UNITED STATES OF AMERICA
April 12, 2001
INVESTMENT ADVISERS ACT OF 1940
INVESTMENT COMPANY ACT OF 1940
The Securities and Exchange Commission ("Commission") issued an Order Instituting Proceedings ("OIP") in this matter on September 28, 2000, pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") and Section 9(b) of the Investment Company Act of 1940 ("ICA"). Respondent Saxena received a copy of the OIP. See Respondent's letter dated October 17, 2000. Respondent Saxena did not participate at prehearing conferences conducted by telephone on November 14, 2000, and December 18, 2000. In a letter erroneously dated January 26, 2000, Respondent Saxena indicated that she declined to participate because she was still seeking affordable counsel and "afraid that anything I would say could be used against me in the court of law." An Order issued February 8, 2001, treated this letter in which Respondent Saxena denied the allegations in the OIP as an answer, and denied a Motion For Default filed by the Division of Enforcement ("Division") on December 21, 2000.
I ordered a telephonic prehearing conference on April 6, 2001, to determine whether Respondent Saxena intended to participate in the hearing scheduled to begin at the Ninth Circuit Court of Appeals, 95 Seventh Street, San Francisco, California, on April 23, 2001, at 9:00 a.m. (PDT). At the designated time and throughout the duration of the conference, the telephone operator was unable to contact Respondent Saxena at the telephone number she supplied to this office. Respondent Saxena's failure to participate in the April 6 prehearing conference, and all other prehearing conferences, places her in default under Rule 155(a) of the Commission's Rules of Practice. 17 C.F.R. § 201.155(a). Rule 155(a) provides that a determination may be made against a party in default upon consideration of the record, including the OIP, the allegations of which may be deemed true. Accordingly, I find the following allegations in the OIP to be true.1
Between October 1995 and August 1996, Respondent Saxena was an associated person of an investment adviser because she served as the president, chief executive officer, and sole shareholder of the investment adviser, which was the adviser to two unregistered investment companies formed by Respondent Saxena and her husband, Sanjay Saxena.
On September 18, 1998, the Commission filed a complaint in the United States District Court for the District of Massachusetts against Respondent Saxena and her husband, SEC v. Sanjay Saxena and Mumtaz Saxena, Civil Action No. 98-11918-EFH. The complaint alleged that Respondent Saxena violated Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act") by offering and selling unregistered securities; the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; and Sections 206(1) and 206(2) of the Advisers Act by making material misrepresentations. Further, the complaint alleged that Sanjay Saxena violated a February 25, 1995, Commission order permanently barring him from acting as, or associating with, a broker-dealer, investment adviser, or investment company ("Bar Order").
Specifically, the complaint alleged that Respondent Saxena and Sanjay Saxena implemented a scheme to evade the Bar Order by establishing, between October 1995 and August 1996, an investment adviser, Saxena Capital Management Inc., and two unregistered investment companies, Index Timing Fund L.P. and Saxena Growth Fund, for which Respondent Saxena was nominally the principal. In reality, Sanjay Saxena was actively associated with the investment adviser and the unregistered investment companies from the outset, and their investment decisions tracked the recommendations in newsletters that he published over an Internet website entitled "Vital Information." The complaint alleged that Sanjay Saxena violated the Bar Order by associating with the entities as well as by continuing to receive fees under a separate consulting agreement with a broker-dealer. In addition to Sanjay Saxena's violation of the Bar Order, the complaint alleged that, between February 1996 and February 1997, Respondent Saxena and her husband failed to register the securities of the two pooled investment funds with the Commission and made material misrepresentations and omissions to investors in their companies. Accordingly, the complaint alleged that Respondent Saxena and her husband unlawfully engaged in the offer and sale of unregistered securities and violated the antifraud provisions of the federal securities laws.
On July 18, 2000, the district court granted the Commission's motion for summary judgment filed June 30, 2000. On July 25, 2000, the district court entered a final judgment against Respondent Saxena permanently restraining and enjoining her from violations 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 Sections 206(1) and 206(2) of the Advisers Act. The judgment directed Respondent Saxena to disgorge jointly and severally with Sanjay Saxena the sum of $277,547, plus prejudgment interest of $49,809. Further, it directed Respondent Saxena to pay a civil monetary penalty of $50,000.
I find it is in the public interest to take the following action pursuant to Section 203(f) of the Advisers Act and Section 9(b) of the ICA based on the record evidence and my findings that Respondent Saxena was enjoined from any action, conduct, or practice as specified in Section 203(e)(4) of the Advisers Act and that she willfully violated Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
I ORDER that Mumtaz Saxena is barred from being associated with an investment adviser and from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor or principal underwriter.
I FURTHER ORDER that the hearing in this matter scheduled to begin on April 23, 2001, is cancelled.
1 Respondent Saxena's letters, dated October 17, 2000, and December 17, 2000, claiming that she has sought affordable counsel and has requested that the Commission provide her with legal representation are unpersuasive. See Kentucky W. Va. Gas v. Pa. Pub. Util. Comm'n, 837 F.2d 600, 618 (3d Cir. 1988) ("The Supreme Court has not recognized a constitutional right to counsel in a civil case or in a civil matter before an administrative agency."); cf. Boruski v. SEC, 340 F.2d 991, 992 (2d Cir. 1965); A. T. Brod & Co., 43 S.E.C. 289, 292-93 (1967). Furthermore, Respondent Saxena was granted a continuance to obtain counsel. See October 26, 2000, Order.