June 25, 2009
SEC Settles Fraud Charges Against Former DVI Officers
The SEC announced that it settled a civil action in the United States District Court for the Eastern District of Pennsylvania against Steven R. Garfinkel (Garfinkel) and Michael O’Hanlon (O’Hanlon) for their participation in a financial fraud that caused the collapse of DVI, Inc. (DVI), a specialty finance company that loaned money to small healthcare service providers for the purchase of high-end medical equipment. The Commission’s complaint alleges that over a period of four years, Garfinkel, DVI’s former Chief Financial Officer, and O’Hanlon, DVI’s former Chief Executive Officer and President, used fraudulent means to conceal the company’s liquidity crisis from investors and to fraudulently obtain additional funding from its commercial lenders. Without admitting or denying the Commission’s allegations, Garfinkel and O’Hanlon consented to settle the action.
According to the Commission’s complaint, Garfinkel and O’Hanlon engaged in a fraudulent scheme to obtain additional funding from DVI’s commercial lenders by pledging collateral that did not meet the quality-related criteria specified in the loan covenants. In addition, Garfinkel and O’Hanlon manipulated paperwork to enable DVI to double pledge collateral and sent DVI’s commercial lenders false monthly reports to make it appear that there was adequate and appropriate collateral securing DVI’s lines-of-credit. Garfinkel and O’Hanlon concealed the fraudulent scheme from investors by knowingly filing false and materially misleading Commission reports and issuing false and materially misleading press releases. In furtherance of their scheme, Garfinkel and O’Hanlon also aided and abetted DVI’s filing violations by knowingly falsifying or causing others to falsify certain books and records, circumventing internal controls and misleading DVI’s auditors.
Garfinkel and O’Hanlon have agreed to the entry of a Final Judgment that permanently enjoins them from further violations of the relevant provisions of the Exchange Act and prohibits them from acting as officers or directors of a public company. Garfinkel is currently incarcerated on related criminal charges.
SEC Concludes Suprema Round-Tripping Charges
The SEC announced that on June 3, 2009, the United States District Court for the District of New Jersey entered Final Judgments against Mark Cocchiola, former CEO, president, and chairman of the board of directors of New Jersey-based Suprema Specialties, Inc. (“Suprema”), and Steven Venechanos, former CFO, secretary, and director of the company. The Commission’s complaint against Cocchiola and Venechanos alleged that they violated the antifraud and other provisions of the federal securities laws through their participation in a multi-year financial fraud orchestrated by Suprema’s management. Without admitting or denying the allegations in the complaint, Cocchiola and Venechanos each consented to the entry of final judgments imposing full injunctive relief and permanent officer and director bars. The final judgments ordered Venechanos to pay $1,484,202 in disgorgement and $732,126.45 in prejudgment interest and Cocchiola to pay $4,834,565 and prejudgment interest in the amount of $2,446,852.74, which obligations were deemed satisfied by the prior entry of restitution orders against each defendant in the parallel criminal action captioned U.S. v. Cocchiola and Venechanos, No. CR05-533-SRC.
The Commission also announced today that on June 4, 2009, the Commission brought to a close related civil injunctive proceedings against eleven other defendants whom the Commission alleged had participated in the Suprema financial fraud.
Each of the eleven above-listed individuals and entities had previously consented to the entry of judgments imposing full permanent injunctive relief and, in the case of the individuals, officer and director bars. These judgments had reserved the Commission’s right to apply to the court at a later time to determine disgorgement and civil penalties. In view of the restitution orders and other criminal sanctions subsequently imposed on these defendants in the parallel criminal case, the Commission has withdrawn its claims for additional disgorgement and civil penalties from these defendants.
As detailed in prior releases, the Commission’s complaints in this matter alleged that Suprema engaged in fraudulent “round-tripping” transactions that resulted in total misstatements of Suprema’s reported revenue of between approximately 35% and over 60% in each of the 1999, 2000 and 2001 fiscal years, and in the first quarter of fiscal year 2002. The complaints further alleged that the scheme resulted in total misstatements of Suprema’s reported accounts receivable of 60% or more in each of the 1999, 2000 and 2001 fiscal years.
FINRA Officer Testifies on Financial Literacy Initiatives
John M. Gannon, Senior Vice President, Office of Investor Education, FINRA, testified today on improving financial literacy before the Subcommittee on Financial Institutions and Consumer Credit,
Committee on Financial Services, U.S. House of Representatives.
FINRA Fines Wachovia $1.4 Million for Prospectus Delivery Failures
FINRA announced today that it fined Wachovia Securities, LLC $1.4 million for its failure to deliver prospectuses and product descriptions to customers who purchased various investment products from July 2003 through December 2004 and for related supervisory failures. FINRA found widespread deficiencies relating to the delivery of prospectuses in connection with certain classes of securities: exchange-traded funds (ETFs), collateral mortgage obligations (CMOs), auction market preferred securities, corporate debt securities, preferred stocks, mutual funds, alternative investment securities, equity syndicate initial public offerings (IPOs) and secondary purchases of equity non-syndicate initial public offerings.
FINRA's investigation showed that the firm failed to deliver the required prospectuses to customers in approximately 6,000 of approximately 22,000 transactions effected between July 2003 and December 2004. The market value of these 6,000 transactions was approximately $256 million. The firm's failures to deliver prospectuses resulted from multiple causes, including coding errors, failures by certain business units to notify the firm's operations department that a prospectus was required to be delivered, and a failure to monitor and supervise the activities of its outside vendor contracted to deliver the prospectuses. FINRA also found that Wachovia Securities had failed to have adequate supervisory systems and policies and procedures in place to ensure that customers who purchased these investment products received prospectuses.
In settling this matter, Wachovia Securities neither admitted nor denied the charges, but consented to the entry of FINRA's findings. As part of the settlement, a senior officer of the firm will certify that it has adopted and implemented systems and procedures reasonably designed to achieve compliance with federal securities laws and FINRA rules applicable to the delivery of prospectuses and product descriptions.
June 24, 2009
SEC Will Consider Discretionary Voting by Brokers at July 1 Meeting
The SEC has several important issues on its July 1 meeting agenda:
Item 1: The Commission will consider whether to propose amendments to the proxy rules under the Securities Exchange Act of 1934 to set forth requirements for U.S. registrants that have received financial assistance under the Troubled Asset Relief Program and that are required, pursuant to Section 111(e) of the Emergency Economic Stabilization Act of 2008, to include an advisory shareholder vote on executive compensation.
Item 2: The Commission will consider whether to approve the proposed rule change, as modified by Amendment No. 4, filed by the New York Stock Exchange, Inc. to amend NYSE Rule 452 and corresponding Listed Company Manual Section 402.08 to eliminate broker discretionary voting for the election of directors, except for companies registered under the Investment Company Act of 1940, and to codify two previously published interpretations that do not permit broker discretionary voting for material amendments to investment advisory contracts with an investment company.
Item 3: The Commission will consider whether to propose amendments to rules under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 to enhance the disclosures that registrants are required to make about compensation and other corporate governance matters, and to clarify certain of the rules governing proxy solicitations.
SEC Proposes Changes to Money Market Funds
The SEC today voted unanimously to propose rule amendments designed to significantly strengthen the regulatory framework for money market funds to increase their resilience to economic stresses and reduce the risks of runs on the funds. The SEC is seeking public comment on the proposals, which would require money market funds to maintain a portion of their portfolios in highly liquid investments, reduce their exposure to long-term debt, and limit their investments to only the highest quality portfolio securities. The proposals also would require the monthly reporting of portfolio holdings, and allow the suspension of redemptions if a fund "breaks the buck" to allow for the orderly liquidation of fund assets.
The proposed amendments would, among other things:
- Require that money market funds have certain minimum percentages of their assets in cash or securities that can be readily converted to cash, to pay redeeming investors.
- Shorten the weighted average maturity limits for money market fund portfolios (from 90 days to 60 days).
- Limit money market funds to investing in only the highest quality securities (i.e., eliminate their ability to invest in so-called "Second Tier" securities).
- Require funds to stress test fund portfolios periodically to determine whether the fund can withstand market turbulence.
The proposals also would:
- Require money market funds to report their portfolio holdings monthly to the Commission and post them on their Web sites.
- Require funds to be able to process purchases and redemptions at a price other than $1.
- Permit a money market fund that has "broken the buck" and decided to liquidate to suspend redemptions while the fund undertakes an orderly liquidation of assets.
In addition, the SEC is seeking comment on other issues related to the regulation of money market funds, including whether money market funds should, like other types of mutual funds, effect shareholder transactions at the market-based net asset value (i.e., whether they should have "floating" rather than stabilized net asset values), and whether to require that funds satisfy redemption requests in excess of a certain size through in-kind redemptions. The Commission may propose further amendments after it considers the comments it receives on these matters.
The SEC also is seeking comment on other issues, including alternatives with respect to the role of credit rating agencies in money market fund regulation.
Here is Chairman Schapiro's statement on the proposal.
June 23, 2009
Madoff Asks Court for Leniency in Sentencing
Bernard Madoff, in a letter from his lawyer to the court, asks for leniency in sentencing, as little as twelve years. His lawyer stated that his estimated life expectancy is 13 years, and so twelve years would be close to a life sentence (give him a year to enjoy his freedom?). Perhaps expecting that is not likely, he argues in the alternative for a sentence of 15-20 years, arguing such a sentence would be consistent with other sentences for non-violent crimes. WSJ, Madoff Seeks Leniency in Sentence.
SEC & CFTC Divide Up Regulation over Derivatives
The Washington Post reports that the SEC and CFTC have reached agreement on the division of regulation over derivatives, with one exception. The SEC would regulate derivatives linked to securities, the CFTC would regulate all others, and the agencies are still negotiating which would regulate derivatives linked to indexes. WPost, Broad Agreement Reached on Derivative Oversight.
SEC Commissioner Paredes Speaks on Shareholder Access
SEC Commissioner Troy A. Paredes spoke at the Conference on "Shareholder Rights, the 2009 Proxy Season, and the Impact of Shareholder Activism" sponsored by the Center for Capital Markets Competitiveness, U.S. Chamber of Commerce, in Washington, D.C. on June 23, 2009. As you will recall, Commissioner Paredes voted against the SEC's proposal Shareholder Access reforms last month. Here is an excerpt of his remarks:
The proposal, especially proposed Rule 14a-11 dictating a direct right of access to the company's proxy materials, encroaches far too much on internal corporate affairs, the traditional domain of state corporate law, and in doing so, denies each corporation the flexibility needed to adapt its governance practices to its distinct qualities and circumstances.
The whole of the Commission's access proposal is about far more than the driving goal of the '34 Act to empower investors by putting information in their hands. The proposal reaches too far past the point of being about disclosure or even about the voting process. Rather, the essence of the proposal is to realign corporate control at the federal level, upsetting the longstanding federalism balance in the area of corporate governance. The mandatory quality of Rule 14a-11 — particularly when one recognizes that the proposal allows a firm to adopt a more generous access regime but not one with more restrictions — belies that the rule is about disclosure or process as compared to achieving a particular substantive outcome.
Money Market Fund Reform on June 24 SEC Agenda
SEC's Open Meeting Agenda for June 24, 2009
Money Market Fund Reform
Office: Division of Investment Management
The Commission will consider whether to propose amendments to rule 2a-7 and other rules under the Investment Company Act of 1940 governing the operation of money market funds.
June 22, 2009
SEC Announces Victory in Case Involving Trading in T-Bills
The SEC announced today that on June 22, 2009, a federal jury in Boston, Massachusetts, returned a verdict in its favor against Steven E. Nothern, a former Senior Vice President and manager of seven fixed income mutual funds for Massachusetts Financial Services Company ("MFS"). This action is one of several brought by the Commission arising from trading in U.S. Treasury 30-year bonds.
The Commission's complaint against Nothern alleged that Peter J. Davis, Jr., a Washington, D.C. based consultant, marketed himself to Wall Street clients by claiming special access that enabled him "to get Washington information ahead of the media," and by promising clients "the first call on investment issues they care about." Nothern, who managed seven fixed income mutual funds for MFS, was Davis' primary contact at MFS.
The complaint alleged that, since 1994, Davis had attended the Treasury Department's quarterly refunding press conferences under an explicit agreement that he would honor the news embargo that Treasury imposed until the designated public announcement time. At these press conferences, the Treasury Department announced the Federal Government's financing requirements for the coming quarter. The complaint further alleged that at the October 31, 2001, refunding press conference, Treasury Department officials announced three times that the information being made available was embargoed until 10:00 a.m. The press conference ended at approximately 9:25 a.m. Then, Davis, despite the officials' warnings, and in violation of his prior explicit agreement to abide by the embargo, placed a series of cell phone calls to his clients, including Nothern, and told Nothern that the Treasury Department was suspending future long bond issuances. The complaint charged that Nothern knew, from a voice mail which Davis left him and which he listened to, that Davis had learned about the suspension of 30-year bond issuances directly from the Treasury Department, and that the news was embargoed until a scheduled 10:00 a.m. press announcement.
According to the complaint, after Nothern heard the news of the Treasury's decision to cease issuance of the long bond from Davis on the morning of October 31, 2001, and before the news became public, Nothern and other MFS portfolio managers that he tipped bought $65 million in par value of 30-year bonds for funds that they managed, generating approximately $3.1 million in illegal profits.
After deliberating for three hours, the jury returned a verdict finding that Nothern violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint seeks as relief a permanent injunction, disgorgement with pre-judgment interest, and a civil money penalty. The court will determine the appropriate remedies against Nothern at a later date.
Schapiro Testifies before Senate on OTC Derivatives
Chairman Mary L. Schapiro, U.S. Securities and Exchange Commission, presented Testimony Concerning Regulation of Over-The-Counter Derivatives Before the Subcommittee on Securities, Insurance, and Investment, Committee on Banking, Housing and Urban Affairs, United States Senate, on June 22, 2009.
Former American Italian Pasta Company Chairman Settles SEC Charges
The SEC settled charges against Horst W. Schroeder, former chairman of the board of directors of Kansas-City based American Italian Pasta Company ("AIPC") that he signed SEC filings that he should have known contained material misstatements.
According to the Commission's complaint, from its fiscal year 2002 through the second quarter of its fiscal year 2004, AIPC inflated its reported income and earnings per share. As alleged in the complaint, during AIPC's 2004 fiscal year, Schroeder was provided with information showing that a $3.4 million receivable recorded at the end of AIPC's 2003 fiscal year was not valid and collectible. The Commission's complaint alleges that in May 2004, Schroeder signed AIPC's Form S-8 registration, which specifically incorporated by reference AIPC's fiscal year 2003 Form 10-K, which Schroeder also signed and which Schroeder should have known was materially misstated in part because of the invalid and uncollectible $3.4 million receivable.
Without admitting or denying the allegations in the Commission's complaint, Schroeder has consented to the entry of a final judgment enjoining him from violations Section 17(a)(3) of the Securities Act of 1933 ("Securities Act") and Rule 13b2-1 under the Securities Exchange Act of 1934 ("Exchange Act"), and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Further, Schroeder has agreed to pay a $50,000 civil penalty.
SEC & Ram Capital Resources Settle Unregistered Broker Dealer Charges
On June 19, the SEC instituted a settled administrative proceeding charging Ram Capital Resources, LLC (Ram) and its two principals - Michael E. Fein and Stephen E. Saltzstein - with willfully violating Section 15(a) of the Securities Exchange Act of 1934 (Exchange Act). The Commission found that Michael E. Fein and Stephen E. Saltzstein, neither of whom was registered as a broker or associated with a registered broker-dealer, operated and controlled Ram as an unregistered broker-dealer while serving as it principals. Specifically, from 2001 through early 2005, Ram engaged in the business of identifying, structuring, and soliciting investors -- a majority of which were hedge funds -- for PIPE offerings (an acronym for "private investments in public equities"). Ram's business model focused on identifying investment opportunities within the PIPEs market and soliciting hedge funds and other investors to invest in these PIPE offerings. Ram also played a significant role in structuring, and negotiating the terms of, the PIPE offerings.
The investors compensated Ram by paying to it a certain percentage of the gross amount invested and, in most instances, allocated to Ram a certain percentage of any warrants they received as part of their investment in the PIPE offerings. Fein's and Saltzstein's compensation was directly derived from the fees Ram earned.
Under the terms of the settlement, Ram, Fein, and Saltzstein, without admitting or denying the Commission's findings, consented to the issuance of an administrative order requiring each of them to cease and desist from committing or causing any violations and any future violations of Section 15(a) of the Exchange Act. Ram also consented to the issuance of an administrative order imposing a censure. In addition, Fein and Saltzstein consented to the issuance of an administrative order (i) requiring each to pay disgorgement of $364,721, plus prejudgment interest of $83,657; (ii) requiring Fein and Saltzstein to pay civil penalties of $90,000 and $60,000, respectively; and (iii) suspending Fein and Saltzstein from association with any broker or dealer for a period of twelve and six months, respectively. (Rel. 34-60149; File No. 3-13524)
SEC Obtains Emergency Asset Freeze Against Broker Charged with Attempting to Move Assets Offshore
On June 17, 2009, a federal district court in Manhattan granted the SEC’s application for an emergency asset freeze against Guillermo David Clamens, FTC Capital Markets, Inc., a registered broker-dealer he controls, (“FTC”), and FTC Emerging Markets, Inc. also d/b/a/ FTC Group, halting Clamens’ attempts to move assets offshore. The Court scheduled a hearing on the matter later in the month.
On May 20, 2009, the Commission filed a civil injunctive action charging Clamens, FTC, Emerging Markets, and Lina Lopez, an FTC employee, with a fraudulent ponzi-like scheme to engage in tens of millions of dollars of unauthorized securities trading in the accounts of two FTC customers. Clamens and Lopez are alleged to have engaged in the unauthorized activity in part to conceal their prior fraudulent sale of $50 million in non-existent notes to a Venezuelan bank. When the fictitious notes held by the Venezuelan bank purportedly came due in August 2008, Clamens misappropriated $50 million from FTC’s customers to fund the redemption. The complaint further alleges that in order to conceal the unauthorized activity, Clamens and Lopez provided the customers with fake account statements.
SEC Charges Madoff Solicitors and Feeder with Fraud
The SEC charged a New York-based broker-dealer and four individuals with securities fraud, alleging that they collectively raised billions of dollars from investors for Bernard L. Madoff's Ponzi scheme. In a complaint filed in U.S. District Court for the Southern District of New York, the SEC charged Cohmad Securities Corporation as well as its chairman Maurice J. Cohn, chief operating officer Marcia B. Cohn, and registered representative Robert M. Jaffe for actively marketing investment opportunities with Madoff while knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud. In a separate complaint filed in the same court, the SEC charged California-based investment adviser Stanley Chais, who oversaw three funds that invested all of their assets with Madoff. When the Ponzi scheme collapsed, Chais investors' accounts were valued at nearly $1 billion.
The SEC previously charged Madoff and Bernard L. Madoff Investment Securities LLC (BMIS) as well as their auditors with committing securities fraud through a Ponzi scheme perpetrated on advisory and brokerage customers of BMIS.
The Cohmad Complaint
The SEC's complaint against the Cohmad defendants alleges that while bringing investors to Madoff, they ignored and even participated in many suspicious practices that clearly indicated Madoff was engaged in fraud. For example, the SEC's complaint alleges that the Cohns and Cohmad filed false Forms BD and FOCUS reports that concealed Cohmad's primary business of bringing in investors for BMIS. This referral business comprised as much as 90 percent of Cohmad's revenue in some years, brought in more than 800 accounts, and billions of dollars into BMIS' advisory business, for which BMIS paid them more than $100 million.
The SEC's complaint also alleges that the compensation arrangement between BMIS and Cohmad indicated fraudulent conduct at BMIS. Cohmad was paid an annual percentage of the funds its representatives (except Jaffe) brought into BMIS offset by any withdrawals from those investor accounts. This compensation arrangement indicated to Cohmad and the Cohns that BMIS was not providing any real returns to investors. For example, where the client's principal investment had been $10,000, Cohmad stopped receiving fees if a client withdrew $15,000 from an account, even if under BMIS' management the account had purportedly grown to $100,000. In Cohmad's internal records, such an account was designated with a negative $5,000 number.
The SEC alleges that Jaffe also participated in Madoff's fraud by soliciting investors and bringing more than $1 billion into BMIS. The SEC's complaint alleges, among other things, that Madoff compensated Jaffe with outsized returns in Jaffe's personal accounts that he knew, or was reckless in not knowing, were manufactured by BMIS employees entering fictitious, backdated trades onto trade confirmations and account statements for his personal accounts at BMIS.
The Chais Complaint
The SEC's complaint alleges that Chais committed fraud by misrepresenting his role in managing the funds' assets and for distributing account statements that he should have known were false.
According to the SEC's complaint, for the last 40 years, Chais has held himself out as an investing wizard who managed hundreds of millions of dollars of investor funds in three partnerships, the Lambeth, Popham and Brighton Companies (the Funds). Chais made a number of misrepresentations over the years to the Funds' investors indicating that he formulated and executed the Funds' trading strategy. In reality, Chais was an unsophisticated investor who did nothing more than turn all of the Funds' assets over to Madoff, while charging the Funds more than $250 million in fees for his purported "services." Although Madoff managed all of the Funds' assets, many of the Funds' investors had never heard of Madoff before the collapse of his Ponzi scheme, and had not known that Chais invested with Madoff until Chais informed them after Madoff's arrest.
The SEC also alleges that Chais ignored red flags indicating that Madoff's reported returns were false. For example, Chais told Madoff that Chais did not want there to be any losses on any of the Funds' trades. Madoff complied with Chais's request, and from 1999 to 2008, despite reportedly executing thousands of trades on behalf of the Funds, Madoff did not report a loss on a single equities trade. Chais however, with the assistance of his accountant, prepared account statements for the Funds' investors based upon the Madoff statements, and continued to distribute them to the Funds' investors even though he should have known they were false.
According to the SEC's complaint, Chais also opened and exercised control over approximately 60 other accounts at Madoff's firm on behalf of his family members and related entities. Taking all of these accounts collectively, between 1995 and 2008, Chais and his family members and related entities withdrew more than $500 million more than they actually invested with Madoff.
Both SEC's complaints seek injunctions, financial penalties and court orders requiring Cohmad, the Cohns, Jaffe and Chais to disgorge their ill-gotten gains.
June 21, 2009
Orcutt on 404 Certification for Smaller Reporting Companies
The Case Against Exempting Smaller Reporting Companies from Sarbanes-Oxley Section 404: Why Market-Based Solutions are Likely to Harm Ordinary Investors, by John L. Orcutt, Franklin Pierce Law Center, was recently posted on SSRN. Here is the abstract:
Section 404 is arguably the most controversial provision of Sarbanes-Oxley (“SOX”). The controversy focuses on whether Section 404’s substantial compliance costs exceed the statute’s benefits, with no consensus on Section 404’s cost-effectiveness. If Section 404 turns out to be cost-ineffective, the companies that are most threatened are smaller companies, as cost-ineffective regulations tend to disproportionately harm smaller companies. This Article considers whether Congress and the SEC should exempt smaller reporting companies from Section 404 compliance, as that would allow for a market-based resolution to the uncertain value of Section 404 for smaller reporting companies. Smaller reporting companies would be relieved from mandatory compliance, but would retain the ability to voluntarily choose to comply with Section 404 if they found it to be cost-effective. Rather than debate the cost-effectiveness of Section 404, Section 404 relief proposals appear to provide a definitive mechanism for answering the cost-benefit question by allowing investors to express their demand (or lack of demand) for the services provided by Section 404 through the price they pay for securities.
While empowering smaller reporting companies with such market-based regulatory solutions might seem appealing at first glance, this Article explains why structural factors within the public securities markets for smaller reporting companies will prevent such market-based proposals from accurately determining the net effect of Section 404. Instead, exempting smaller reporting companies from Section 404 is likely to significantly increase the information asymmetry between smaller reporting companies and their investors. This outcome would be particularly problematic since ordinary shareholders (rather than institutional shareholders) are the predominant external shareholders for smaller reporting companies and have historically demonstrated themselves to be vulnerable to just this type of information asymmetry. This Article constructs a model for analyzing the probable impact of granting Section 404 relief to smaller reporting companies and concludes that making Section 404 voluntary for smaller reporting companies would almost certainly guarantee an insufficient amount of investment by those companies in their “internal control over financial reporting” (“ICFR”), with the cost for that insufficient dedication of resources to ICFR being borne primarily and unknowingly by unsophisticated ordinary investors.