U.S. Securities and Exchange Commission
Litigation Release No. 18248 / July 24, 2003
SEC v. Schield Management Company and Marshall L. Schield, Case No. 03-B-1332 (District of Colorado)
The Securities and Exchange Commission filed an action in the United States District Court for the District of Colorado on July 23, 2003, against Schield Management Company and its president, Marshall L. Schield. Schield Management, a Littleton, Colorado, investment adviser registered with the Commission, has approximately 12,000 clients and $589,000,000 under management. Simultaneously with the filing of the action and without admitting or denying the allegations in the Commission's complaint, Schield Management and Marshall Schield consented to the entry of an order prohibiting future violations of Section 204 of the Investment Advisers Act of 1940 and Rule 204-2 and an order to provide an accounting. The order, which was also entered on July 23, 2003, will remain in effect until one of the parties petitions the court for a hearing in the action.
The Commission's complaint alleges that, at the direction of Marshall Schield, Schield Management destroyed and altered documents it was required to produce during the course of a Commission compliance examination. The examination at issue began in May 2003. According to the complaint, as part of the examination Commission examiners asked Schield Management to produce certain e-mails for their inspection. After the request was made, Marshall Schield directed two of the firm's employees to destroy e-mails responsive to the request. The complaint also alleges that Commission examiners asked Schield Management to produce the firm's log of trading errors. Schield Management responded by producing several different, inconsistent versions of the log, none of which is complete or accurate. The complaint further alleges that Commission examiners requested records maintained by Schield Management to document each instance in which the firm used a client's personal identification number, or PIN, to make a securities trade. These PINs had been issued to the clients by mutual fund complexes holding the clients' assets. After Commission examiners made the request encompassing the PINs, securities traders at Schield Management were directed to remove PINs from their records.
The complaint alleges that, based on the conduct described above, Schield Management violated Section 204 of the Investment Advisers Act of 1940 and Rule 204-2 thereunder. These provisions require investment advisers to make and keep certain books and records. Section 204 also requires investment advisers to make their books and records available for inspection by Commission compliance examiners. The complaint further alleges that Marshall Schield aided and abetted Schield Management's violations of these provisions. The Commission's action seeks injunctive relief prohibiting future violations of these provisions and civil penalties against each defendant.