UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Investment Advisers Act of 1940 Release No. 1775 / November 25, 1998 Administrative Proceedings File No. 3-9782 ____________________________________ : ORDER INSTITUTING PUBLIC In the Matter of : ADMINISTRATIVE PROCEEDINGS, : MAKING FINDINGS, IMPOSING : SANCTIONS, AND ISSUING Robert J. Smith : CEASE-AND-DESIST ORDER : : ____________________________________: I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be instituted pursuant to Sections 203(e), (f), and (k) of the Investment Advisers Act of 1940 ("Advisers Act") against Robert J. Smith ("Smith"). II. In anticipation of the institution of this administrative proceeding, Smith has submitted an Offer of Settlement ("Offer") which the Commission, after due consideration, has determined is in the public interest to accept. Solely for the purpose of this proceeding, and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, Smith, without admitting or denying the findings contained herein, except admitting the jurisdiction of the Commission over him and the subject matter of this proceeding, and the findings set forth in Section IV.A. below, consents to the issuance of this Order Instituting Public Administrative Proceedings, Making Findings, Imposing Sanctions, and Issuing Cease-and-Desist Order ("Order") and the entry of the findings and the imposition of sanctions set forth below. III. Accordingly, IT IS ORDERED that public administrative proceedings pursuant to Sections 203(e), (f), and (k) of the Advisers Act be, and hereby are, instituted. IV. On the basis of this Order and the Offer, the Commission finds that: A. Smith, who maintains office space in New York, New York, has been acting as an investment adviser since October 1977 and was registered as an investment adviser pursuant to Section 203(c) of the Advisers Act from October 6, 1995 to July 8, 1997. B. Smith does business as the Center for Performance Investing. C. From October 1977 to the present, Smith has made use of the mails in connection with his investment advisory business. D. For the entire period between March 18, 1991 and October 6, 1995, Smith managed the assets of fifteen or more clients. E. From in or around March 18, 1991 through October 6, 1995, Smith entered into contracts with thirteen clients that provided for compensation to Smith on the basis of a share of capital gains upon or capital appreciation of the funds of such clients when those clients did not have either assets with a market value of at least $500,000 under the management of Smith or a net worth of at least $1,000,000. F. The improper performance based fees charged by Smith exceeded by $34,865.00 annual fees equal to two percent of the market value of the assets under management by Smith, which is the amount Smith would otherwise have charged such clients. G. From October 1977 to the present, Smith has directed all of his advisory clients' brokerage business to a registered representative at a registered broker-dealer ("Registered Representative"). H. From 1982 through November 30, 1995, the Registered Representative paid approximately $68,000.00 in rent for Smith's office space and approximately $2,819.00 in fees for a Quotrek machine, both used by Smith in his advisory business. Smith failed to disclose these payments to his advisory clients and failed to disclose these arrangements in his application on Form ADV for registration as an investment adviser. I. By engaging in the conduct described above, Smith willfully violated Sections 203(a), 205(a)(1), 206(1), 206(2), and 207 of the Advisers Act. V. In view of the foregoing, the Commission finds it is in the public interest to accept Smith's Offer of Settlement. Accordingly, it is HEREBY ORDERED that Smith cease and desist from committing or causing any violation and any future violation of Sections 203(a), 205(a)(1), 206(1), 206(2), and 207 of the Advisers Act. It is FURTHER ORDERED that Smith is censured. It is FURTHER ORDERED that Smith shall, within thirty (30) days of the entry of this Order, pay $51,653.73, which shall represent disgorgement of $34,865.00 plus prejudgment interest of $16,788.73. 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, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Robert J. Smith as the Respondent and the number of this administrative proceeding, and specifying that the payment is disgorgement and prejudgment interest. A copy of the cover letter and payment shall be simultaneously sent to Eric M. Schmidt, Assistant Regional Director, Securities and Exchange Commission, 7 World Trade Center, 13th Floor, New York, New York 10048. The disgorgement and prejudgment interest paid by Smith shall be held by the Secretary, to be utilized for payment to persons eligible to receive such funds pursuant to a plan of distribution, which shall be submitted by the Division of Enforcement within 60 days from the date of the payment by Smith. In the event that all or any portion of these funds remain after adjudication of any claims and disbursements of any funds, the remainder shall be disbursed to the United States Treasury. In no event shall any portion of these funds be returned to Smith or his agents, successors, or assigns. It is FURTHER ORDERED that Smith shall, within thirty (30) days of the entry of this Order, pay a civil money penalty in the amount of $15,000 to the United States Treasury. 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, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Robert J. Smith as the Respondent and the number of this administrative proceeding, and specifying that the payment is a civil money penalty. A copy of the cover letter and payment shall be simultaneously sent to Eric M. Schmidt, Assistant Regional Director, Northeast Regional Office, Securities and Exchange Commission, 7 World Trade Center, 13th Floor, New York, New York 10048; It is FURTHER ORDERED that Smith comply with his undertakings to: A. Provide a notice, within thirty (30) days of the entry of this Order, disclosing to all of his current clients the material terms of this Order, in a form acceptable to the staff of the Commission; B. File an affidavit with the Commission's staff, within forty-five (45) days of the entry of this Order, addressed to the attention of Eric M. Schmidt, Assistant Regional Director, Northeast Regional Office, Securities and Exchange Commission, 7 World Trade Center, 13th Floor, New York, New York 10048, setting forth the details of his compliance with his undertakings set forth in subparagraph A. above; C. Provide a notice, for a period of one (1) year from the entry of this Order, disclosing to all of his prospective clients the material terms of this Order, in a form acceptable to the staff of the Commission; and D. File an affidavit with the Commission's staff, within one (1) year and fifteen (15) days from the entry of this Order, certifying his compliance with subparagraph C. above. By the Commission. Jonathan G. Katz Secretary