UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933
Release No. 7997 / July 27, 2001

SECURITIES EXCHANGE ACT OF 1934
Release No. 44600 / July 27, 2001

INVESTMENT ADVISERS ACT OF 1940
Release No. 1954 / July 27, 2001

ADMINISTRATIVE PROCEEDING
File No. 3-10540

In the Matter of: SAGE ADVISORY SERVICES LLC, as successor to STANDARD ASSET GROUP LP, and STANDARD GROUP HOLDINGS LLC, as successor to STANDARD ASSET GROUP, INC., Respondents.

: : : : : : : :

ORDER INSTITUTING PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 203(e) AND 203(k) OF THE INVESTMENT ADVISERS ACT OF 1940, SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, IMPOSING REMEDIAL SANCTIONS AND ISSUING CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public cease-and-desist and administrative proceedings be instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act"), Section 8A ofthe Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Sage Advisory Services LLC, as successor to Standard Asset Group LP, and pursuant to Sections 203(e) and 203(k) of the Advisers Act against Standard Group Holdings LLC, as successor to Standard Asset Group, Inc., registered investment advisers (collectively, "Respondents").

II.

In anticipation of the institution of these proceedings, Sage Advisory Services LLC and Standard Group Holdings LLC have submitted Offers of Settlement ("Offers") that the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying any of the findings contained herein except as to the jurisdiction of the Commission over them and over the subject matter of this proceeding, which are admitted, Sage Advisory Services LLC and Standard Group Holdings LLC consent to the issuance of this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the Advisers Act, Section 8A of the Securities Act and Section 21C of the Exchange Act, Making Findings, Imposing Remedial Sanctions and Issuing Cease-and-Desist Order ("Order"), the entry of the findings and the imposition of the remedial sanctions and the cease-and-desist order set forth below.

Accordingly, IT IS ORDERED that proceedings pursuant to Sections 203(e) and 203(k) of the Advisers Act, Section 8A of the Securities Act and Section 21C of the Exchange Act be, and hereby are, instituted.

III.

On the basis of this Order and the Offers submitted by Sage Advisory Services LLC and Standard Group Holdings LLC, the Commission makes the following findings:¹

A. Respondents²

1. Sage Advisory Services LLC, a Massachusetts limited liability company with its principal place of business in Wellesley, Massachusetts, has been registered with the Commission as an investment adviser pursuant to Section 203(c) of the Advisers Act since June 10, 1991 (File No. 801-39009). Initially registered with the Commission under the name Standard AssetGroup LP, the firm changed its name and corporate structure in August 1996 and became Sage Advisory Services LLC (when it is appropriate to refer to the two entities collectively herein, they shall be referred to as "Sage"). Sage was the investment adviser for all of the soft dollar securities transactions described in this Order.

2. Standard Group Holdings LLC, a Massachusetts limited liability company with its principal place of business in Wellesley, Massachusetts, has been registered with the Commission as an investment adviser pursuant to Section 203(c) of the Advisers Act since August 18, 1998 (File No. 801-55808). Standard Group Holdings LLC and its predecessor in interest, Standard Asset Group, Inc. ("SAGI"), at all relevant times held a controlling interest in Sage (when it is appropriate to refer to Standard Group Holdings and SAGI collectively, they shall be referred to as "Standard"). SAGI has been registered with the Commission as an investment adviser since June 29, 1987 (File No. 801-29883). Between August 1993 and April 1997, Standard had assets under management (which includes amounts managed by Sage) ranging from approximately $80 million to $120 million.

B. Summary

This matter involves the misappropriation of almost $900,000 in soft dollar credits and other monies by Sage and related failures to fully disclose Sage's soft dollar practices in Forms ADV filed by Sage and SAGI.³ Between August 1993 and April 1997, Sage, acting through its former principal, Gordon Rollert ("Rollert"), defrauded its largest investment advisory client, a church endowment fund (the "Church"), by misappropriating soft dollar credits generated from trading in a Sage soft dollar account that Rollert had established at a registered Boston area broker-dealer ("Broker") and by fraudulently offering investment interests in Sage to the Church.⁴ To generate large amounts of soft dollar credits, Sage, through Rollert, churned the Church account and caused the Church to be charged commissions averaging $0.30 a share, prices far higher than the rate charged by the Broker for similar transactions, in violation of Sage's duty to seek to obtain best execution. In addition, between 1990and 1996, Sage, acting through Rollert, fraudulently offered and sold securities in the form of limited partnership interests and promissory notes to the Church.

C. Willful Violations of Sections 206(1) and 206(2) of the Advisers Act

1. Background

In late 1980, the Church retained Rollert and his advisory firm as its investment adviser to manage its $2.7 million endowment portfolio. The Church became Rollert's largest client, with assets roughly divided between equities (managed by Sage) and fixed income (managed by SAGI). The Church agreed to pay an annual advisory fee consisting of a percentage of assets under management (ranging from 3/4 to 3/8 of one percent). The Church also authorized Sage to select brokers and, in accordance with Section 28(e) of the Exchange Act, to charge the Church's account reasonable brokerage commissions in return for a broker's provision of research and execution services.⁵ The parties agreed that Sage would not receive any compensation from the Church other than the agreed-upon percentage of assets under management.

In mid-1993, Sage opened a soft dollar account at the Broker's Boston office. Sage and the Broker agreed that Sage would receive $1.00 in soft dollar credits for each $1.75 in commissions charged by the Broker for trades that it executed in the Sage soft dollar account. Sage, through Rollert, set the commission rate charged for these trades. Between mid-1993 and April 1997 (when Sage ceased placing trades through the Broker), these commissions averaged $.30 a share, an amount that was at least twice as high as the commissions available from the Broker for similar soft dollar transactions placed by other customers.⁶

2. Undisclosed Soft Dollar Arrangements

Sections 206(1) and 206(2) of the Advisers Act make it unlawful for an investment adviser to employ any device, scheme, or artifice to defraud clients or prospective clients or to engage in any transaction, practice, or course of business that defrauds clients or prospective clients. These sections impose a fiduciary obligation upon investment advisers to act for the benefit of their clients. Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 17 (1979); Oakwood Counselors, Inc., Advisers Act Rel. No. 1614, 63 SEC Docket 2485 (Feb. 10, 1997). This includes the duty to exercise the utmost good faith in dealings with clients, to disclose all material facts, and to employ reasonable care to avoid misleading clients. SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194 (1963). The standard of materiality is whether a reasonable client or prospective client would have considered the information important in deciding whether to invest with the adviser. See SEC v. Steadman, 967 F.2d 636, 643 (D.C. Cir. 1992).

Soft dollar arrangements are material because of the potential conflict of interest arising from an adviser's receipt of some benefit in exchange for directing brokerage on behalf of client accounts. See Renaissance Capital Advisers, Inc., Advisers Act Rel. No. 1688, 66 SEC Docket 564, 567 (Dec. 22, 1997); Oakwood, 63 SEC Docket at 2488; 1986 Interpretive Release, 35 SEC Docket at 909. Because the advisory clients' commission dollars generate soft dollar credits, soft dollar benefits are the assets of the clients. See Dawson-Samberg Capital Management, Inc., Advisers Act Rel. No. 1889, 2000 SEC LEXIS 1604 at * 16-17 (Aug. 3, 2000); Republic New York Securities Corp., Advisers Act Rel. No. 1789, 1999 SEC LEXIS 278 at *3 (Feb.10, 1999). Form ADV includes items intended to ensure that material information regarding brokerage placement practices and policies are disclosed to investors. See Investment Adviser Requirements Concerning Disclosure, Record Keeping, Applications for Registration and Annual Filings, Advisers Act Rel. No. 664, 16 SEC Docket 901 (Jan. 30, 1979); Disclosure of Brokerage Placement Practices By Certain Registered Investment Companies and Certain Other Issuers, Advisers Act Rel. No. 665, 16 SEC Docket 837 (Jan. 30, 1979). Specifically, Items 12.B and 13.A. of Part II of the Form ADV require disclosure of soft dollar arrangements, Oakwood, 63 SEC Docket at 2488-89, and an adviser must adequately disclose the uses to which clients' soft dollars are being put in order to avail itself of the safe harbor of Section 28(e).⁷ Dawson-Samberg, 2000 SEC LEXIS 1604 at *18. More detailed disclosure is required when the adviser receives products or services that fall outside the scope of Section 28(e). Id.

Beginning in September 1994, Sage, through Rollert, began to submit invoices for FA Partners to the Broker for soft dollar payment. FA Partners was a shell entity that Rollert controlled and it provided no products or services to Sage or SAGI. Some of the FA Partners invoices falsely indicated that they were for consulting services provided to Sage; others failed to specify what services had been provided. Based upon the invoices submitted by Rollert, the Broker paid FA Partners from the Sage soft dollar account. Rollert personally picked up the checks made out to FA Partners at the Broker's Boston office. Rollert submitted, and the Broker paid, two FA Partners invoices totaling $9,000 in 1994, 52 FA Partners invoices totaling $251,000 in 1995, 60 FA Partners invoices totaling $400,000 in 1996 and nine FA Partners invoices totaling $52,000 between January and April 1997. In total, the Broker issued approximately $714,000 worth of soft dollar payments to FA Partners.

Rollert deposited these funds into an FA Partners bank account that he controlled. During 1995, all of the disbursements from the FA Partners account were payments directly to Rollert or to other payees for his benefit, including his wife, the mortgagee for his residence, or various university clubs where he stayed while traveling. Beginning in late 1995 or early 1996, Rollert funneled the Broker's payments through FA Partners to a SAGI bank account and then withdrew a substantial portion of those funds for himself, including at least $236,000 during 1996.

In addition to the monies obtained by submitting the fraudulent FA Partners invoices to the Broker, between August 1993 and the end of 1996, Sage used more than $180,000 of client soft dollar credits to pay for non-research business expenses of Sage and SAGI, as well as for unidentified expenses. Non-research business expenses, totaling approximately $123,000, included payments to individuals who had referred clients to Sage or SAGI (frequently referred to as "marketing fees"), periodic payments for legal, accounting and back-office record keeping services, payments of NASD and NYSE fees and rental payments. In addition, approximately $56,000 of the soft dollar payments were made to individuals or entities who provided unidentified services, including thousands of dollars of invoices from individuals for "consulting services."

Sage failed to disclose the use of soft dollar credits for Rollert's personal benefit, to pay non-research business expenses, and to pay undocumented expenses to clients in Form ADV filings or otherwise. Accordingly, between August 1994 and April 1997, by misappropriating approximately $714,000 in soft dollar credits through undisclosed payments to FA Partners,⁸ using soft dollar credits, without disclosure to clients, to pay $123,000 for non-research business expenses and an additional $56,000 for undocumented services, Sage willfully violated Sections 206(1) and (2) of the Advisers Act.

3. Churning

In 1995 and 1996, Sage, acting through Rollert, executed over 400 trades in the Church's account to generate commissions and the attendant soft dollar credits. These trades generated commissions of approximately $553,000 per year during 1995 and 1996. Often, transactions were effected for the primary purpose of generating commissions, in that large positions in a stock were quickly assembled only to be sold at a similar price within weeks, and then repurchased a short while later at a similar price. The portfolio turnover rate for the Church's account was 6.3 in 1995 and 6.8 in 1996.⁹ The cost-to-equity ratio for the account was 20% for 1995 and 33% for 1996.¹⁰ The Church paid high commissions and sustained a negative return at least for 1996. In this period, commissions generated from soft dollar trading on the Church's behalf at the Broker represented approximately 76% of commissions generated through all brokers used by Sage, even though its account represented approximately 8% of Sage's assets under management. An investment adviser violates Section 206(1) and 206(2) by churning an account when the adviser buys and sells securities for a customer's account without regard for the customer's investment interests, for the purpose of generating commissions. See, e.g. First Multifund Advisory Corp., 1982 SEC LEXIS 2646 at *50-*53 (Dec. 29, 1982) (Initial Dec.). Each of these elements is present here. Accordingly, during 1995 and 1996, by churning the Church's account, Sage willfully violated Sections 206(1) and (2) of the Advisers Act.

4. Best Execution

Between mid-1993 and April 1997, Sage, acting through Rollert, breached its fiduciary duty to seek to obtain best execution by directing that the Broker charge the Church commissions averaging $0.30 per share. This amount was at least twice as high as the rate for similar transactions that wereavailable from the Broker.¹¹ Sage, through Rollert, persisted in this practice even after the Broker sent him a written notice that it would execute Sage's soft dollar trades at a lower commission rate. The commissions that the Church paid also vastly exceeded commissions generated by Rollert's other managed accounts combined.

In executing securities transactions on behalf of clients, investment advisers, as fiduciaries, are obligated to serve the interests of the client. This includes the basic duty of executing securities transactions for clients "in such a manner that the client's total cost or proceeds in each transaction is the most favorable under the circumstances." Kidder, Peabody & Co., 43 S.E.C. 911, 915 (1968) (trades at non-market prices). Sage, acting through Rollert, breached this duty because it made no effort to seek reasonable execution terms from the Broker for its soft dollar trades and more favorable terms were reasonably available for the types of securities transactions in which Sage was engaged at that time. See, e.g., Founders Asset Management LLC, Advisers Act Rel. No. 1879, 2000 SEC LEXIS 1239 (June 15, 2000) (adviser violated Advisers Act Sections 206(1) and (2) by failing to disclose adoption of policy directing individual client account transactions to broker who charged a higher commission rate, in exchange for referrals; reasonably available terms demonstrated because lower commission rates were charged prior to change); Fleet Investment Advisers, Inc., Advisers Act Rel. No. 1821, 1999 SEC LEXIS 1805 (Sept. 9, 1999) (adviser violated Advisers Act Sections 206(1) and (2) by failing to disclose practice of paying higher brokerage commissions to compensate brokers for client referrals; traders altered trade tickets by crossing out better bids or using white-out to conceal better bids from other firms); Karen Michalski, Advisers Act Rel. No. 1822, 1999 SEC LEXIS 1803 (Sept. 9, 1999) (adviser, without disclosure, paid higher client commissions to compensate broker for client referrals; traders altered order tickets to conceal failure to obtain best price); Michael J. Smirlock, 51 SEC 849, 1993 SEC LEXIS 3313, *4 (Nov. 29, 1993) (adviser's failure to obtain best execution by executing trades at non-market prices violates Section 206(2)).

Sage failed to disclose these order execution practices to the Church or in its Forms ADV. Accordingly, between mid-1993 and April 1997, by violating its duty to obtain best execution, Sage willfully violated Sections 206(1) and (2) of the Advisers Act.

5. Fraudulent Sales and Exchange of Securities

In about late 1990, the Church invested $200,000 in Sage in the form of a limited partnership interest. Sage failed to provide Church representatives with material financial information such as income statements, a balance sheet or statements of cash flow, falsely inflated the value of Rollert's contribution, and falsely promised to provide church representatives with annual financial reports. In1995 and 1996, after the Church's investment had increased to $250,000, Sage, acting through Rollert, persuaded Church representatives to restructure the investment, reducing its equity interest to $62,500 and substituting a promissory note for $187,500 for the remaining equity interest.¹² As an inducement to the 1995 and 1996 offerings, Rollert agreed to limit his compensation from Sage, while concealing the fact that he had, and would continue to, improperly augment his salary by misappropriating soft dollar credits for his personal benefit. Sage was the issuer of the securities purchased by the Church. Accordingly, Sage willfully violated Sections 206(1) and 206(2) of the Advisers Act. See David A. King, Advisers Act Rel. No. 1391, 1993 SEC LEXIS 3071 (Nov. 9, 1993) (adviser's principal barred, and adviser's registration revoked, based on entry of injunction against violating, and aiding and abetting violations of, Sections 206(1) and (2); complaint alleged that principal made material false statements and omissions in connection with offering of pooled investment securities to clients).

D. Willful Violations of Section 10(b) of the Exchange Act and

Rule 10b-5 thereunder and Section 17(a) of the Securities Act

Sage also willfully violated Exchange Act Section 10(b) and Rule 10b-5 thereunder and Section 17(a) of the Securities Act. These provisions prohibit fraudulent or deceptive practices in the offer, purchase or sale of securities. Sage, through Rollert, engaged in the fraudulent practices discussed in this Order. Rollert acted knowingly or recklessly. As an officer of Sage, his state of mind is imputed to the entity. See Kurzweil Applied Intelligence, Inc., Exchange Act Rel. No. 36021, 59 SEC Docket 2615, 2626 (July 29, 1995).

1. Undisclosed Soft Dollar Arrangement

Misappropriation of soft dollar credits violates Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Trading by an investment adviser in a client's securities without disclosing that it will use the client's soft dollar credits for personal and business expenses satisfies the "in connection with" requirement of Section 10(b). See SEC v. Tandem Management Inc., 95 Civ. 8411 (JGK) (S.D.N.Y.), Lit. Rel. No. 14670 (Oct. 2, 1995) (registrant and three principals charged with violations of Section 10(b) of the Exchange Act and Sections 206(1) and 206(2) of the Advisers Act where firm's president and chief investment officer, without disclosure, personally received over $500,000 in soft dollar credits). Sage willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by misappropriating soft dollar credits for undisclosed personal and business expenses.

2. Churning

Sage also willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by churning the Church's account. Churning occurs when a broker or a fiduciary, such as an investment adviser, buys and sells securities for a customer's account without regard for the customer's investment interests, for the purpose of generating commissions. Olson v. E.F. Hutton & Co., Inc., 957 F.2d. 622, 628 (8^th Cir. 1992). Churning in violation of Section 10(b) and Rule 10b-5 has three elements: (i) control of the customer's account by the broker or fiduciary; (ii) excessive trading in light of the customer's investment objectives; and (iii) scienter. Rizek v. SEC, 215 F.3d 157 (1^st Cir. 2000). Each element is present here. Sage had discretionary control over the Church's account and the trading effected in that account was excessive. Analysis of an account's turnover rate and the cost-to-equity ratio are two tests used to determine whether an account has been excessively traded. Al Rizek, Exchange Act Rel. No. 41725, 1999 SEC LEXIS 1585 at *15 (Aug. 11, 1999), aff'd sub. nom., Rizek v. SEC, 215 F.3d 157. A turnover rate in excess of 6 is generally presumed to reflect excessive trading. Rizek, 1999 SEC LEXIS 1585 at *16 (holding that turnover rates of 6.1 to 7.9 in a conservative account were indicative of churning). A cost-to-equity ratio of 15-21% imposed on a conservative account has also been held to indicate excessive trading. Rizek,1999 SEC LEXIS 1585 at *17. As discussed above, trading in the Church's account exceeded these thresholds. Such excessive trading violates the antifraud provisions of the securities laws. See Stephen Stout, Exchange Act Rel. No. 43410, 2000 SEC LEXIS 2119 at *51 (Oct. 4, 2000). The trading was effected for the purpose of generating commissions, thereby obtaining additional soft dollar credits.

3. Best Execution

Sage also willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by failing to seek to obtain best execution on the Church's trades. Investment advisers, like broker-dealers, owe a duty to their clients to seek to obtain best execution and must obtain the most favorable terms reasonably available when executing securities transactions. See SEC Order Execution Obligations, Exchange Act Rel. No. 37619A (Sept. 6, 1996); Kidder, Peabody & Co., 43 S.E.C. at 915 (noting that fiduciaries such as investment advisers owe clients a duty to seek to obtain best execution). See also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 270 (3d Cir. 1998) (broker-dealer).

4. Fraudulent Sales and Exchange of Securities

Sage also willfully violated Section 17(a) of the Exchange Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by making material misstatements and omissions with respectto the Church's investments in Sage. See David A. King, 1993 SEC LEXIS 3071 (adviser's principal barred, and adviser's registration revoked, based on entry of injunction against violating, and aiding and abetting violations of, Section 17(a) of the Exchange Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; complaint alleged that principal made material false statements and omissions in connection with offering of pooled investment securities to clients); Stiles-Lane & Associates, Inc., Advisers Act Rel. No. 1075, 1987 SEC LEXIS 4019 (Aug.10, 1987) (adviser's violations of Section 17(a) of the Exchange Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder premised on material misstatements and omissions in offer and sale of limited partnership interests).

E. False Filings --Willful Violations of Advisers Act Section 207

Section 207 of the Advisers Act provides that it shall be unlawful for any person willfully to make any untrue statement of material fact in any registration application or report filed with the Commission or willfully to omit to state in any such application or report any material fact required to be stated therein.¹³ A person violates Section 207 by filing a false Form ADV, including any amended Forms ADV. Stanley Peter Kerry, Advisers Act Rel. No. 1550, 61 SEC Docket 431 (Jan. 25, 1996). Violations of Section 207 do not require a showing of scienter. Parnassus Investments, Inc., Initial Dec. Rel. No. 131, 67 SEC Docket 2760, 2784 (Sept. 3, 1998). Under Section 207 of the Advisers Act, Sage and SAGI had a duty to file Forms ADV that were not false or misleading and that did not omit to state material facts required to be stated therein. See S Squared Technology Corporation, Advisers Act Rel. No. 1575, 62 SEC Docket 1560, 1567 (Aug. 7, 1996).

Form ADV Part II, Item 12.B. specifically requires that an investment adviser (and its related persons) disclose factors affecting the selection of broker-dealers from whom it receives "products, research and services" if the value of such products, research or services is a factor in selecting broker-dealers. Item 13.A of Part II of Form ADV requires an investment adviser to state whether it, or a related person, receives any direct or indirect economic benefit from a non-client (including soft dollar benefits) and, if it does, to describe the manner in which it uses the soft dollars or other benefits.

Sage filed an amended Form ADV on March 31, 1994, January 25, 1995, March 31, 1995, March 26, 1996 and September 17, 1996, which failed to correct an affirmative misstatement that Sage used its own funds to pay for non-research services, and failed to disclose that Sage and its related persons, Standard and Rollert, were using soft dollars and/or economic benefits from a non-client (i.e., the Broker) to pay for a variety of Rollert's personal expenses and to pay Sage and SAGI's non-research and undocumented business expenses. SAGI filed Form ADV amendments on March 31, 1994, March 31, 1995, June 6, 1996 and March 26, 1997 which failed to disclose that SAGI and its related persons, Sage and Rollert, were using soft dollars and/or receiving economic benefits from a non-client (i.e., the Broker) to pay for a variety of Rollert's personal expenses and to pay Sage and SAGI's non-research and undocumented business expenses. Any use of soft dollars must be described in detail sufficient to enable advisory clients to understand the nature of the products and services being obtained. See Dawson-Samberg, 2000 SEC LEXIS 1604, at *18 (failure to disclose use of soft dollar credits to pay for non-research business travel, personal travel, marketing and other administrative and undocumented expenses violated Advisers Act Section 207, even though registrant disclosed a number of other products and services obtained using soft dollar credits). Accordingly, Sage and SAGI willfully violated Section 207 of the Advisers Act.

F. Financial Disclosure Statements

Sage Advisory Services LLC, as successor to Standard Asset Group, LP, and Standard Group Holdings LLC, as successor to SAGI, have submitted a joint sworn statement of financial condition, dated December 31, 2000, and other evidence, and have asserted, subject to the provisions of this Order requiring them to pay disgorgement, a financial inability to pay disgorgement, prejudgment interest thereon or a civil penalty. The Commission has reviewed the Respondents' sworn financial statement and other evidence provided by the Respondents and has determined that they do not have the financial ability to pay disgorgement or a civil penalty in addition to the amounts imposed by this Order. This Order imposes certain joint obligations on the Respondents because they are, and have at all relevant times been, commonly controlled.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offers submitted by Sage Advisory Services LLC, as successor to Standard Asset Group LP, and Standard Group Holdings LLC, as successor to Standard Asset Group, Inc., and impose the sanctions and cease-and-desist order agreed to in the Offers.

V.

Accordingly, IT IS HEREBY ORDERED, pursuant to Sections 203(e) and 203(k) of the Advisers Act, Section 8A of the Securities Act and Section 21C of the Exchange Act that Sage Advisory Services LLC, as successor to Standard Asset Group LP, cease and desist from committing or causing any violations and any future violations of Sections 206(1) and (2) of the Advisers Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act;and that Sage Advisory Services LLC, as successor to Standard Asset Group LP, and Standard Group Holdings LLC, as successor to Standard Asset Group, Inc., cease and desist from committing or causing any violations and any future violations of Section 207 of the Advisers Act.

IT IS FURTHER ORDERED that Sage Advisory Services LLC, as successor to Standard Asset Group LP, and Standard Group Holdings LLC, as successor to Standard Asset Group, Inc., be, and hereby are, censured.

IT IS FURTHER ORDERED that Sage Advisory Services LLC, as successor to Standard Asset Group LP, and Standard Group Holdings LLC, as successor to Standard Asset Group, Inc., shall pay, jointly and severally, disgorgement in the amount of $1,120,007, representing unlawful soft dollar benefits and the Church's remaining investment in Sage, plus prejudgment interest thereon, to the Church, provided, however, that all but $288,328 shall be waived, and penalties not assessed, based on their demonstrated inability to pay. Payment of $288,328, plus post-judgment interest of $16,524 (a total of $304,852) shall be according to the following schedule:

(A) the sum of $20,000 shall be paid within 10 days of the entry of this Order;

(B) the sum of $268,328 shall be paid on a quarterly basis according to the following schedule, provided that the first date shall be at least 90 days from the entry of the Order and, if necessary, payment dates shall be adjusted so that they are on a quarterly basis thereafter:

1. $22,360 on or before November 30, 2001;

2. $22,360 on or before February 28, 2002;

3. $22,360 on or before May 31, 2002;

4. $22,360 on or before August 30, 2002;

5. $22,361 on or before November 29, 2002;

6. $22,361 on or before February 28, 2003;

7. $22,361 on or before May 30, 2003;

8. $22,361 on or before August 29, 2003;

9. $22,361 on or before November 28, 2003;

10. $22,361 on or before February 27, 2004;

11. $22,361 on or before May 28, 2004; and

12. $22,361 on or before August 31, 2004; and

(C) the sum of $16,524, representing post-judgment interest, shall be paid on or before November 30, 2004; and in the event of a sale of all or a substantial portion of the business or assets, excluding involuntary liquidations, Sage and Standard shall comply with their undertakings to give first priority to payment of the obligations set forth in paragraphs (A) through (C) above. Sage and Standard shall submit evidence satisfactory to the staff, within five days of each payment, confirming that payment has been made. The Division of Enforcement may, at any time following entry of this Order, petition to: (i) reopen this matter to reconsider whether Sage Advisory Services LLC and Standard Group Holdings LLC provided accurate and complete financial information at the time such representations were made; (ii) determine the amount of the civil penalty to be imposed; and (iii) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Sage Advisory Services LLC's and Standard Group Holdings LLC's Offers had not been accepted. No other issue shall be considered in connection with this petition other than whether the financial information provided by Sage Advisory Services LLC or Standard Group Holdings LLC was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of disgorgement and administrative penalty to be imposed, and whether any additional remedies should be imposed. Sage Advisory Services LLC and Standard Group Holdings LLC may not, by way of any defense to any such petition, contest the findings in the Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.

IT IS FURTHER ORDERED that Sage Advisory Services LLC, as successor to Standard Asset Group LP and Standard Group Holdings LLC, as successor to Standard Asset Group, Inc., shall comply with the following additional undertakings contained in their Offers:

A. At least 45 days prior to directly or indirectly opening, utilizing or maintaining a soft dollar account with any soft dollar broker, or otherwise entering into any soft dollar relationship, Sage Advisory Services LLC and Standard Group Holdings LLC shall provide written notice to the staff of the Boston District Office of their intention to enter into such relationship;

B. Retention of Consultant:

1. Sage Advisory Services LLC and Standard Group Holdings LLC shall retain, within 30 days of the date of the notice specified in Part A of this Undertaking, at their expense, an Independent Consultant (the "Consultant") not unacceptable to the Commission staff. The Consultant shall conduct a review of their supervisory, compliance and other policies and procedures designed to prevent and detect federal securities law violations of the nature involved in this matter;

2. Sage Advisory Services LLC and Standard Group Holdings LLC shall provide to the Commission staff, within 30 days of retaining the Consultant, a copy of an engagement letter detailing the Consultant's responsibilities;

3. Sage Advisory Services LLC and Standard Group Holdings LLC shall cooperate fully with the Consultant, including providing the Consultant with access to its files, books, records, and personnel as reasonably requested for the above-mentioned review, and obtaining the cooperation of their employees or other persons under their control;

4. The Consultant shall report to the Commission staff on his/her activities as the staff shall request;

5. The Consultant may engage such assistance, clerical, legal or expert, as necessary and at reasonable cost, to carry out his/her activities and the cost, if any, of such assistance shall be borne exclusively by Sage Advisory Services LLC and Standard Group Holdings LLC;

6. Sage Advisory Services LLC and Standard Group Holdings LLC shall require the Consultant, at their expense, to prepare a report making recommendations as to their policies and procedures and system for applying such procedures, as described in paragraph (1) above;

7. Sage Advisory Services LLC and Standard Group Holdings LLC shall require the Consultant to deliver the report to Sage Advisory Services LLC, Standard Group Holdings LLC and to the Commission staff within 90 days after providing the notice specified in Part A of this Undertaking;

8. Sage Advisory Services LLC and Standard Group Holdings LLC shall adopt all recommendations by the Consultant in the report within six months after its issuance; provided, however, that as to any of the Consultant's recommendations that Sage Advisory Services LLC and Standard Group Holdings LLC determines is unduly burdensome or impractical, Sage Advisory Services LLC and Standard Group Holdings LLC may, within 30 days of receipt of the Consultant's report, suggest an alternative procedure designed to achieve the same objective, submitted in writing to the Consultant and the Commission staff. The Consultant shall reasonably evaluate Sage Advisory Services LLC or Standard Group Holdings LLC's alternative procedure. SageAdvisory Services LLC or Standard Group Holdings LLC shall abide by the Consultant's determination with regard thereto and adopt such recommendations;

9. Sage Advisory Services LLC and Standard Group Holdings LLC shall ensure that, for the period of the engagement and for a period of two years from completion of the engagement, the Consultant shall not enter into any employment, consultant, attorney-client, auditing or other professional relationship, with Sage Advisory Services LLC or Standard Group Holdings LLC, or any of their present or former affiliates, directors, officers, employees, or agents acting in their capacity. Any firm with which the Consultant is affiliated or of which he/she is a member, and any person engaged to assist the Consultant in the performance of his/her duties under this Order shall not, without prior written consent of the Boston District Office, enter into any employment, consultant, attorney-client, auditing or other professional relationship with Sage Advisory Services LLC or Standard Group Holdings LLC, or any of their present or former affiliates, directors, officers, employees, or agents acting in their capacity as such for the period of engagement and for a period of two years after the engagement; and

10. Sage Advisory Services LLC and Standard Group Holdings LLC shall employ a director of compliance, shall define the duties of such officer, and shall ensure that such officer has access to the boards of directors of Sage Advisory Services LLC and Standard Group Holdings LLC, and is subject to the direct supervision of, and reports to, Sage Advisory Services LLC's and Standard Group Holdings LLC's Chief Executive Officer.

C. Within nine months from the date of the notice set forth in Part A of this Undertaking, Sage Advisory Services LLC and Standard Group Holdings LLC shall provide an affidavit via certified mail to Juan Marcel Marcelino, District Administrator, Securities and Exchange Commission, Boston District Office, 73 Tremont Street, Suite 600, Boston, Massachusetts 02108, that each has complied with the above Undertaking. Such affidavit shall contain a statement describing the procedures adopted and implemented in compliance with paragraph (B)(8) above. Such affidavit shall be submitted under cover letter which identifies Sage Advisory Services LLC and Standard Group Holdings LLC as the respondents in these proceedings, the file number and the Commission's case number; and

IT IS FURTHER ORDERED that Sage Advisory Services LLC shall comply with its Undertaking, contained in its Offer, to mail a copy of this Order, together with a cover letter in a form acceptable to the staff of the Commission, to all current clients by registered or certified mail, return receipt requested, within 30 days from the entry of this Order, and shall continue, for a period of twelve months from the effective date of this Order to provide a copy of this Order to all prospective clients not less than 48 hours prior to entering into any written or oral investment advisory contract, or no later than the time of entering into such contract if the client has the right to terminate the contract without penalty within five business days after entering into the contract; and, after the expiration of the twelve month period specified in this Undertaking, Sage Advisory Services LLC shall disclose to all prospective clients the material terms of this Order for the period of time specified in and with delivery as required by Advisers Act Rule 206(4)-4. Within 13 months of the date of this Order, Sage Advisory Services LLC shall execute and deliver to the staff of the Commission's Boston District Office an affidavit that it has provided this Order to its current and prospective clients in accordance with the terms of this Order.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes

http://www.sec.gov/litigation/admin/33-7997.htm