Initial Decision Release No. 1392

Administrative Proceeding

File No. 3-18061

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Retirement Surety LLC,

Crescendo Financial LLC,

Thomas Rose,

David Leeman, and

David Featherstone

Initial Decision

December 20, 2019

Appearances: Jennifer K. Vakiener, Steven Rawlings, and Jack 

Kaufman for the Division of Enforcement, 

Securities and Exchange Commission

Jeffrey J. Ansley and Troy (T.J.) Hales, Bell Nunnally & 

Martin LLP, for Respondents Thomas Rose, David 

Leeman, and David Featherstone

Before: James E. Grimes, Administrative Law Judge

Summary

In this administrative proceeding, the Securities and Exchange 

Commission alleged that Respondents David Featherstone, David Leeman, 

and Thomas Rose sold securities in violation of the registration requirements 

of the Securities Act of 1933 and the Securities Exchange Act of 1934. The 

parties agreed to a partial settlement which included findings of fact and a 

finding of liability on a no-admit, no-deny basis. I partially granted the 

Division of Enforcement’s motion for summary disposition and found that 

Featherstone, Leeman, and Rose should pay disgorgement and prejudgment 

interest. This initial decision resolves the remaining issues. I conclude that 

Featherstone, Leeman, and Rose did not act with scienter, first-tier civil 
2

penalties are in public interest, and the disgorgement to be paid by

Featherstone and Leeman but not Rose should be reduced due to a 

demonstrated inability to pay.

Procedural Background

The Commission initiated this proceeding in July 2017, when it issued an 

order instituting proceedings alleging that Featherstone, Leeman, and Rose

(Respondents), together with Retirement Surety LLC and Crescendo Financial 

LLC, violated Securities Act Section 5(a) and (c) by selling unregistered 

securities and Exchange Act Section 15(a)(1) by acting as brokers without 

registering with the Commission. In November 2017, the Commission entered 

an order accepting Respondents’ settlement offer.1 The settlement order made 

findings of fact and determined that they committed the charged violations.

The settlement order also resolved claims against Retirement Surety and 

Crescendo based on their agreement to each be legally dissolved.2 As to 

Featherstone, Leeman, and Rose, the settlement order provided for additional 

proceedings to resolve whether they should be ordered to pay disgorgement, 

prejudgment interest, and civil penalties.3 In these additional proceedings, 

Respondents cannot contest that they violated Section 5 and Section 15 or the 

settlement order’s factual findings, which must be accepted as true.4

Following issuance of the settlement order, the Division moved for 

summary disposition. A previously assigned administrative law judge granted 

that motion in April 2018 and issued an initial decision.5 In August 2018, 

following the Supreme Court’s decision in Lucia v. SEC, the Commission 

remanded all pending administrative proceedings on appeal from this office, 

including this one; ordered that each proceeding must be reassigned to an 

administrative law judge who did not previously participate in the matter, 

 

1 Retirement Surety LLC, Securities Act Release No. 10436, 2017 WL 

5437486 (Nov. 14, 2017) (Settlement Order).

2 Settlement Order § III.E.

3 Id. § IV.

4 Id.

5 Retirement Surety, Initial Decision Release No. 1250, 2018 WL 1872124 

(ALJ Apr. 18, 2018).
3

unless the parties expressly agreed otherwise; and directed the newly assigned 

judges to give each respondent the opportunity for a new hearing.6 

After initial reassignment, this proceeding was reassigned to me in March 

2019.7 The Division filed a new motion for summary disposition. Respondents 

opposed the motion and asserted inability to pay as an affirmative defense. I 

granted the Division’s motion in part.8 I determined, based on the violations 

found in the settlement order, that Featherstone, Leeman, and Rose should 

disgorge the commissions they received for selling the unregistered securities 

and that prejudgment interest was appropriate.9 I concluded, however, that 

factual disputes prevented me from deciding whether Featherstone, Leeman, 

and Rose acted with scienter.10 Because scienter is a factor to be weighed in 

determining civil penalties and whether disgorgement or penalties should be 

reduced due to an inability to pay, I was unable to resolve those questions.11

I asked the parties to jointly propose a procedure and schedule for 

resolving the remaining issues, and the parties proposed that I decide the 

proceeding based on the existing written record, supplemented by additional 

briefing and evidence, without an in-person hearing. Based on the parties’ 

agreement and the Commission’s order on the continuation of proceedings, I 

adopted this proposal.12

 

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

4003609, at *1, *6 (Aug. 22, 2018); see also Lucia v. SEC, 138 S. Ct. 2044 (2018).

7 Retirement Surety, Admin. Proc. Rulings Release No. 6475, 2019 SEC 

LEXIS 294 (ALJ Mar. 4, 2019). 

8 Retirement Surety, Admin. Proc. Rulings Release No. 6602, 2019 SEC 

LEXIS 1385, at *45 (ALJ June 13, 2019).

9 Id. at *27–29.

10 Id. at *29–41.

11 Id. at *41, *44.

12 Retirement Surety, Admin. Proc. Rulings Release No. 6634, 2019 SEC 

LEXIS 1794 (July 19, 2019); see Settlement Order § IV (“[T]he hearing officer 

may, in his discretion, determine the issues raised in the additional 

proceedings on the basis of the written record, without a hearing.”); Pending 

Admin. Proc., 2018 WL 4003609, at *1 (ordering administrative law judges to 

consider the parties’ “proposals for the conduct of further proceedings” in 

remanded proceedings). The parties waived any claim on appeal that 
4

In conducting this proceeding, I gave no weight to the opinions, orders, or 

rulings of the administrative law judge who presided over this proceeding

before the Commission’s remand.

13

Findings of Fact

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

record and on facts officially noticed.14 After my summary disposition order, 

Featherstone, Leeman, and Rose each submitted a new declaration regarding 

his financial condition in support of the inability-to-pay defense. Otherwise,

the factual record is the same as the summary disposition record. For this 

reason, the factual findings below are largely similar to those made in the order 

on summary disposition.15 On summary disposition, however, I reviewed the 

evidence in light most favorable to Respondents. In this decision, I resolve any 

factual disputes by a preponderance of the evidence as the standard of proof.

16

In a separate section, I make new findings about Respondents’ ability to pay.

Background

Respondents are in their 60s or 70s and at relevant times described 

themselves as licensed insurance agents.17 None of them hold securities 

licenses and none of them has ever been registered as a broker-dealer or 

associated with a registered broker-dealer.18

The unregistered securities at issue in this proceeding were created by 

William R. Schantz.19 Schantz was sanctioned and suspended in 2002 by the 

National Association of Securities Dealers for brokering the sale of 

 

determining the outcome on the basis of a written record without an in-person 

hearing was error. Retirement Surety, 2019 SEC LEXIS 1794, at *1.

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

14 See 17 C.F.R. § 201.323. 

15 See 2019 SEC LEXIS 1385, at *6–24 & nn.18–101.

16 See John Francis D’Acquisto, Investment Advisers Act of 1940 Release 

No. 1696, 1998 WL 34300389, at *2 (Jan. 21, 1998). 

17 Settlement Order ¶¶ 3–5. The Commission’s factual findings in Section III 

of the Settlement Order are cited by paragraph number.

18 Id. ¶¶ 3–5, 29.

19 Id. ¶¶ 6, 12.
5

unregistered nine-month promissory notes guaranteed by insurance 

companies without disclosing the sales to the NASD-member firm with which 

he was associated.20 In 2006, he entered into a consent order with the New 

Jersey Bureau of Securities for the same conduct.21 Schantz agreed to disgorge 

$7,000 in commissions to New Jersey.22 Respondents were aware of the consent 

order.23 In 2009, Schantz formed Verto Capital Management LLC.

24

In late 2013, Verto began issuing 7% promissory notes that are central to 

the findings and charges in the settlement order.25 From then until November 

2015, Verto issued about $12.5 million of these notes.26

In May 2017, the Commission filed a civil complaint against Schantz and 

Verto in the United States District Court for the District of New Jersey.27

Following settlement, the court entered judgment against Schantz and Verto, 

permanently enjoining them from violating Securities Act Sections 5 and 17(a) 

and, after amendment, ordering them to pay about $4.8 million in 

 

20 Id. ¶ 6.

21 Id. I take official notice of Schantz’s consent order with the New Jersey 

Bureau of Securities. See Clearing Servs. of Am., Inc., No. BOS 1796-02 (N.J. 

Bureau of Sec. Jan. 18, 2006), http://www.njconsumeraffairs.gov/Actions

/20060117_ClearingServicesofAmericaIncschantz.pdf; 17 C.F.R. § 201.323. 

22 Settlement Order ¶ 6. 

23 Id. ¶ 27.

24 Id. ¶ 9.

25 Id. ¶¶ 9, 12.

26 Id. ¶12.

27 See Complaint, SEC v. Schantz, No. 1:17-cv-03115 (D.N.J. May 4, 2017), 

ECF No. 1. I take official notice of the district court’s docket and its orders and 

the parties’ filings, as reflected in the docket. See 17 C.F.R. § 201.323. 
6

disgorgement, interest, and civil penalties.28 About $1.5 million remains due 

to 36 investors, 32 of whom were Respondents’ clients.29

Respondents managed Retirement Surety from 2013 through 2015.30 It 

described itself on its website as an organization “comprised of a group of ‘state 

licensed partners,’ all from ‘career[s] outside of the financial services industry’ 

who provide investment advice for retirement planning.”31 Retirement Surety 

has never been associated with a registered broker-dealer or registered as a 

broker-dealer.32

Rose and Leeman also managed Crescendo, which was formed in June 

2013 to broker the sale of Verto notes.33 Crescendo’s website described its 

members as “licensed partners” using language almost identical to that found 

on Retirement Surety’s website.34 It also has never been associated with a 

registered broker-dealer or registered as a broker-dealer.35

Sales of Verto Notes

Turning to the events in this case, Schantz first contacted Leeman 

sometime in 2012.36 Rose and Featherstone first met Schantz in late 2012.37

Schantz proposed to offer “a nine month note product ... that caught 

 

28 Settlement Agreement, Schantz (May 4, 2017), ECF No. 3; Final 

Judgment as to Defendants William R. Schantz and Verto Capital 

Management LLC at 1–4, Schantz (May 8, 2017), ECF No. 4; see Amended 

Final Judgment as to Defendants William R. Schantz and Verto Capital 

Management LLC 1, 4, Schantz (Feb. 27, 2018), ECF No. 13.

29 Vakiener Decl. ¶ 14.

30 Settlement Order ¶ 1.

31 Id. (alteration in original).

32 Id.

33 Id. ¶ 2.

34 Id. (alterations in original).

35 Id.

36 Vakiener Decl., Ex. D at 106; see Resp’ts’ App. 1509.

37 Resp’ts’ App. 1506, 1512; see Vakiener Decl., Ex. D. at 107.
7

[Respondents’] eyes, because [they] thought it was not a security.”38 And 

Respondents knew that if the Verto notes were securities, they “should not be 

selling” the notes because Respondents held no securities licenses.

39 

Respondents began selling Verto notes in November 2013.40 In order to 

satisfy themselves that Verto notes were not securities, they took certain steps, 

including conferring with Schantz and his attorney, John Pauciulo with the 

firm Eckert Seamans Cherin & Mellott, LLC, who told Respondents that the 

nine-month note “wasn’t a security because of [certain] exemptions.”41 Before

Respondents began selling Verto notes, Schantz told them that Pauciulo 

opined that the notes were not securities.42 Rose testified that he, Leeman, and 

Schantz also had “a couple of phone call conversations” with Pauciulo, and 

“some” of those calls were before they started selling Verto notes.43

Respondents and Schantz participated in phone conference calls with Pauciulo, 

during which Pauciulo told Respondents that the Verto notes were not 

securities.44

As part of their “due diligence outside of the law firm” that Schantz 

retained—meaning Pauciulo and Eckert Seamans—Respondents performed 

internet research about what constitutes a security and exemptions from 

 

38 Vakiener Decl., Ex. D. at 107.

39 Resp’ts’ App. 1430; see Vakiener Decl., Ex. D at 107.

40 Settlement Order ¶ 27.

41 Vakiener Decl., Ex. D. at 107; see Resp’ts’ App. 1513. During investigative 

testimony, Schantz stated, “it’s pretty clear. I’ve read the code” and “it 

specifically states that notes [that] would mature in nine months or less are 

not ... securities.” Resp’ts’ App. 1447.

42 Resp’ts’ App. 1431. And Leeman testified that he believed Schantz: “most 

of all, we had the testimony of Mr. Schantz, who we believed would have never 

engaged in selling” Verto notes “if his attorney had said you better not, it is a 

security. He wouldn’t do that.” Vakiener Decl., Ex. E at 106.

43 Vakiener Decl., Ex. D at 137. Leeman testified that they had received 

Pauciulo’s “view” that the Verto notes were not securities before sales started, 

but he could not recall whether that view was expressed in a phone call or 

email exchange. Vakiener Decl., Ex. E at 106; see Resp’ts’ App. 1513.

44 Vakiener Decl., Ex. D at 136–38.
8

registration, including the nine-month note exemption.45 Their research led 

Respondents to conclude that a nine-month note “may or may not be a security” 

depending on “different criteria.”46 When asked what criteria Respondents 

found, Rose stated: “One, the fact that it is nine months; two, it said even if it 

was longer than nine months, as long as the note is backed by assets of a 

company, then it is not a security.”

47 Based on their research, Respondents “felt 

that [a Verto note] wasn’t a security.”48

Leeman emailed Schantz on November 15, 2013, to say that another 

individual, Dave Valencia, told Leeman that he (Valencia) would “not 

participate” because Valencia’s attorney believed the Verto notes were 

securities.49 Leeman added, however, that his internet research revealed 

nothing “that would call a 9 month note a security unless the laws are different 

in California.”50 Schantz responded that “[w]e use very good and expensive 

counsel to vet these issues and there is no problem at all with a 9 month note. 

You may be correct that there is something in California .... I would be happy 

to have [Valencia’s] counsel speak to ours ....”51

On November 19, 2013, Schantz emailed Leeman and attorney Thomas D. 

Sherman, of Locke Lord LLP, in order to introduce the two to each other.52

Context shows that Sherman was the attorney who told Valencia that the 

Verto notes were securities. Schantz said he would be “happy to discuss our 9 

month note program” and added that Pauciulo, who “has an extensive 

 

45 Vakiener Decl., Ex. D at 108; see id. at 110 (“[J]ust doing Google searches, 

right, and trying to find SEC documents. We’re obviously not securities 

licensed, so we wanted to make sure we weren’t, you know, doing anything 

wrong.”); Vakiener Decl., Ex. E at 109; Vakiener Decl., Ex. F at 7917.

46 Vakiener Decl., Ex. D at 108, 110.

47 Id. at 109.

48 Id. at 108.

49 Vakiener Decl., Ex. F at 7917.

50 Id.

51 Id.

52 Vakiener Decl., Ex. G at 271. 
9

securities background and is an ex investigator for the SEC,” was “[o]ur 

counsel for the note program.”53

Sherman responded the next morning raising issues relating to whether 

the Verto notes could qualify for certain registration exemptions.54 He also 

noted that California does not have a commercial-paper exemption and asked 

why the notes would not be securities under California law.55 Leeman 

responded that he hoped “it’s all OK because I wrote up $75,000 today!”56 This 

statement by Leeman is the earliest evidence of when an investor purchased a 

Verto note brokered by Respondents. Based on a preponderance of the 

evidence, November 20, 2013, was the first day Respondents sold Verto notes.

The next day, November 21, 2013, Leeman forwarded Sherman’s email to 

Rose.57 Among other things, Leeman said that if Schantz and Pauciulo 

convinced Sherman that “it’s OK” for them to sell the notes, “we’ve scored a big 

win for future people who may question it.”58 He added that he “hope[d] it all 

works out because I wrote about $85,000 yesterday.”59 There is no evidence 

that Respondents had additional contact or discussions with Sherman.

At some point before November 21, 2013, Respondents also spoke to a 

securities attorney in Dallas named David Shelmire.60 Leeman testified that 

Respondents spoke to Shelmire before November 21, 2013, about whether 

Verto notes were securities.61 And when asked whether Respondents 

 

53 Id.

54 Id. at 269–70.

55 Id. at 270.

56 Id. at 269. He added, “Nice that we have an attorney vetting the company 

for us on Dave Valencia’s nickel!!” Id. 

57 Vakiener Decl., Ex. H at 31789.

58 Id.

59 Id.

60 Vakiener Decl., Ex. D at 108–10, Ex. E at 107–08. 

61 Vakiener Decl., Ex. E at 107.
10

“consult[ed] any other attorney about” whether Verto notes were securities,

Rose responded that Respondents spoke to Shelmire.62

The Division asserts that Respondents did not speak to Shelmire about 

whether the Verto notes were securities but instead consulted him on other 

issues.63 Respondents did not disclose attorney-client communications with 

Shelmire. For this reason, I will not give any weight to Respondents’ 

consultations with Shelmire in determining Respondents’ mental state when 

selling the Verto notes.

In any event, as noted, Respondents began selling Verto notes in 

November 2013.64 Over the next two years, Respondents sold 162 notes to 82 

investors.65 Respondents received a 7% commission for each note they sold, 

with 5% going to the individual seller and 2% to Crescendo.66

Respondents solicited investors, including their insurance clients; gave 

investors offering materials; advised investors; and monitored and managed 

investor repayments.67 Rose and Leeman advertised the notes on two radio 

networks and directed listeners to Retirement Surety’s website.68 According to 

the site, a Verto note was “A Nine Month, Short-Term Investment with 

significantly higher returns than CDs or other safe money investments,” and 

was “200% collateralized” by life settlement policies.69 Crescendo’s website 

described an investment in the Verto notes as low risk and said the investment 

was “not a speculative investment influenced by market performance or the 

economy but rather an investment backed by 200% collateral with a known 

value.”70

 

62 Vakiener Decl., Ex. D at 108–09.

63 Mot. at 8, 18.

64 Settlement Order ¶¶ 12, 27.

65 Id. ¶¶ 12, 20.

66 Id. ¶ 21.

67 Id. ¶¶ 13–20.

68 Id. ¶ 18.

69 Id.

70 Id. ¶ 19.
11

Respondents also provided investors with a brochure.71 In the brochure, 

Respondents stated that investments were “fully collateralized and secured by 

a collateral assignment and pledge agreement of the life settlements acquired 

and owned by Verto.”72 They added that “life settlement assets will have a 

minimum ratio of 2:1 or 200% (loan to face value) in life settlements acquired 

and traded.”73 Respondents also stated that the investment was “not ... 

speculative” and “[a]ll the risk of a life settlement maturing at an accurately 

determined life expectancy is born by the institutions that purchase them from 

Verto.”74

In late June 2014, Leeman emailed Schantz to ask about “the difference 

between” the notes that led to Schantz’s consent order “and what we have?”75

Leeman added that “it looks like” the notes Schantz previously sold “were also 

9 month notes.”76

In early August 2014, Pauciulo responded to Leeman’s forwarded email 

that the law in the area “is complex and can be confusing.”77 He said, however, 

“We have drafted the documents with the intent to meet the requirements of 

the 9 month note exemption.”78 Although Pauciulo thought the Commission or 

a court would agree they are exempt, he wrote that it “would not be feasible” 

to “provid[e] a formal legal opinion” on the subject.79 He also offered that they 

could rely on the exemption in Securities Act “Section 4(2)” and “possibly,

Regulation D.”80 Finally, he suggested that rather than accepting commissions, 

 

71 Vakiener Decl. ¶ 11.

72 Vakiener Decl., Ex. J at 3 (capitalization altered).

73 Id. (capitalization altered).

74 Id. at 4.

75 Settlement Order ¶ 27.

76 Id.

77 Vakiener Decl., Ex. I at 1.

78 Id.

79 Id.

80 Id. The reference to Section 4(2) is presumably a reference to Securities 

Act Section 4(a)(2), which provides a registration exemption for issuer 

transactions not involving any public offering. 15 U.S.C. § 77d(a)(2). 

Regulation D under the Securities Act establishes exemptions for “limited 
12

Respondents “could serve as a purchaser representative and be retained and 

paid by the purchaser.”81

Verto was sometimes unable to pay investors under the terms of their 

notes.82 When that happened, Respondents negotiated and arranged 

“forbearance agreements” between Verto and the investors.83 Respondents 

received an additional 4% commission for each forbearance agreement.84

Respondents received $565,419 in commissions for brokering Verto notes, 

$89,279 for obtaining signed forbearance agreements, and an additional 

$29,552 for obtaining second forbearance agreements.85 In total, this broke 

down to $297,360 for Rose, $243,435 for Leeman, and $120,760 for 

Featherstone.86

For purposes of this proceeding, it is established that the Verto notes were 

securities and that no registration exemption applied to them.87 No 

registration statement was ever filed for the offer and sale of the Verto notes.88

Respondents knew that at least five of their investors were unaccredited.89

Respondents did not provide investors with the financial information required 

by Securities Act Rule 502(b)(2), and no one ever filed a Form D with the 

 

offerings” and transactions deemed not to be public offerings. 17 C.F.R. 

§§ 230.504(a), .506(a). 

81 Vakiener Decl., Ex. I at 1.

82 Settlement Order ¶ 22.

83 Id. ¶¶ 16, 22.

84 Id. ¶ 22.

85 Id. ¶ 23.

86 Id. ¶ 24.

87 Id. ¶¶ 26, 28.

88 Id. ¶ 28.

89 Id. Rule 506 under Securities Act Regulation D deals with unregistered 

offerings to accredited investors—those who meet certain income or 

sophistication requirements found in Rule 501(a). 17 C.F.R. §§ 230.501(a), 

.506.
13

Commission stating that Verto had complied with the exemptions in Securities 

Act Rule 506.90

Financial Condition of Respondents

The facts concerning Respondents’ financial condition come from the 

Respondents’ statements of financial condition and supporting documentation, 

which were prepared in May 2017, and supplemented by Respondents’ August 

2019 declarations.91

Featherstone

Featherstone is 72 years old.92 He is self-employed as a piano tuner and 

rebuilder, which can be a physically demanding job and becomes more difficult 

as he ages.

93 A significant portion of his income comes from Social Security 

benefits.94 Featherstone provides for two adult dependents who require 

around-the-clock care.95 Caring for his dependents reduces the time he has to 

work, although he relies on a friend to help when he needs to work or run 

 

90 Settlement Order ¶ 28. Rule 502(b)(2) governs the information that must 

be given to investors when securities are sold under Rule 506. 17 C.F.R. 

§ 230.502(b)(2). Issuers that rely on Rule 504 or 506 use Form D to file notice 

with the Commission of an offering. 17 C.F.R. § 230.503(a).

91 Pages 1 to 1425 of Respondents’ appendix are filed under seal. Retirement 

Surety, Admin. Proc. Rulings Release No. 6526, 2019 SEC LEXIS 665 (ALJ 

Mar. 28, 2019). For the same reasons, Respondents’ supplemental filings, 

pages 1505 to 1514 of the appendix and accompanying exhibits, will be placed 

under seal. Because Respondents’ ability to pay is one of the core issues in this 

proceeding, however, I will discuss some high-level details from those 

materials that do not reveal personally identifiable or otherwise sensitive 

information. See Rules of Practice, 60 Fed. Reg. 32,738, 32,792–93 (June 23, 

1995) (comment to adoption of 17 C.F.R. § 201.630(c)). 

92 Resp’ts’ App. 1505.

93 Id. at 1506.

94 Id. at 1505.

95 Id. at 1505–06.
14

errands.96 Featherstone expects to incur “significant expenses” related to the 

care of his dependents.97

In 2017, Featherstone’s monthly household income varied from month to 

month and was approximately $11,000.

98 His monthly household expenses 

were about $8,600.99 Because of the need to devote additional time to the care

of his dependents, Featherstone’s household income decreased to 

approximately $4,000 per month as of August 2019.100 He did not provide an 

update to his monthly expenses. Featherstone reported assets of about 

$1,500,000, including a home valued at $300,000, and liabilities of about 

$140,000, by far the largest of which was his home mortgage, on his 2017 

statement of financial condition.101

Leeman

Leeman is 70 years old.102 He is self-employed selling life insurance and a 

self-published book.103 The vast majority of his household income comes from 

his wife, but she is 71 years old and wishes to retire.104 Leeman has a 

significant medical condition that requires expensive treatment and hinders 

his ability to work.105 Since 2017, Leeman’s monthly household income has 

been approximately $6,300 and his monthly expenses were about $8,000.106 In 

 

96 Id. 

97 Id. at 1506.

98 Id. at 1015–16.

99 Id. at 1016.

100 Id. at 1505–06. 

101 Id. at 1012–13.

102 Id. at 6, 1508.

103 Id. at 1508.

104 Id. at 4–6, 1508.

105 Id. at 1508–09.

106 Id. at 1508. Leeman’s household income was substantially higher in 2016. 

Id. at 5.
15

2017, his total assets were over $430,000, including a home, and liabilities 

were about $200,000.107

Rose

Rose is 63 years old.108 He is a self-employed insurance salesperson.109 His 

combined household income is about $6,000 per month, the majority of which 

is Social Security benefits.110 Rose’s monthly expenses are about $9,200.

111

Rose’s household income was significantly higher before 2017 due to changes 

in his wife’s employment.112 Including two homes with a combined value of

about $650,000, Rose and his wife have over $1,000,000 in total assets and 

about $320,000 in total liabilities.113

Conclusions of Law

Civil Penalties

I denied the Division’s motion for summary disposition with respect to civil 

money penalties due to material questions of fact regarding whether 

respondents acted recklessly. Reviewing the record again, I do not find 

sufficient evidence to conclude that they were reckless. Applying the statutory 

factors and considering the other sanctions imposed, I find that first-tier civil 

money penalties are in the public interest.

Legal Standards

In this proceeding, the Commission may impose civil monetary penalties 

if a respondent has willfully violated a provision of the Securities Act or 

Exchange Act and the penalty is in the public interest.114 The settlement order 

 

107 Id. at 1–3.

108 Id. at 1511.

109 Id.

110 Id.

111 Id. at 1512.

112 Id. 

113 Id. at 420–22.

114 15 U.S.C. §§ 77h-1(g)(1), 78u-2(a)(1). Under Exchange Act Section 

21B(a)(2), the Commission may also impose civil monetary penalties here 

because this proceeding was instituted as a cease-and-desist proceeding and 
16

conclusively resolves against Respondents the question of whether they 

violated the Securities Act or Exchange Act and whether they acted willfully.115

That leaves the public interest and the penalty tier. 

In determining whether civil penalties are in the public interest, the 

Commission considers (1) whether the violation involved fraud, deceit, 

manipulation, or deliberate or reckless disregard of a regulatory requirement; 

(2) the harm to others; (3) any unjust enrichment; (4) the respondent’s history 

of securities-law violations or criminal offenses; (5) the need for deterrence; 

and (6) such other matters as justice requires.116 The maximum civil penalty 

that may be imposed is based on the culpability of the respondent and is 

divided into three tiers. A first-tier penalty for the period at issue in this 

proceeding is limited to $7,500 and may be imposed for any violation.117 A 

second-tier penalty, which has a maximum of $80,000, may be imposed if the 

violation involved fraud, deceit, manipulation, or deliberate or reckless 

disregard of a regulatory requirement.118 And a third-tier penalty, with a 

maximum of $160,000, may be imposed if the requirements for second-tier 

penalties are met and the violation resulted in either “substantial losses or 

 

Respondents violated a provision of the Exchange Act. 15 U.S.C. § 78u-2(a)(2). 

Section 21B(a)(2) does not explicitly require a finding that a Respondent acted 

willfully or that the penalty be in the public interest. Id. 

115 Settlement Order § III.D.

116 15 U.S.C. § 78u-2(c). Although the Securities Act does not contain a 

statutory list of public-interest factors, the Commission considers the factors 

listed under the other securities statutes when assessing the public interest

under the Securities Act. See Thomas C. Gonnella, Securities Act Release 

No. 10119, 2016 WL 4233837, at *14 & n.70 (Aug. 10, 2016), pet. argued, 

No. 16-3433 (2d Cir. Sept. 9, 2019); see generally 15 U.S.C. § 77h-1.

117 15 U.S.C. §§ 77h-1(g)(2)(A), 78u-2(b)(1); 17 C.F.R § 201.1001, tbl.I. Higher 

maximum penalty amounts apply to conduct occurring after November 2, 2015. 

See Adjustments to Civil Monetary Penalty Amounts, 84 Fed. Reg. 5122 (Feb. 

20, 2019). Although the last Verto notes were sold in November 2015, 

Settlement Order ¶ 12, and Respondents earned commissions on forbearance 

agreements in 2016, id. ¶ 24, the vast majority of commissions were earned 

before November 2, 2015. Because the Division did not make any argument to 

the contrary, I will use the maximum civil penalty amounts in effect from 

March 6, 2013, to November 2, 2015.

118 15 U.S.C. §§ 77h-1(g)(2)(B), 78u-2(b)(2); 17 C.F.R § 201.1001, tbl.I.
17

created a significant risk of substantial losses to other persons” or “substantial 

pecuniary gain to the person who committed the act or omission.”

119

There is no allegation that Respondents’ conduct involved fraud, deceit, or 

manipulation. The parties dispute whether Respondents acted in reckless 

disregard of a regulatory requirement. Recklessness is not a “heightened form 

of ordinary negligence” but requires “an ‘extreme departure from the standards 

of ordinary care ... which presents a danger of misleading buyers ... that is ... 

so obvious that the actor must have been aware of it.’”120 For example, the 

“‘egregious refusal to see the obvious, or to investigate the doubtful’ ... is strong 

evidence of recklessness.”121

Parties’ Arguments

The Division argues that third-tier civil penalties should be imposed 

because Respondents recklessly disregarded the registration requirements of 

the Securities Act and Exchange Act.122 In support of this, the Division 

contends that Respondents harbored concerns that the Verto notes could be 

securities and were on notice after hearing from Valencia that he would not 

participate due to his attorney’s opinion that the Verto notes were securities.123

The Division also argues that Respondents could not have reasonably relied on 

the information they received from Schantz and Pauciulo—who, as Verto’s 

attorney, was not a disinterested party.

124 According to the Division, 

Respondents began selling the notes before hearing from Pauciulo, and 

Pauciulo stated that he could not provide a formal legal opinion.125 The 

 

119 15 U.S.C. §§ 77h-1(g)(2)(C), 78u-2(b)(3); 17 C.F.R § 201.1001, tbl.I.

120 SEC v. Steadman, 967 F.2d 636, 641–42 (D.C. Cir. 1992) (quoting 

Sundstrand Corp. v. Sun Chem. Corp., 553 F.2d 1033, 1045 (7th Cir. 1977)).

121 Bernerd E. Young, Securities Act Release No. 10060, 2016 WL 1168564, 

at *17 (Mar. 24, 2016) (quoting Chill v. General Elec. Co., 101 F.3d 263, 269 

(2d Cir. 1996)), argued, No. 16-1149 (D.C. Cir. Dec. 16, 2019).

122 Div. Supp. Reply at 2

123 Id. at 2–3; Settlement Order ¶ 27.

124 Div. Supp. Reply at 3.

125 Id.
18

Division further contends that Respondents’ sale of the notes created a 

substantial risk of loss to investors.126

Respondents assert that they acted in good faith. Because they were 

inexperienced in securities matters, they relied on others, including Schantz 

and Pauciulo, who repeatedly told them that the Verto notes were not 

securities.127

Recklessness

The evidence does not show that Respondents recklessly disregarded the 

registration requirements of the securities laws. Respondents knew they could 

not sell securities.

128 And they were interested in the Verto notes because they 

believed the notes were not securities under the nine-month exemption.

129

Although Respondents did some research on their own, because they did not 

have a securities background, they primarily relied on others’ advice.130 In this 

 

126 Id. at 4–5.

127 Supp. Resp. at 7.

128 See Vakiener Decl., Ex. D. at 107.

129 See id.

130 One court has observed that because “securities laws are ‘complex and 

often uncertain’” a “‘layman [i.e., a non-lawyer] has no real choice but to rely 

on counsel.’” Howard v. SEC, 376 F.3d 1136, 1147 n.20 (D.C. Cir. 2004) 

(quoting Douglas W. Hawes & Thomas J. Sherrard, Reliance on Advice of 

Counsel as a Defense in Corporate and Securities Cases, 62 Va. L. Rev. 1, 36 

(1976) (alteration in original)). 

Although a securities attorney familiar with the history of the nine-month 

exemption might think otherwise, the statute’s plain language could be read 

to support a blanket exception for all nine-month notes. 15 U.S.C. §§ 77c(a)(3) 

(listing as exempted securities any note “which has a maturity at the time of 

issuance of not exceeding nine months”); 78c(a)(10) (“The term ‘security’ ... 

shall not include ... any note ... which has a maturity at the time of issuance 

of not exceeding nine months ....”). But see Reves v. Ernst & Young, 494 U.S. 

56, 63 (1990) (“[T]he phrase ‘any note’ should not be interpreted to mean 

literally ‘any note,’ but must be understood against the backdrop of what 

Congress was attempting to accomplish in enacting the Securities Acts.”); id. 

at 73 (Stevens, J., concurring) (noting that the courts of appeals “have been 

unanimous in rejecting a literal reading” of the nine-month-note exemption); 
19

proceeding, Respondents did not assert a formal advice of counsel defense, but 

“reliance on the advice of counsel need not be a formal defense; it is simply 

evidence of good faith,” and therefore “a relevant consideration in evaluating 

... scienter.”

131

Given Schantz’s position and disciplinary background, if Respondents had 

relied solely on his word that the Verto notes were not securities, their reliance 

would have been misplaced and they consequently might have been reckless to 

sell the notes. But the same is not true about Respondents’ reliance on 

Pauciulo. Respondents knew that he was “from a very large and reputable law 

firm in Philadelphia,”132 and that he had extensive securities experience.133

Rose and Leeman communicated with Pauciulo and received his assurance 

that the Verto notes were exempt before starting sales.

134 When Leeman raised 

questions about the exemption in 2014, Pauciulo again advised that the notes 

were created to meet the exemption’s requirements.

135 It is true that Pauciulo

conditioned his analysis with the statement that “a formal legal opinion”

regarding the Verto notes was not “feasible.”

136 Although this might have been 

a red flag to experienced securities practitioners, Respondents were not 

experienced. And while the Division remarks on Pauciulo’s statement that he 

could not “provid[e] a formal legal opinion,” it has neither explained the 

significance Respondents as laymen should have attached to this qualifier nor 

denied that Pauciulo was, in fact, an experienced securities attorney. 

Respondents were unwise and perhaps overly credulous, but relying on 

Pauciulo’s advice was not an egregious refusal to investigate the doubtful.137

 

Interpretation of Section 3(a)(3), 26 Fed. Reg. 9158, 9159 (Sept. 20, 1961)

(explaining the reach of the nine-month exemption).

131 Howard, 376 F.3d at 1147.

132 Vakiener Decl., Ex. E. at 105.

133 Vakiener Decl., Ex. G at 271.

134 Vakiener Decl., Ex. D at 136–38; Ex. E at 106; Resp’ts’ App. 1513.

135 Vakiener Decl., Ex. I at 1.

136 Id.

137 Some securities professionals, including experienced registered 

representatives, have a duty to investigate “‘where there are any unusual 

factors’” and the failure to do so in the face of an “abundance of red flags” is 

evidence of extreme recklessness despite the approval of a compliance officer. 

See Graham v. SEC, 222 F.3d 994, 1005–06 (D.C. Cir. 2000) (quoting Sharon 
20

Although there were some red flags, the evidence does not show that it was so 

obvious the notes were securities that Respondents must have known it.

Respondents, therefore, did not act with scienter when they failed to register 

as brokers and sold unregistered securities. The first public interest factor 

weighs in Respondents’ favor. 

Other Factors

Regarding harm to others, the Verto notes did not perform as advertised, 

causing some investors to lose money. The fair fund established in SEC v. 

Schantz is evidence of the significant overall harm caused by the Verto notes, 

and as of April 2019 Schantz still owed $1.5 million to investors under the 

terms of his judgment.

138 Respondents’ conduct contributed to this harm, 

although their role in selling the notes based on Schantz’s assertions was not 

as significant as Schantz’s role in creating the notes and making unlikely

assertions about them. Twenty-three investor customers of Leeman and Rose, 

who invested about $1.65 million or roughly 20% of the investments brokered 

by Leeman and Rose, submitted declarations stating that they were “happy 

 

M. Graham, Exchange Act Release No. 40727, 1998 WL 823072, at *6 n.30 

(Nov. 30, 1998)). But Respondents were inexperienced and unregistered—a 

violation of the securities laws for which they are liable. While they perhaps 

should have known better, in their position not further investigating the notes 

was not extremely reckless. Cf. id. at 1006. Indeed, in another case involving 

the sale of unregistered securities, the Commission held that consulting with 

others, including an attorney, “whom [the respondent] reasonably regarded as 

more sophisticated ... than ... himself” was a strong mitigating factor that 

weighed in favor of a minor sanction. Charles C. Carlson, Exchange Act 

Release No. 14246, 1977 SEC LEXIS 162, at *20 (Dec. 12, 1977).

138 Vakiener Decl. ¶ 14; Amended Final Judgment as to Defendants William 

R. Schantz and Verto Capital Management LLC, Schantz (Feb. 27, 2018), ECF 

No. 13. Schantz and the Commission have continued to litigate over the 

unsatisfied balance of the consent judgment. See Order, Schantz (July 1, 2019), 

ECF No. 28 (holding Schantz in contempt); Consent Order, Schantz (Sept. 23, 

2019), ECF No. 45 (appointing an agent to sell a property).
21

with the services provided.”139 Of those 23 investors, 11 had received a full 

return of principal and interest.140

Respondents received large commissions—7% on the original sales and 4%

on the forbearance agreements. These commissions constituted unjust 

enrichment. On the other hand, Respondents do not have any history of 

violations of the securities laws or prior disciplinary history. And given

Respondents’ age, current employment, suspensions from industry association, 

and cease-and-desist order, the need for specific deterrence is minimal and the 

need for general deterrence is adequately covered by the other sanctions 

imposed.

As to “such other matters as justice requires,” Respondents’ liability 

hinges on whether the Verto notes were securities. Although Respondents now 

concede—and the settlement order confirms—that the notes were securities, 

Respondents were not reckless in determining that the notes were not 

securities.141 I cannot ignore, however, the fact that Respondents “held 

themselves out as financial advisors providing specialized knowledge on 

investments,” when they lacked any specialized knowledge.142 And although 

they were aware of Schantz’s background, Respondents accepted his unlikely 

assertions about Verto notes at face value without further investigation and 

without supporting documentation.143 They therefore told prospective 

investors that Verto notes were non-speculative, low risk and “200% 

 

139 Resp’ts’ App. 1451–60, 63–78, 81–82, 1487–1504; see Settlement Order 

¶ 24.

140 Resp’ts’ App. at 1451, 1453, 1455, 1457, 1471, 1473, 1477, 1489, 1493, 

1495, 1497.

141 Respondents’ situation is similar to that in Carlson, where the 

Commission held that although Carlson sold unregistered securities, his 

liability was mitigated by the fact that he relied on the advice of others, 

including an attorney, “whom he reasonably regarded as more sophisticated ... 

than he was.” 1977 SEC LEXIS 162, at *20; see id. at *20 n.40 (stating that 

although “those assurances [were] incorrect[,] ... we cannot shut our eyes to 

the fact that some” authoritative sources “appear[ed] to have agreed with ... 

the assurances on which Carlson relied.”).

142 Settlement Order ¶ 25; Vakiener Decl., Ex. E at 112.

143 Vakiener Decl., Ex. D at 76, 89–90.
22

collateralized” based only on what Schantz told them.144 So, while Respondents 

did not act with scienter in violating Section 5 and Section 15, their actions 

leave much to be desired.

Conclusion

Because Respondents did not act with scienter, only first-tier civil 

penalties may be imposed. Respondents’ misconduct led to serious harm to 

investors and Respondents received hundreds of thousands in unjust 

enrichment. Weighing Respondents’ conduct and the other statutory factors,

and Respondents’ ability to pay, which is addressed below, a civil penalty 

within the first-tier range is appropriate and in the public interest. I will order 

each Respondent to pay a $3,750 civil penalty.

Ability to Pay

In determining whether disgorgement, interest, or monetary penalties are

in the public interest, the Commission or its administrative law judges may 

consider evidence concerning ability to pay.145 Considering this evidence is an 

exercise of discretion, and even if the Commission considers ability to pay, it 

“is only one factor ... and is not dispositive.”146 Respondents bear the burden of 

proving their inability to pay.147

The Commission has not provided extensive guidance concerning inability 

to pay, but it has imposed penalties despite a demonstrated inability to pay 

when the misconduct at issue is “sufficiently egregious.”148 I will apply a twopart inquiry in determining whether to reduce monetary sanctions due to an 

inability to pay.

149 First, I will consider whether any Respondent has 

 

144 Settlement Order ¶¶ 18–19; Vakiener Decl., Ex. D at 76, 89–90.

145 17 C.F.R. § 201.630(a); see 15 U.S.C. §§ 77h-1(g)(3), 78u-2(d). Because the 

Division has not disputed Respondents’ ability-to-pay evidence, I take it at face 

value.

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

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

Cir. 2010).

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

*4 & nn.29–30 (Oct. 27, 2006).

148 Bridge, 2009 WL 3100582, at *25; Lehman, 2006 WL 3054584, at *4.

149 See Retirement Surety, 2019 SEC LEXIS 1385, at *42–44.
23

demonstrated an inability to pay in whole or in part. Second, if a Respondent 

has demonstrated an inability to pay, I will consider whether I should credit 

that in view of the seriousness or egregiousness of the violation in relation to 

the Commission’s mission of “‘protecting investors[,] ... safeguarding the 

integrity of the markets,’” and “making securities law violations 

unprofitable.”150

Featherstone

Although Featherstone reported significant assets on his statement of 

financial condition, review of that document shows that his net assets are not 

as significant as they appear.

151 Since he submitted that statement, his income 

has decreased substantially and he has an additional adult dependent. 

Featherstone’s income is now insufficient to cover his monthly expenses, and 

his long-term earning potential is low. 

I previously determined that Featherstone should disgorge $120,760.152

While I did not calculate prejudgment interest, it is likely to be significant—

more than $13,000.153 Comparing this amount to Featherstone’s current 

financial condition, he has established an inability to pay the entire amount.

Turning to the second part of the inquiry, while the violations are serious,

154

 

150 Gordon Brent Pierce, Securities Act Release No. 9555, 2014 WL 896757, 

at *19 (Mar. 7, 2014) (quoting SEC v. Rind, 991 F.2d 1486, 1491 (9th Cir. 1993)) 

(describing the Commission’s mission in the course of explaining the purpose 

of disgorgement), pet. denied, 786 F.3d 1027 (D.C. Cir. 2015).

151 In his May 2017 statement of financial condition, Featherstone declared 

that his net worth exceeded $1 million. Resp’ts’ App. at 1012–13. His largest 

asset, however, was identified as the “Cash Surrender Value of Insurance.” Id.

at 1012. But in his explanation of assets, Featherstone stated that his 

insurance policies were “beneficial to [his] family as stated in the policy,” and 

“[b]oth are term, not permanent life.” Id. at 1013. Featherstone’s next biggest 

asset is his home, but it is partially encumbered by a mortgage and is the home 

for two dependents who depend on him to provide constant care. Id. at 1012–

13. One of Featherstone’s dependents is also the beneficiary of a trust that, in 

2017, provided annual income of about $3,000. Id. at 1419–20.

152 Retirement Surety, 2019 SEC LEXIS 1385, at *27.

153 See id. at *27 n.106.

154 The registration requirements in Securities Act Section 5 “are a keystone 

of the entire system of securities regulation, and set forth basic requirements 

for the protection of investors.” Sirianni v. SEC, 677 F.2d 1284, 1289 (9th Cir. 
24

Featherstone’s conduct was not egregious. As discussed, he did not act with 

scienter. It is appropriate to credit his inability to pay.

Because Featherstone’s monthly cash flow is negative and not likely to 

increase in the future, and because of the economic challenges he faces 

resulting from the fact he must provide long-term, continuous care for two 

dependents, it is appropriate to discount his disgorgement amount. But 

because of the importance of Section 5 and Section 15, and because of the 

manner in which Respondents held themselves out as financial advisors and 

accepted and repeated Schantz’s claims, I cannot waive the entire 

disgorgement amount. I will discount it by half, for a final disgorgement figure 

of $60,380, plus prejudgment interest.

155

Leeman

Leeman reported a net worth of about $240,000, most of which is equity 

in his home.156 His monthly household expenses exceed his monthly household 

income, and this income is likely to decrease in the future considering his 

significant medical condition and his and his wife’s age. I previously 

determined that Leeman should disgorge $243,435, and prejudgment interest 

is likely to exceed $26,000.157 I find that Leeman has established an inability 

to pay. Leeman did not act with scienter, and his conduct was not otherwise 

egregious. I will credit his inability to pay.

Leeman’s financial condition is precarious and unlikely to improve in the 

future. Nevertheless, Leeman is not impecunious, and the seriousness of the 

violations and his behavior requires that some monetary sanction be imposed. 

Balancing these factors with Leeman’s health, income, and expenses, I reduce 

 

1982). Similarly, the registration requirement in Exchange Act Section 15 “is 

‘of the utmost importance in effecting the purposes of the Act’ because it 

enables the SEC ‘to exercise discipline over those who may engage in the 

securities business and it establishes necessary standards with respect to 

training, experience, and records.’” SEC v. Benger, 697 F. Supp. 2d 932, 944 

(N.D. Ill. 2010) (quoting Celsion Corp. v. Stearns Mgmt. Corp., 157 F. Supp. 2d 

942, 947 (N.D. Ill. 2001)).

155 Prejudgment interest will be calculated from January 1, 2017, as 

Respondents’ earned Commissions “through 2016.” Settlement Order ¶ 24.

156 Resp’ts’ App. at 1–3.

157 Retirement Surety, 2019 SEC LEXIS 1385, at *27 & n.106.
25

the disgorgement amount to $24,343.50, or 10% of the determined total, plus 

prejudgment interest.

Rose

Rose is the youngest of the Respondents and in the best financial 

condition. Although he reported that his expenses currently exceed his 

household income, he has the highest prospects for increasing income in the 

future. Rose owns two homes with a combined value of about $650,000, he and 

his wife have over $1,000,000 in total assets and about $320,000 in total 

liabilities.158 I previously determined that Rose should disgorge $297,360 and 

prejudgment interest is likely to exceed $31,000.159 Comparing this amount to 

Rose’s financial condition, I find that he has not demonstrated an inability to 

pay.

Although Rose reported negative monthly cash flow, his net worth is 

significant, and it appears likely that his household income will increase (or 

his expenses will decrease) in the future. He and his wife have not yet reached

retirement age. For these reasons, I find that Rose can pay the amount of the 

disgorgement ordered, plus prejudgment interest.

160

Order

Under Rules of Practice 322 and 630(c), I ORDER that pages 1505 to 1514 

of Respondents’ appendix and accompanying exhibits be maintained under 

seal.

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

21C(e) of the Securities Exchange Act of 1934, David Featherstone must 

DISGORGE $60,380; David Leeman must DISGORGE $24,343.50; and 

Thomas Rose must DISGORGE $297,360. Respondents must pay prejudgment 

interest on the amount of disgorgement imposed. The prejudgment interest 

owed will be calculated from January 1, 2017, to the last day of the month 

preceding the month in which payment of disgorgement is made. Prejudgment 

interest will be computed at the underpayment rate of interest established 

 

158 Resp’ts’ App. at 420–22.

159 Retirement Surety, 2019 SEC LEXIS 1385, at *27 & n.106.

160 Cf. Robert L. Burns, Advisers Act Release No. 3260, 2011 WL 3407859, at 

*12 (Aug. 5, 2011) (holding that, where a respondent’s net worth exceeded the 

total amount of disgorgement, penalties, and interest, the respondent had not 

shown an inability to pay).
26

under Section 6621(a)(2) of the Internal Revenue Code, 26 U.S.C. § 6621(a)(2), 

and compounded quarterly. 

Under Section 8A(g) of the Securities Act of 1933 and Section 21B(a)(1)–

(2) of the Securities Exchange Act of 1934, David Featherstone, David Leeman, 

and Thomas Rose must each PAY A CIVIL MONEY PENALTY of $3,750.

Under Rule of Practice 1100, I ORDER that any funds recovered by 

disgorgement or civil penalties be placed in a fair fund for the benefit of 

investors harmed by the violations. 

Payment of civil money 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 the Respondent and

Administrative Proceeding No. 3-18061: 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 360.161 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.162 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. 

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 the 

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

 

161 See 17 C.F.R. § 201.360. 

162 See 17 C.F.R. § 201.111. 
27

to a party. If any of these events occur, the initial decision will not become final 

as to that party.

_______________________________

James E. Grimes

Administrative Law Judge