like permanently from the investment advisory business imposes very substantial fines and very substantial fines against the firm and this all relates into a substantial part relating to work called the global investment performance standards are gaps but it really drills down to what i'll talk about are will call eight advertisements three of those advertisements were run in the fall of two thousand and eight at and i think this is important in the courts analysis of the eight advertisements there was no charge by the commission that the ads in and of themselves were deceptive under section two hundred six there is no claim that the numbers within the ad were guarding performance weren't in an accurate and misleading or deceptive the problem according to the commission with the ads was the fact that in a footnote the firm said we claim compliance with the gap standards and the commission's argument was is that when you make that statement it now triggers the gibs advertising guidelines which will require a certain format of performance to be put into the advertisement now and we have contended as to these six advertisements from a materiality standpoint we don't think that the story stops on the publication of the advertisement because what the evidence was shown for the commission was that after the advertisement and the advertisement said specifically if you want to learn more call us if you want you can go to our website and the evidence showed if you went to the website the information that was required by the advertising guidelines was in fact available and accessible on the firm's website you could as i understand the argument from the other side it is you know there are certain purchasers of investment services that don't even look at firms that are  otherwise so you've already kind of pulled them in where they would not have otherwise been exactly i think the commission takes the position you know this ad was like a bait and switch but if you really said it so much better than i did that well it was the words that they elected to use but if you take a look at the firm this being a bait and switch here's what you have to think about it and you raised a very good point to become a gibbs compliance firm which  very few firms become you have to go through a vetting process where they come in and they rake and outside verify or comes in and examines your composites your performance your policies your procedures and the firm was it was found to be gibbs compliant it's actually gibbs compliant as i stand here today the through the entire period now if a firm is taking those kind of steps and knowing that gaps requires any prospective client has to be given a gibbs compliant for taishan which is what the advertising guidelines so if you made a decision to become transparent to use the gold standard so your performance can be evaluated you  what substantial evidence we we all know that part asked to support what the commission did that if there is a legal error or a legal conclusion that is erroneous which i'll contend is materiality then the review is to know  and coupled with that any evidence that's in the record that would detract or take away from the substantial evidence the court can evaluate it seems to me that from the commission's perspective the easiest argument here is the morning star reports where you claim you were not under assy sea investigation now under substantial evidence it seems that we face a very tough burden to show that fat was not imminent turly false statement yes and that's that's two that's two then you had to put the date of the charge well there weren't any charges in charges was the word investigation it says are you the subject of any investigation but then it wanted to know the date of the chart i don't have the exhibit reference but it says the date of the charge and the whole point about show who was responsible for this who testified who said well we didn't have a charge so i couldn't answer it but once the charge was filed we amended the morningstar report and disclosed the s e c charges so it is i said he the question is did we do that negligent or intentionally commissioner if you are hopefully i'm not mispronouncing his name but that was what was a problem to him because he kept asking himself well you know how can you answer something that you don't know and  testimony was that was the reason we didn't answer it that way but as i said that is that is that what the testimony was i didn't read bustles testimony quite the way you do in there some space between the way you're representing what he's saying and what he said i mean i don't mistake i don't want to miss characterize his testimony but i thought his testimony was he knew that the the  inquiring and doing things but he also knew that there were charges and and it was his opinion that until those charges were filed you knew you couldn't answer the question i and i know you're relying on was so the but the other eight charges are would brings in the permanent bar on max out in l a and relate to the advertisements and once again i think from a materia has stated when it did its morgan keegan case and did the analysis and went through the supreme court decisions one of the things that this court stated was inciting merchant capital was is that when you look at materiality you have to look at all of the information that is available to our reasonable hypothetical investor and our argument in this case is because the investment decision hadn't been made you'll make the investment decision until you sign up if  you now say ok what was on the buffet table for a prospective investor to look at who had looked at the at well there was testimony that we sent out a package of information the commission seems to dispute whether or not that was what was in the package of information but there's no dispute that we sent a gibbs compliant presentation to every perspective investor but the commission's position is well yeah them the information that should have been in the advertisement but because you gave it to the investor at and then pants to stay it doesn't count now to me i  this what he testified to he said the reason why he didn't go back and change the box on the morningstar foremost because whenever we got a new letter from the f c c we would have a meeting and it was downplayed as being anything significant and so the box wasn't changed on or he did he did testify to that and that's not exactly what you're saying now but in his testimony he also stated though that  advertisements it because the commission's other argument was ok well you you withheld you would tell your performance on your benchmarks in the fall of two thousand and eight as they said because and you withheld that because it would have shown or performance well the reality is is that we had evidence to introduce that look we would send off anybody inquired we use the august e mail showing that we were underperforming information on our website show that we were underperforming and if you responded to it we were also going to provide you with a gibbs compliant presentation so the question would become if you're being transparent why would you possibly withhold this information zab banalities testimony was i had previously been advertising in two thousand and seven and two thousand and eight and i was following the gibbs format but when this one came up the format or called me and said and he wasn't involved in the ad this was about szell in the marketing said it's too long and he said you want me to chop the footnote he said no don't chop the foot out and just run it and he wasn't even aware of what was in that ad until it happened at the end of the day the firm tried to be transparent and what's interesting is that when we go to the two thousand and eleven ads those three ads which were reprints well now the omitted information and  testimony was we couldn't put it in there because once it calculated the same way but the if the omitted information had been provided that would have shown that we were crushing the benchmarks and it would be no reason for us to withhold that information other than the fact we were doing a reprint of the two newsletters i'll just touch on very very briefly which are that's six print ads in the two newsletters the two newsletter the one newsletter april isn't really even talking about  is doing an uptick and showing forty percent losses the second newsletter specifically says it's not gibbs compliant and it how extensively that's how we get several of the december newsletter yes good morning may it please the court emily rosen for the securities and exchange commission the advisors act imposes fiduciary duties on registered investment advisors who investors trust to manage their money and must be  scrupulously honest in doing so indeed the supreme court has said that investment advisors are charged with the duty of utmost good faith and full and fair disclosure of all material facts as well as the obligation to apply reasonable care to avoid misleading their clients this case is about an investment adviser and its principal who lied to its fiduciary clients and prospective clients who lied about being in compliance with the industry gold standard when it wasn't who lied repeatedly with full knowledge that it was lying indeed the evidence showed that mr salmon ellie was told for the first ad she ran that they were not in compliance but he chose to run them anyways then he was told by ashland there verifiers who he pays to advise on these issues that he was not compliance and he lied and ran the newsletters and the subsequent ads anyways then he was told by the commission after nick sam again these ads were not in compliance and yet he runs the two thousand and eleven ads anyways after promising the commission that this issue would be fixed and indeed after his number two had given investigative testimony in this very matter but you know that you're an expert on these cases but my understand this record is there really born any financial losses for any investors that that are part of the evidence in this case is that right it is correct that the commission did not the division did not prove any investor losses because it was simply not required reliance is not an element of the offense but i guess what asking about is the penalty i mean is that i mean it's almost eight hundred thousand dollars right between the two and the the person and the entity in it i mean is that kind of par things here and so they made that specific determination and we set a case such as corn where there was no you know investor losses directly proven and that was not you know an impediment to a bar here so i think you know on these facts the commission found that there was no specific investor harm but there was harm to the investors at large and the commission made that specific to the investing community at large and this commission made that specific factual finding and i ask you about what i think is the weakest part of your case probably won't be the exactly what you don't want to talk about and that is the december newsletter yes so i've got it and from me and the you know the the there's what six words all numbers or investment for your reading is not gibbs compliant it was never intended to be nor can it be you know it says it again you know our report remains not gi compliant at the bottom of page these gifts titles are misleading since they don't go back prior to two thousand and one may explained in several different ways  that the the numbers that are in the newsletter are not gets compliant i just i don't see how that i mean defeats the mattoon i don't see how you went on materiality  on i mean with all of those kind of warnings sure so let me try to address your question judge martin i think it's important when you look at that december report first of all this was an argument that was considered by the commission they made detailed factual findings on this very argument and they're supported by substantial evidence i think if you look first on page three which you referenced that's where the claim of gets compliance is all numbers are gets compliance and that's a specific reference to those performance returns that are on that page there when you look at page four and they're saying this report is not gets  compliance they're talking about something else they're talking about how the timing is such that they can't make them you know gets compliant but they're not talking about the issue that was misleading here the report the returns on page three are not gets complete because they don't a claim of gets compliance but they don't have the required returns there's nothing on page four that speaks to that fundamental deficiency and there's also extensive testimony in the record from philly's that you can't have this partial claim of gets compliance if you say you know if there's it and she said it would be misleading to have this claim gets compliance on page three and on page four and that's exactly what the commission found that you can't have the benefit of claiming these performance returns or get to comply on page three and then later say something about this report is not gets compliant investors would have been confused and misled because the guidelines are very clear that you can't have partial get compliance and the commission made those specific findings based on police's testimony and the guidelines and on the facts of the report here can i just i haven't have the benefit of my colleagues wisdom about that and you know they may talk me into agreeing with you although i'm not sure i do right now it's just  in the penalties again mr zappa nelly were set out per violation and i think i believe the penalty for the december newsletter was seventy five thousand dollars  we were to decide against you on that i'm assuming that we as a court of appeals could just subtract out the seventy thousand dollars penalty assuming everything else stays in place that we were in the delivery man for that would we if it's if it's on that very specific violation it's clear it can be tied to that then i would agree that you would not need to remand in that case but then my question goes on to the company that penalty was just maximum there's still substantial evidence in the record to support that penalty even if you take out that one december two thousand i'm violation but if there's any question you know you could remand it to the commission to ensure that they would give the same penalty all right thank you there seems to be some reference on the record to ministers of an ally firing mr bhatia all in retaliation for his testimony to the commission make a specific finding on that issue and that play a role at all and either the sanction or the commission's disposition of this case the commission found that there was testimony in the record that was certainly one of the reasons that he was bashed who was fired i don't believe the commission made any finding that was the sole reason and it did not refer to that that incident in any of the penalty discussion or so it i don't believe it played a role in the penalty determination but it was a you know of fact that the commission  the outputs which is what went to clients in the morning star port said very clearly pending f c c investigations no there's no charges or anything like that and it's important to know that the record shows that bausch will knew that that's what these reports that were going to clients  pending f c c investigations no and he knew that was false you know he had from the letter from the commission and then from going with undergoing investigative testimony where the commission examiners specifically told him he was under under commission investigation so there's no misunderstanding and his judge martin accurately described his testimony he said that the read this that simple simple reason he didn't correct it is because he didn't feel that it was  if the the forms had to charges and daschle had thought of that he knew what the outputs and the outputs are what what is misleading the flannery case from the first circuit yes and that stands for the proposition that information investors could access after but the flannery case is very different from the case we have here for several reasons that we talk about first of all i think it's important to note that the nothing in the on the website or in any materials that the investors guide at any stage spoke to the affirmative misrepresentation in this case the affirmative misrepresentation that was charged in this case was that c p r was gets compliant nothing on the web site said hey we're not because it gets compliant nothing in this any after providing information center not gets compliant and so there's simply no correction or cure in the after provide information for the fundamental misrepresentation here do you disagree that the website and the materials that were sent out were gibbs compliant i believe that there are some testimony that there were gaps compliance returns on the website and that eventually at the late stage some investors got a gets compliant presentation but that's different from the information that's required by the advertising returns the gives complier presentations a separate requirement in the guidelines the advertising requirements are very specific as to what is to be provided and it is not necessarily the case that that information was provided on the website or in the gets compliant presentation and certainly not in a format that investors could easily identify that they were given missing information and that in fact they would then also have to go the additional step of realizing oh i know i missed these missing these returns and that means an investor would do due diligence and follow up on one stock of that slide whereas here you have the precise opposite situation you have an advertisement ever has which are very important in the best investment buys or scheme they're the first point of contact with investors you have an advertisement that says you know this is this is where gets compliant and that is a signal to investors that they don't have to look behind that to find these other information find these are the returns that may be buried on the website or in other materials that representation comes comes anyways he does that at a time where returns have fallen to conceal poor returns and then again he's told by ashley these these advertisements are not comply these newsletters are not compliant he runs the many ways he's told by the commission you have this problem so important to investors which again is is very different than the situation you have in flannery you just to clarify a few things that obviously the court raised it's true there were no financial losses no no no person in the public was ever harmed by these advertisements as a matter of fact  testimony that these advertisements were an absolute disaster and that they they just didn't work to bring him and he assets is this is not a world i live in and so i just i just was curious about whether these penalties were kind of in line with what you see in cases where there are no financial losses well and i was and i think the court is focusing on something that is probably appropriate which is that this is a permanent bar by this individual and there has been not one that ounce of harm to the investing public that and he didn't line his pockets with any money either did the firm and that's part of our whole contention is that this whole penalty of the permanent bar and these huge fines for when you look at the conduct in question it we just don't believe it should be warrant we conceded in our brief we conceded in our brief we knew we were gibbs compliant firm and we knew that that ultimately that the ads didn't comply those eight ads in the two newsletters but he what mr zevon now we would not concede that as i understand and that seemed to be that there seemed to be the rub here is that in despite of the fact that as one partners resigned in spite of the fact that they said you weren't gibbs compliant you by the fact as he says you weren't gibbs compliant despite the fact you say they weren't gibbs compliant he said we were and we never did anything wrong and fortunately my client is not here today a but no i mean isn't that the rub here he would never exactly did anything wrong what the rub with him was is he kept saying to himself i've complied with all of the gibbs standards i've been with get ups you'll recall in the record we started to advertise again and we started to advertise and the commission found that those advertisements that were run starting in december of two thousand and nine through two thousand and ten complied with guess now the bone of contention that came up was the reprint on those those three reprint ads and he said i couldn't make them gibbs compliant because they told me i couldn't change you know what they said in the ads and so it's so he said i was just reprinting them at you know but i know there's a point there's a point in time that but i would still suggest to the court that's why we argued there's an argument that the firm was negligent on those a politician's but not doing it intentionally but that assumes to have ticked your we've already concluded it's material thank you yeah we appreciate the presentation so it's this case