In the Matter of Kent D. Nelson
The Commission has declared final the initial decision of an administrative law judge barring Kent D. Nelson from association with any broker, dealer, or investment adviser. The initial decision found that, on Sept. 14, 2005, Nelson pleaded guilty in the U.S. District Court for the District of New Mexico to one count of mail fraud in U.S. v. Nelson Crim. Information No. 05-2021 JP (D.N.M.).
Nelson pled guilty to allegations that he paid substantial sums of money to the Treasurer of the State of New Mexico to secure securities work. Nelson was sentenced to a prison term of thirty-six months, followed by three years of supervised release, surrendered his property interest in a condominium, and ordered to pay a penalty of $175,000. (Rels. 34-59787; IA-2868, File No. 3-13112)
SEC Halts Multi-Million Dollar Fraud Conducted By Philadelphia-Area Investment Adviser
The Commission announced that, on April 17, 2009, it charged a Philadelphia-area investment adviser and its principal with misappropriating millions of dollars in client assets, and obtained an emergency court order freezing their assets. According to the Commission's complaint, since mid-2005 Donald Anthony Walker Young, of Coatesville, Pennsylvania, through Acorn Capital Management, LLC (Acorn Capital), a registered investment adviser controlled by Young, has misappropriated more than $23 million from investors buying into limited partnership interests in Acorn II, L.P., (Acorn LP) which invested in publicly traded securities. Young used investor funds to pay other investors in the nature of a Ponzi scheme, and directly stole some of the money to purchase a vacation home in Palm Beach, Florida, and pay personal expenses related to horse ownership and racing, construction, boats, limousines, chartered aircraft and other luxuries. He has also directed funds to others. According to the Commission's complaint, the defendants refused to provide Commission staff with client files, account statements, general ledgers and other documents that are statutorily required to be maintained and produced by registered investment advisers.
The Honorable John R. Padova, U.S. District Judge for the Eastern District of Pennsylvania, has issued an order granting a temporary restraining order, freezing assets, and imposing other emergency relief. The Court also froze the assets of three named relief defendants - Oak Grove Partners, L.P., W. B. Dixon Stroud, Jr. and Neely Young, Young's wife.
The Commission's complaint alleges that Young established Acorn LP in 2001 for the purpose of investing in securities, and he has nearly complete control of all aspects of the operations and makes all of the investment decisions. In addition, he has complete control of and access to the assets of Acorn LP held at a broker-dealer. Young also controls the information provided to investors, accountants and the broker-dealer and he has used this information flow to provide false information about investor deposits and withdrawals, and to perpetuate the scheme.
The complaint further alleges that, although the Acorn LP account currently holds approximately $3 million for approximately 40 investors, Young has told investors through quarterly and annual statements that their account balances are much higher. In February 2009, Young gave phony documents to employees at the broker-dealer to deceive them into believing that Acorn LP held an additional $23 million at two other broker-dealers.
The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 204, 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 204-2 and 206(4)-8 thereunder. In addition to the emergency relief already obtained, the complaint seeks disgorgement of the defendants' ill-gotten gains plus pre-judgment interest, civil penalties, and permanent injunctions barring future violations of the charged provisions of the federal securities laws. The complaint also seeks disgorgement from the relief defendants.
The Commission's investigation is continuing.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of Pennsylvania, and the Federal Bureau of Investigation. (SEC v. Donald Anthony Walker Young, et al., Case No. 09-cv-01634 (JRP)(E.D. Pa.) (LR-21006)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the Depository Trust Company (SR-DTC-2009-08) to amend its Settlement Service Guide and Settlement Progress Payments procedures has become effective pursuant to Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of April 20. (Rel. 34-59774)
A proposed rule change filed by NYSE Amex to adopt a policy relating to its treatment of trade reports that it determines to be inconsistent with the prevailing market (SR-NYSEAmex-2009-12) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of April 20. (Rel. 34-59778)
Proposed Rule Change
The Commission noticed Amendment No. 1 to a proposed rule change (SR-Phlx-2009-32) submitted by NASDAQ OMX PHLX pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to amend the proposed rule change relating to Phlx's enhanced electronic trading platform for options, Phlx XL II. Publication is expected in the Federal Register during the week of April 20. (Rel. 34-59779)
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