United States of America
In the Matter of
Matthew P. Brady
|ORDER INSTITUTING< ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 203(f) AND 203(k) OF THE INVESTMENT ADVISERS ACT OF 1940|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act") against Matthew P. Brady ("Brady" or "Respondent").
In anticipation of the institution of these proceedings, Brady has submitted an Offer of Settlement (the "Offer"), 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 in which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and over the subject matter of these proceedings, which are admitted, Brady consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 ("Order"), as set forth below.
On the basis of this Order and the Offer, the Commission makes the following findings:
A. At all relevant times, Brady, age 38, was the president and sole shareholder of P&A Consulting, Inc. ("P&A"), a now-defunct investment adviser that was registered with the Commission. Brady is currently working as an insurance broker.
B. P&A was incorporated in the state of New York from March 29, 1996, through August 21, 2000, and was registered with the Commission as an investment adviser from April 21, 1997, through July 11, 2000. P&A was wholly owned by Brady, and Brady controlled all aspects of P&A's operations.
C. In September 1995, Brady was censured and fined $17,500 by the New York Stock Exchange ("NYSE") for unauthorized trading and agreeing to share in the losses of a customer. In that proceeding, the NYSE also barred Brady from membership, employment or association with any member organization for a period of two months. New York Stock Exchange, Inc., Exchange Hearing Panel Decision 95-134 (October 12, 1995).
D. Section 206(4) of the Advisers Act makes unlawful any deceptive or manipulative act, practice, or course of action that the Commission defines in its rules promulgated under the Advisers Act. Rule 206(4)-4(a)(2) provides that it shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of Section 206(4) for any registered investment adviser to fail to disclose to any client or prospective client all material facts with respect to a legal or disciplinary event that is material to an evaluation of the adviser's integrity or ability to meet contractual commitments to clients. A self-regulatory organization ("SRO") proceeding in which an investment adviser (or a management person) was found to have been involved in a violation of the SRO's rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or fining the person more than $2,500, is presumed to be material under Rule 206(4)-4(b)(3). Fromat least April 1997 through at least March 2000, on certain occasions, P&A, at the direction of Brady, failed to disclose to clients and prospective clients the 1995 NYSE proceeding against Brady described in paragraph III.C., above.
E. On or about July 8, 1997, March 19, 1998, December 18, 1998, and January 10, 1999, P&A filed Forms ADV-T, ADV-SCI, and two ADV-Y2K filings with the Commission. Each of those ADV filings falsely stated that P&A had assets under management of over $32,000,000. In fact, P&A never had more than $4 million in assets under management. Brady signed the above-described filings in his capacity as president of P&A and filed them, or caused them to be filed, with the Commission.
F. The overstatement of P&A's assets in its various Forms ADV made it appear that P&A was qualified for registration with the Commission as an investment adviser under Section 203A of the Advisers Act, when it was not. Section 203A of the Advisers Act generally prohibits an adviser that is regulated or required to be regulated in the state in which it has its principal office and place of business from registering with the Commission, unless it has assets under management in excess of $25 million or advises a registered investment company. As described above in paragraph E., P&A failed to meet the monetary qualifications for registration with the Commission under Section 203A.
G. Section 204 of the Advisers Act and Rule 204-2 thereunder require every registered investment adviser to make and keep for a prescribed period of time, true, accurate and current books and records relating to its investment advisory business. From at least April 1997 through at least March 2000, P&A failed to maintain: (i) a cash receipts and disbursements journal; (ii) general or auxiliary ledgers; (iii) order memoranda; (iv) cash reconciliations; (v) fee billing information; (vi) trial balances or income statements; (vii) certain written communications relating to its advisory business; and (viii) advisory contracts. Brady was responsible for the maintenance of P&A's books and records.
H. Under Section 204 of the Advisers Act and Rule 204-3(a) thereunder, P&A was required to furnish to each new and prospective advisory client a written disclosure statement consisting of a copy of Part II of its Form ADV or containing at least the information required by Part II of Form ADV. From at least April 1997 through at least March 2000, on certain occasions P&A, at the direction of Brady, failed to provide the written disclosure statement required under Section 204 and Rule 204-3(a) to new and prospective advisory clients.
I. At all relevant times, P&A and Brady made use of the mails or means or instrumentalities of interstate commerce in connection with P&A's business as an investment adviser.
J. From at least April 1997 through at least March 2000, P&A willfully violated, and Brady willfully aided and abetted and caused P&A's violations of, Section 206(4) of the Advisers Act and Rule 206(4)-4(b)(3) thereunder, in that P&A, aided and abetted by Brady, by use of the mails or means or instrumentalities of interstate commerce, directly or indirectly, failed to disclose to clients and prospective clients a legal or disciplinary event that was material to an evaluation of Brady's integrity, as described in paragraphs III.C. and III.D., above.
K. On or about July 8, 1997, March 19, 1998, December 18, 1998, and January 10, 1999, Brady willfully violated Section 207 of the Advisers Act, in that Brady willfully made untrue statements of material facts in Form ADV-T, Form ADV-SCI, and two Forms ADV-Y2K filed with the Commission, as described in paragraphs III.E. above.
L. From at least March 29, 1996 through at least July 11, 2000, P&A willfully violated, and Brady willfully aided and abetted and caused P&A's violations of Section 203A of the Advisers Act, by unlawfully registering with the Commission when it was not qualified to do so, as described in paragraphs III.E. and III.F. above.
M. From at least April 1997 through at least March 2000, P&A willfully violated, and Brady willfully aided and abetted and caused P&A's violations of, Section 204 of the Advisers Act and Rules 204-2(a)(1),(2), (3), (4), (5), (6), (7) and (10) thereunder, by failing to make and keep true, accurate and current certain books and records, as described in paragraph III.G., above.
N. From at least April 1997 through at least March 2000, P&A willfully violated, and Brady willfully aided and abetted and caused P&A's violations of, Section 204 of the Advisers Act and Rule 204-3 thereunder, in that P&A, at the direction of Brady, failed to furnish each advisory client and prospective advisory client with a written disclosure statement containing at least the information required by Part II of Form ADV, as described in paragraph III.H., above.
Based upon the foregoing, the Commission finds that it is appropriate and in the public interest to accept Brady's Offer of Settlement, and, accordingly:
It is hereby ORDERED:
A. Pursuant to Section 203(k) of the Advisers Act, that Respondent Brady cease and desist from committing or causing any violations and any future violations of Sections 203A, 204, 206(4) and 207 of the Advisers Act and Rules 204-2(a), 204-3, and 206(4)-4 promulgated thereunder; and
B. Pursuant to Section 203(f) of the Advisers Act, that Respondent Brady be, and hereby is barred from association with any investment adviser, with the right to reapply for association after three (3) years to the appropriate self-regulatory organization, or if there is none, to the Commission.
C. Any reapplication for association by the Respondent will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against the Respondent, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order.
D. IT IS FURTHER ORDERED that Respondent Brady shall, within thirty (30) days of the entry of this Order, pay a civil money penalty in the amount of $20,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, 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 Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Brady as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Leslie Kazon, Esq., Assistant Regional Director, Securities and Exchange Commission, Northeast Regional Office, 233 Broadway, New York, NY 10279.
By the Commission.
Jonathan G. Katz
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