==========================================START OF PAGE 1====== UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION INVESTMENT ADVISERS ACT OF 1940 Release No. 1561 / April 30, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8874 ------------------------------ : In the Matter of : ORDER MAKING FINDINGS AND : IMPOSING REMEDIAL : SANCTIONS BRIAN J. SHEEN : : : ------------------------------ I. In these public administrative and cease and desist proceedings instituted on October 31, 1995, by the Securities and Exchange Commission ("Commission") pursuant to Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act"), Respondent Brian J. Sheen ("Sheen") has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over him and over the subject matter of this proceeding and as to the findings contained in Section II, paragraph A., below, which are admitted, Sheen, by his Offer, consents to the entry of findings and remedial sanctions set forth below. II. On the basis of this Order, the Order Instituting Public Proceedings and the Offer, the Commission finds that: A. From December 1986 through February 1995, Sheen Investment Advisory Services, Inc. ("SIAS") was an investment adviser registered with the Commission and at all relevant times herein, Sheen was president, CEO and sole shareholder of SIAS and was responsible for SIAS' compliance with the federal securities laws. B. From approximately June 1991 through at least December 1993, SIAS violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5), thereunder, and Sheen willfully aided and abetted and caused such violations, in that they published a misleading advertisement concerning purported real case histories of former clients of SIAS. C. From at least June 1992 through February 1995, SIAS violated Section 206(4) of the Advisers Act and Rule 206(4)- 4(a)(2), thereunder, and Sheen willfully aided and abetted and caused such violations, in that they failed to disclose to clients and prospective clients all material facts with respect to legal or disciplinary events material to the evaluation of the adviser's integrity. As part of the aforesaid conduct, SIAS (i) failed to disclose to its clients or prospective clients in Form ADV, or otherwise, that on April 27, 1993, Sheen and Sheen Financial Resources, Inc. were jointly and severally censured and fined $7,500 for their violations of the NASD's Rules of Fair Practice relating to advertising; and (ii) prematurely discontinued disclosure in Form ADV of the disciplinary action brought by the Florida Division of Securities against Sheen in August 1984, and did not otherwise disclose that action to clients or prospective clients. D. From at least February 1992 through at least December 1993, SIAS violated Section 206(2) of the Advisers Act, and Sheen willfully aided and abetted and caused such violations, in that SIAS utilized written investment advisory agreements which contained a clause that reads, "The client acknowledges that (i) the Adviser will not be liable for any losses in the portfolio..." in violation of the fiduciary duty owed to advisory clients. E. From at least June 1991 through at least December 1993, SIAS violated Section 206(4) of the Advisers Act and Rule 206(4)- 2, thereunder, and Sheen willfully aided and abetted and caused such violations, in that SIAS maintained custody and possession over client funds and securities pursuant to a trust agreement whereby SIAS served as sole trustee, yet SIAS failed to issue quarterly itemized statements to clients and failed to submit the account to annual examinations by an independent public accountant. F. From at least June 1991 through at least December 1993, SIAS violated Section 204 of the Advisers Act and Rules 204-2, 204-1(b)(1) and 204-3(c) thereunder, and Sheen willfully aided and abetted and caused such violations, in that SIAS failed to make and keep for prescribed periods such records (as defined in Section 3(a)(37) of the Securities Exchange Act of 1934), furnish such copies thereof and make and disseminate such reports as the Commission prescribes as necessary or appropriate in the public interest or for the protection of investors. For example: (i) certain client files failed to contain records reflecting the client's purchase of limited partnership interests, partnership reports, correspondence, or records of payments made by the partnership to the clients; (ii) SIAS failed to promptly amend its Form ADV as required to disclose that (a) on June 24, 1991, the NASD initiated a disciplinary action against SFR and Sheen, and (b) on April 27, 1993, the NASD found that SFR and Sheen committed such violations and imposed a censure and fine; and (iii) SIAS failed to annually deliver or offer in writing to deliver upon written request to each of its clients, a written disclosure statement required by Rule 204-3 under the Advisers Act. III. A. The Commission has reviewed Sheen's sworn financial statement dated December 4, 1995, and other evidence adduced by Sheen, and provided that Sheen has submitted a true, accurate and complete sworn affidavit establishing his inability to pay concerning his financial condition, including his assets, liabilities, income and expenses, has determined that he does not have the financial ability to pay a civil penalty. B. The Commission does not impose a civil penalty against Sheen based upon his demonstrated financial inability to pay, and that the determination that Sheen is unable to pay a civil penalty is contingent upon the accuracy and completeness of his Statement of Financial Condition executed under oath by him on December 4, 1995, and that the Division of Enforcement ("Division") may petition the Administrative Law Judge ("ALJ") to reopen this matter to consider Sheen's inability to pay a civil penalty if the Division obtains information from any source that the financial information provided by Sheen was inaccurate or incomplete in any material respect as of the time such representations were made, and that the Division may, at its sole discretion and without prior notice to Sheen, petition the ALJ for an order requiring Sheen to pay a civil penalty, and that in connection with any such petition, the only issues shall be whether the financial information provided by Sheen, was fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, and the amount of civil penalty to be imposed, and that in any such petition, the Division may move the ALJ to consider all available remedies, and that Sheen may not, by way of defense to such petition, contest the findings in the Order or assert that a civil penalty should not be ordered for the violations of the federal securities laws alleged therein. IV. In view of the foregoing, it is in the public interest to impose the sanctions specified in the Offer. ACCORDINGLY, IT IS ORDERED that: A. Sheen shall cease and desist from committing or causing any violation or future violation of Sections 204, 206(2) and 206(4) of the Advisers Act and Rules 204-1(b)(1), 204-2, 204- 3(c), 206(4)-1(a)(5), 206(4)-2 and 206(4)-4(a)(2) thereunder; and B. Sheen is hereby barred from association with any broker, dealer, municipal securities dealer, investment company or investment adviser provided, however, that after a period of one (1) year subsequent to the entry of this Order he has a right to re-apply to the appropriate self-regulatory organization or, where there is none, to the Commission for permission to become so associated. By the Commission. Jonathan G. Katz Secretary