UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7261 / January 25, 1996 SECURITIES EXCHANGE ACT OF 1934 Release No. 36767 / January 25, 1996 INVESTMENT ADVISERS ACT OF 1940 Release No. 1550 / January 25, 1996 INVESTMENT COMPANY ACT OF 1940 Release No. 21707 / January 25, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8826 ______________________________ ) ) ) In the Matter of: ) ORDER MAKING FINDINGS, ) IMPOSING REMEDIAL STANLEY PETER KERRY ) SANCTIONS, AND ISSUING ) CEASE-AND-DESIST ORDER ) ______________________________) I. In this remedial administrative proceeding instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act"), Sections 203(e) and 203(f) of the Investment Advisers Act of 1940 ("Advisers Act"), and Section 9(b) of the Investment Company Act of 1940 and the cease-and- desist proceeding instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), Section 21C of the Exchange Act, and Section 203(k) of the Advisers Act, Stanley Peter Kerry ("Kerry") has submitted an Offer of Settlement (the "Offer"), which the Commission has determined to accept. -[1]- II. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the ---------FOOTNOTES---------- -[1]- The Order Instituting Proceedings was issued on September 25, 1995. ==========================================START OF PAGE 2====== findings set forth below, except that he admits the jurisdiction of the Commission over him and the subject matter of this proceeding and he admits the entry of the orders by the State of Connecticut as set forth in paragraphs III(C)(1),(2), and (3) below, Kerry consents to the entry of the findings, the imposition of the remedial sanctions, and the issuance of the cease-and-desist order set forth below. III. On the basis of the Order Instituting Proceedings and the Offer submitted by Kerry, the Commission finds that: A. Respondent Kerry has been registered with the Commission as an investment adviser (File No. 801-31887) since April 21, 1988. Kerry is the sole employee and principal of the adviser and was, at all times relevant hereto, an associated person of an investment adviser. From October 1989 to June 1994, Kerry was also an associated person with various registered broker-dealers. B. Kerry's Violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder, and Sections 204, 206(1), 206(2), 206(4), and 207 of the Advisers Act and Rules 204-1(b), 204-1(c), 204-2, and 206(4)-2 Thereunder 1. In or about October 1990, Kerry willfully violated the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act by misappropriating the investment funds of a client for his personal use. 2. Between at least October 1990 and continuing through at least October 1993, Kerry maintained possession and custody of funds of his investment advisory clients. During this period, Kerry willfully violated Section 204 of the Advisers Act and Rule 204-1(b) thereunder by failing to amend his registration application on Form ADV to disclose that he maintained custody of his clients' funds. 3. Between at least October 1990 and continuing through at least October 1993, Kerry willfully violated Section 204 of the Advisers Act and Rule 204-2 thereunder by failing to keep true, accurate and complete records of cash receipts and disbursements, including the receipt and disbursement of client funds. Kerry failed to keep such records, and such records as he maintained were materially incomplete, in that they failed to reflect his custody of client funds. ==========================================START OF PAGE 3====== 4. Between at least October 1990 and continuing through at least October 1993, while maintaining possession and custody of client funds or securities, Kerry willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-2(a) thereunder by, among other things, failing to have an independent accountant conduct a surprise count and verification of such funds or securities during each calendar year and, promptly thereafter, file a verification certificate with the Commission setting forth the accountant's findings in the surprise count. 5. In or about March 1992, Kerry willfully violated Section 207 of the Advisers Act by falsely stating in an amendment to his registration application on Form ADV that he filed with the Commission, that he did not maintain custody of client funds. 6. On or about March 7, 1991, April 29, 1992 and April 5, 1993, Kerry willfully violated Section 207 of the Advisers Act by falsely stating in his filings on Form ADV-S that no amendment to his Form ADV was required, when, in fact, he was subject to the filing and amendment requirements imposed on advisers who maintain custody of client funds. In addition, Kerry violated Section 207 of the Advisers Act, because the Forms ADV-S that he filed on the above-listed dates falsely stated, in response to Item 4(a), that Kerry was not subject to the filing requirements of Part II, Item 14 of Form ADV, when, in fact, he was subject to such a requirement, because he maintained custody of client funds. 7. Kerry willfully violated Advisers Act Rule 204-1(c) by failing to file, within the time period prescribed by that rule, the Forms ADV-S that he filed on or about April 29, 1992, April 5, 1993, and April 25, 1994. C. Kerry is Subject to an Order by the Connecticut Department of Banking to Pay Restitution to a Client's Estate 1. On December 15, 1994, the State of Connecticut, Department of Banking ("Department of Banking"), issued a Notice of Intent to Revoke Investment Adviser Registration and Order to Cease and Desist and Notice of Right to Hearing (In the Matter of Stanley P. Kerry d/b/a Kerry Retirement Planning, Inc., Docket No. NR/CD-94-2309-S )("Notice and Order"). The Notice and Order alleged that: (i) on or about October 1, 1990, Kerry initiated a telephone redemption of a mutual fund investment held by his client in the amount of $10,000 for the purpose of using the proceeds to purchase an alternative investment product for such client; (ii) upon receiving the proceeds from the liquidated investment, Kerry deposited such funds into a personal checking account; and (iii) such monies were not subsequently invested on behalf of the client, but were used by Kerry to pay his own personal expenses. ==========================================START OF PAGE 4====== 2. On April 4, 1995, in connection with that proceeding, the Department of Banking entered a Consent Order requiring Kerry to make restitution to the estate of a former investment advisory client in the amount of $10,000 and barring Kerry for six years from associating in any capacity with any broker-dealer or investment adviser and from offering or selling securities, rendering investment advice, acting as an investment adviser agent or soliciting accounts for any investment adviser. 3. On November 29, 1994, based upon a complaint from the Department of Banking and the allegations set out in paragraph 1, the Office of the Chief State's Attorney, State of Connecticut, filed an Information charging Kerry with Larceny in the Second Degree. On April 4, 1995, the Superior Court (State of Connecticut vs. Stanley P. Kerry, Docket No. CR 94-151247S) placed Kerry on probation for a period of two years under Connecticut's accelerated rehabilitation program. -[2]- The court further required that Kerry comply with the Department of Banking's Consent Order and pay restitution of $10,000. In addition, the court required that Kerry pay prejudgment interest in the amount of $2,700 to the client's estate. D. Kerry's Inability to Pay an Administrative Penalty The Commission has reviewed Kerry's sworn Disclosure of Assets and Financial Information Form ("Financial Disclosure Statement") and has determined that he does not have the financial ability to pay an administrative penalty. The determination that Kerry is unable to pay an administrative penalty is conditioned upon Kerry's having stated fully and truthfully in all material respects the information contained in the Financial Disclosure Statement executed under oath by Kerry on November 10, 1995. It is further provided that the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Administrative Law Judge to reopen this matter to consider Kerry's inability to pay an administrative penalty, if the Division obtains information from any source that Kerry's Financial Disclosure Statement made to the Commission regarding his financial condition was inaccurate or incomplete in any material respect. After notice and ---------FOOTNOTES---------- -[2]- The Connecticut criminal statutes provide for a pretrial program for accelerated rehabilitation of certain persons accused of crimes for which a sentence to a term of imprisonment may be imposed. A defendant accepted into the program is placed on probation for up to two years under such conditions as the court may order. Upon successful completion, the defendant may apply for dismissal of the charges against him. ==========================================START OF PAGE 5====== opportunity for a hearing, the Administrative Law Judge may determine what, if any, monetary penalty should be imposed. Kerry may not, by way of a defense to such petition, contest the allegations of the Order Instituting Proceedings in this matter or the findings contained herein, or assert that an administrative penalty should not be imposed. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer and impose the sanctions and issue the cease-and-desist order specified in the Offer. Accordingly, IT IS HEREBY ORDERED that Kerry cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 204, 206(1), 206(2), 206(4), and 207 of the Advisers Act and Rules 204-1(b), 204-1(c), 204-2, and 206(4)-2 thereunder; IT IS FURTHERED ORDERED, effectively immediately, that Kerry's registration as an investment adviser be, and hereby is, revoked; and IT IS FURTHERED ORDERED that Kerry be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser, or investment company. By the Commission. Jonathan G. Katz Secretary