U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21895 / March 23, 2011
SEC V. TIMOTHY J. ROTH, ET AL. Case No. 11-CV-02079 (C.D. Ill., filed March 21, 2011)
On March 21, 2011, the SEC obtained an emergency court order freezing the assets of Urbana, Illinois money manager Timothy J. Roth for stealing more than $6 million of his clients’ mutual fund shares, liquidating the shares, and sending the ill-gotten gains to various accounts and companies under his control. The Court also entered a temporary restraining order prohibiting Roth from violating the anti-fraud provisions of the federal securities laws.
According to the civil complaint filed by the SEC, Roth worked for Comprehensive Capital Management, Inc. (“CCM”), a New Jersey-based registered investment adviser. The SEC’s complaint alleges that from October 2010 through February 2011, Roth stole more than $6 million worth of mutual fund shares from several employee deferred compensation plans (“Plans”) for whom he provided investment advice. The SEC alleges that Roth, who worked out of CCM’s office near Urbana, Illinois, secretly caused the Plans’ mutual fund shares to be transferred to an account under his control, even though no such transfer had been requested or authorized by the Plans or the Plans’ participants. The SEC alleges that after selling the Plans’ shares, Roth funneled the cash proceeds to various accounts and companies under his control or for his benefit. According to the SEC’s complaint, at the time he was engaging in his scheme, Roth did not tell the Plans or their participants about the transfers. Instead, Roth sent them bogus account statements that deliberately omitted his surreptitious transfer of the mutual fund shares. Thus, the account statements overstated the Plans’ account holdings and concealed Roth’s theft.
The SEC's complaint charges Roth with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and with aiding and abetting violations of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2 thereunder. In addition to the emergency relief already obtained, the complaint seeks preliminary and permanent injunctions, disgorgement, and civil penalties from Roth. The SEC’s complaint also names Roth’s companies as relief defendants and seeks disgorgement from them. The Court’s freeze order extends to the assets of the relief defendants. A hearing on the SEC's motion for preliminary injunction has been set for 1:00 p.m. on March 30, 2011, at the U.S. District Court for the Central District of Illinois courthouse in Peoria, Illinois before Judge Michael M. Mihm.