UNITED STATES OF AMERICA
In the Matter of
ROBERT C. SEARS
|ORDER MAKING FINDINGS|
AND IMPOSING REMEDIAL
SANCTIONS BY DEFAULT
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) on November 8, 2002, pursuant to Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act). On January 10, 2003, the Division of Enforcement (Division) filed a Motion For Default (Motion). In support of the Motion, the Division states that it learned on December 30, 2002, that Respondent had been served with the OIP via certified mail on November 30, 2002. Respondent was also served on December 17, 2002, when the OIP was left with a person of suitable age and discretion at Respondent's regular place of business.
As provided by Rules 155(a)(2) and 220(f) of the Commission's Rules of Practice, 17 C.F.R. §§ 201.155(a)(2) and .220(f), Respondent is in default because he has failed to answer the OIP, respond to motions or orders, or otherwise defend the proceeding. Accordingly, I find that the allegations in the OIP are true.
A. On September 26, 2000, the Commission filed an action against Sears, Securities and Exchange Commission v. Robert C. Sears, et al., Civil Action Number 00-30170-FHF, in the U.S. District Court for the District of Massachusetts. On that same day, the Court granted the Commission's motion for an ex parte order temporarily restraining Sears's fraudulent activities, freezing Sears's assets, and imposing other equitable relief. On October 6, 2002, (sic) the Court granted a preliminary injunction and asset freeze against Sears and several relief defendants for misappropriation of approximately $1.9 million in client funds.
B. On January 31, 2001, the Commission filed an Amended Complaint, incorporating the claims of two additional clients of Sears's and alleging that Sears defrauded his clients of a total of $2,214,485.
The Commission's Complaint alleged the following:
1. 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.
2. When 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 fifteen percent 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.
3. Through his conduct, Sears violated the antifraud provisions of the federal securities laws, including Sections 206(1) and 206(2) of the Advisers Act, Section 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.
C. On June 25, 2001, the Court entered an order finding Sears in default, and on September 10, 2002, a final judgment was entered against Sears, permanently enjoining him from future violations of Sections 206(1) and 206(2) of the Advisers Act, Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and ordering him to pay disgorgement and civil monetary penalties.
Based on the above and pursuant to Section 203(f) of the Advisers Act, I conclude that the public interest requires that Respondent be barred from acting as an investment adviser and from associating with an investment adviser.
Accordingly, IT IS ORDERED THAT Robert C. Sears is barred from acting as an investment adviser and from associating with an investment adviser.
Robert G. Mahony
Administrative Law Judge
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