U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22605 / January 30, 2013
Securities and Exchange Commission v. Kurt S. Hovan, et al., Civil Action No. CV-11-4795-RS (Northern District of California)
Court Enters Final Judgments, By Consent
On January 14, 2013, the Honorable Richard Seeborg entered final judgments against defendants Kurt S. Hovan, Hovan Capital Management, LLC, Lisa B. Hovan and Edward J. Hovan, Jr., in the civil action entitled Securities and Exchange Commission v. Kurt Hovan, et al., No. CV-11-4795-RS, in the United States District Court for the Northern District of California. The complaint alleged the fraudulent use by the defendants of "soft dollars," which were rebates on commissions received for client accounts in their investment advisory business from brokerage services.
The final judgment against Kurt Hovan permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934, Exchange Act Rule 10b 5, Sections 204(a), 206(1), 206(2) and 207 of the Investment Advisers Act of 1940, Advisers Act Rule 204-2(a)(7), and Section 17(e)(1) of the Investment Company Act of 1940, and orders him to pay a $75,000 civil money penalty. He also agreed to disgorge $65,000, which was deemed satisfied by his payment of restitution in the related criminal case. Kurt Hovan consented to the judgment, based upon admissions he made in his guilty plea to one count of mail fraud in United States v. Kurt S. Hovan, Case No. CR-11-0699-RS, in the United States District Court for the Northern District of California, where he stated that he participated in a fraudulent scheme involving the misuse of soft dollars. Kurt Hovan also admitted that in January 2010, in response to requests from the Commission's examiners for documents related to purported services by a third party, he altered documents which he caused to be produced to the examiners in an attempt to make it appear that the documents had been prepared at an earlier time by the third party.
The final judgments against Hovan Capital Management, Lisa Hovan and Edward Hovan were based on their consent, without admitting or denying the allegations against them. Hovan Capital Management was permanently enjoined from violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5; Sections 204(a), 206(1), 206(2), and 207 of the Advisers Act and Rule 204-2(a)(7); and Section 17(e)(1) of the Investment Company Act, and was ordered to disgorge $14,942, including prejudgment interest. The final judgment against Lisa Hovan permanently enjoins her from violations of Section 10(b) of the Securities Exchange Act and Rule 10b 5; Sections 206(1), 206(2) and 207 of the Advisers Act, and orders her to pay a $50,000 civil money penalty. The final judgment against Edward Hovan permanently enjoins him from violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b 5; Sections 206(1) and 206(2) of the Advisers Act; and Section 17(e)(1) of the Investment Company Act and orders him liable for disgorgement of $50,000 but waives payment of that amount, and does not impose a civil monetary penalty, based on his financial condition as described in his sworn financial statements.
For further information, see Lit. Release No. 22107 (September 28, 2011).