Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, April 20, 2009

SEC Obtains TRO & Freeze Against Philadelphia Investment Adviser

On April 17, 2009, the SEC charged a Philadelphia-area investment adviser and its principal with misappropriating millions of dollars in client assets and obtained an emergency court order freezing their assets. According to the Commission's complaint, since mid-2005 Donald Anthony Walker Young, of Coatesville, Pennsylvania, through Acorn Capital Management, LLC ("Acorn Capital"), a registered investment adviser controlled by Young, has misappropriated more than $23 million from investors buying into limited partnership interests in Acorn II, L.P., ("Acorn LP") which invested in publicly traded securities. Young used investor funds to pay other investors and directly stole some of the money to purchase a vacation home in Palm Beach, Florida, and pay personal expenses related to horse ownership and racing, construction, boats, limousines, chartered aircraft and other luxuries.  According to the Commission's complaint, the defendants refused to provide Commission staff with client files, account statements, general ledgers and other documents that are statutorily required to be maintained and produced by registered investment advisers.

The Honorable John R. Padova, U.S. District Judge for the Eastern District of Pennsylvania, has issued an order granting a temporary restraining order, freezing assets, and imposing other emergency relief. The Court also froze the assets of three named relief defendants — Oak Grove Partners, L.P., W. B. Dixon Stroud, Jr. and Neely Young, Young's wife.  The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 204, 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 204-2 and 206(4)-8 thereunder. In addition to the emergency relief already obtained, the complaint seeks disgorgement of the defendants' ill-gotten gains plus pre-judgment interest, civil penalties, and permanent injunctions barring future violations of the charged provisions of the federal securities laws. The complaint also seeks disgorgement from the relief defendants.


 

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