UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 39753 / March 13, 1998 INVESTMENT ADVISERS ACT OF 1940 RELEASE NO. 1707 / March 13, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9559 : ORDER INSTITUTING : ADMINISTRATIVE : PROCEEDINGS PURSUANT TO In the Matter of : SECTIONS 15(b)(4), 15(b)(6) : AND 19(h) OF THE SECURITIES : EXCHANGE ACT OF 1934 AND : SECTIONS 203(e) and 203(f) OF SCOTT S. BELL and : THE INVESTMENT ADVISERS ACT THETA GROUP, LLC, : OF 1940, MAKING FINDINGS AND : IMPOSING REMEDIAL SANCTIONS Respondents : I. The Commission deems it appropriate and in the public interest that public administrative proceedings be instituted pursuant to Sections 15(b)(6) and 19(h) of the Securities Exchange Act of 1934 (Exchange Act) and Sections 203(e) and 203(f) of the Investment Advisers Act of 1940 (Advisers Act), against Scott S. Bell (Bell), and pursuant to Sections 15(b)(4) and 19(h) of the Exchange Act against Theta Group, LLC (Theta). In anticipation of the institution of these administrative proceedings, the Respondents have submitted Offers of Settlement, (Offers) which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to jurisdiction and the findings contained herein in Section III. A., C. and E, which are admitted by Bell and Section III. B., D. and E., which are admitted by Theta, the Respondents consent to the entry of this Order Instituting Administrative Proceedings Pursuant to Sections 15(b)(4), 15(b)(6) and 19(h) of the Securities Exchange Act of 1934 and Sections 203(e) and 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions. ======END OF PAGE 1====== II. Accordingly, it is ordered that administrative proceedings be, and hereby are, instituted. III. On the basis of this Order and the Offers submitted by the Respondents, the Commission makes the following findings<(1)>: A. Bell, age 35, a resident of Lawrenceville, New Jersey, acted as an unregistered investment adviser, and an associated person of an investment adviser, from at least October 1995 until November 1996 and has acted as President of Shadowstone Partners I, LLC (Shadowstone), a broker- dealer registered with the Commission, from August 1996 until the present. B. Theta, which is located in Chicago, Illinois, registered as a broker-dealer with the Commission in April 1995. C. On February 11, 1998, the United States District Court for the Northern District of Illinois, in the case of SEC v. Theta Group LLC, Shadowstone Partners I, LLC, Scott S. Bell and R. Scot Rubel (U.S.D.C., N.D. Illinois, Civil Action No. 96-C-7987, filed December 6, 1996), entered a Final Judgment of Permanent Injunction against Bell. The Court also ordered that Bell pay disgorgement of $1.2 million, plus prejudgment interest, as payment for Bell's ill-gotten gains. However, the Court waived payment of disgorgement and prejudgment interest, except for assets totalling approximately $144,000, and did not impose a civil penalty, based on Bell's demonstrated inability to pay. D. On February 11, 1998, the United States District Court for the Northern District of Illinois, in the case of SEC v. Theta Group LLC, Shadowstone Partners I, LLC, Scott S. Bell and R. Scot Rubel (U.S.D.C., N.D. Illinois, Civil Action No. 96-C-7987, filed December 6, 1996), entered a Final Judgment of Permanent Injunction against Theta. The Court also ordered that Theta pay disgorgement of $11.1 million, plus prejudgment interest, as payment for Theta's ill-gotten gains. However, the Court waived payment of disgorgement and prejudgment interest, except for assets totalling approximately $3.6 million and any disgorgement paid by Theta's co-defendants, and did not impose a civil penalty, based on Theta's demonstrated inability to pay. E. The Commission's Complaint in the above-noted injunctive action alleges that, between October 1995 and November 1996, Bell, Theta and others made fraudulent misrepresentations and omissions of material fact in the offer and sale of $13.4 million in membership interests in Theta. The Complaint further alleges that Bell, Theta and others failed to inform <(1)>/ The findings herein are made pursuant to Bell and Theta's Offers and are not binding on any other person or entity named as a respondent in this or any other proceeding. ======END OF PAGE 2====== investors that Bell would be receiving at least $1.9 million in investor monies, represented to investors that Theta had earned returns in 1993 and 1994 even though Theta did not exist, and claimed that Theta was earning profits when it was actually losing money. In addition, the Complaint alleged that Bell made additional misrepresentations to one individual who invested $500,000 in Shadowstone. IV. In view of the foregoing, it is in the public interest to impose the sanction specified in the Offers of Settlement. Accordingly, IT IS ORDERED THAT: 1. Bell is barred from association with any broker, dealer, investment company, investment adviser or municipal securities dealer; and 2. Theta's registration as a broker-dealer is revoked. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 3======