Initial Decision of an SEC Administrative Law Judge
In the Matter of
In the Matter of
THE BARR FINANCIAL
June 21, 2002
|APPEARANCES:|| Mitchell E. Herr and Chin-Pin Lu for the Division of Enforcement, Securities and Exchange Commission
Respondent Alfred E. Barr, pro se
|BEFORE:||Lillian A. McEwen, Administrative Law Judge|
The Respondents, The Barr Financial Group, Inc. (BFG) and Alfred E. Barr (Barr), violated Section 207 of the Investment Advisers Act of 1940 by willfully making material misstatements in their Form ADV filings; they were also enjoined, pursuant to a 1999 United States District Court order, from violating Section 204 of the Investment Advisers Act of 1940. This Initial Decision (Decision) imposes sanctions on BFG and Barr, including a cease-and-desist order, a bar, and a revocation of BFG's registration.
On June 16, 1999, the Securities and Exchange Commission (Commission) issued an Order Instituting Proceedings (OIP) pursuant to Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 (Advisers Act). On September 28 and 29, 1999, a public hearing was held before me in Miami, Florida.
The Division of Enforcement (Division) called one witness, Barr, in its case in chief. Barr testified on his own behalf and called four additional witnesses. I admitted into evidence twelve exhibits for the Division, and twenty-two exhibits for BFG and Barr.1
The OIP is Amended.
Pursuant to the Administrative Procedure Act, 5 U.S.C. § 557(c) and 17 C.F.R. § 201.340, I have considered the Division's July 15, 1999, Motion to Amend the OIP. Pursuant to Rule 200(d) of the Commission's Rules of Practice, 17 C.F.R. § 201.200(d), the OIP may be amended "to include new matters of fact or law that are within the scope of the original order instituting proceedings." Because the June 16, 1999, OIP presently describes only the temporary and preliminary injunctions issued by the United States District Court for the Middle District of Florida, the same federal court that issued the permanent injunction, I conclude that an amendment that describes the May 5, 1999, permanent injunction is within the scope of the original OIP. Arguments raised by the Respondents in their opposition are frivolous. The Division's Motion is hereby GRANTED. It is HEREBY ORDERED that the OIP is amended to include a new paragraph II. D. that reads as follows:
In SEC v. The Barr Financial Group, Inc. and Alfred E. Barr, 98-1806-CIV-T-17E (M.D. Fla.), the United States District Court for the Middle District of Florida on May 5, 1999, entered a Final Judgment of Permanent Injunction and Other Relief enjoining BFG and Barr from directly or indirectly, violating or aiding or abetting violations of Section 204 of the Advisers Act and the rules and regulations promulgated thereunder, by failing to furnish to the SEC copies of BFG's records that are required by SEC rule to be kept, and by failing to make all of BFG's records subject at any time, or from time to time, to such reasonable periodic, special, or other examinations by representatives of the SEC as the SEC deems necessary or appropriate in the public interest or for the protection of investors. The court expressly held that BFG, an investment adviser registered with the Commission, aided and abetted by its Chief Executive Officer, Barr, violated Section 204 of the Investment Advisers Act of 1940 by willfully refusing to allow the SEC to examine BFG's books and records and to produce to the SEC copies of certain legally-required documents.
I have also considered the Respondents' posthearing Motion to Dismiss and their Motion to Strike from the Record the Division's Entire Post-Hearing Brief and Prohibit Any Consideration of Any Reply Brief. Rule 340 of the Commission's Rules of Practice, 17 C.F.R. § 201.340, allows each party to file in writing proposed findings and conclusions together with, or as part of, its brief; a reply brief may be filed by the party assigned to file first. Rule 111 of the Commission's Rules of Practice, 17 C.F.R. § 201.111, authorizes the administrative law judges to perform acts necessary and appropriate to discharge their duties. Rule 250 of the Commission's Rules of Practice, 17 C.F.R. § 201.250, provides for summary disposition "if there is no genuine issue with regard to any material fact and the party making the motion is entitled to a summary disposition as a matter of law." The Respondents' Motions are both frivolous and are hereby DENIED.
The OIP alleges that BFG, located in Tampa, Florida, has been registered with the Commission as an investment adviser since April 1996; that, at all times relevant, Barr was the president and chief executive officer of BFG; and that BFG and Barr violated Section 207 of the Advisers Act by willfully making untrue statements of material facts in BFG's Form ADV registration application and amendments filed with the Commission. The OIP as amended also alleges that BFG and Barr are subject to a federal district court permanent injunction. If I conclude that the allegations in the OIP are true, I must then determine what, if any, remedial sanctions are appropriate pursuant to the federal securities laws.
FINDINGS OF FACT
The findings and conclusions in this Decision are based on the record and the demeanor of the witnesses who testified at the hearing. Preponderance of the evidence was applied as the standard of proof. See Steadman v. SEC, 450 U.S. 91 (1981). All arguments, testimony, and proposed findings and conclusions that were inconsistent with this Decision were rejected. Having reviewed the entire record, I find the following facts to be true.
BFG and Barr.
BFG, a Delaware corporation, submitted its initial investment adviser registration application, signed by Barr, on Form ADV to the Commission on April 29, 1996. (Tr. 59; Div. Ex. 4, Attestation.) Later amendments to that application were also signed by Barr as an officer of BFG. (Tr. 59-60; Div. Exs. 5-9.) BFG has been registered with the Commission as an investment adviser since May 24, 1996. (Div. Ex. 4, Form ADV, Part 1, Page 1; Resp. Ex. 1 at 61.) Barr, at all relevant times, was BFG's president or chief executive officer. (Div. Ex. 4, Schedule A.) BFG's initial application and amendments falsely represent that Barr graduated from Indiana University in 1980 with a bachelors of science degree in finance and that he earned a doctorate in economics in 1994. (Div. Ex. 4, Form ADV, Schedule D, Page 2; Div. Ex. 5, Form ADV, Schedule D, Page 2.) Barr, however, attended only one semester at Indiana University, is not a college graduate, and has no advanced degrees. (Tr. 362-63, 371; Div. Ex. 10.) He began his financial services career in 1977 as an insurance salesman. (Tr. 354.) After about ten years, Barr thought he and BFG should be part of a "broker-dealership." (Tr. 378-79.) By 1992, Barr was being investigated by the National Association of Securities Dealers (NASD). (Tr. 383.) By 1993, the broker-dealer application was "on hold." (Tr. 393.) BFG filed its application as an investment adviser in 1996 because Barr had been unable to get an application for a broker-dealer approved. (Tr. 395-96; Resp. Ex. 7.)
BFG's initial application accurately represented that the corporation had less than $100,000 under management and no discretionary authority over any accounts. (Div. Ex. 4, Form ADV, Part 1, Page 6.) Approximately one year later, shortly after the law was changed to require investment advisers registered with the Commission to have $25 million under management, BFG and Barr falsely represented via amendments that BFG had over $74 million under management, including discretionary authority over twenty-five portfolios worth $56 million. (Div. Exs. 6, Form ADV-T, Parts II and III; and 7, Form ADV, Part 1, Page 6.) BFG, however, did not have discretionary authority over any of its clients' accounts except for one $7,500 IRA account. (Tr. 68-70; Div. Ex. 11 at 59-60.) Since May 24, 1996, BFG has offered securities-related advice to approximately twenty-one clients. (Tr. 60-68; Div. Ex. 11 at 58.) BFG received compensation as an investment adviser in 1996 and 1997, but not in 1998, when BFG provided free advice and services to its clients. (Tr. 73-77.)
The Commission's Branch of Investment Company Investment Adviser Examinations usually examines investment advisers once every five years to ensure compliance with applicable securities laws. (Tr. 130, 132, 162-63.) The examinations are structured and follow certain procedures, but remain flexible to address areas of concern. (Tr. 131.) BFG was on schedule for its first Commission examination in 1998. (Tr. 119, 162.) During the standard pre-examination research, however, Commission examiners discovered several incidents that raised their level of concern. (Tr. 135-40, 260.) On July 28, 1998, Commission examiners attempted to examine BFG's books and records at its Tampa, Florida, business address. (Tr. 140-42, 203, 260-61.) Due to the unavailability of Barr, the examiners returned the following day and advised Barr of their intention to examine BFG's books and records. (Tr. 140-42, 260-61.) At Barr's request, they postponed the examination and agreed to conduct it at Barr's residence. (Tr. 140-42, 264.)
On August 10, 1998, the examiners returned and met Barr at his residence to proceed with the examination. (Tr. 142-43, 267.) The examination lasted three days - August 10 through 12, 1998. (Tr. 124, 261.) During the examination, Barr objected to the release of his clients' personal information. (Tr. 228.) To alleviate Barr's concerns and allow the examination to proceed, the examiners agreed to allow Barr to redact client information, subject to the examiners' ability to memorialize the client information by note-taking. (Tr. 113-16, 158-59, 172-73, 276, 296.) Barr still refused, however, to allow the examiners to record client information. (Tr. 300.) In fact, he refused to provide any information that would allow the examiners to perform a third-party verification. (Tr. 300, 321-22; Resp. Ex. 1.) Barr finally terminated the examination, requested that the examiners leave, and refused to allow them to carry away any documents. (Tr. 145-46, 299.) The examiners later unsuccessfully attempted to obtain the necessary documents via written correspondence. (Tr. 181-82.)
The inability of the examiners to obtain client information or to perform a third-party verification prevented them from completing the examination or effectuating its purpose. (Tr. 147, 173-74, 181, 229-30, 279.) Verification of an investment adviser's books and records is a vital part of the examination process, which is accomplished by reconciling the investment adviser's books and records with confirmation statements or with a third-party custodian's records. (Tr. 116-17, 126-27, 144, 277.) Without the requested information, verification is impossible. (Tr. 145.) Because the examiners were unable to obtain the requisite information and complete the exam, they referred the matter to the Division of Enforcement. (Tr. 111-12, 147-48; Resp. Ex. 2.)
On September 3, 1998, the United States District Court for the Middle District of Florida, a court of competent jurisdiction, issued an order in SEC v. The Barr Financial Group, Inc. and Alfred E. Barr, 98-1806-T-17E (M.D. Fla.), granting the Commission's motion for a temporary restraining order (TRO) and requiring the production of documents. (Div. Ex. 1; Resp. Ex. 5.) The subject of the TRO and other orders was BFG's failure to provide the Commission with books and records required under Section 204 of the Advisers Act. (Div. Ex. 1.) On September 11, 1998, the same court issued an order granting a preliminary injunction and other relief, enjoining BFG and Barr from violating Section 204 of the Advisers Act. (Div. Ex. 2; Resp Ex. 3; Resp. Ex. 4; Resp. Ex. 6.) Finally, on May 5, 1999, the court issued a final judgment of permanent injunction and other relief. (Div. Ex. 3.) In that order the court ruled as a matter of law that BFG, an investment adviser registered with the Commission, aided and abetted by its chief executive officer, Barr, violated Section 204 of the Advisers Act by willfully refusing to allow the Commission to examine BFG's books and records, and it required them to produce to the Commission certain records. (Div. Ex. 3.) Although BFG and Barr ultimately relinquished some documents in response to the court's final order, the small amount of information they provided proved to be false. (Tr. 231-32.)
CONCLUSIONS OF LAW
BFG has been registered with the Commission as an investment adviser since 1996. At all times relevant, Barr was the president and chief executive officer of BFG. BFG and Barr willfully violated Section 207 of the Advisers Act by willfully making untrue statements of material fact in BFG's Form ADV registration application and amendments. BFG and Barr are subject to a federal district court injunction.
BFG is a Registered Investment Adviser.
Section 203(c) of the Advisers Act allows one to register as an investment adviser by submitting an application to the Commission containing such information as the Commission may prescribe. The Commission shall by order grant such registration, or institute a proceeding to determine whether registration should be denied. BFG submitted its initial investment adviser registration application, Form ADV, under Section 203(c) of the Advisers Act to the Commission on April 29, 1996. (Div. Ex. 4, Attestation.) The application identifies Barr as the president/chief executive officer of BFG, and it was signed by Barr as an officer of BFG on April 24, 1996. (Tr. 59; Div. Ex. 4, Form ADV, Part 1, Page 1, and Schedule A.) The Commission found that the application contained all the information prescribed under Section 203(c) and the rules thereunder. (Div. Ex. 4, Order Granting Registration.) Pursuant to Section 203(c)(2)(A) of the Advisers Act, BFG's registration was granted by the Commission, effective May 24, 1996. (Div. Ex. 4, Order Granting Registration.) Thus, I conclude that BFG is a registered investment adviser.
BFG and Barr Willfully Violated Section 207 of the Advisers Act.
Section 207 of the Adviser Act states that it is unlawful for anyone willfully to make any untrue statement of a material fact in any registration application or report filed with the Commission under Sections 203 or 204 of the Advisers Act, or willfully to omit to state any material fact in any registration or report filed with the Commission, which is required to be stated. "Willfully" simply means that one intentionally committed the act that constitutes the violation; they need not know that they are violating the law. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); see also Steadman v. SEC, 603 F.2d 1126, 1135 (5th. Cir. 1979); Arthur Lipper Corp. v. SEC, 547 F.2d 171, 180 (2d Cir. 1977); Tager v. SEC, 344 F.2d 5, 8 (2d. Cir. 1965). The standard of materiality is whether or not a reasonable investor or prospective investor would consider the information important in deciding whether or not to invest. See SEC v. Steadman, 967 F.2d 636, 643 (D.C. Cir. 1992); see also Basic v. Levinson, 485 U.S. 224, 231-32, 240 (1988); TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976).
I conclude that BFG and Barr violated Section 207 of the Advisers Act by willfully making material false statements about Barr's education and BFG's assets under management in their registration application and amendments. BFG's initial application and a number of its subsequent amendments falsely state that Barr is a university graduate with an advanced degree. I conclude that this false statement is material because it describes the qualifications of the investment adviser's president/chief executive officer. A reasonable investor or prospective investor would consider the education and training of the president or chief executive officer to be of primary importance in making an investment decision. The difference in quality between the advice of a mere high school graduate and the advice of a post graduate with a doctorate in economics and a background in science and finance is likely to be quite substantial. This false information was also conveyed to clients and potential clients. (Resp. Ex. 13-22.)
As for assets under management, BFG's initial application truthfully stated that it had less than $100,000 under management and no discretionary authority over any accounts. Approximately one year later, and shortly after the Commission required registered investment advisers to have $25 million under management, BFG and Barr falsely represented via amendments that BFG had over $74 million under management including discretionary authority over twenty-five portfolios worth $56 million. I find these misrepresentations to be material because they enabled BFG to remain registered with the Commission. They were also conveyed to clients and potential clients, who would consider the information important in making an investment decision.
At trial, Barr presented no credible evidence or testimony to contradict the Division's proof as to the false statements on the BFG application. Barr testified that he thought he had received post-graduate degrees as a result of theology and divinity courses that he took at Simmons Bible College, plus correspondence courses through the training allowance program at Connecticut Mutual Life Insurance Company, where he was employed full time. (Tr. 350-74.) I reject his testimony as incredible. He admitted, however, that he is not a college graduate. (Tr. 355, 362-63, 371.) Barr also concedes that financial data in BFG's Form ADV was not accurate. (Tr. 413-15, 456-58.)
BFG and Barr Are Subject to a Federal District Court Injunction.
Section 203 of the Advisers Act provides the basis for a permanent bar, suspension, revocation, or censure of an investment adviser. Specifically Sections 203(e)(4) and 203(f) authorize the Commission to censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding twelve months, or revoke the registration of any investment adviser; or bar any such person from being associated with an investment adviser if the Commission finds that the sanction is in the public interest and that one is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, or from engaging in or continuing any conduct or practice in connection with any such activity. See Seaboard Inv. Advisers, Inc., 74 SEC Docket 201 (Jan. 10, 2001.)
On May 5, 1999, after a hearing, the United States District Court for the Middle District of Florida, a court of competent jurisdiction, issued an order in SEC v. The Barr Financial Group, Inc. and Alfred E. Barr, 98-1806-T-17E (M.D. Fla.), of permanent injunction and other relief, which permanently enjoined both BFG and Barr from violating federal securities laws. (Div. Ex. 3.) The court ruled as a matter of law that BFG, an investment adviser registered with the Commission, aided and abetted by its chief executive officer, Barr, violated Section 204 of the Advisers Act by willfully refusing to allow the Commission to examine BFG's books and records, and ordered them to produce to the Commission certain legally-required documents. (Div. Ex. 3.) The ruling was substantially supported by law, fact, and the evidence, including BFG's initial investment adviser application and its amendments. Barr blames his attorney, Division counsel, the judge, Barr's late wife, and the examiners for his predicament. (Tr. 394-402, 411, 418, 433-42, 444-46, 455-57; Resp. Exs. 8-13.) Barr called four witnesses in his defense - Jeri Dresner, Patricia Flynn, Bart Gancher, and Rodger Miranda. However, these Commission employees and the Respondents' exhibits that were admitted established that Barr committed the defiant acts described in the federal court's order. (Tr. 84-353, Div. Ex. 3.)
Respondents in a Commission administrative proceeding are collaterally estopped from relitigating the merits of a proceeding that resulted in an injunction, i.e. they may not relitigate the findings of fact or conclusions of law made by the court in the prior civil proceeding. See BFG Sec., Inc., 75 SEC Docket 1506, 1508 n.5 (July 31, 2001); Robert Sayegh, 69 SEC Docket 1307, 1312 (Mar. 30, 1999); John Francis D'Acquisto, 53 S.E.C. 440, 444 (1998); Meyer Blinder, 53 S.E.C. 250, 253 (1997). Although Respondents may present evidence as to the appropriateness of the sanction, they are precluded from contesting the allegations and from relitigating the facts. Samuel O. Forson, 53 S.E.C. 1328 (1997). Official judicial notice is therefore taken of the orders, i.e. the temporary and permanent injunctions, in SEC v. The Barr Financial Group, Inc. and Alfred E. Barr, 98-1806-T-17E (M.D. Fla.).
Barr is Responsible for the Acts of BFG.
Barr had primary responsibility for BFG's compliance with the federal securities laws because he was BFG's president and chief executive officer. See Patrick v. SEC, 19 F.3d 66 (2d Cir. 1994) (high-level officers of broker-dealer responsible for supervision of appointed representatives); C. James Padgett, 64 SEC Docket 319 (Mar. 20, 1997) (firm's principals responsible for diligence to ensure compliance with federal securities laws); Everest Securities, 52 S.E.C. 958 (Aug. 26, 1996), aff'd in part, vacated in part, 116 F.3d 1235 (8th Cir. 1997) (firm's president primarily responsible for compliance with securities laws despite limited control over firm's affairs); David M. Haber, 52 S.E.C. 201 (Apr. 5, 1995) (president of broker-dealer responsible for firm's compliance with the federal securities laws, and abdication of duties justified imposition of permanent bar); Donald T. Sheldon, 51 S.E.C. 59 (1992), aff'd 45 F.3d 1515 (11th Cir. 1995); Kirk A. Knapp, 50 S.E.C. 858 (1992); Mark James Hankoff, 48 S.E.C. 705 (1987) (head of broker-dealer could not rely on compliance personnel to insulate him from violating NASD rules while aware of firm's deficient net-capital position).
A firm's official is relieved of responsibility for compliance with the federal securities laws only when he or she reasonably "delegates a particular function to another person in the firm, and neither knows nor has reason to know that such person is not properly performing his or her duties." Mark James Hankoff, 48 S.E.C. at 707. Here, Barr was fully aware of the false statements in BFG's Form ADVs because the statements concerned his own qualifications. He was also aware that there was false financial data in the forms.
The Division requests that a cease-and-desist order, an appropriate civil penalty, an order barring Barr from associating with an investment adviser, and an order revoking BFG's registration as an investment adviser be levied against the Respondents. Having found the allegations in the OIP to be true, I now turn my attention to discussing the appropriate sanctions.
When the Commission determines administrative sanctions it considers what is in the public interest; specifically, it considers a number of different factors, including but not limited to:
the egregiousness of the defendant's actions, the isolated or recurrent nature of the infraction, the degree of scienter involved, the sincerity of the defendant's assurances against future violations, the defendant's recognition of the wrongful nature of his conduct, and the likelihood that the defendant's occupation will present opportunities for future violations.
Steadman v. SEC, 603 F.2d at 1140 (quoting SEC v. Blatt, 583 F.2d 1325, 1334 n.29 (5th Cir. 1978)). Taking into consideration these public interest factors, I find the actions of Barr and BFG were egregious, demonstrated ignorance of and disregard for securities laws and regulations, and consistently frustrated the Commission's examination of BFG. Respondents gave no assurances against future violations and at no time recognized any wrongful conduct for which they take responsibility.
Cease and Desist.
Section 203(k) of the Advisers Act authorizes the Commission to issue a cease-and-desist order against any person who is violating, has violated, or is about to violate any provision of the Advisers Act or rules thereunder. Although the Commission must consider whether there is a reasonable likelihood of such violations in the future, it may look at past violations as an indication of future violations. See KPMG Peat Marwick LLP, 74 SEC Docket 384, 429 (Jan. 19, 2001), petition denied, 289 F.3d 109 (D.C. Cir. May 14, 2002).
I conclude that a cease-and-desist order is appropriate. Barr has devoted his entire adult life to the business of insurance and financial advice. BFG and Barr violated Section 207 of the Advisers Act from 1996 until 1998 by making false statements to the Commission and to the firm's clients and potential clients about Barr's qualifications and the amount of funds under their management. (Div. Exs. 4-9.) BFG and Barr also physically prevented the Commission's examination of BFG, violating Section 204 of the Advisers Act, by delaying the examination, withholding necessary requested information, and providing false data. I conclude that there is a strong likelihood of future violations and that a cease-and-desist order is necessary.
Section 203(i) of the Advisers Act authorizes the Commission to impose civil monetary penalties for willful violations of the Advisers Act if the penalty is in the public interest. In determining whether a penalty is in the public interest, Section 203(i)(3) authorizes the Commission to consider (1) whether the act involved fraud, deceit, or deliberate or reckless disregard of a regulatory requirement; (2) the harm to other persons resulting directly or indirectly from the act; (3) the extent to which one was unjustly enriched; (4) whether one has previously violated the securities laws; (5) the need to deter such person from committing such acts; and (6) any other matters as justice requires.
Although the violations were willful and show blatant disregard for regulatory requirements, I conclude that no monetary penalty is appropriate. Barr's lack of education and training were most likely the proximate causes of the violations. The Division failed to prove unjust enrichment for Barr or harm to clients that resulted from the violations. There is no significant history of previous securities law violations, and BFG and Barr operated as an investment adviser for only two years and never controlled client money. Finally, the United States District Court for the Middle District of Florida has already fined Barr for the Section 204 violation, while noting that BFG is defunct and worthless. For these reasons I find a civil monetary penalty is not warranted.
Section 203(f) of the Advisers Act authorizes the Commission to bar any person from being associated with an investment adviser if the Commission finds that the bar is in the public interest and that such person (1) is permanently or temporarily enjoined by any court of competent jurisdiction, (2) willfully made a false or misleading statement with respect to a material fact in any application for registration or report filed with the Commission, or (3) willfully violated any provision of the Advisers Act.
Barr was permanently enjoined by the United States District Court for the Middle District of Florida from violating Section 204 of the Advisers Act. He willfully made material misrepresentations to the Commission, his clients, and his prospective clients regarding his education and the amount of funds under management. Finally, he willfully frustrated the Commissions examination of BFG by delaying the exam, withholding client information, and providing false information. I also find a bar to be in the public interest due to the egregiousness of the violations. Barr's ignorance of, and disregard for, securities laws and regulations were evident in his interaction with the Commission, his prior court proceedings, and his testimony before this court. He failed to provide necessary documents, threatened the examiners, terminated the examination, and prevented third-party verification. His behavior and refusal to accept responsibility dictate that he be barred from associating with any investment adviser as defined by Section 202 of the Advisers Act.
Section 203(e) of the Advisers Act authorizes the Commission to revoke the registration of any investment adviser if the revocation is in the public interest and the investment adviser or any person associated with the investment adviser willfully made a false or misleading statement with respect to any material fact in any application for registration or report filed with the Commission, is permanently or temporarily enjoined by any court of competent jurisdiction, or willfully violated any provision of the Advisers Act.
It is clear that a revocation of BFG's registration is appropriate. BFG and Barr are permanently enjoined from violating Section 204 of the Advisers Act. BFG and Barr willfully made repeated material misrepresentations to the Commission, the Respondents' clients, and their prospective clients regarding Barr's education and the amount of funds under management. Moreover, the record indicates that BFG is no longer entitled to be registered with the Commission as an investment adviser. BFG received no compensation for its services in 1998 and has less than $25 million under management. Given the egregiousness of the violations, the fact that BFG is no longer entitled to be registered under the Advisers Act, and the fact that allowing BFG to remain registered could facilitate future violations, I conclude that BFG's registration under the Advisers Act should be revoked, and that such revocation is in the public interest.
Pursuant to Rule 351(b) of the Commission's Rules of Practice, 17 C.F.R. § 201.351(b), it is certified that the record includes the items set forth in the record index issued by the Secretary of the Commission on June 5, 2000.
IT IS ORDERED that, pursuant to Section 203(k) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-3(k), The Barr Financial Group, Inc. and Alfred E. Barr CEASE AND DESIST from committing or causing any violations or future violations of Sections 204 and 207 of the Investment Advisers Act.
IT IS FURTHER ORDERED that, pursuant to Section 203(f) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-3(f), Alfred E. Barr BE, AND HE HEREBY IS, BARRED from associating with any investment adviser registered as defined by Section 202 of the Investment Advisers Act.
IT IS FURTHER ORDERED that, pursuant to Section 203(e) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-3(e), The Barr Financial Group, Inc.'s registration BE AND IT HEREBY IS REVOKED.
This Order shall become effective in accordance with and subject to the provisions of Rule 360 of the Commission's Rules of Practice, 17 C.F.R. § 201.360 (1998). Pursuant to that rule, a petition for review of this Initial Decision may be filed within twenty-one days after service of the decision. It shall become the final decision of the Commission as to each party who has not filed a petition for review pursuant to Rule 360(d)(1) within twenty-one days after service of the Initial Decision upon such party, unless the Commission, pursuant to Rule 360(b)(1), determines on its own initiative to review this Initial Decision as to any party. If a party timely files a petition for review, or the Commission acts to review as to a party, the Initial Decision shall not become final as to that party.
Lillian A. McEwen
Administrative Law Judge
|1||Citations to the hearing transcript, and exhibits offered by the Division and the Respondents will be noted as "Tr. __," "Div. Ex. __," and "Resp. Ex. __," respectively.|
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