UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING 

File No. 3-19494

In the Matter of

HCR Wealth Advisors

Respondent.

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PLAN OF DISTRIBUTION

I. Overview 

1. Purpose. The Division of Enforcement (“Division”) has prepared this plan of 

distribution (the “Plan”) pursuant to Rule 1101 of the Commission’s Rules on Fair Fund and 

Disgorgement Plans (the “Commission’s Rules”), 17 C.F.R. § 201.1101. The Plan provides for 

the distribution of the civil money penalty paid by HCR Wealth Advisors (“HCR” or the 

“Respondent”) in the captioned administrative proceeding. As described in more detail below, 

this Plan seeks to compensate the one remaining harmed investor for losses sustained as a result 

of the Respondent’s conduct, plus reasonable interest.

2. Background. On September 23, 2019, the Commission issued an Order Instituting 

Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and 203(k) of the 

Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a 

Cease-and-Desist Order (the “Order”)1against the Respondent. In the Order, the Commission 

found that HCR failed to reasonably supervise Jeremy Joseph Drake (“Drake”), formerly an 

investment adviser representative of HCR, and failed to implement reasonable compliancerelated policies and procedures in response to red flags about Drake’s handling of client 

accounts. From 2012 to July 2016, Drake defrauded two HCR clients, a married couple, out of 

approximately $1.2 million in management fees, approximately $900,000 of which Drake 

received as incentive-based compensation from HCR. During the same period, Drake

misappropriated over $200,000 from the accounts of four HCR clients, including the married 

couple and two other individuals, to support a struggling restaurant in which Drake held a 

minority ownership interest.

The Commission ordered the Respondent to pay a civil money penalty of $220,000 to the 

Commission. The Order provided that the Commission may distribute the civil money penalties

1 Advisers Act Rel. No. 5361 (Sept. 23, 2019).
if, in its discretion, the Commission orders the establishment of a Fair Fund pursuant to 15 

U.S.C. § 7246, Section 308(a) of the Sarbanes-Oxley Act of 2002.

The Respondent has paid a total of $220,000.00 pursuant to the Order. 

Prior to entry of the Order, HCR paid the married couple $300,000. Drake also paid the 

married couple $600,000 in partial satisfaction of a criminal restitution order entered against 

him. Drake additionally reimbursed the third client from the restaurant account that he 

controlled. In connection with the issuance of the Order, Respondent voluntarily undertook to 

pay the married couple an additional $328,912.20, which fully compensated them for the $1.2 

million in losses resulting from Drake’s management-fee fraud. The fourth individual, who was 

defrauded on June 18, 2014 (“Relevant Date”) when Drake transferred $100,000 from her 

account to the restaurant’s account, remains uncompensated.

 

On December 2, 2021, the Commission issued an order establishing a Fair Fund (the 

“Fair Fund”), pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the civil money 

penalty paid by HCR can be distributed to the remaining harmed investor.2

The Fair Fund is currently deposited in a Commission-designated account at the United 

States Department of the Treasury. Other than potential interest income from any investment, the 

Commission does not anticipate that the Fair Fund will receive additional funds. If any additional 

funds are received, those funds will be sent to the U.S. Treasury. 

3. Jurisdiction and Control. The assets of the Fair Fund are subject to the continuing 

jurisdiction and control of the Commission. The Plan is approved by the Commission, and the 

Commission retains jurisdiction over its implementation. 

II. Administration of the Plan

4. Costs. All costs of administering the Fair Fund, including taxes, fees, and 

expenses of administration (“Costs”) shall be paid by the Fair Fund, first from the interest earned 

on the Fair Fund, and if the interest is not sufficient, from the corpus of the Fair Fund. 

5. Fund Administrator. Nancy Chase Burton will serve as the fund administrator for 

the Fair Fund (the “Fund Administrator”). As a Commission employee, the Fund Administrator 

shall receive no compensation, other than her regular salary as a Commission employee, for her 

services in administering the Fair Fund. In accordance with Rule 1105(c) of the Commission’s 

Rules,3no bond is required since the Fund Administrator is a Commission employee. 

The Fund Administrator will be responsible for, among other things: overseeing the 

administration of the Fair Fund, obtaining accurate mailing information for the Harmed Investor

(as defined below), preparing accountings, cooperating with the Tax Administrator in providing 

the information necessary to accomplish income tax compliance, and distributing money from 

the Fair Fund in accordance with the Plan. 

2

 Order Establishing a Fair Fund, Exchange Act Rel. No. 93706 (Dec. 2, 2021).

3 17 C.F.R. § 201.1105(c).
6. Tax Administrator. On August 31, 2022, the Division, pursuant to delegated 

authority, appointed Miller Kaplan Arase LLP as the tax administrator (the “Tax Administrator”) 

of the Fair Fund.

4

 The Tax Administrator will be compensated for all reasonable fees and 

expenses from the Fair Fund in accordance with its 2022-2024 Letter Agreement with the 

Commission.

5

7. Qualified Settlement Fund. The Fair Fund constitutes a Qualified Settlement Fund 

(“QSF”) under Section 468B(g) of the Internal Revenue Code, 26 U.S.C. § 468B(g), and related 

regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. The Tax Administrator is the 

administrator of such QSF for purposes of Treas. Reg. § 1.468B-2(k)(3)(I) and shall satisfy the 

tax-related administrative requirements imposed by Treas. Reg. § 1.468B-2, including, but not 

limited to: obtaining a taxpayer identification number; requesting funds necessary for the timely 

payment of all applicable taxes, the payment of taxes for which the Tax Administrator has 

received funds, and the filing of applicable returns; and fulfilling any information reporting or 

withholding requirements imposed on distributions from the Fair Fund.

III. Plan Procedures 

8. No Claims Process. Based on information obtained by the Commission staff 

during its investigation and the review and analysis of applicable records, the Commission staff 

has reasonably concluded that it has all records necessary to determine and calculate harm. As a 

result, the Fair Fund is not being distributed according to a claims-made process, so procedures 

for making and approving claims in accordance with Rule 1101(b)(4) of the Commission’s 

Rules, 17 C.F.R. § 201.1101(b)(4), are not applicable. 

9. Specification of Harmed Investors. Persons able to receive a payment pursuant to 

this Plan are limited to only those persons who were investment advisory clients of Drake, and 

who suffered a loss amount as a result of the conduct described in the Order and have not been 

compensated for their loss (“Harmed Investors”). The Plan seeks to compensate a single 

Harmed Investor for the full harm suffered due to the misappropriation of funds by Drake. Based 

on information obtained during the Commission’s investigation and in accordance with the 

methodology for determining harm in paragraph 10, the Commission staff have identified one (1) 

Harmed Investor6 who suffered a loss and has not been compensated for the loss.

 

10. Determining Distribution Amount. It is anticipated that there will be one 

distribution. The Harmed Investor’s loss is the total amount of funds misappropriated minus any 

recoveries (“Net Loss”). The Fair Fund, plus interest, less Costs (the “Net Available Fair Fund”) 

exceeds the Net Loss suffered by the Harmed Investor. Accordingly, the Harmed Investor will 

receive full reimbursement of its Net Loss, plus reasonable interest calculated using the Short4

 Order Appointing Tax Administrator, Exchange Act Rel. No. 95641 (Aug. 31, 2022).

5

 See Omnibus Order Directing the Engagement of Two Tax Administrators for Appointment on a Case-by-Case 

Basis in Administrative Proceedings that Establish Distribution Funds, Exchange Act Rel. No. 94845 (May 4, 2022).

6

 The Harmed Investor identified by Commission staff is now deceased. Distribution to this investor will be made to 

the Estate of the Harmed Investor (the “Estate”) and all communications will be directed to the representative of the 

Estate.
term Applicable Federal Rate plus three percent (3%), compounded quarterly from the Relevant 

Date through the approximate date of the disbursement of the funds.

In the view of the Commission staff and the Fund Administrator, this constitutes a fair 

and reasonable disposition of the Fair Fund to compensate the Harmed Investor for its harm. 

12. Plan Notice and Harmed Investor’s Obligation with Respect to the Plan Notice. 

Within thirty (30) days of Commission approval of the Plan, the Fund Administrator will send 

to the representative of the Estate via electronic mail a notice (the “Plan Notice”) regarding the 

Commission’s approval of the Plan.

The Plan Notice will include a link to the approved Plan posted on the Commission’s 

website and a copy of the Plan; the calculated Net Loss for the Harmed Investor; and specify all 

the information and documentation required to be returned to the Fund Administrator in order to 

receive its Distribution Payment. 

13. Distribution Timing. The Fund Administrator will use her best efforts to start the 

distribution within thirty (30) days of receipt of the Harmed Investor’s response to the Plan 

Notice described in paragraph 12 above.

14. Disbursement of the Fair Fund. The Fund Administrator will compile the payee 

information and prepare a payment file to make the disbursement. The completed payment file, 

and support, will be processed in accordance with the appropriate procedures. Pursuant to Rule 

1101(b)(6) of the Commission’s Rules, 17 C.F.R. § 201.1101(b)(6), the Fund Administrator will 

obtain an order from the Commission to disburse the Fair Fund. The Fund Administrator is 

responsible for accounting for all payments.

15. Amendments and Procedural Deadline Extensions. The Fund Administrator will 

take reasonable and appropriate steps to distribute the Net Available Fair Fund according to the 

Plan. If there are any changes needed to the Plan that are determined to be material by the 

Commission staff, Commission approval is required prior to implementation by amending the 

Plan. Immaterial changes may be made by the Fund Administrator. For good cause shown, the 

Fund Administrator may extend any of the procedural deadlines set forth in the Plan. 

16. Procedures for Disputing Net Loss. Disputes will be limited to questions 

regarding the calculation of Net Loss. Within thirty (30) days of the date of the Plan Notice, the 

Fund Administrator must receive a written communication detailing the dispute along with any 

supporting documentation. The Fund Administrator will investigate the dispute, and such 

investigation will include a review of the written dispute as well as any supporting 

documentation. Within thirty (30) days of receipt of the written dispute, the Fund Administrator 

will notify any Harmed Investor of her resolution of the dispute, which will be final. 

17. Residual and Disposition of Undistributed Funds. A residual account within the 

Fair Fund will be established for any amounts remaining after the final disbursement to the 

Harmed Investor from the Fair Fund (the “Residual”). The Residual may include, but is not 

limited to, undistributed funds, distribution checks that have not been cashed, Fair Fund tax 
refunds for overpayment or for waiver of IRS penalties. If any funds remain in the Residual 

account after completion of all distributions and the payment of all Costs, those funds shall be 

transferred to the U.S. Treasury, subject to Section 21F(g)(3) of the Securities Exchange Act of 

1934 (the “Exchange Act”), after the final accounting is approved by the Commission.

18. Accountings. When all funds have been disbursed, except for the Residual, the 

Fund Administrator will submit a final accounting pursuant to Rule 1105(f) of the 

Commission’s Rules, 17 C.F.R. § 201.1105(f), for the approval of the Commission prior to 

termination of the Fair Fund and discharge of the Fund Administrator. Since the funds are being 

held in a Commission designated account at the U.S. Treasury and the Fund Administrator is a 

Commission employee, no interim accountings will be made. 

19. Termination of the Fair Fund. Following the final disbursement from the Net 

Available Fair Fund to the Harmed Investor, the Fund Administrator will arrange for the final 

payment of all Costs and will submit a final accounting to the Commission. The Fair Fund will 

be eligible for termination and the Fund Administrator discharged after the following have 

occurred: (a) a final accounting, appearing on the standard accounting form supplied by the 

Commission staff, has been submitted by the Fund Administrator, and has been approved by the 

Commission; and (b) all Costs have been paid. Once the Commission has approved the final 

accounting, Commission staff will seek an order from the Commission authorizing: (a) the 

transfer of the Residual that is infeasible to return to investors, and any amounts returned to the 

Fair Fund in the future that is infeasible to return to investors, to the general fund of the U.S. 

Treasury, subject to Section 21F(g)(3) of the Exchange Act; (b) discharge of the Fund 

Administrator; and (c) termination of the Fair Fund.