United States Securities and Exchange Commission
Securities Exchange Act of 1934
Release No. 47699 / April 18, 2003
Investment Advisers Act of 1940
Release No. 2123
File No. 3-11088
In the Matter of Gregory L. Fears
Administrative Proceedings Instituted against former Joplin, Missouri Resident Gregory L. Fears
The Securities and Exchange Commission ("Commission") announced that it instituted public administrative proceedings against Gregory L. Fears, formerly of Joplin, Missouri. The Commission entered an Order Instituting Public Administrative Proceedings Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers act of 1940 ("Order") based upon Fears' alleged twenty-two count criminal conviction.
In the Order, the staff alleges that from 1992 to 2001, Fears acted as an investment adviser and was a control person, a 50% shareholder and, at various times, an officer and director of Investors Financial, Inc. ("Investors Financial"), an investment advisory firm formerly registered with the Commission and of World Securities, Inc. ("World Securities"), a broker-dealer registered with the Commission,
In addition, the staff alleges that in the case of United States of America v. Gregory L. Fears, Case No. 2:01CR20033 in the United States District Court for the Western District of Arkansas, Fears pled guilty and was convicted on a twenty-two count criminal information, which included three counts of violating 15 U.S.C. §§ 80b-6 and 80b-17 (investment advisory fraud), one count of violating 18 U.S.C. § 1343 (wire fraud), five counts of violating 18 U.S.C. § 1957 (money laundering), six counts of violating 18 U.S.C. § 1014 (loan fraud) and seven counts of violating 18 U.S.C. § 982(b)(1) (criminal forfeiture). The information against Fears alleged, among other things, that beginning in 1992, Fears and Smith formed a partnership in which Fears promoted himself to potential clients as a financial trustee available to handle all investment decisions for the clients, with Smith providing investment advice to Fears as the clients' trustee, as well as directly to the clients. The information also alleged that Fears and Smith formed World Securities and Investors Financial for the purpose of managing their clients' assets and to allow Fears and Smith to profit from buying and selling securities for their clients. Fears recommended that a number of their unsophisticated and generally elderly advisory clients invest in World Capital Management, L.P. ("World Capital"), an unregistered hedge fund created by Fears and Smith and managed by Smith, who conducted high-risk securities trading in its account through World Securities. The information further alleged that in order to induce their clients to invest in World Capital, Fears made misrepresentations and omissions of material facts to clients regarding the nature of World Capital and the risks of investing in it. As a result of Fears and Smith's fraudulent scheme, their advisory clients lost essentially all of their investments.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Fears an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.