UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7273 /March 14, 1996 SECURITIES EXCHANGE ACT OF 1934 Release No. 36966 /March 14, 1996 INVESTMENT COMPANY ACT OF 1940 Release No. 21826 /March 14, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8819 _________________________ ) ORDER MAKING FINDINGS AND ) IMPOSING SANCTIONS PURSUANT TO In the Matter of ) SECTION 8A OF THE SECURITIES ) ACT OF 1933, SECTIONS 15(b)(6) RICHARD G. WIWI and ) AND 21C OF THE SECURITIES ORACLE PARTNERS, ) EXCHANGE ACT OF 1934 AND ) SECTIONS 9(b) AND 9(f) OF THE Respondents ) INVESTMENT COMPANY ACT OF 1940 ------------------------- I. The Securities and Exchange Commission ("Commission") has previously instituted public administrative and cease and desist proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Section 9(f) of the Investment Company Act of 1940 ("Investment Company Act") against Richard G. Wiwi ("Wiwi") and Oracle Partners ("Oracle") (collectively "Respondents") and also pursuant to Section 15(b)(6) of the Exchange Act and Section 9(b) of the Investment Company Act against Wiwi. 1/ Wiwi and Oracle have submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined is in the public interest to accept. II. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, Wiwi and Oracle admit the jurisdiction of the Commission over them and the subject matter of these 1/ The administrative proceeding was instituted on September 19, 1995. ==========================================START OF PAGE 2====== administrative and cease and desist proceedings, and, without admitting or denying any of the findings contained herein, consent to the entry of this Order Making Findings and Imposing Sanctions Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b)(6) and 21C of the Securities Exchange Act of 1934 and Sections 9(b) and 9(f) of the Investment Company Act of 1940 ("Order") containing the findings set forth in Section III below and imposing sanctions set forth in Section IV below. III. On the basis of this Order and the Offer submitted by Wiwi and Oracle, the Commission finds that: 2/ A. RESPONDENTS Respondent Oracle was at all relevant times, a limited partnership located in Orinda, California. From 1991 to March 1994, Oracle was solely engaged in the business of accepting funds from individuals and entities throughout the United States for investment in an investment company, Delphoi Partners ("Delphoi"). Oracle was not registered with the Commission as an investment company. Respondent Wiwi was a registered representative for two separate registered securities broker-dealers from at least January 1991 up until his associations were terminated on March 21, 1994 and April 9, 1994, respectively, in connection with his conduct as described below. Wiwi controlled the activities and finances of Oracle during the relevant periods. B. THE UNREGISTERED OFFER AND SALE OF ORACLE'S SECURITIES In 1987, Delphoi implemented an investment strategy that used investors' funds to purchase treasury and municipal bonds. Delphoi then used the bonds as margin collateral to engage in an option writing program involving S&P 100 index options. Initially, Wiwi was paid a finder's fee by the general partner of Delphoi for each investor referred to it. In 1988, Wiwi stopped receiving finder's fees. From 1988 to 1991, Wiwi received compensation directly from the investors he referred to Delphoi. In 1991, Wiwi formed Oracle as a separate partnership, designating himself as the sole general partner. Monies Wiwi 2/ The findings herein are made pursuant to Respondents' Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. ==========================================START OF PAGE 3====== collected on behalf of Oracle were invested in Delphoi. Oracle's operations only involved transmitting investors' monies to and from Delphoi. Wiwi had no role in Delphoi's option or bond trading. Wiwi took a disclosed fee directly from the Oracle limited partners at the time of their investment. From 1991 until March 1994, Wiwi and Oracle willfully engaged in the business of offering and selling Oracle securities to the general public. During this period, Oracle continuously offered its securities. Wiwi and Oracle willfully used interstate telephonic communication and the mails to facilitate the offer and sale of Oracle securities. No registration statement has been in effect or filed with the Commission with respect to the securities offered and sold by Oracle. As of March 1994, Wiwi and Oracle had offered and sold Oracle securities to at least 41 individuals and entities, raising an amount in excess of $1.2 million. As Oracle's sole control person, Wiwi was aware of Oracle's conduct. He arranged the offer and sale of the Oracle securities. In view of the above, Wiwi and Oracle willfully violated Sections 5(a) and 5(c) of the Securities Act. C. WIWI'S AND ORACLE'S FRAUDULENT COURSE OF CONDUCT In the course of raising funds from investors for Oracle, Wiwi made a series of misrepresentations and omissions of material fact. Wiwi claimed Delphoi's trading results as Oracle's own, hiding the fact that an investment in Oracle was really an investment in Delphoi and the fact that the general partner of Delphoi managed the portfolio. Specifically, Wiwi and Oracle misrepresented to investors that Oracle had been in existence since 1987 and had a history of producing successful investment returns for its investors since that time. In addition, Wiwi failed to disclose that: (1) the investment portfolio was managed by the general partner of Delphoi; (2) Oracle invested only in Delphoi and therefore an investment in Oracle was essentially an investment in Delphoi; and (3) the general partner of Delphoi took a 10% management fee from the profits. In furtherance of his scheme, Wiwi created and distributed marketing materials on behalf of Oracle that were separate and apart from any materials produced by the general partner of Delphoi. The materials consisted, among other written documents, of a document entitled "Oracle Partners Summary of Investment" and a document entitled "Supplemental Information." Wiwi gave ==========================================START OF PAGE 4====== these materials to investors before they invested in Oracle. "Oracle Partners Summary of Investment" consisted of various charts and graphs that purported to show Oracle's past performance as an investment since 1987. The material falsely stated that Oracle had been in existence since 1987 and included past performance figures for the period 1987 through 1991. The document did not mention Delphoi at all, nor did it state that an investment in Oracle was really an investment in Delphoi. Similarly the "Supplemental Information" represented that Oracle had been in existence since 1987 and included performance statistics from 1988 to 1993. These materials represented that monies invested in Oracle were managed by Wiwi and did not disclose that an investment in Oracle was really an investment in Delphoi. In fact, as noted above, Oracle had only been in operation since 1991, the investment strategy was directed by the general partner of Delphoi, and the performance figures presented for Oracle before 1991 were those of Delphoi, not Oracle. In addition, Wiwi and Oracle failed to disclose the risks inherent in an investment in Delphoi, that the strategy involved options trading, or that their investment was used to write uncovered options. After Wiwi raised funds for Oracle from investors, he continued to distribute false and misleading statements to hide his fraud and deceit. Wiwi occasionally sent newsletters to his investors describing the progress and performance of Oracle. However, instead of sending them Oracle specific material and original writings, Wiwi merely regenerated material that Delphoi had sent him, as general partner of Oracle, and added a few insignificant changes to Delphoi's work. Once a month, Wiwi received a copy of Delphoi's monthly statement which had been generated for investors in Delphoi. These reports included information regarding net asset value per share, the number of shares in the fund held by that investor, and the total value of each investment. Wiwi then took the statement, made the calculations for each individual limited partner of Oracle, and sent out their statements under the heading "Oracle Partners." Thus, the materials that Wiwi sent to investors and represented as his own gave them the misleading impression that he, and not the general partner of Delphoi, was directing Oracle's investment strategy. In view of the above, Wiwi and Oracle willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. ==========================================START OF PAGE 5====== D. ORACLE'S FAILURE TO REGISTER AS AN INVESTMENT COMPANY From 1991 through March 1994, Oracle's "operations" were limited to obtaining investors' monies and investing them in the securities of Delphoi. Wiwi willfully made no attempt to limit the number of individuals and entities who invested with Oracle and, as noted above, was engaged in a public distribution of Oracle's securities. Oracle was, and is, an "investment company" under the definition of Section 3(a) of the Investment Company Act and was not registered under Section 7(a) of the Investment Company Act. In view of the above, Oracle willfully violated Section 7(a) of the Investment Company Act and Wiwi willfully aided and abetted and caused Oracle's violation of Section 7(a) of the Investment Company Act. IV. On the basis of the foregoing, it is appropriate and in the public interest to impose the sanctions which are set forth in the Offer submitted by Wiwi and Oracle. Accordingly, IT IS HEREBY ORDERED that: A. Oracle shall cease and desist from committing or causing any violation and any future violation of, Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, Rule 10b-5 thereunder, and Section 7(a) of the Investment Company Act; B. Wiwi shall cease and desist from committing or causing any violation and any future violation of, Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and from causing any violation, and any future violation of, Section 7(a) of the Investment Company Act; C. within thirty (30) days of the date of this Order, Wiwi shall pay a civil money penalty in the amount of $12,500 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) mailed by certified mail to the Comptroller, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549; and (D) submitted under a cover letter which identifies Wiwi as a Respondent in these proceedings, with a copy of said cover letter and money order or check sent to David B. ==========================================START OF PAGE 6====== Bayless, District Administrator, Securities and Exchange Commission, 44 Montgomery Street, Suite 1100, San Francisco, CA 94104. D. Commencing the second Monday following the entry of this Order, Wiwi be suspended from association with any broker, dealer, municipal securities dealer, investment adviser, or investment company for a period of eight months; and E. Wiwi shall deliver an affidavit of compliance to the San Francisco District Office within ten (10) days following his period of suspension stating that he has complied with the terms of his suspension. By the Commission. Jonathan G. Katz Secretary