In the Matter of Sarkauskas and Associates, Inc., et al.
Admin. Proc. File No. 3-15471
On September 13, 2013, the Commission instituted and simultaneously settled cease-and-desist proceedings (the "Order") against Sarkauskas and Associates, Inc. ("Adviser") and James M. Sarkauskas ("Sarkauskas") (collectively, the "Respondents"). In the Order, the Commission found that, from August 2009 through August 2012, the Respondents violated federal securities laws when they purchased unit investment trust ("UIT") units that included transactional sales charges without disclosing that identical UIT units with no transactional sales charges could be purchased. The Respondents' failure to disclose this information resulted in their substantially increasing their compensation at the expense of their clients, which created a conflict of interest. The Commission ordered the Respondents to pay a total of $449,837.20 in disgorgement, prejudgment interest, and civil money penalties to the Commission. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, so the penalties, along with the disgorgement and prejudgment interest, collected can be distributed to those harmed by the Respondents' misconduct (the "Fair Fund"). See the Commission's Order: Release No. 34-70388. LINK TO https://www.sec.gov/litigation/admin/2013/34-70388.pdf
On October 8, 2014, the Commission issued an order appointing Damasco & Associates LLP ("Damasco") as the Tax Administrator of the Fair Fund. Damasco was acquired by Miller Kaplan Arase LLP and on June 30, 2017, the Commission issued a notice of name change for the Tax Administrator.
On May 21, 2015, the Commission issued an order appointing Rust Consulting, Inc., as the Fund Administrator to oversee the administration and distribution of the Fair Fund and setting the administrator's bond amount. See the Commission's Order: Release No. 34-75034. LINK TO https://www.sec.gov/litigation/admin/2015/34-75034.pdf
On December 24, 2015, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution ("Proposed Plan"). The notice provided the public with 30 days to submit their comments on the Proposed Plan. See the Commission's Notice: Release No. 34-76775 LINK TO https://www.sec.gov/litigation/admin/2015/34-76775.pdf and the Proposed Plan. LINK TO https://www.sec.gov/litigation/admin/2015/34-76775-plan-of-distribution.pdf
On February 3, 2016, the Commission issued an order approving the plan of distribution and published the approved plan of distribution ("Plan"). See the Commission's Order: Release No. 34-77048 LINK TO https://www.sec.gov/litigation/admin/2016/34-77048.pdf and the Plan. LINK TO https://www.sec.gov/litigation/admin/2016/34-77048-dp.pdf
The Plan provides that the distribution of the Fair Fund shall be made to harmed investors, identified by Commission staff during its investigation of the underlying securities violation, in accordance with the methodology detailed in the Plan.
On August 17, 2017, the Commission issued an order approving the disbursement of $362,571.15 from the Fair Fund for distribution to eligible investors in accordance with the Plan. The Commission also approved payment of the Fund Administrator's fees and expenses in the amount of $30,978.23 from the Fair Fund and authorized the Assistant Director of the Office of Distributions to direct the payment of the Fund Administrator's future fees and expenses from the Fair Fund, not to exceed $25,000.00 per monthly invoice, so long as the total paid does not exceed the Fund Administrator's cost proposal. See the Commission's Order: Release No. 34-81416. LINK TO https://www.sec.gov/litigation/admin/2017/34-81416.pdf
On September 30, 2019, the distribution in this matter was closed when the Commission approved the final accounting and issued an order transferring the remaining funds and any future funds returned to the Fair Fund to the U.S. Treasury, discharging the Fund Administrator, cancelling the Fund Administrator's bond, and terminating the Fair Fund. See the Commission's Order: Release No. 34-87173.