UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Investment Advisers Act of 1940
Release No. 2078 / November 8, 2002
File No. 3-10929
SEC Institutes Administrative Proceeding
Against Robert C. Sears
Based on Entry of Injunction
The Securities and Exchange Commission today instituted an administrative proceeding against Robert C. Sears based on the entry of an injunction against him in Securities and Exchange Commission v. Robert C. Sears, et al. (Civil Action Number 00-30170-FHF)(D. Mass.). In the Order, the Division of Enforcement alleges that on September 10, 2002, the United States District Court for the District of Massachusetts entered a default judgment against Sears enjoining him from further violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 ("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 Investment Advisers Act of 1940 ("Advisers Act").
The Division of Enforcement further alleges that on September 26, 2000, the Commission filed its complaint alleging that, beginning in February 2000, Sears, an unregistered investment adviser, misappropriated his clients' funds by causing unauthorized transfers from his clients' accounts at several brokerage firms. To accomplish the transfers, Sears either forged his clients' signatures on letters directing the brokerage firms to transfer funds or fraudulently induced clients to transfer funds to the bank account of a corporation, Last Minute Concessions, Inc. ("Last Minute"), co-owned by Sears and another individual who is a relief defendant in the Commission's civil case relating to this matter. To generate the transferred cash, Sears forged client signatures on margin agreements and obtained unauthorized margin loans in client accounts. Last Minute used the money to buy a controlling interest in Cold Spring Golf, an entity developing a golf course near Belchertown, Massachusetts. Last Minute also purchased stock in Cold Spring Development, which was to build an adjoining condominium community. The Commission's complaint further alleged that when Sears' clients eventually learned of the transfers and began to question Sears, he provided varying false explanations, including that the money had been invested in government bonds that would earn 15% interest. Sears did not disclose to clients that he had used the money to buy a controlling interest in Cold Spring Golf for Last Minute. Clients who relied on him as a fiduciary for investment advice did not know that Sears had taken advantage of their trust and served his own financial interest at their expense.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Sears an opportunity to dispute these allegations, and to determine what sanctions, if any, are in the public interest.
For further information, see Litigation Release No. 16735.