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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940
Release No. 2112 / February 26, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-10918


In the Matter of

STEVIN R. HOOVER and HOOVER CAPITAL MANAGEMENT, INC.,

Respondents.


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ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS PURSUANT TO SECTIONS 203(e) AND 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940

I.

The Securities and Exchange Commission ("Commission") instituted public administrative proceedings pursuant to Sections 203(e) and 203(f) of the Advisers Act against Stevin R. Hoover and Hoover Capital Management, Inc. ("HCM" and collectively, with Hoover, "Respondents") on October 21, 2002.

II.

Respondents have submitted Offers of Settlement ("Offers") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings and the findings contained in Section III.4 below, which are admitted, Respondents consent to the entry of this Order Making Findings and Imposing Remedial Sanctions Pursuant to Sections 203(e) and 203(f) of the Investment Advisers Act of 1940 ("Order"), as set forth below.

III.

Respondents

1. Respondent Hoover is the sole owner of HCM, until January 3, 2002, a registered investment adviser, and Chestnut Management LLC ("Chestnut Management"), an unregistered investment adviser. Before founding HCM, Hoover was a registered representative with two broker-dealers from 1974 to 1989. Respondent is 54 years old and until recently, resided in Kansas City, Missouri.

2. Respondent HCM (File no. 801-34643) was registered with the Commission as an investment adviser from 1989 to 2002. On January 3, 2002, HCM filed a Form ADV-W withdrawing its registration with the Commission. HCM was a Delaware corporation based in Kansas City, Missouri. HCM provided discretionary account management services to individuals, endowment funds and hedge funds. According to Form ADV filed with the Commission, as of November 7, 2001, HCM had approximately 110 accounts under management with total assets of approximately $57 million. HCM is now defunct.

Other Relevant Entity

3. Chestnut Management is a Delaware limited liability company based in Kansas City, Missouri. Chestnut was created in April 2000 and is wholly owned by Hoover. Chestnut is not registered with the Commission or the State of Missouri as an investment adviser. Chestnut was the general partner and investment adviser of two hedge funds, the Chestnut Fund LP, a domestic fund that has been placed under receivership by the United States District Court for the District of Massachusetts, and the Chestnut Fund LTD, an off-shore fund based in the British Virgin Islands that is now defunct.

Hoover's Criminal Conviction

4. On August 7, 2002, Hoover pleaded guilty to one count of securities fraud in violation of Title 15, United States Code, Sections 80b-6(2) and 80b-17, and Title 18, United States Code, Section 2 before Judge Douglas P. Woodlock of the United States District Court for the District of Massachusetts in United States v. Hoover, Criminal Information No. 02-cr-10309. On October 31, 2002, a judgment in the criminal case was entered against Hoover. Hoover was sentenced to a prison term of 18 months followed by three years of supervised release during which he will be barred from providing any financial services or acting as the custodian of funds belonging to other people.

5. The criminal information to which Hoover pleaded guilty alleged that Hoover, by use of the mails and means and instrumentalities of interstate commerce, willfully engaged and caused HCM to engage in transactions which operated as a fraud and deceit upon clients, to wit, by falsely representing that he and HCM would serve as investment advisers exercising fiduciaryresponsibilities with respect to client funds entrusted to him and HCM, and thereafter misapplying and misappropriating client funds, as specified below:

a. Misappropriation of a total of $108,000 (by means of unauthorized transfers of $28,000, $20,000, and $60,000) from Christian Hinneberg;

b. Misappropriation of $50,000 from Mathilda Miller Cuneo; and

c. Misappropriation of $40,171.55 from Alexander S. Coke.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Respondents' Offers.

Accordingly, IT IS HEREBY ORDERED that:

A. Pursuant to Section 203(f) of the Advisers Act, Respondent Hoover is hereby barred from association with any investment adviser;

B. Pursuant to Section 203(e) of the Advisers Act, Respondent HCM is hereby censured.

By the Commission.

Jonathan G. Katz
Secretary

 

http://www.sec.gov/litigation/admin/ia-2112.htm


Modified: 02/28/2003