Initial Decision Release No. 1357

Administrative Proceeding

File No. 3-18288

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Lawrence E. Penn, III

Initial Decision

February 22, 2019

Appearances: Howard A. Fischer, Thomas P. Smith, Karen E. Willenken, 

and Katherine S. Bromberg for the Division of Enforcement,

Securities and Exchange Commission

Lawrence E. Penn III, pro se

Before: James E. Grimes, Administrative Law Judge

Summary

I grant the Division of Enforcement’s motion for summary disposition.

Respondent Lawrence E. Penn III is barred from associating with an 

investment adviser, broker, dealer, municipal securities dealer, municipal 

advisor, transfer agent, or nationally recognized statistical rating 

organization.

Procedural Background

The Securities and Exchange Commission initiated this proceeding in 

November 2017, when it issued an order instituting proceedings (OIP) under 

Section 203(f) of the Investment Advisers Act of 1940.

1 This is a follow-on 

proceeding based on a permanent injunction entered against Penn by the 

United States District Court for the Southern District of New York and 

 

1 OIP ¶ I; see 15 U.S.C. § 80b-3(f).
2

Penn’s 2015 New York convictions for grand larceny in the first degree and 

falsifying business records in the first degree.

2

Penn was served with the OIP in 2017 and filed an answer in January 

2018.

3 At the time Penn was served, this proceeding was assigned to a 

different administrative law judge, who issued an initial decision in June 

2018.

4

The day after the initial decision was issued, the Commission stayed all 

pending cases.5 In August 2018, the Commission allowed the stay to lapse, 

vacated decisions in all pending cases, remanded all cases pending before it, 

and ordered that all pending cases be reassigned to a different administrative 

law judge from the one previously assigned.

6 Following the Commission’s 

August order, this proceeding was reassigned to me.7

Following reassignment, I held a prehearing conference, permitted Penn 

to amend his answer, and set a motions schedule.8 Penn later filed an 

amended answer and the Division moved for summary disposition, which 

Penn opposed. As the Commission has directed, in conducting this proceeding 

and considering the parties’ motions, I have given no weight to the opinions, 

orders, or rulings issued by the prior administrative law judge.9

 

2 See SEC v. Penn., No. 1:14-cv-0581 (S.D.N.Y.); People v. Penn, No. 

00073/2014 (N.Y. Sup. Ct. filed Feb. 7, 2014); OIP ¶¶ II.B.2, II.B.4.

3 Lawrence E. Penn, III, Admin. Proc. Rulings Release No. 6260, 2018 SEC 

LEXIS 2985, at *1 (ALJ Oct. 26, 2018). 

4 Lawrence E. Penn, III, Initial Decision Release No. 1258, 2018 WL 

3046490 (ALJ June 20, 2018).

5 Pending Admin. Proc., Securities Act of 1933 Release No. 10510, 2018 

WL 3193858 (June 21, 2018).

6 Pending Admin. Proc., Securities Act Release No. 10536, 2018 WL 

4003609, at *1 (Aug. 22, 2018).

7 Pending Admin. Proc., Admin. Proc. Rulings Release No. 5955, 2018 SEC 

LEXIS 2264, at *2–3 (ALJ Sept. 12, 2018).

8 Penn, 2018 SEC LEXIS 2985, at *1.

9 See Pending Admin. Proc., 2018 WL 4003609, at *1.
3

Findings of Fact

The findings and conclusions in this initial decision are based on the 

record and on facts officially noticed under Commission Rule of Practice 323, 

17 C.F.R. § 201.323.10 In making the findings below, I have applied 

preponderance of the evidence as the standard of proof.11 

Following graduation from the United States Military Academy and five 

years’ service in the Army, Penn worked for a variety of entities in the 

financial industry.12 From 2007 through 2014, he was the general partner of 

Camelot Acquisitions Secondary Opportunities, LP (the Fund).13 Camelot 

Acquisitions Secondary Opportunities Management, LLC (Camelot 

Management), was the Fund’s investment adviser and became registered 

with the Commission in 2012.14 Penn controlled Camelot Management.15

By 2010, Penn and an accomplice had created an entity call Ssecurion, 

LLC, which ostensibly was an investigations company.16 But Ssecurion was a 

sham entity and its website was a fraud.17 Relying on 32 fictitious invoices 

issued by Ssecurion, purportedly for “due diligence” services, Penn diverted 

millions from the Fund.18 Between 2010 and 2013, Penn orchestrated 80 

monetary transfers to Ssecurion, totaling nearly $9.3 million.19 Most of these 

funds were then transferred to Camelot Management and Camelot Group 

 

10 I take official notice of the district court’s docket in SEC v. Penn and the 

orders the court has issued. See 17 C.F.R. § 201.323.

11 See John Francis D’Acquisto, Advisers Act Release No. 1696, 1998 WL 

34300389, at *2 (Jan. 21, 1998).

12 Div. Ex. 20 at 6.

13 Div. Ex. 13 at 2.

14 Div. Ex. 10 at 2, 4 (answer to complaint in SEC v. Penn); see Div. Ex. 9 at 

6 (complaint).

15 Div. Ex. 10 at 2, 4–5.

16 Div. Ex. 13 at 2, 4.

17 Id. at 4; Div. Ex. 15 at 2.

18 Div. Ex. 12 at 2; Div. Ex. 13 at 2.

19 Div. Ex. 13 at 2; Div. Ex. 14 at 2.
4

International, LLC (Camelot Group), which was also a Penn-controlled 

entity.20

Once the Fund’s auditors became involved, Penn created fake work 

product to correspond to the fake Ssecurion invoices and lied to the 

auditors.21 And when that failed to satisfy the auditors, Penn fired them.22

Based on Penn’s actions, he was indicted in New York state court in 

February 2014.23 In March 2015, Penn pleaded guilty to grand larceny in the 

first degree in violation of New York Penal Law § 155.42 and falsifying 

business records in the first degree in violation of New York Penal Law 

§ 175.10.

24 He was sentenced the following month to an indeterminate term 

of two to six years’ imprisonment and ordered to pay over $8.3 million in 

restitution.25

Meanwhile, the Commission filed an injunctive complaint against Penn 

in the United State District Court for the Southern District of New York.26

The Commission’s complaint and Penn’s indictment shared the same factual 

basis.27 In December 2016, the district court granted summary judgment on 

allegations that Penn violated Section 10(b) of the Securities Exchange Act of 

1934, Advisers Act Sections 204 and 206, Exchange Act Rule 10b-5, and 

Advisers Act Rule 204-2.28 In August 2017, the court permanently enjoined 

Penn from violating these provisions.29 In its later final judgment, the court 

 

20 Div. Ex. 13 at 2; Div. Ex. 14 at 2.

21 Div. Ex. 12 at 4, 5 (deeming paragraph 5 of the complaint admitted); see

Div. Ex. 9 at 3.

22 Div. Ex. 13 at 4.

23 Div. Ex. 6.

24 Div. Ex. 4.

25 Div. Ex. 6.

26 Div. Ex. 9.

27 Div. Ex. 12 at 3.

28 Id. at 2, 16.

29 Div. Ex. 13 at 1–2.
5

found Penn liable for over $11 million in disgorgement and interest and 

ordered him to pay a civil monetary penalty of nearly $9.3 million.30

Conclusions of Law

Under Rule 250(b), which governs summary disposition in 75-day cases, 

an administrative law judge may grant a motion for summary disposition if 

“there is no genuine issue with regard to any material fact and . . . the 

movant is entitled to a summary disposition as a matter of law.”31 The 

Commission has repeatedly upheld use of summary disposition in cases such 

as this one, where the respondent has been enjoined or convicted and the sole 

determination concerns the appropriate sanction.

32

Although Penn denies every material allegation in the OIP in his 

answer,

33 Penn’s guilty plea and the district court orders in the civil case

based on Penn’s guilty plea and subsequent admissions establish facts that 

cannot be challenged in this proceeding.34 There is thus sufficient evidence to 

decide this matter in the Division’s favor, Penn’s denials notwithstanding.35

 

30 Div. Ex. 15 at 4–5.

31 17 C.F.R. § 201.250(b).

32 Gary M. Kornman, Exchange Act Release No. 59403, 2009 WL 367635, 

at *10 (Feb. 13, 2009), pet. denied, 592 F.3d 173 (D.C. Cir. 2010); Jeffrey L. 

Gibson, Exchange Act Release No. 57266, 2008 WL 294717, at *5 & n.21 

(Feb. 4, 2008) (collecting cases), pet. denied, 561 F.3d 548 (6th Cir. 2009).

33 Am. Answer at 2–3.

34 See Div. Exs. 4, 12, 13; Kornman, 2009 WL 367635, at *8; James E. 

Franklin, Exchange Act Release No. 56649, 2007 WL 2974200, at *4 & nn. 

13–14 (Oct. 12, 2007).

35 See James S. Tagliaferri, Exchange Act Release No. 80047, 2017 WL 

632134, at *7 (Feb. 15, 2017) (“The party opposing summary disposition may 

not rely on bare allegations or denials but instead must present specific facts 

showing a genuine issue of material fact for resolution at a hearing.” 

(internal quotation marks omitted)).
6

1. A collateral bar is warranted.

The Advisers Act gives the Commission authority to impose a collateral 

bar36 against Penn if, as is relevant here, (1) he was associated with or 

seeking to become associated with an investment adviser at the time of the 

misconduct at issue; (2) he was enjoined “from engaging in or continuing any 

conduct or practice ... in connection with the purchase or sale of any 

security”; and (3) imposing a bar is in the public interest.37 

The first factor is met in this case. Camelot Management was an 

investment adviser and Penn was associated with it.38 Indeed, he controlled 

it.39 And Penn’s action while associated with Camelot Management formed 

the basis for his conviction and injunction. Moreover, the district court found 

that “[t]here is no dispute Penn was acting as an investment adviser.”40 As a 

result, there is no doubt that he was associated with an investment adviser at 

the time of his misconduct.

Turning to the second factor, the district court permanently enjoined 

Penn from committing fraud in connection with the purchase or sale of any 

security.41 The terms of this injunction meet the requirement that a court has 

enjoined Penn from “engaging in ... any conduct ... in connection with the ...

sale of any security.”42

 

36 A collateral bar, also referred to as an industry bar, is a bar that 

prevents an individual from participating in the securities industry in 

capacities in addition to those in which the person was participating at the 

time of his or her misconduct. See Toby G. Scammell, Advisers Act Release 

No. 3961, 2014 WL 5493265, at *1 & n.1 (Oct. 29, 2014). 

37 15 U.S.C. § 80b-3(e)(4), (f).

38 Div. Ex. 10 at 2, 4–5; Div. Ex. 22.

39 Div. Ex. 10 at 2, 4–5.

40 Div. Ex. 12 at 14.

41 Div. Ex. 15 at 2.

42 15 U.S.C. § 80b-3(e)(4) (emphasis added). As the Division argues, the 

second factor could potentially also be met based on evidence that Penn was

convicted within ten years before the issuance of the OIP of any offense that 

“involves the larceny, theft, ... fraudulent concealment, ... or 

misappropriation of funds.” Mot. at 13; see 15 U.S.C. § 80b-3(e)(2)(C), (f). 

Although it might seem self-evident that Penn’s first-degree grand larceny 

(continued...)
7

To determine whether imposing a collateral bar would be in the public 

interest, I must weigh the public-interest factors set forth in Steadman v. 

SEC.

43 These include: 

the egregiousness of the respondent’s actions, the 

isolated or recurrent nature of the infraction, the degree 

of scienter involved, the sincerity of the respondent’s 

assurances against future violations, the respondent’s 

recognition of the wrongful nature of his conduct, and 

the likelihood that the respondent’s occupation will 

present opportunities for future violations.44

 

conviction involves larceny, the Supreme Court has held that when “Congress 

predicate[s]” a penalty on a conviction, one must consider “the statutory 

definition of the offense of conviction” to determine whether the predicate has 

been established. Mellouli v. Lynch, 135 S. Ct. 1980, 1986 (2015); see

Moncrieffe v. Holder, 569 U.S. 184, 190–91 (2013) (explaining that 

determining whether a generically defined offense includes a particular statelaw conviction requires comparison of the elements of the generic federal 

offense with the elements of the state-law offense of conviction); see also 

Descamps v. United States, 570 U.S. 254, 257 (2013) (courts “compare the 

elements of the statute forming the basis of the defendant’s conviction with 

the elements of the ‘generic’ crime—i.e., the offense as commonly 

understood”). Going through this elements-based comparison in this case 

would serve little point, however, because (1) I’ve determined that Penn was 

enjoined, and (2) even if Penn had not been enjoined and Penn’s conviction 

did not involve larceny, Advisers Act Section 203(e)(3) contains a catch-all for 

felonies—offenses “punishable by imprisonment for 1 or more years”—not 

already described in Section 203(e)(2). See 15 U.S.C. § 80b-3(e)(3)(A). In other 

words, it does not matter whether Penn’s offense involved larceny because 

even it did not, he was enjoined and he was sentenced to an indeterminate 

term of two to six years’ imprisonment, in excess of the one-year threshold in 

Section 203(e)(3)(A). 

43 603 F.2d 1126, 1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91 

(1981); see Kornman, 2009 WL 367635, at *6.

44 David R. Wulf, Exchange Act Release No. 77411, 2016 WL 1085661, at 

*4 (Mar. 21, 2016).
8

The Commission also considers the deterrent effect of administrative 

sanctions.45 The public interest inquiry is “flexible” and “no one factor is 

dispositive.”46 

Before imposing a collateral bar, an administrative law judge must 

determine, based on the evidence presented, whether a bar “is necessary or 

appropriate to protect investors and markets.”47 I must therefore “‘review 

[Penn’s] case on its own facts’ to make findings regarding [his] fitness to 

participate in the industry in the barred capacities.”48 A decision to impose a 

collateral bar “should be grounded in specific ‘findings regarding the 

protective interests to be served’ by barring the respondent and the ‘risk of 

future misconduct.’”49 

Turning to the Steadman public-interest factors, Penn’s conduct was 

egregious. The Commission has held that “[t]he securities industry presents 

continual opportunities for dishonesty and abuse, and depends heavily on the 

integrity of its participants and on investors’ confidence.”50 This is especially 

so for investment advisers, in whom clients must be able to put their trust.51

Given this fact and the fact that investment advisers are fiduciaries who owe 

their clients “an affirmative duty of ‘utmost good faith and full and fair 

 

45 Id. General deterrence is relevant but not determinative of whether the 

public interest weighs in favor of imposing a collateral bar. See Peter Siris, 

Advisers Act Release No. 3736, 2013 WL 6528874, at *11 n.72 (Dec. 12, 2013), 

pet. denied, 773 F.3d 89 (D.C. Cir. 2014). 

46 Conrad P. Seghers, Advisers Act Release No. 2656, 2007 WL 2790633, at 

*4 (Sept. 26, 2007), pet. denied, 548 F.3d 129 (D.C. Cir. 2008).

47 Ross Mandell, Exchange Act Release No. 71668, 2014 WL 907416, at *2 

(Mar. 7, 2014) (internal quotation marks omitted), vacated in part on other 

grounds, Exchange Act Release No. 77935, 2016 WL 3030883 (May 26, 2016). 

48 Id. (quoting McCarthy v. SEC, 406 F.3d 179, 188 (2d Cir. 2005)). 

49 Id. (quoting McCarthy, 406 F.3d at 189–90); see also John W. Lawton, 

Advisers Act Release No. 3513, 2012 WL 6208750, at *9 (Dec. 13, 2012) 

(“[T]he Commission must consider not only past misconduct, but the broader 

question of the future risk the respondent poses to investors.”), vacated in 

part on other grounds, Advisers Act Release No. 4402, 2016 WL 3030847 

(May 27, 2016).

50 Seghers, 2007 WL 2790633, at *7.

51 Schield Mgmt. Co., Advisers Act Release No. 2477, 2006 WL 231642, at 

*10 n.56 (Jan. 31, 2006).
9

disclosure of all material facts,’” the Commission consistently views 

investment advisers who defraud their clients with particular opprobrium.52

Rather than honor his fiduciary obligation, Penn abused his position of 

trust by stealing over $9 million of his clients’ money. This level abuse of 

trust by an investment adviser easily qualifies as egregious.53

Penn’s conduct was not isolated. He transferred funds 80 times over a 

three-year period, eventually stealing over $9 million.

Penn also acted with a high degree of scienter. In New York, larceny is a 

specific intent crime,54 and when he pleaded guilty, Penn admitted that he 

stole the Fund’s money.55 In other words, he intended to take the Fund’s 

money.56 Penn’s high degree of scienter is also shown by the 80 fund transfers 

he made and his efforts to hide his misconduct by providing auditors with 

fake work-product, lying to the auditors, and eventually firing the auditors.

Penn has neither made assurances against future misconduct nor 

demonstrated that he understands or recognizes the wrongfulness of his 

criminal acts. To the contrary, soon after pleading guilty he began a wideranging effort to attack his guilty plea, first in New York appellate courts, 

which rejected his efforts, and then before the district court in response to the 

Commission’s injunctive complaint.57 As is discussed below, Penn has 

continued that effort during the course of this proceeding. 

 

52 James C. Dawson, Advisers Act Release No. 3057, 2010 WL 2886183, at 

*3 (July 23, 2010); see id. at *4 (“[W]e have consistently viewed misconduct 

involving a breach of fiduciary duty or dishonest conduct on the part of a 

fiduciary, such as the fraud committed by Dawson on his clients, as 

egregious.”).

53 See Alfred Clay Ludlum, III, Advisers Act Release No. 3628, 2013 WL 

3479060, at *4 (July 11, 2013) (involving $852,000 taken from investment 

advisory clients).

54 People v. Guzman, 416 N.Y.S.2d 23, 25 (N.Y. App. Div. 1979); People v. 

Coates, 407 N.Y.S.2d 866, 871 (N.Y. App. Div. 1978).

55 Div. Ex. 4 at 6–7.

56 See N.Y. Penal Law § 155.05(1). 

57 See Div. Exs. 7–8; Div. Ex. 10 at 19–20.
10

Allowing Penn to remain in the securities industry would present him 

with future opportunities for further misconduct and would put the investing 

public at risk. Indeed, the fact of Penn’s past misconduct raises an inference 

that if given the chance, he will cause additional harm to the investing 

public.58 This determination is supported by my finding that Penn’s conduct 

was egregious.59 

Finally, imposing a collateral bar will serve the Commission’s interest in 

deterring others from engaging in similar misconduct. 

2. Penn’s arguments have no merit.

Penn presents a number of meritless arguments which only serve to 

show that he has not accepted responsibility for his actions.

Penn argues that I cannot rely on his conviction because it has “not been 

heard on the merits and ... is in conflict with the law.”60 But Penn pleaded 

guilty, thereby putting the merits inquiry to rest.61 And the Advisers Act, 

which allows the entry of a bar based on a conviction, defines the term 

 

58 See Tzemach David Netzer Korem, Exchange Act Release No. 70044, 

2013 WL 3864511, at *6 n.50 (July 26, 2013).

59 Geiger v. SEC, 363 F.3d 481, 489 (D.C. Cir. 2004) (holding that a finding 

of egregiousness “justifies the inference” that misconduct will recur); 

Warwick Capital Mgmt., Inc., Advisers Act Release No. 2694, 2008 WL 

149127, at *11 (Jan. 16, 2008) (“The existence of a violation raises an 

inference that the violation will be repeated, and where the misconduct 

resulting in the violation is egregious, the inference is justified.”).

60 Opp’n at 7.

61 See Kornman, 2009 WL 367635, at *8; Don Warner Reinhard, Exchange 

Act Release No. 63720, 2011 SEC LEXIS 158, at *26 & nn.32-33 (Jan. 14, 

2011) (a respondent cannot challenge a plea agreement in a Commission 

proceeding); see also United States v. Andreadis, 366 F.2d 423, 433 (2d Cir. 

1966) (“Under New York law the guilty pleas entered by appellants in the 

state proceeding were formal judicial admissions of the allegations contained 

in the information.”); cf. United States v. Podell, 572 F.2d 31, 35 (2d Cir. 

1978) (“[A] criminal conviction, whether by jury verdict or guilty plea, 

constitutes estoppel in favor of the United States in a subsequent civil 

proceeding as to those matters determined by the judgment in the criminal 

case.”). 
11

convicted to include a plea of guilty.62 The fact of an appeal makes no 

difference.63

And Penn’s subjective belief that his conviction—which resulted from his 

guilty plea—is invalid is irrelevant. As I have already noted, he cannot 

collaterally attack his conviction in this proceeding.64

Penn also claims that members of the Division “worked in concert with 

the” Manhattan district attorney and “constructed a [c]omplaint” that “was 

used to construct an unlawful [i]ndictment.”65 Penn, however, provides no 

evidence that members of the Division “worked in concert with the” 

Manhattan district attorney. Moreover, he does not attempt to explain what 

would be improper about Division personnel alerting prosecutorial 

authorities that Penn likely committed a crime. Further, if Penn thought 

something untoward had occurred in relation to this indictment, the proper 

forum to raise the issue would have been the trial court.

Penn next takes aim at his injunction, but he also cannot attack in this 

proceeding the injunction the district court entered, orders the district court 

issued, or the Division’s conduct before or during the litigation before the 

district court.66

To the extent Penn has requested a stay based on his argument that his 

conviction is invalid,67 his argument is meritless, and a stay is not warranted.

 

62 15 U.S.C. § 80b-2(a)(6); Div. Exs. 4, 6.

63 See United States v. 303 W. 116th St., 901 F.2d 288, 292 (2d Cir. 1990) 

(“Generally, the pendency of an appeal from a conviction does not deprive a 

judgment of its preclusive effect.”). Even if the pendency of an appeal did 

matter, Penn has already lost his appeal. Div. Ex. 8.

64 See Elliott v. SEC, 36 F.3d 86, 87 (11th Cir. 1994); Kornman, 2009 WL 

367635, at *8; see also Prehearing Tr. 31–32 (explaining Penn’s inability in 

this forum to collaterally attack the state and district court judgments 

against him).

65 Opp’n at 10.

66 Franklin, 2007 WL 2974200, at *4 & nn. 13-14.

67 See Opp’n at 23–24.
12

This would be the case even if an appeal were pending.68 Penn’s stay motion 

is denied. 

Penn’s arguments are thus meritless. In light of the foregoing, I find that 

it is in the public interest to impose a collateral bar against Penn.

69

Order

The Division of Enforcement’s motion for summary disposition is 

GRANTED. 

Under Section 203(f) of the Investment Advisers Act of 1940, Lawrence 

E. Penn III is BARRED from associating with an investment adviser, broker, 

dealer, investment adviser, municipal securities dealer, municipal advisor, 

transfer agent, or nationally recognized statistical rating organization.

This initial decision will become effective in accordance with and subject 

to the provisions of Rule 360.70 Under that rule, a party may file a petition for 

review of this initial decision within twenty-one days after service of the 

initial decision. A party may also file a motion to correct a manifest error of 

fact within ten days of the initial decision, pursuant to Rule 111.71 If a motion 

to correct a manifest error of fact is filed by a party, then a party shall have 

twenty-one days to file a petition for review from the date of the 

undersigned’s order resolving such motion to correct a manifest error of fact.

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

 

68 Jon Edelman, File No. 3-8950, 1996 SEC LEXIS 3560, at *2 (May 6, 

1996) (“The pendency of an appeal of a criminal conviction generally is an 

insufficient basis upon which to grant a motion to stay proceedings.”).

69 In his amended answer, Penn referred to a “motion for more definitive 

statement,” Am. Answer at 1–2, but did not elaborate or separately file such 

a motion. To the extent Penn has moved for a more definite statement, his 

motion is denied. 

70 See 17 C.F.R. § 201.360. 

71 See 17 C.F.R. § 201.111. 
13

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

as to a party. If any of these events occurs, the initial decision shall not 

become final as to that party.

_______________________________

James E. Grimes

Administrative Law Judge