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U.S. Securities and Exchange Commission

Before the

RELEASE NO. 1978 / September 27, 2001

FILE NO. 3-10595

In the Matter of




SECTIONS 203(e), (f) and (k)


The Securities and Exchange Commission (Commission) deems it appropriate in the public interest that public administrative and cease-and-desist proceedings be instituted against Performance Analytics, Inc. (Performance) and Robert P. Moseson (Moseson) pursuant to Sections 203(e), (f) and (k) of the Investment Advisers Act of 1940 (Advisers Act).


In anticipation the institution of these proceedings, Performance and Moseson have submitted an Offer of Settlement (Offer) which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, Performance and Moseson consent, without admitting or denying the findings, except as to jurisdiction over them and the subject matter of this proceeding and those matters set forth in paragraphs III.1. and III.2. below, which they admit, without a hearing, to the issuance of this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e), (f), and (k) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions and Cease-and-Desist Order (Order).

Accordingly, IT IS ORDERED that proceedings against Respondents Performance and Moseson be, and hereby are, instituted.



On the basis of this Order and the Offer, the Commission finds that1:

1. At all relevant times, Performance Analytics, Inc. (Performance), based in Chicago, Illinois, was registered with the Commission as an investment adviser pursuant to Section 203(c) of the Investment Advisers Act of 1940 (Advisers Act).

2. At all relevant times, Robert P. Moseson (Moseson), age 55 and a resident of Highland Park, Illinois, was a principal and associated person of Performance.

3. At all relevant times, Merrimac Advisors Company (Merrimac), based in Albuquerque, New Mexico, was registered with the Commission as an investment adviser pursuant to Section 203(c) of the Advisers Act.

4. At all relevant times, Fredric J. French (French), age 52 and a resident of Albuquerque, New Mexico, was an associated person and the only principal of Merrimac.

5. At all relevant times, Performance has provided consulting services to its clients, primarily corporate pension funds, profit sharing plans and individuals with substantial net worths. Performance does not manage client funds. Instead, Performance provides consulting services to its clients by assisting them in defining their investment objectives and in selecting money managers. Performance does so in part, by maintaining a database listing thousands of money managers and by selecting from that database certain money managers matching the investment criteria chosen by its clients. Performance produces a written report and comparison concerning the selected money managers, and provides this report to its clients. Performance also monitors and evaluates the performance of its clients' money managers.

6. French, who founded Merrimac, was an employee of Lakeview Securities Corporation (Lakeview), Performance's affiliated broker-dealer, from 1993 until he founded Merrimac in late 1996. In 1993, Performance hired French to work for the Arms Division of Lakeview, assisting Richard W. Arms in the management of the portfolio for Investors Research Fund, Inc. (IRF), a mutual fund for which Lakeview acted as an investment adviser. Richard W. Arms introduced French to Moseson. Moseson interviewed French and participated in the decision to hire him to work for the Arms Division of Lakeview. In addition, French reported to Moseson during the time that he worked for the Arms Division of Lakeview.

7. French founded Merrimac in 1996. Performance helped Merrimac by introducing Merrimac to several prospective clients, reviewing parts of Merrimac's Form ADV and causing affiliates to pay fees to Merrimac. Moseson was instrumental in helping French found Merrimac. From 1997 through 1998, Merrimac managed securities portfolios for one individual and a few pension and retirement funds. In addition, Merrimac became the sub-adviser for the IRF portfolio in 1997.

8. Merrimac, through French, gave approximately 10-12 presentations to clients of Performance from March 1997 through early 1998. Merrimac would make its presentation to a Performance client in competition with other money managers selected by Performance. Three of Performance's clients hired Merrimac as a money manager based on French's presentations.

9. Merrimac obtained clients partly by using an inaccurate track record in the presentations made to Performance clients. For each of Merrimac's presentations, Performance provided the client a Management Report including performance data for Merrimac for the preceding five-year period. These performance numbers placed Merrimac's portfolio in the first or second percentile of all of the similarly styled money managers in the Performance database. In addition, these Management Reports frequently included a single page synopsis of database information on each investment adviser called a Manager Watch. The Manager Watch for Merrimac stated that Merrimac managed $200 million of client funds for 10 clients and was founded in 1993. In addition, the Manager Watch contained graphs and charts showing Merrimac's cumulative annual rate of return for the previous five years.

10. The information that Performance passed on to its clients regarding Merrimac's track record was inaccurate. Merrimac began conducting business in early 1997, not in 1993 as represented to Performance clients. The representations that Merrimac had 10 clients and $200 million dollars under management were also inaccurate. At its zenith, Merrimac had only five clients, including the three Performance clients, and only $90 million in client funds under management. Merrimac's five-year track record was inaccurate because Merrimac had not conducted business for five years.

11. Based on the facts stated above, Moseson should have known that the Merrimac track record provided to Performance clients was inaccurate.

12. As a result of the conduct described above, Performance and Moseson willfully violated Section 206(2) of the Advisers Act by using mails or means or instrumentalities of interstate commerce, directly or indirectly, to engage in any transaction, practice, or course of business which operated as a fraud or deceit upon any client or prospective client.2



In light of the foregoing, it is appropriate in the public interest to impose the sanctions specified in the Offer submitted by Performance and Moseson. Accordingly, IT IS HEREBY ORDERED that:

1. Pursuant to Section 203(k) of the Advisers Act, Moseson and Performance shall cease and desist from committing or causing any violation and any future violation of Section 206(2) of the Advisers Act;

2. Performance and Moseson are hereby censured;

3. Moseson is suspended from association with any investment adviser for a period of three (3) months, effective on the second Monday following the entry of the Order;

4. Moseson shall provide to the Commission, within thirty (30) days after the end of the three (3) month suspension period described above, an Affidavit that he has complied fully with the sanctions described in Section IV.3. above; and

5. Moseson shall, within seven (7) days of the entry of the Order, pay a civil penalty in the amount of $25,000 to the United States Treasury. Such payment shall be: (a) made by United States postal money, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) hand delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Alexandria, Virginia 22312-0003; and (d) submitted under cover of letter which identifies Moseson as a respondent in this proceeding, the file number of this proceeding, a copy of which letter and money order or check shall be sent to Mary Keefe, Regional Director, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison, Suite 1400, Chicago, Illinois, 60661.

By the Commission.

Jonathan G. Katz


1 The findings herein are not binding on anyone other than Respondents Performance and Moseson.
2 "Willfully" as used in this Order means intentionally committing the act which constitutes the violation, see Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). There is no requirement that the actor also be aware that he is violating one of the Rules or Acts.


Modified: 10/02/2001