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UNITED STATES OF AMERICA
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In the Matter of TIFFANY CAPITAL ADVISORS, INC.,
Respondents. |
: |
ORDER INSTITUTING PUBLIC PROCEEDING, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AND CEASE-AND-DESIST ORDER |
I.
The Securities and Exchange Commission ("Commission') deems it appropriate in the public interest that administrative and cease-and-desist proceedings be instituted pursuant to Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act") against Tiffany Capital Advisors, Inc. ("Tiffany") and Curtis Townsend.
In anticipation of the institution of these proceedings, Tiffany and Curtis Townsend have submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, Respondents, by their Offer, consent, without admitting or denying the findings contained herein, except that they admit the findings contained in subparagraphs II. 1. and 2. and that the Commission has jurisdiction over them and over the subject matter of these proceedings, to the entry of this Order Instituting Public Proceedings, Making Findings and Imposing Remedial Sanctions and Cease-and-Desist Order ("Order").
Accordingly, IT IS ORDERED that proceedings against Respondents be, and hereby are, instituted.
II.
On the basis of this Order and the Offer, the Commission finds that:
1. Tiffany, a corporation located in Willow Grove, Pennsylvania, has been registered with the Commission as an investment adviser since July 14, 1989.
2. Curtis Townsend is the President, Chief Executive Officer and Chairman of Tiffany. He is also the sole owner of Tiffany.
3. Tiffany offers investment advisory services, specializing in domestic equities for its investment advisory portfolios. Tiffany has discretionary authority over all client accounts. Curtis Townsend controls Tiffany's investment advisory operations, including all investment decisions for client portfolios. As of November 1999, Tiffany had three institutional clients and managed a total of approximately $418 million in assets.
4. From approximately February 1998 through July 2000, Tiffany materially overstated the number of its advisory clients and assets under management. These overstatements occurred in Forms ADV filed with the Commission, in various advertisements consisting of submissions to third party reporting services, Nelson's Investment Manager Database, Mobius Group, Inc. and Mercer Investment Consulting, Inc., and in a request for a proposal ("RFP") to a prospective client. In the RFP, Tiffany also overstated the number of its professional personnel.
5. The largest overstatement Tiffany made of its assets under management was that it had $560 million under management when, in fact, the correct number was $250 million. The largest overstatement Tiffany made of the number of its clients was that, in addition to three institutional clients, it had eleven individual clients when, in fact, Tiffany did not have any individual clients. These material overstatements were made at the direction of Curtis Townsend, who knew or was reckless in not knowing that Tiffany's assets under management and number of advisory clients were overstated in the foregoing documents.
6. When the Commission's examination staff performed an inspection of Tiffany in November 1999, Tiffany sought to create the appearance that its records comported with the misrepresentations made in its Forms ADV regarding the number of its clients by providing the examiners with a list of clients that included, in addition to Tiffany's three institutional clients, the names of eleven individuals who were not, in fact, advisory clients of Tiffany's.
7. From approximately February 1998 through July 2000, Tiffany failed to maintain true, accurate and current copies of its advertisements which consisted of submissions to third party reporting services.
8. Based on the above-described conduct, Tiffany willfully violated:
a. Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder, which provide that it is unlawful, by using the mails or means or instrumentalities of interstate commerce to, directly or indirectly: (i) employ any device, scheme, or artifice to defraud any client or prospective client; (ii) engage in any transaction, practice or course of business which operates as a fraud or deceit upon any client or prospective client; and (iii) engage in any act, practice or course of business which is fraudulent, deceptive or manipulative by publishing circulating or distributing any advertisement which contains any untrue statement of material fact or which is otherwise false or misleading;
b. Section 204 of the Advisers Act and Rules 204-2(a)(8) and 204-2(a)(11), thereunder, which require every investment adviser who makes use of the mails or any means or instrumentality of interstate commerce in connection with its business as an investment adviser to maintain and/or make available for inspection by representatives of the Commission (i) a true, accurate and current list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of any client, and (ii) copies of each notice, circular, advertisement, newspaper article, investment letter, bulletin or other communication that the investment adviser circulates or distributes, directly or indirectly, to 10 or more persons (other than persons connected with such investment adviser); and
c. Section 207 of the Advisers Act, which provides that it is unlawful to make any untrue statement of material fact in reports filed with the Commission under Section 203 or 204 of the Advisers Act.
9. Based on the above-described conduct, Curtis Townsend willfully violated Section 207 of the Advisers Act and willfully aided and abetted and caused Tiffany's violations of Sections 204, 206(1), 206(2) and 206(4) of the Advisers Act and Rules 204-2(a)(8), 204-2(a)(11) and 206(4)-1(a)(5) thereunder.
III.
On the basis of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Tiffany and Curtis Townsend and impose the sanctions specified therein.
Accordingly, IT IS HEREBY ORDERED that:
1. Tiffany and Curtis Townsend shall cease and desist from committing or causing any violation and any future violation of Sections 204, 206(1), 206(2), 206(4) and 207 of the Advisers Act and Rules 204-2(a)(8), 204-2(a)(11) and 206(4)-1(a)(5) thereunder;
2. Tiffany and Curtis Townsend are censu red;
3. Tiffany and Curtis Townsend shall together pay a civil penalty in the amount of $40,000 to be paid to the United States Treasury within 30 days of the entry of the Order. Such payment shall be: (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop 0-3, Alexandria, VA 22312; and (d) submitted under cover letter which identifies Tiffany and Curtis Townsend as Respondents in these proceedings, and the Commission's file number in these proceedings, a copy of which cover letter and money order or check shall be simultaneously sent to Ronald C. Long, Securities and Exchange Commission, The Curtis Center, Suite 1120E., 601 Walnut St., Philadelphia, PA 19106.
4. Tiffany shall comply with the following undertakings:
a. Tiffany shall retain, within 30 days of the entry of this Order, the services of a consultant who is not unacceptable to the staff of the Commission. Such consultant shall be retained by Tiffany, and his or her compensation and expenses shall be borne exclusively by Tiffany. Tiffany undertakes to arrange for the consultant to review Tiffany's methods of collecting, recording, and reporting information regarding its assets under management and number of clients and to make any recommendations concerning Tiffany's compliance policies and procedures that he or she deems appropriate to ensure that all such reported information is truthful and accurate.
b. No later than ten days following the date of the consultant's engagement, Tiffany shall provide to the Commission staff a copy of an engagement letter detailing the consultant's responsibilities pursuant to sub-paragraph 4.a. above.
c. Tiffany shall arrange for the consultant to issue a report within 90 days of the date of engagement setting forth in detail the nature and scope of the review conducted, the consultant's conclusions, and any recommendations concerning Tiffany's policies and procedures.
d. Tiffany shall take all necessary and appropriate steps to adopt and to implement all recommendations of the consultant.
e. Tiffany shall compile a compliance manual in accordance with recommendations made by the consultant. Tiffany undertakes to make available copies of the compliance manual to its employees and familiarize them with the policies and procedures set forth in this compliance manual. In addition, Tiffany undertakes to make available at Tiffany's offices for inspection by the Commission's staff, a copy of the Tiffany compliance manual.
f. Tiffany shall arrange for the consultant to conduct a follow-up review no later than 90 days after the date the review report was issued to determine whether all recommendations have been implemented. Tiffany undertakes to arrange for the consultant to provide to the staff of the Commission's Philadelphia District Office, no later than 30 days from the date of such follow-up review, a written report stating that the follow-up review has been completed and whether the recommendations have been implemented.
g. Tiffany shall mail a copy of this Order, together with a cover letter, in a form acceptable to the staff of the Commission, to each of its existing clients by certified mail, return receipt requested, within 30 days from the date of this Order. From the effective date of this Order until the expiration of 12 months, Tiffany shall provide a copy of this Order to all prospective investment advisory 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). Also, within 30 days from the date of this Order, Tiffany shall execute and deliver to the staff of the Commission's Philadelphia District Office an affidavit that it has provided this Order to its existing clients in accordance with this Order's terms. Finally, within 13 months from the date of this Order, Tiffany shall execute and deliver to the staff of the Commission's Philadelphia District Office an affidavit that it has provided this Order to its prospective clients in accordance with this Order's terms.
By the Commission.
Jonathan G. Katz
Secretary
http://www.sec.gov/litigation/admin/ia-1988.htm
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