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SEC v. STEADMAN

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


May 1, 1991

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
CHARLES W. STEADMAN, et al., Defendants.

The opinion of the court was delivered by: LOUIS F. OBERDORFER

PERMANENT INJUNCTION

 For the reasons stated in the Memorandum and Order dated February 27, 1991, this Court: has found that defendants Charles W. Steadman ("Steadman"), Steadman Security Corporation ("SSC"), Steadman Financial Fund, Steadman Investment Fund, Steadman Oceanographic, Technology & Growth Fund, Steadman American Industry Fund, and Steadman Associated Fund (collectively "the Funds"), have violated certain provisions of the federal securities laws; has granted judgment to plaintiff Securities and Exchange Commission ("Commission") on all claims; and has held that plaintiff is entitled to injunctive relief to prevent defendants from committing future violations of those enumerated federal securities laws. Therefore, it is this 1st day of May, 1991, hereby ORDERED that:

 I. Defendants Steadman, SSC, and the Funds are permanently enjoined from making use of any means or instruments of transportation or communication in interstate commerce or any means or instrumentality of interstate commerce, or of the mails, in the offer or sale, or in connection with the purchase or sale, or any security to:

 (a) employ any devices, schemes, or artifices to defraud;

 (b) obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

 (c) engage in any act, transaction, practice, or course of business which operates or would operate as a fraud or deceit upon any person;

 in violation of Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. 240.10b-5 thereunder.

 II. Defendants Steadman and SSC, are permanently enjoined from making use of the mails or any means or instrumentality of interstate commerce to violate or aid and abet violations of Sections 206(1) and 206(2) of the Investment Advisors Act of 1940 ("Advisors Act"), 15 U.S.C. § 80b-6(1) and 80b-6(2), by:

 (a) employing any device, scheme, or artifice to defraud any investment advisory client or prospective client; or

 (b) engaging in any transaction, practice or course of business which operates as a fraud or deceit upon any investment advisory client or prospective client.

 III. Defendants Steadman and the Funds are permanently enjoined from selling, redeeming, or repurchasing the shares of any registered investment company at prices not based upon the current net asset value of such security computed after receipt of a tender of such security for redemption or of an order to purchase or sell such security, or aiding and abetting the foregoing, in violation of Section 22(c) of the Investment Company Act of 1940 ("ICA"), 15 U.S.C. § 80a-22(c), and Rule 22c-1, 17 C.F.R. 270.22c-1 thereunder.

 IV. Defendants Steadman, SSC, and the Funds are permanently enjoined from making any untrue statements of a material fact or omitting to state any fact necessary in order to prevent the statements made therein, in light of the circumstances under which they are made, from being materially misleading, in any registration statement, application, report, account, record or other document filed or transmitted pursuant to the ICA, 15 U.S.C. § 80a-1 to 80a-52, or the keeping of which is required pursuant to Section 31(a) of the ICA, 15 U.S.C. § 80a-31(a), in violation of Section 34(b) of the ICA, 15 U.S.C. § 80a-33(b).

 V. Defendant SSC is permanently enjoined from undertaking investment advisory services for a registered investment company except pursuant to a written contract that has been approved by a vote of a majority of the outstanding securities of such registered investment company, and that has continued in effect for a period not more than two years from the date of its execution, or pursuant to the specific approval of a contract providing for advisory services, on an annual basis, by a majority of the investment company's board of directors or by a vote of a majority of the outstanding voting securities of such investment company, in violation of Section 15(a) of the ICA, 15 U.S.C. § 80a-15(a).

 VI. Defendants Steadman and SSC are permanently enjoined from maintaining custody of, and taking action with respect to, funds or securities of investment advisory clients, or aiding and abetting the foregoing, without (a) maintaining such funds in bank accounts maintained in the name of the investment adviser as agent or trustee for the client; and/or (b) arranging to have such funds and securities verified by means of an annual surprise audit by an independent accountant and having a certificate of verification filed promptly with the Commission, in violation of Section 206(4) of the Advisers Act, 15 U.S.C. § 80b-6(4), and Rules 206(4)-2(a)(2)(ii) and (a)(5), 17 C.F.R. 275.206(4)-2(a)(2)(ii) and (a)(5) thereunder.

 VII. Defendant SSC is permanently enjoined from failing to file with the Commission a compete Form ADV, in violation of Section 204 of the Advisers Act, 15 U.S.C. § 80b-4, and Rule 204(a)(1), 17 C.F.R. 275.204-1(a)(1) thereunder.

 VIII. Defendant SSC is permanently enjoined from failing to file with the Commission a report concerning its system of internal accounting and control for the transfer of record ownership and the safeguarding of related securities and funds, in violation of Section 17A(d)(1) of the Exchange Act, 15 U.S.C. § 78q-1(d)(1) and Rule 17Ad-13(a), 17 C.F.R. 240.17Ad-13(a) thereunder.

 Louis F. Oberdorfer

 UNITED STATES DISTRICT JUDGE

19910501

© 1992-2004 VersusLaw Inc.



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