U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18927 / October 8, 2004
Securities and Exchange Commission v. Market-Timing Technologies, LLC and David A. Perry, Civil Action No. 1:04-CV-2933 (N.D.GA. October 6, 2004)
SEC SUES GEORGIA INVESTMENT ADVISER AND ITS PRINCIPAL, ALLEGING MISLEADING PERFORMANCE ADVERTISING
On October 6, 2004, the Securities and Exchange Commission ("Commission") filed a complaint in the United States District Court for the Northern District of Georgia against Market-Timing Technologies, LLC ("Market-Timing") and David A. Perry ("Perry"). Market-Timing is a Georgia Limited Liability Company based in Atlanta, Georgia. Perry, who resides in Atlanta, is the president of Market-Timing.
The complaint alleges that from at least November 2002 to September 2004, the defendants actively solicited investment advisory clients through internet websites that advertised eight different asset management programs. The programs used models that, based on short term market trends, identified when Market-Timing and Perry should shift clients' investments among various mutual funds within a fund family. The complaint alleges that although the websites represented that the models produced historical average annual returns between 9% and 91.4%, the websites failed to disclose that these return rates were based primarily on hypothetical investments, rather than actual results. The complaint, also alleged that Market-Timing failed to maintain records required by the Investment Advisers Act of 1940 ("Advisers Act"), such as ledgers reflecting its assets, liabilities and other accounts and copies of all written communications to customers. The complaint alleges further violations of the books and records provisions of the Advisers Act because, during a recent examination by the Commission staff, Perry declined to produce documentation substantiating the accuracy of the performance representations in the websites.
The complaint alleges that Market-Timing violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Sections 204, 206(1), (2) and (4) of the Advisers Act and Rules 204-2(a)(2), 204-2(a)(7), 204-2(a)(16) and 206(4)-1(a)(5) thereunder, and that Perry violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aided and abetted Market-Timing's violations of Sections 204, 206(1), (2) and (4) of the Advisers Act and Rules 204-2(a)(2), 204-2(a)(7), 204-2(a)(16) and 206(4)-1(a)(5) thereunder.