LEILA JENKINS
The Securities and Exchange Commission today filed a civil injunctive action against Locke Capital Management, Inc., an investment adviser based in Newport, Rhode Island and New York City, and Leila C. Jenkins, its founder and sole owner who currently serves as its President, Chief Executive Officer, and Chief Investment Officer. The Complaint alleges that Locke and Jenkins invented a billion-dollar client in order to gain credibility and attract legitimate investors. The Complaint further alleges that Jenkins tried to perpetuate her scheme by lying to the Commission staff about the existence of the invented client and furnishing the staff with bogus documents in 2008, including fake custodial statements that she created on her laptop.
According to the Complaint, Jenkins repeatedly claimed that the so-called "confidential" client accounts that she invented and claimed to manage contained more than $1 billion in assets. Even as Locke began to take on genuine clients in late 2006, the assets under management of its real clients never amounted to more than a very small portion of the billion-plus dollars that Jenkins claimed to manage. From at least 2003 to 2009, falsehoods concerning the confidential accounts were made in brochures, meetings, submissions to online databases that prospective clients used to select money managers, and in SEC filings.
Besides the invented client and assets under management, the Complaint alleges several other lies Jenkins and her firm told to investors. These include misrepresenting Locke's performance for years in which Locke had no clients and deceiving clients about the makeup of the firm, including the number, identity, and role of its employees.
The Complaint alleges that Locke and Jenkins violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940. The Complaint further alleges that Locke violated, and Jenkins aided and abetted violations of, Sections 204, 204A, and 206(4) of the Advisers Act and Rules 204-2(a), 204A-1, and 206(4)-1(a)(5) thereunder. The Complaint seeks a permanent injunction against future violations of the securities laws, disgorgement of ill-gotten gains and prejudgment interest thereon, and a civil monetary penalty.