U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21331 / December 10, 2009
Securities and Exchange Commission v. Investools Inc., Michael J. Drew, and Eben D. Miller, Civil Action No. 1:09-CV-02343 (D.D.C.) (December 10, 2009)
SEC Charges Investools Inc. and Two Former Employees with Securities Law Violations for Misrepresentations at Investor Workshops
The Securities and Exchange Commission today filed a settled civil injunctive action against Investools Inc., Michael J. Drew and Eben D. Miller. Investools agreed to a civil injunction and to pay a $3 million civil penalty. Drew and Miller agreed, respectively, to pay civil penalties of $380,000 and $130,000, and to be enjoined from violating the antifraud provisions of the federal securities laws. Drew and Miller additionally agreed to be enjoined, for five years, from receiving compensation for their participation in, among other related activities, the sale of classes, workshops, or seminars given to actual or prospective securities investors concerning securities trading. In settling the matter, Investools, Drew and Miller neither admitted nor denied the allegations in the Commission's complaint.
The Commission's complaint alleges that from 2004 to approximately June 2007 at Investools how-to-trade-securities workshops former Investools employees Drew and Miller misleadingly portrayed themselves as expert investors who made their living trading securities. They did so to mislead investors into believing that they too would make extraordinary profits trading securities if they purchased expensive Investools instructional courses and other products and followed Investools' securities trading strategies. The complaint further alleges that in reality, neither Drew nor Miller made the trading profits they claimed. For example, in 2005 and 2006, while Drew was portraying himself as a successful investor, he had hundreds of thousands of dollars in net trading losses. In 2006 and 2007, while Miller was portraying himself as a successful investor, he had tens of thousands of dollars in net trading losses.
The complaint also alleges that Investools is liable for the fraudulent conduct of its sales personnel as a "controlling person" under the federal securities laws. According to the complaint, Investools' management learned that sales personnel were claiming that they were successful securities traders. However, Investools did not take the next step-examining workshop speakers' brokerage statements to determine whether their success claims were accurate. The complaint further alleges that Investools did not prevent its speakers from misleading investors about the results of a survey of its customers' trading success.
Investools agreed to be enjoined from violating Sections 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5, and to pay a civil money penalty. In addition to their five-year conduct-based injunctions and civil money penalties, Drew and Miller agreed to be enjoined from violating Exchange Act Section 10(b) and Exchange Act Rule 10b-5.
The Commission's settlements with Investools, Drew, and Miller are subject to the approval of the U.S. District Court for the District of Columbia.
The Commission's investigation is continuing.