Initial Decision Release No. 1393

Administrative Proceeding

File No. 3-19145

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Matthew R. Rossi and

SJL Capital, LLC

Initial Decision

December 23, 2019

Appearances: Daniel J. Hayes and Bradley N. Lewis

for the Division of Enforcement,

Securities and Exchange Commission

Matthew R. Rossi, pro se

Before: James E. Grimes, Administrative Law Judge

This is a partially settled proceeding against Respondents Matthew R. 

Rossi and SJL Capital, LLC. The Securities and Exchange Commission found

that they violated the antifraud provisions of Section 17(a) of the Securities 

Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, subsections 

(1), (2), and (4) of Section 206 of the Investment Advisers Act of 1940, Exchange 

Act Rule 10b-5, and Advisers Act Rule 206(4)-8. Under the terms of the 

settlement, Rossi and SJL are precluded from arguing that they did not commit 

these violations and have agreed to cease-and-desist orders, associational and 

investment-companybars for Rossi, and a censure for SJL. The only remaining 

issues are whether Respondents should be ordered to pay disgorgement plus 

interest and a civil monetary penalty, and if so, in what amounts.

Introduction

The Commission instituted this proceeding under Securities Act Section 

8A, Exchange Act Section 21C, subsections (e), (f), and (k) of Advisers Act 
2

Section 203, and Section 9(b) and the Investment Company Act of 1940.1 The 

proceeding was instituted, based on Respondents’ offers of settlement, to 

determine whether they should be ordered to pay disgorgement plus interest 

and a civil monetary penalty.2 

In July 2019, I granted in part and denied in part the Division’s motion 

for summary disposition and denied Rossi’s motion for summary disposition.3

I held that Rossi and SJL must disgorge $28,935 in pre-paid performance fees

plus interest.4 I also held that although the Division had met certain 

prerequisites necessary for the imposition of third-tier monetary penalties—

conduct involving fraud, deceit, manipulation, or deliberate or reckless 

disregard of a regulatory requirement and substantial losses—it would be 

premature to assess whether the public interest supported monetary 

penalties.5 Finally, I held that Respondents had not carried their burden on 

summary disposition to show an inability to pay disgorgement or civil 

penalties.6

I held the merits hearing on August 21, 2019, in Brooklyn, New York. 

Rossi was the only witness who testified during the hearing. I admitted all of 

the parties’ joint exhibits and two of Rossi’s supplemental exhibits.

Findings of Fact

The OIP requires me to accept its factual findings as true.7 I therefore 

base the following findings of fact and conclusions on the OIP’s binding factual 

findings and on the entirety of the remaining record. Outside of the binding 

factual findings in the OIP, I have applied preponderance of the evidence as 

 1 See 15 U.S.C. §§ 77h-1, 78u-3, 80a-9(b), 80b-3(e), (f), (k).

2 Order Instituting Proceedings (OIP) at 2, 9.

3 Matthew R. Rossi, Admin. Proc. Rulings Release No. 6636, 2019 SEC 

LEXIS 1803 (ALJ July 23, 2019).

4 Id. at *6.

5 Id. at *12–14.

6 Id. at *18.

7 OIP at 9.
3

the standard of proof.8 All arguments that are inconsistent with this decision 

are rejected.

Rossi, who holds a Series 65 license, founded SJL, a registered investment 

adviser, and was its managing partner and 80% majority owner.9 SJL 

managed the MarketDNA Hedge Fund LP (the Fund) and served as the Fund’s 

general partner.10 Rossi made investment decisions for the Fund and for SJL.11

Rossi was responsible for SJL’s private placement memorandum.12

Through that document, oral representations,and other means, Rossi and SJL 

told investors that SJL would primarily invest in equities publicly traded in 

domestic markets and would select investments using SJL’s “highly successful 

proprietary” MarketDNA algorithm (the Algorithm), which was “proven to 

bring [investors] substantially higher returns” and “included ‘safety valves’ or 

stop losses to limit downside risk.”13

The OIP describes two sets of investors. Susan Ennis (Investor A), who is 

Rossi’s friend; Patrick Walters (Investor B); Elizabeth Stiegler (Investor C), 

who was Rossi’s girlfriend from 2013 through 2017; and an unidentified 

Investor D.14 Each of these investors invested directly in the Fund.15 Mr. 

Oldenkamp (SMA Client 1), his wife (SMA Client 2), and their church (SMA 

Client 3) owned separate, SJL-managed brokerage accounts.16

Ennis, Walters, and Stiegler invested in the Fund at some point between 

its launch in January 2016 and May 2016.17 As of May 2016, Rossi allocated 

 8 See Rita J. McConville, Exchange Act Release No. 51950, 2005 WL 

1560276, at *14 (June 30, 2005), pet. denied, 465 F.3d 780 (7th Cir. 2006).

9 OIP at 3.

10 Id.

11 Id.

12 Id. at 4.

13 Id. at 2, 4.

14 Id. at 4–5; Tr. 28–30.

15 OIP at 4; Tr. 26–29.

16 OIP at 2–8; Tr. 50.

17 OIP at 3–4. 
4

the Fund’s assets as: Ennis ($265,675.80), Walters ($50,000), Stiegler ($10,000) 

and Rossi ($92,000).18

It’s not clear whether the Algorithm actually was, as Respondents 

claimed, “highly successful.”19 But by June 2016, Rossi decided that he “wasn’t 

making enough income” from the Fund’s use of the Algorithm to cover his 

personal expenses.20 Contrary to what he had represented to the Fund’s 

investors, he began engaging in unhedged options trading using Fund assets, 

resulting in substantial gains in June and July 2016.21 Rossi had prior 

experience with options trading and, based on that experience, was aware of 

the risks involved.22

In early July 2016, Investor D invested $100,000 in the Fund.23 Around 

that time, Rossi also solicited investment by the Oldenkamps.24 Although the 

Oldenkamps did not want to invest directly in the Fund, they were interested 

in following the MarketDNA strategy and took comfort in both the alleged stop 

losses that Rossi told them about and the Fund’s positive returns in June and 

July, which Rossi said resulted from use of the Algorithm.25 In August 2016, 

Mrs. Oldenkamp appointed SJL as the investment adviser for her $150,000 

brokerage account and authorized SJL to supervise and direct the investments 

in that account.26

Following SJL’s gains in June and July, Rossi continued to engage in 

unhedged options trading.27 This time, however, things did not go well. In all, 

 18 Id. at 4.

19 Id. at 2.

20 Tr. 100–01.

21 OIP at 4.

22 Id.

23 Id. at 5.

24 Id. at 6.

25 Id.

26 Id.

27 Id. at 5.
5

the Fund lost over $1 million—88% of its value—in August 2016.28 While 

accruing these losses, Rossi told Investor D via e-mail that some recent trades 

notwithstanding, “the trading is doing well” and that the Fund was “down 4% 

then [back] to even.”29 By the time Investor D learned the truth and withdrew 

his investment, only $11,000 of his original $100,000 remained.30

As Rossi continued to use Fund assets to engage in unhedged options 

trading, the Fund continued to lose money. By November 2016, the Fund was 

down to its last $22,000, which Rossi transferred to SJL’s brokerage account

before writing himself checks totaling $1,000 and losing most of the remaining 

$21,000 in further options trading.31

Rossi covered up the losses.32 He sent false account statements to Walters 

and false tax documents to both Ennis and Walters.33 In total, Ennis, Walters, 

Stiegler, and Investor D lost in excess of $300,000.34

Rossi did not tell the Oldenkamps about the Fund’s August losses.35 And 

instead of using the Algorithm while trading in Mrs. Oldenkamp’s account, he 

engaged in unhedged options trading that led to losses of over 8% between 

August and October 2016.36 But Rossi told the Oldenkamps that Mrs. 

Oldenkamp’s account was up 9%, so Mrs. Oldenkamp deposited an additional 

$50,000 and Mr. Oldenkamp deposited $200,000 in a brokerage account that 

he had given Rossi authority to manage.37

Around that time, Mr. Oldenkamp—using materials Rossi provided that 

showed returns of about 135% from May through August 2016—recommended 

 28 Id.

29 Id.

30 Id.

31 Id.

32 Id.

33 Id.

34 Id. at 3.

35 Id. at 6.

36 Id.

37 Id. at 6–7.
6

to his church that it also invest with Rossi and SJL.38 Between December 2016 

and February 2017, the church deposited $300,000 into a brokerage account 

Rossi and SJL managed.39

Based on the purported gains in his and Mrs. Oldenkamp’s account, Rossi 

asked Mr. Oldenkamp to prepay “certain performance-based fees.”40 Mr. 

Oldenkamp agreed to make several payments, totaling $28,935, as a “gesture 

of good faith.”41 Rossi used the fees for his personal benefit, including 

additional unhedged options trading, a $6,000 check to Stiegler, and checks to 

himself and a family member.42

In January 2017, Rossi told Mr. Oldenkamp that the Algorithm’s net 

return for 2016 was 186.44% and that the Fund was “#1 for Returns %” for 

“2016 YTD.”43 Neither of these statements were true; by that time, Rossi had 

lost all of the Fund’s assets.44 Not knowing the true facts, in late January 2017, 

Mrs. Oldenkamp deposited another $600,000 and, in early February, Mr. 

Oldenkamp deposited $499,000.45

But by mid-February, Mr. Oldenkamp noticed that he and Mrs. 

Oldenkamp had suffered large losses in their brokerage accounts.46 When Mr. 

Oldenkamp confronted Rossi, Rossi blamed a fictitious “rogue trader”whom he 

said had caused “losses of nearly 58%” when Rossi supposedly underwent 

surgery, and claimed that his personal account was also affected.47 In fact, the 

losses suffered by the Oldenkamps and the church—70% in February—were 

caused by Rossi’s continued unhedged options trading, and most of the losses 

happened before the date Rossi said he’d given the rogue trader access to the 

 38 Id. at 7.

39 Id.

40 Id. at 8.

41 Id.; see also Rossi, 2019 SEC LEXIS 1803, at *4 & n.15, *6. 

42 OIP at 8.

43 Id. at 7.

44 Id.

45 Id.

46 Id.

47 Id. at 7.
7

accounts.48 Rossi tried to maintain the lie about the rogue trader,however,and 

asked Mr. Oldenkamp “to ‘stick with us,’ adding” that he “truly believe[d] we 

will recover a significant amount in March and the following months.”49

After the Oldenkamps and the church lost another 56% in March 2017, 

they revoked Rossi’s access to their accounts.50 By that point, they had lost 

over $1.5 million.51

In light of these circumstances and the Commission’s uncontested finding 

of liability against Respondents, the hearing in this matter primarily focused 

on Rossi’s ability to pay a financial penalty and disgorgement. The hearing 

revealed that Rossi is a single parent, raising three daughters, two of whom 

are in college and one of whom is in high school.52 Rossi pays his daughters’ 

expenses, including tuition and activities’ costs.53

Rossi testified that his net worth is negative $121,829.54 According to his 

testimony and a financial declaration he submitted, he has about $3,000 in 

cash and owes almost $27,000 in auto loans, over $24,000 in credit card debt, 

and over $60,000 in other loans.55 Rossi’s financial declaration also describes 

his approximate annual expenses, including groceries and food ($22,200) and

rent ($23,500).56 Rossi presented a spreadsheet created from downloading 

entries from his bank accounts that itemized all of his expenses over the 

previous 12 months.57

 48 Id. at 7–8.

49 Id. at 8.

50 Id. at 7–8. 

51 Id. at 8.

52 Tr. 19–21.

53 Tr. 19, 21, 97–98; J. Ex. 9 at 96.

54 Tr. 12; see J. Ex. 9 at 91. 

55 J. Ex. 9 at 94; see Tr. 12–13. 

56 Tr. 53–54; J. Ex. 9 at 96.

57 See J. Ex. 10; Tr. 92–93.
8

Rossi is currently employed as a financial controller at a start-up company 

in New York City with an annual salary of $106,780 and a $10,000 bonus.58

Cross-examination revealed that Rossi failed to include assets in his 

declaration, including one vehicle worth $15,000.59 And the $60,000 in loans 

listed in the declaration included about $32,000 owed to Rossi’s father, over 

$21,300 owed to Ennis, and $2,200 owed to Stiegler—none of which are 

documented.60 Rossi is not currently making payments on his father’s loan, 

which carries no interest and is not collateralized, and entered into a 

repayment plan with Ennis only after he knew the Commission might initiate 

this proceeding.61 Rossi is currently paying “[n]ominal amounts per month” on 

the Stiegler and Ennis loans, although he has paid $9,000 to Stiegler on what 

was originally a loan in excess of $11,000.62

Rossi conceded that he and his children “eat out a lot” for dinner and that 

he typically eats out for lunch in “one of the most expensive parts of the City,”

because he does not have time to pack one.63 Rossi also explained that in order 

to generate extra income, he decided in early 2019 to try playing poker on-line, 

losing about $3,900 before stopping.64

Rossi has taken two recent trips, but paid for neither. He spent 

approximately six days at a national swimming event in April 2019, in 

 58 Tr. 17; J. Ex. 9 at 95.

59 Tr. 35–36.

60 Tr. 45–46, 48, 52.

61 Tr. 48–49, 70–71.

62 Tr. 49–50, 52. As noted, Rossi wrote a $6,000 check to Stiegler after 

receiving one of the Oldenkamps’ performance-fee payments. OIP at 8.

63 Tr. 60–61.

64 Tr. 64, 89–92; see J. Ex. 10 at 7–8, 38; J. Ex. 34 at 1, 3, 7, 10–12; see also

Tr. 63, 81–84 (explaining entries in J. Exs. 10 and 34); J. Exs. 6, 7. Although 

Rossi testified that he stopping gambling after two months when he realized 

he could not generate income from gambling, Tr. 64, the record shows that his 

foray into on-line gambling lasted from December 2018 to May 2019, during 

which time he spent about $5,400 and generated almost $1,500 in gambling 

income, see J. Ex. 10 at 7–8, 38; J. Ex. 34 at 1, 3, 7, 10–12; see also Tr. 63, 81–

92; J. Ex. 6, 7.
9

Orlando, Florida, during which he stayed at a Disney World resort.65 Rossi’s 

father paid for flights and lodging.66 And Rossi flew to California in January 

2019 and stayed with Stiegler, who paid for his flight.67

Rossi has not tried to repay the Oldenkamps or their church.68 When 

asked if he had offered to pay the church, he said that although he had not 

“spoken to the church[,] [i]f I could, I certainly would.”69 Rossi testified that he 

“tried to reach out to Mr. Oldenkamp,” but was soon advised by counsel at the 

time to discontinue attempts to contact him.70 He added that if Mr. Oldenkamp 

had “come to me at any point in time and asked me to start paying him back, 

I certainly would come [up] with a 100-dollar payment plan and start doing 

that. I [have] serious remorse for that.”71

On questioning, Rossi insisted that the Algorithm “actually works.”72

After admitting that he stopped following it only because he was personally 

not making enough money, he testified that he prepared false account 

statements and tax documents because, “with the algorithm being so good, I 

thought I could make up the losses.”73 After it was noted that he “never went 

back to the algorithm,” Rossi claimed that he “continued to run” it to trade 

options, but he “didn’t follow it in terms of just making sure I traded on 

equities.”74 As Rossi explained, the Algorithm doesn’t work with options 

because although he could use it to predict that a relevant or material event 

 65 J. Ex. 10 at 41–43; Tr. 66.

66 Tr. 66, 96–97; see J. Ex. 10 at 42–44.

67 Tr. 98–99; see J. Ex. 34 at 5.

68 Tr. 73.

69 Tr. 73.

70 Tr. 73.

71 Tr. 73.

72 Tr. 99.

73 Tr. 102. Rossi provided a similar explanation for why he issued a false tax 

document. See Tr. 104.

74 Tr. 102; see Tr. 103.
10

would occur, it could not predict when that event would occur.75 And this 

matters because options expire.76

Near the end of Rossi’s affirmative presentation, he said that his “financial 

condition is extremely poor,” his employment situation is uncertain, and he is 

“extremely remorseful for what happened” and “sad and upset with 

[him]self.”77 He added, “I’ve tried to apologize, and have, to as many people as 

I can.”78 At the conclusion of the hearing, Rossi said that he is “remorseful 

about what happened” and: 

if I can win the lottery right now and pay everyone back, 

I certainly would. I just -- I can only -- I can only give what 

I have. And it’s -- I don’t have any assets. I wish I could 

sell something, Your Honor. I wish I had stocks or [an] 

IRA I can liquidate to pay people back. I just don’t. It’s 

been a struggle for me.79

Issues

A. Whether Rossi and SJL should pay a civil monetary penalty as a 

result of their violations of the antifraud provisions. 

B. Whether Respondents’ liability should be reduced due to an inability 

to pay.

Discussion and Conclusions of Law

1. The public interest supports imposing third-tier monetary penalties.

As noted, the Division showed on summary disposition that 

(1) Respondents’ conduct involved fraud, deceit, manipulation, or deliberate or 

reckless disregard of a regulatory requirement, and (2) substantial losses to 

other individuals.80 As a result, I granted the Division summary disposition on 

 75 Tr. 103.

76 Tr. 103.

77 Tr. 25.

78 Tr. 26.

79 Tr. 110.

80 Rossi, 2019 SEC LEXIS 1803, at *10–13.
11

the question of whether it met these two prerequisites for imposition of thirdtier monetary penalties.81 This leaves the third prerequisite, the public 

interest, which in this case includes consideration of Rossi’s claimed inability 

to pay.82

In weighing the public interest, I must consider: 

(1) whether the act or omission for which such penalty is 

assessed involved fraud, deceit, manipulation, or 

deliberate or reckless disregard of a regulatory 

requirement;

(2) the harm to other persons resulting either directly or 

indirectly from such act or omission;

(3) the extent to which any person was unjustly enriched, 

taking into account any restitution made to persons 

injured by such behavior;

(4) whether such person previously has been found by [a 

regulator] to have violated ... securities laws ... or the 

rules of a self-regulatory organization ... , has been 

enjoined by a court ... from violations of such laws or 

rules, or has been convicted ... of violations of such laws 

or of [certain] felon[ies] or misdemeanor[s];

 81 As noted in the summary disposition order, the statutes under which 

penalties are authorized in this proceeding “set out a three-tiered system, 

based on increasing degrees of culpability, for determining the maximum civil 

penalty for ‘each ... act or omission’ constituting a securities violation.” Id. at 

*9–10; see 15 U.S.C. §§ 77h-1(g)(2), 78u-2(b), 80b-3(i)(2). Third-tier penalties, 

i.e., the most severe, may be imposed if in the public interest and if the violation

in question involved fraud, deceit, manipulation, or deliberate or reckless 

disregard of a regulatory requirement and substantial losses to other persons. 

Rossi, 2019 SEC LEXIS 1803, at *10–12. Although this proceeding was 

instituted under the Investment Company Act, the OIP does not authorize 

monetary sanctions under that Act. OIP at 1, 9. To the extent the summary 

disposition order referenced Investment Company Act Section 9(b) as a basis 

for monetary sanctions, I withdraw that provision as a basis for this analysis. 

82 See Charles Trento, Securities Act Release No. 8391, 2004 WL 329040, at 

*4 (Feb. 23, 2004).
12

(5) the need to deter such person and other persons from 

committing such acts or omissions; and

(6) such other matters as justice may require.83

Given the Commission’s finding that Respondents violated Exchange Act 

Section 10(b), Advisers Act Section 206(1), and Exchange Act Rule 10b-5, 

Respondents necessarily acted with scienter.84 Because scienter refers to the 

intent to deceive, manipulate, or defraud,85 the first public-interest factor 

supports monetary penalties. 

The Oldenkamps and their church together lost over $1.5 million after 

Rossi induced them to invest based on his material falsehoods about the Fund 

and its performance and how he would manage their investments. And the four 

individuals who invested directly in the Fund lost at least $300,000. 

Respondents are thus directly responsible for serious harm that resulted from 

their misconduct.86 

The amount of unjust enrichment, $28,935 in advance performance fees to 

which Respondents were not entitled, is small compared to the total amount 

investors lost. And the Division presented no evidence of previous securities 

violations, injunctions, or convictions. So those two factors weigh in 

Respondents’ favor.

Preventing fraud, especially by investment advisers, lies at the heart of 

the Commission’s investor-protection mission. Given the degree to which the 

industry and investors must, of necessity, rely on the integrity of industry 

professionals, especially investment advisers, the Commission’s need to 

 83 See 15 U.S.C. § 78u-2(c); see also 15 U.S.C. § 80b-3(i)(3). Unlike the other 

statutes, the Securities Act does not contain a statutory list of public-interest 

factors. But the statutory factors in the other statutes are an appropriate guide 

and the Commission relies on the other statutes’ listed factors when assessing

the public interest under the Securities Act. See Barbara Duka, Initial Decision 

Release No. 1167, 2017 WL 3725300, at *67 & n.66 (ALJ Aug. 29, 2017). 

84 See SEC v. Steadman, 967 F.2d 636, 641 & n.3 (D.C. Cir. 1992).

85 Aaron v. SEC, 446 U.S. 680, 686 n.5 (1980).

86 See David E. Lynch, Exchange Act Release No. 46439, 2002 WL 1997953, 

at *4 (Aug. 30, 2002) (finding that a respondent whose fraud cost customers “at 

least $1.85 million,” had caused substantial losses).
13

promote honesty and to deter misconduct is high.87 The fifth factor thus weighs 

against Respondents.

As to other matters, because they were investment advisers, Rossi and 

SJL were fiduciaries who owed their investment clients “an affirmative duty 

of ‘utmost good faith, and full and fair disclosure of all material facts,’ as well 

as an affirmative obligation ‘to employ reasonable care to avoid misleading’ 

[their] clients.”88 Given investment advisers’ fiduciary responsibilities, the 

Commission has always viewed with particular opprobrium investment 

advisers who defraud their investment clients.89

Respondents thoroughly abused their fiduciary position by lying about the 

performance of the Fund, omitting that they were investing in a risky manner 

contrary to what investors had been told, and then covering up their 

misconduct with false account statements and more lies while they were 

running the Fund and investors’ accounts into the ground.

Rossi knew unhedged options trading could result in significant losses; he 

“had generated significant losses through” “risky, unhedged options” “trading 

in the years preceding the launch of the Fund.”90 He also knew that the 

Algorithm wasn’t designed for options trading. And he knew that, despite his 

representations, there were no stop losses. Yet, knowing the risks and without 

any notice to investors, Rossi placed the burden of serious losses on his 

investors’ shoulders. And he did so not because he wanted to generate returns 

for them, but because he wanted to enrich himself so he could cover his 

personal expenses. Moreover, even if Rossi did not know that (1) unhedged 

options trading was risky, (2) the Algorithm should be used only for equities, 

 87 See Montford & Co., Advisers Act Release No. 3829, 2014 WL 1744130, at 

*18 (May 2, 2014) (“Investors in the securities industry place a high degree of 

trust and confidence in the investment advisory relationship.”), pet. denied, 

793 F.3d 76 (D.C. Cir. 2015); Alfred Clay Ludlum, III, Advisers Act Release 

No. 3628, 2013 WL 3479060, at *4 (July 11, 2013) (holding that “defraud[ing] 

investors” and “violating the trust placed in a fiduciary amounts to egregious 

behavior”).

88 SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194 (1963)

(footnotes omitted).

89 See James C. Dawson, Advisers Act Release No. 3057, 2010 WL 2886183, 

at *4 (July 23, 2010).

90 OIP at 4.
14

and (3) there were no stop losses, his ignorance would not excuse sending

investors false account statements and tax documents.

Further, although Rossi mentioned remorse three times during the 

hearing,91 his statements of contrition ring hollow. Rossi said that he “tried to 

apologize, and have, to as many people as” he could.92 Oddly, these “many 

people” did not include his most aggrieved victims. Rossi claimed that he would 

like to pay the church back if he could, but it doesn’t appear he tried very hard 

to do so. He also said that he “tried” to contact Mr. Oldenkamp, who ignored 

him, and that counsel advised him “not to engage anymore.”93

Considering the foregoing, it is apparent that the public interest weighs 

in favor of monetary penalties. Because Respondents lied to induce 

investments and fund Rossi’s undisclosed, risky trading and then worked to 

cover up their lies, maximum third-tier penalties are warranted. For the time 

period at issue, the maximum third-tier penalty for each violation of the 

Securities Act for a natural person is $173,437, and for an entity, $838,275.94

For the Exchange Act and Advisers Act, the maximum amount for a natural 

person is $189,427, and for an entity, $947,130.95

The statutes state that a penalty may be imposed for “each act or 

omission,” but do not define “the precise unit of violation.”96 Because 

Respondents’ misconduct amounts to a continuing course of conduct, I might 

ordinarily impose penalties based on the number of defrauded investors.97

Because seven investors were defrauded, the resulting penalty could be as 

 91 Tr. 25, 73, 110.

92 Tr. 26.

93 Tr. 73.

94 Adjustments to Civil Monetary Penalty Amounts, 84 Fed. Reg. 5122, 5123 

(Feb. 20, 2019); see 17 C.F.R. § 201.1001, tbl.I.

95 84 Fed. Reg. at 5123–24.

96 Anthony Fields, CPA, Advisers Act Release No. 4028, 2015 WL 728005, 

*24 n.162 (Feb. 20, 2015).

97 See Eric J. Brown, Advisers Act Release No. 3376, 2012 WL 625874, at 

*17 (Feb. 27, 2012) (“we believe that imposing a penalty for each defrauded 

customer is appropriate”), aff’d sub nom. Collins v. SEC, 736 F.3d 521 (D.C. 

Cir. 2013); Steven E. Muth, Exchange Act Release No. 52551, 2005 WL 

2428336, at *19 (Oct. 3, 2005) (same).
15

much as $1,325,989 for Rossi and $6,629,910 for SJL. But the Division asks 

that penalties be imposed based on only the number of statutes violated—

three—and proposes basing penalties on the $173,437 figure for violations of 

the Securities Act by a natural person.98 This calculation yields a figure of 

$520,311. Because this is all the Division requests, Respondents voice no 

objection to the Division’s argument, and, as is discussed below, Respondents 

have not carried their burden to show an inability to pay, I will impose this 

amount jointly and severally on Rossi and SJL.

2. Rossi and SJL have not carried their burden to show that their 

liability should be reduced based on an inability to pay.

By statute, a respondent in Commission administrative proceedings may 

present evidence of his or her inability to pay a monetary penalty and the 

Commission may, in its discretion, consider that evidence in deciding whether 

the public interest supports imposing a penalty.99 Commission Rule of Practice 

Rule 630(a) provides discretionary authority to “consider evidence concerning 

ability to pay in determining whether disgorgement, interest or a penalty is in 

the public interest.”100 Inability to pay, however, “is not dispositive” and “is 

only one factor that informs [the] determination” of penalties and 

disgorgement.101 Respondents bear the burden to show inability to pay.102

As I noted in ruling on the parties’ motions for summary disposition,

although the Commission has not provided specific guidance about how to 

evaluate whether a respondent has shown an inability to pay, it has repeatedly 

held that it may decline to waive disgorgement or penalties “when the 

[relevant] misconduct is sufficiently egregious.”103 This means that a 

 98 Division Post-hr’g Br. at 11.

99 15 U.S.C. §§ 77h-1(g)(3), 78u-2(d), 80b-3(i)(4).

100 17 C.F.R. § 201.630(a).

101 Thomas C. Bridge, Securities Act Release No. 9068, 2009 WL 3100582, at 

*25 (Sept. 29, 2009), pet. denied, Robles v. SEC, 411 F. App’x 337 (D.C. Cir. 

2010); see SEC v. Warren, 534 F.3d 1368, 1370 (11th Cir. 2008) (“At most, 

ability to pay is one factor to be considered in imposing a penalty.”).

102 Philip A. Lehman, Exchange Act Release No. 54660, 2006 WL 3054584, at 

*4 & nn. 29–30 (Oct. 27, 2006).

103 Rossi, 2019 SEC LEXIS 1803, at *16; see Gregory O. Trautman, Exchange 

Act Release No. 61167A, 2009 WL 6761741, at *24 (Dec. 15, 2009) (declining 
16

particularly deceitful respondent will face an uphill battle when seeking to 

reduce monetary liability based on an inability to pay.104 But a respondent who 

shows an inability to pay and whose misconduct is less egregious, or not 

egregious at all, might succeed in convincing an administrative law judge to 

exercise his or her discretion to reduce disgorgement or a penalty.

Considering inability to pay thus involves a two-part inquiry. The first 

question is whether a respondent has shown an inability to pay the imposed 

disgorgement and penalties. Answering this question requires a comparison of 

the amounts imposed against the respondent’s income, assets, liabilities, and 

any other factors, such as daily living expenses, that might bear on his or her 

ability to pay. If the respondent fails to show an inability to pay, the inquiry 

ends.

If the respondent shows an inability to pay, whether in whole or in part, 

the next question is whether to credit that inability. The Commission has not 

explained how to undertake this assessment but in light of the Commission’s 

focus on the egregiousness of the misconduct involved, I’ve held that the 

assessment must involve weighing the seriousness or egregiousness of the 

violation in relation to the Commission’s core mission of “‘protecting 

investors[,] ... safeguarding the integrity of the markets,’” and “making 

securities law violations unprofitable.”105

Rossi fails at both steps.106 Rossi is gainfully employed and earned more 

than $100,000 in the year preceding his filing of his Form D-A.107 He testified 

that he is $121,000 under water, including obligations to repay personal loans 

totaling about $55,500.108 But Rossi, who has the burden on this issue, 

 

to reduce a penalty in light of the egregiousness of respondent’s actions); 

Lehman, 2006 WL 3054584, at *4.

104 See Trento, 2004 WL 329040, at *4 (“Even accepting Trento’s financial 

report at face value, we find that the egregiousness of his conduct far outweighs 

any consideration of his present ability to pay a penalty.”).

105 Rossi, 2019 SEC LEXIS 1803, at *17 (quoting Gordon Brent Pierce, 

Securities Act Release No. 9555, 2014 WL 896757, at *19 (Mar. 7, 2014)).

106 Respondents presented no evidence about SJL’s ability to pay.

107 J. Ex. 9 at 95.

108 Tr. 12–13, 45–46.
17

provided nothing to document these personal loans.109 This matters because 

the loans are from a parent and two friends; they are not the result of armslength transactions between neutral parties. These circumstances raise 

questions about the validity of the loans.110 But there are other reasons to 

question them, as well. 

For starters, Rossi’s supposed creditors have been quite generous, 

continuing to pay for his trips.111 It is safe to say that neutral parties who are 

owed money on legitimate loans do not typically afford their debtors such 

generosity. Moreover, Rossi admitted that as of the time of the hearing, he was 

not making payments on his father’s loan, which carries no interest and is not 

collateralized.112 And Rossi only entered into a repayment plan with Ennis 

after he knew the Commission might initiate this proceeding.113 On this record, 

Rossi has not carried his burden to show that these undocumented and 

uncollateralized loans are valid. I therefore cannot credit these loans.114

Adding to the difficulty of crediting Rossi’s alleged inability to pay is the 

fact that Rossi’s claimed efforts to limit his spending are best described as halfhearted. For example, Rossi admitted that he normally does not pack a lunch 

and that he and his daughters “eat out a lot.”115 These expenses are arguably 

“beyond ordinary, day-to-day living expenses” that might be considered in 

 109 See Tr. 46, 48, 52.

110 Cf. Commodity Futures Trading Comm’n v. Wellington Precious Metals, 

Inc., 950 F.2d 1525, 1530 (11th Cir. 1992) (characterizing uncollateralized 

loans to friends and family as suspicious).

111 Tr. 96–99.

112 Tr. 48–49.

113 Tr. 70–71.

114 Cf. Russell C. Schalk, Jr., Exchange Act Release No. 32279, 2016 WL 

5219501, at *4 (Sept. 21, 2016) (declining to consider alleged out-of-pocket 

expenses absent supporting documentation); David Henry Disraeli, Advisers 

Act Release No. 2686, 2007 WL 4481515, at *19 (Dec. 21, 2007) (“The vague 

and unsubstantiated nature of Disraeli’s disclosures renders them neither 

adequate nor credible as a basis for reducing the disgorgement or penalty 

amounts.”).

115 Tr. 25, 60–61.
18

determining a respondent’s ability to pay.116 No doubt those he defrauded 

would rather Rossi forgo expensive meals in favor of making them whole.

Rossi also claims that he owes about $24,000 in credit card debt.117 He 

has, however, provided no evidence concerning how he incurred that debt. 

Because Rossi bears the burden of proof, this failure means there is no basis to 

consider that debt on the question of his ability to pay.118

In addition, cross-examination revealed that Rossi’s schedule of assets and 

liabilities is not completely reliable. Rossi listed as liabilities a loan against a 

life insurance policy and an auto loan, but failed to list the insurance policy or 

the car as assets.119 Rossi also listed expenses for his daughters who are 

currently in college.120 But these are necessarily expenses that—every parent 

hopes—won’t last forever.121

Finally, I cannot ignore the thousands Rossi spent gambling. This 

behavior is reminiscent of Rossi’s decision, despite his previous experience, to 

engage in risky options trading. Discounting Rossi’s assets by the amount he 

lost gambling would encourage others to follow Rossi’s reckless example.122

Rossi thus failed to present sufficient evidence to show that he is unable 

to pay. And given that Respondents presented no evidence about SJL’s ability 

to pay, Respondents have failed to carry their burden on this issue.

 116 See Schalk, 2016 WL 5219501, at *3 (noting that Schalk’s “credit card debt 

includes charges beyond ordinary, day-to-day living expenses”).

117 J. Ex. 9 at 94.

118 Cf. Schalk, 2016 WL 5219501, at *3 (declining to consider credit card 

expenses because Schalk failed to explain the nature of charges reflected in 

statements).

119 Tr. 35–39.

120 J. Ex. 9 at 96; Tr. 95–96. 

121 The parties have not discussed whether or how college expenses for a 

respondent’s children should be weighed in the ability-to-pay analysis. I 

therefore express no opinion on the issue. 

122 Cf. Schalk, 2016 WL 5219501, at *3 (noting that Schalk’s “credit card debt 

includes charges beyond ordinary, day-to-day living expenses, such as 

thousands of dollars spent at Pimlico Race Course”).
19

But even assuming Respondents had shown an inability to pay, they 

would fare no better. Under the second step in the inability-to-pay analysis, I 

would decline to credit Rossi’s alleged inability to pay after weighing the 

seriousness or egregiousness of the violations in relation to the Commission’s 

core mission.123 Rossi and SJL owed their investment clients a “duty of ‘utmost 

good faith, and full and fair disclosure of all material facts.’”124 Respondents 

abused that fiduciary duty and defrauded their investment clients. They lied 

about the Fund’s performance, engaged in risky trading with their clients’ 

funds, and provided false information to cover up their losses, thus dissuading 

investors from taking action to protect themselves from additional losses. 

Indeed, Rossi’s lies in January 2017, after he had squandered all of the Fund’s 

assets, induced the Oldenkamps to invest an additional $1 million, most of 

which Rossi promptly wasted through reckless trading. And Respondents 

engaged in risky trading not in a foolhardy attempt to help their clients, but 

rather in a reckless attempt to generate more money for Rossi. 

Further, Rossi’s actions—or lack of actions—speak louder than his words 

of contrition. He said that he would have attempted to pay Mr. Oldenkamp 

back, if Mr. Oldenkamp had asked him to do so.125 But Mr. Oldenkamp is the 

victim and the onus should not be on him to ask Rossi to make him whole, 

particularly because Rossi claims to be remorseful. The same goes for the 

church. Rossi said that although he had not “spoken to the church[,] [i]f I could, 

I certainly would.”126 But because there is nothing evident that might have 

stopped him from speaking to a representative of the church, it is apparent 

that Rossi’s professed remorse is meaningless.

Fraudulent conduct by investment advisers typically calls for severe 

sanctions.127 Such is the case here.128 Given the egregiousness of Respondents’ 

conduct, the Commission’s mission would be advanced—even if Respondents 

 123 See Rossi, 2019 SEC LEXIS 1803, at *17.

124 Capital Gains, 375 U.S. at 194 (footnotes omitted).

125 Tr. 73.

126 Tr. 73.

127 See Dawson, 2010 WL 2886183, at *6.

128 Cf. id. (noting that Dawson “defrauded his advisory clients of more than 

$300,000 ... in a manner designed to avoid detection”).
20

had shown an inability to pay—through the decision to not exercise discretion 

to credit Respondents’ alleged inability to pay. 

Record Certification

I certify that the record includes the items set forth in the record index 

issued by the Secretary of the Commission on December 5, 2019, supplemented 

by the following filings:129

December 11, 2019: Second Post-hearing Protective 

Order (AP-6717)

Joint Exhibits 2, 9–10, 16, and 30–

31 (REDACTED)

Division’s redacted version of 

Rossi Exhibit 3

Division’s redacted version of the 

hearing transcript

December 19, 2019: Transcript of December 3, 2019, 

telephonic post-hearing 

conference, pages 1–30

Order

Under Section 8A(g) of the Securities Act of 1933, Section 21B of the 

Securities Exchange Act of 1934, and Section 203(i) of the Investment Advisers 

Act of 1940, Matthew R. Rossi and SJL Capital, LLC, must jointly and 

severally PAY A CIVIL MONEY PENALTY in the amount of $520,311.

Under Section 8A(e) of the Securities Act of 1933, Sections 21B(e) and 

21C(e) of the Securities Exchange Act of 1934, and Section 203(j) of the 

Investment Advisers Act of 1940, Matthew R. Rossi and SJL Capital, LLC, 

must jointly and severally DISGORGE $28,935, plus prejudgment interest. 

The prejudgment interest owed will be calculated from March 1, 2017, to the 

last day of the month preceding the month in which payment of disgorgement 

is made.130 Prejudgment interest will be computed at the underpayment rate 

 129 See 17 C.F.R. § 201.351(b).

130 See 17 C.F.R. § 201.600(a); OIP at 8 (detailing months Respondents 

received performance-based fees); see also Terence Michael Coxon, Advisers Act 

Release No. 2161, 2003 WL 21991359, at *14 (Aug. 21, 2003) (ordering “that 
21

of interest established under Section 6621(a)(2) of the Internal Revenue Code, 

26 U.S.C. § 6621(a)(2), and compounded quarterly.131

Under Commission Rule of Practice 1100, any funds recovered by way of 

disgorgement, prejudgment interest, or penalties must be placed in a fair fund 

for the benefit of investors harmed by the violations.132

Payment of civil penalties, disgorgement, and interest must be made no 

later than 21 days following the day this initial decision becomes final, unless 

the Commission directs otherwise. Payment must be made in one of the 

following ways: (1) transmitted electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request; (2) direct 

payments from a bank account via Pay.gov through the SEC website at 

http://www.sec.gov/ofm; or (3) by certified check, bank cashier’s check, bank 

money order, or United States postal money order made payable to the 

Securities and Exchange Commission and hand-delivered or mailed to the 

following address alongside a cover letter identifying Respondent(s) and 

Administrative Proceeding No. 3-19145: Enterprise Services Center, Accounts 

Receivable Branch, HQ Bldg., Room 181, AMZ-341, 6500 South MacArthur 

Blvd., Oklahoma City, Oklahoma 73169. A copy of the cover letter and 

instrument of payment must be sent to the Commission’s Division of 

Enforcement, directed to the attention of counsel of record.

This initial decision will become effective in accordance with and subject 

to the provisions of Rule of Practice 360.133 Under that rule, a party may file a 

petition for review of this initial decision within 21 days after service of the 

initial decision. Under Rule of Practice 111, a party may also file a motion to 

correct a manifest error of fact within ten days of the initial decision.134 If a 

motion to correct a manifest error of fact is filed by a party, then a party has

21 days to file a petition for review from the date of the order resolving such 

motion to correct a manifest error of fact. 

This initial decision will not become final until the Commission enters an 

order of finality. The Commission will enter an order of finality unless a party 

 

the interest run from the date of the last violation”), aff’d, 137 F. App’x 975 

(9th Cir. 2005). 

131 17 C.F.R. § 201.600(b).

132 17 C.F.R. § 201.1100.

133 17 C.F.R. § 201.360.

134 See 17 C.F.R. § 201.111.
22

files a petition for review or motion to correct a manifest error of fact or the 

Commission determines on its own initiative to review the initial decision as 

to a party. If any of these events occur, the initial decision willnot become final 

as to that party.

_______________________________

James E. Grimes

Administrative Law Judge