UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940

Release No. 5853 / September 8, 2021

ADMINISTRATIVE PROCEEDING 

File No. 3-20531

In the Matter of

Horter Investment Management, LLC 

and Drew K. Horter, 

Respondents.

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE AND 

DESIST PROCEEDINGS PURSUANT 

TO SECTIONS 203(e), 203(f) AND 

203(k) OF THE INVESTMENT 

ADVISERS ACT OF 1940 AND 

NOTICE OF HEARING

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against Horter Investment Management, LLC and Drew K. Horter (individually 

“Horter Investment” and “Horter,” collectively “Respondents”).

II.

After an investigation, the Division of Enforcement alleges that:

SUMMARY

1. Horter Investment, a registered investment adviser, and Drew Horter, Horter 

Investment’s founder and CEO, failed reasonably to supervise Kimm Hannan, an Investment 

Adviser Representative (“IAR”) with Horter Investment. 

2. From at least November 2015 through at least March 2017, Hannan 

misappropriated $728,001 from Horter Investment clients purportedly for his outside business 

activities (“OBA”), but instead he used those funds to gamble, pay personal expenses, and repay 

other investors. 

3. Horter Investment’s overall supervisory structure was inadequate to reasonably

supervise its IARs generally and Hannan specifically. Horter Investment failed to establish 

supervisory policies and procedures and failed to follow those policies and procedures it had in 

place. Horter Investment also failed reasonably to follow up on red flags. Similarly, Horter, who 
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had overall supervisory responsibility for Horter Investment, failed to follow specific policies 

and procedures, failed reasonably to supervise Hannan, made open-ended delegations of 

supervisory responsibility without following up, and failed reasonably to follow up on red flags.

4. As described below, Horter Investment and Horter failed to reasonably supervise 

Hannan within the meaning of Sections 203(e)(6) and 203(f) of the Advisers Act and Horter 

Investment willfully violated Section 206(4) of the Advisers Act, and Rule 206(4)-7 thereunder, 

by failing reasonably both to adopt policies and procedures designed to safeguard client assets 

against misappropriation by Hannan and also to implement policies and procedures it had 

adopted.

RESPONDENTS

5. Horter Investment Management, LLC is a Cincinnati-based investment adviser 

founded in 1991 and registered with the Commission since January 2007. Horter is Horter 

Investment’s Managing Member and owns a 90% share. Horter Investment has approximately 

$400 million in assets under management. On December 8, 2017, the Commission issued a 

settled order against Horter Investment for misstatements in its advertisements and other related 

issues. Horter Investment was censured and ordered to cease and desist, pay $482,595 in 

disgorgement and $46,209 in prejudgment interest, and pay a $250,000 civil penalty. Horter 

Investment Management, LLC, Advisers Act Release. No. 4823 (Dec. 8, 2017).

6. Drew K. Horter, age 66, resides in Mason, Ohio. Drew Horter is Horter 

Investment’s founder and has been Horter Investment’s Chief Executive Officer and President 

since 1991. Drew Horter previously held Series 6, 7, 22, and 63 licenses. Drew Horter has no 

disciplinary history.

OTHER RELEVANT ENTITIES AND INDIVIDUALS

7. Kimm C. Hannan, age 68, was an IAR with Horter Investment from December 

1, 2014 through March 24, 2017. Hannan was in Canton, Ohio while he was associated with 

Horter Investment. Prior to the conduct at issue, Hannan was a registered representative holding 

Series 7 and 63 licenses. Hannan is currently serving a 20-year prison term at the Lorain

Correctional Institution in Grafton, Ohio following his January 2019 conviction for Ohio state 

securities law violations arising, in part, from his misappropriation of funds from Horter 

Investment clients for his OBAs. On July 11, 2019, in a follow-on proceeding based on Hannan’s 

conviction, the Commission issued an Order Instituting Proceedings pursuant to Section 203(f) 

of the Investment Advisers Act of 1940 (“Advisers Act”). In re Kimm Hannan, Adviser Act Rel. 

5295 (July 11, 2019). On January 15, 2020, the Division of Enforcement moved for entry of an 

Order finding Hannan in default and seeking to bar him from associating with any investment 

adviser, broker, dealer, municipal securities dealer, municipal adviser, transfer agent, or 

nationally recognized statistical rating agency; that motion is pending.
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FACTS

Horter Investment Background

8. Horter Investment is an investment adviser whose business model is premised on 

employing IARs operating as independent contractors from remote locations. Since 2014, 95% 

or more of Horter Investment’s IARs have worked in remote or field offices. 

9. The Commission’s examination staff issued a deficiency letter to Horter 

Investment in December 2014, noting Horter Investment “appears to have not taken our previous 

deficiency letters seriously” and had “failed to conduct adequate annual compliance reviews 

[and] failed to implement an effective compliance program . . .” The consultant Horter 

Investment brought in to review its compliance program following that examination noted Horter

Investment’s “growth has obviously outpaced its supervisory, compliance, and operational 

capabilities.” The consultant advised Horter Investment to “develop a more detailed procedure 

for supervising the activities of its remote IARs.”

Horter’s Supervisory Responsibility and Delegations.

10. Horter has had ultimate authority over Horter Investment’s policies and 

procedures since the firm’s inception. Horter also has overall supervisory responsibility for 

Horter Investment and its IARs. Drew Horter has had final authority to hire, fire, or discipline 

Horter Investment’s IARs since the firm’s inception. 

11. Although Horter allegedly delegated some of his supervisory responsibilities, his 

delegations were ad hoc with no documentation evidencing the delegations or defining their 

nature and scope. Most importantly, he failed to follow up on or oversee those delegations. 

12. Horter delegated responsibility to a compliance officer at Horter Investment (the 

“Compliance Officer”) for the required annual review of Horter Investment’s policies and 

procedures in 2016 and 2017 and to a consulting firm and the Compliance Officer for the 2015 

annual review. However, Horter did nothing to follow up on those delegations, nor did he 

confirm the delegatees were following Horter Investment’s policies and procedures.

Horter Investment Hires Hannan.

13. On October 22, 2014, Hannan voluntarily terminated his employment with his 

prior investment adviser following an internal review. The Form U5 filed on November 14, 2014 

confirmed Hannan’s “use of marketing materials not approved by the firm and that checks were 

made payable to his DBA, rather than his RIA as required.” 

14. On November 21, 2014, Hannan signed an IAR agreement with Horter 

Investment and, on December 1, 2014, he registered with Horter Investment. Horter was 

primarily responsible for supervising Hannan.

15. The day after Hannan registered with Horter Investment, FINRA sent Hannan a 

letter informing him it was initiating an inquiry regarding his conduct at his prior investment 

adviser, specifically “allegations regarding marketing materials and checks made payable to yoru 
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[sic] DBA.” A week later, Hannan forwarded the FINRA letter to the Compliance Officer. 

16. After reviewing the FINRA letter, the Compliance Officer recommended to 

Horter that Hannan be fired for effectively failing Horter Investment’s due diligence process. 

Horter rejected the Compliance Officer’s advice and instead accepted Hannan’s self-serving 

explanation, without any further inquiry, that clients were paying Hannan for providing 

consulting services. As a result, Horter Investment and Horter failed reasonably either to 

investigate the conduct identified by FINRA or to follow up on the FINRA inquiry. 

17. Hannan continued as an IAR with Horter Investment through March 2017. 

Though Horter Investment designated Hannan a high-risk adviser, it subjected him to no specific 

restrictions, no additional requirements, and no heightened supervision. 

Hannan Fraudulently Solicits and Receives $728,001 in

Horter Investment Client Funds for his Outside Business Activities.

18. Hannan Properties, LLC (“Hannan Properties”), an OBA of Hannan’s, was a 

business entity for tax purposes only that Hannan used to solicit investors and to loan their funds 

to Hannan’s other projects. HR Resources, LLC, another of Hannan’s OBAs, was purportedly in 

the business of providing risk monitoring and financial education; Hannan was its managing 

member.

19. Horter and Horter Investment knew Hannan Properties was an OBA of Hannan 

through Hannan’s onboarding. Through Hannan’s repeated submissions of third-party 

distribution requests to Horter Investment from his clients to Hannan Properties, Horter 

Investment was on notice Hannan continued to operate Hannan Properties during his tenure at 

Horter Investments. In the fall of 2016, Horter Investments and Horter learned that HR 

Resources was another of Hannan’s OBAs.

20. Between November 19, 2015 and March 8, 2017, Hannan solicited and received 

investments in Hannan Properties totaling $728,001 from the accounts of several Horter 

Investment clients. 

21. To receive those funds, Hannan submitted to Horter Investment 17 requests to 

distribute Horter Investment client funds to Hannan Properties, which the firm processed and 

executed. Each of those third-party distribution requests clearly list Hannan Properties as the 

recipient of the transferred client funds. As a result, Horter Investment knew, or should have 

known, Hannan was soliciting client funds for his OBAs.

22. After Hannan emailed Horter about HR Resources in October 2016, Hannan 

solicited him for investments during November and December of 2016 and into early 2017,

seeking as much as $250,000. Throughout that time, there were numerous communications about 

the business among Hannan, Horter, and the Compliance Officer, including exchanges regarding 

HR Resources’ business model, business plan, and projections. Hannan also proposed Horter 

invest between $125,000 and $146,000 in return for “10% permanent equity in HR Resources[.]”
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23. In mid-December 2016, Hannan emailed Horter and explained, “I believe the 

money issue got in the way to beginning this relationship with Horter [Investment]. I have taken 

it off the table and will find it elsewhere.” Hannan nevertheless continued to solicit Horter to 

invest in HR Resources through early 2017.

24. Hannan solicited and receive funds from his Horter Investment clients for HR 

Resources via distributions to Hannan Properties. But neither Horter Investment nor Horter ever 

investigated whether Hannan was soliciting Horter Investment clients to invest in HR Resources.

25. On or about March 17, 2017, Horter Investment initiated an internal investigation 

after staff responsible for processing third-party distributions alerted the Compliance Officer that 

she was having a problem processing a distribution from a Horter Investment client to one of 

Hannan’s OBAs. The investigation concluded that Hannan violated investment related statutes, 

regulations, rules, or industry codes of conduct. 

26. Horter Investment terminated Hannan’s employment on March 24, 2017.

Hannan Commits Securities Fraud.

27. Hannan, as an IAR, owed a fiduciary duty and duty of undivided loyalty to his 

Horter Investment clients. As a fiduciary, Hannan had a duty to disclose material information to 

his clients, and to make his statements concerning proposed investment opportunities true and 

not misleading. Further, Hannan had a duty not to engage in activity that conflicted with his

clients’ interest without their informed consent. 

28. Hannan made materially false and/or misleading statements and omissions to his 

Horter Investment clients to persuade them to transfer funds from their Horter Investment 

accounts to Hannan Properties, an entity under his control and one of his OBAs. These 

materially false and/or misleading statements and omissions included:

(a) misrepresenting the state of the businesses (e.g., a dry cleaner, doggie day care, 

and HR Resources) for which he was soliciting their funds, including 

misrepresenting those businesses were doing well;

(b) failing to disclose those businesses had generated little or no profit, could not 

make payroll, and were encumbered by debt;

(c) failing to disclose that he used funds provided by clients for a variety of expenses 

unrelated to the businesses, including: gambling; alimony and support payments 

for his ex-wife; personal credit card bills; rent on the building for his investment 

advisory services business; his utilities; and his car payment and insurance; and

(d) failing to disclose their funds were used, in part, to pay prior investors rather than 

for the businesses themselves.
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29. At the time Hannan made these materially false and misleading statements and 

omissions, Hannan knew, or was reckless or negligent in not knowing, that these statements were 

materially false and omitted to state material facts necessary to make these statements not 

misleading under the circumstances. Further, Hannan knew, or was reckless or negligent in not 

knowing, of these disclosure failures to his Horter Investment clients. 

30. Hannan’s materially false and/or misleading statements to investors were 

important in their decision whether to invest. Had Hannan disclosed those true uses of funds to 

his Horter Investment clients, they would not have provided funds to him.

31. Hannan used means or instrumentalities of interstate commerce, including email, 

mail, and interstate wire transfers, to defraud his Horter Investment clients.

Hannan is Convicted and Imprisoned.

32. On January 18, 2019, Hannan was convicted by a jury in Stark County, Ohio of 

violating Ohio state laws and sentenced to a 20-year term of imprisonment. The conduct at issue 

in Hannan’s criminal trial included the same conduct—soliciting and receiving fund from clients 

for his outside business activities through the use of material misrepresentations and omissions—

that provides the basis for the failure to supervise at issue here. Among the statutes Hannan was 

convicted of violating was Ohio Revised Code § 1707.44(M)(1)(a)-(b), which provides: 

No investment adviser or investment adviser representative shall do 

any of the following: (a) Employ any device, scheme, or artifice to 

defraud any person; (b) Engage in any act, practice, or course of 

business that operates or would operate as a fraud or deceit upon any 

person . . . 

33. To convict Hannan for violating § 1707.44(M)(1)(a)-(b), the jury found that 

Hannan acted knowingly.

34. Section 1707.44(M)(1)(a)-(b) is Ohio’s analog to Section 206 of the Advisers Act 

provides:

It shall be unlawful for any investment adviser by use of the mails 

or any means or instrumentality of interstate commerce, directly or 

indirectly—(1) to employ any device, scheme, or artifice to defraud 

any client or prospective client; (2) to engage in any transaction, 

practice, or course of business which operates as a fraud or deceit 

upon any client or prospective client . . .

35. Hannan’s knowing conduct that was found to have violated Ohio Revised Code §

1707.44(M)(1)(a)-(b) constitutes uncharged violations of Section 206(1) and 206(2) of the 

Advisers Act, 15 U.S.C. § 80b-6(1)-(2).
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36. Hannan’s uncharged violations of the Advisers Act were made possible by Horter 

Investment’s and Horter’s failure reasonably to supervise Hannan and their failure to safeguard

retail investors’ assets against misappropriation.

37. Horter Investment and Horter failed reasonably to supervise Hannan by failing 

reasonably to: (a) establish supervisory policies and procedures; (2) implement existing policies and 

procedures; (c) follow up on red flags; and (d) delegate supervisory authority.

Horter Investment and Horter Fail Reasonably

to Establish Supervisory Policies and Procedures.

38. Horter Investment and Horter failed to adopt and implement written policies and

procedures reasonably designed to prevent violations of the Advisers Act in the areas of high-risk 

advisers heightened supervision, field visits and branch audits of remote IARs, and third-party 

distribution requests.

A. High-Risk Advisers and Heightened Supervision

39. More than half of the IARs Horter Investment has hired since November 2014 

were identified as high or moderate risk. 

40. In March 2015, a consultant warned Horter Investment that “higher risk IAR’s 

(those with previous disclosures and without IAR experience) require a program of closer 

supervision, particularly during their first years with Horter [Investment]. Currently, no 

procedures call for such a review.” In September 2016, the Compliance Officer similarly warned 

of the need for Horter Investment to “get our internal heightened supervision program 

developed.” 

41. Despite those warnings, Horter Investment and Horter did not institute heightened 

supervision procedures for high-risk advisers like Hannan until March 20, 2017, days before 

Horter Investment terminated his employment. Horter Investment and Horter did not adopt a 

heightened supervision agreement until November 2017. 

42. Horter Investment did establish procedures for identifying high-risk advisers and 

had concerns enough to designate Hannan a high-risk adviser, but those concerns did not 

translate into any restrictions on, or requirements of, Hannan and other high-risk advisers.

B. Field Visits and Branch Audits of Remote IARs

43. Horter Investment’s business model is premised on IARs functioning from remote 

offices. During Hannan’s tenure with Horter Investment, 95% or more of the firm’s investment 

adviser representatives, including Hannan, worked from remote or field offices. 

44. Examination staff in December 2014 noted in a deficiency to Horter Investment 

that it failed to conduct supervisory inspections of its IARs’ branch offices and an outside 

consultant in March 2015 recommended that Horter Investment “develop a more detailed 

procedure for supervising the activities of its remote IARs.” 
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45. Despite these warnings, Horter Investment and Horter did not adopt or implement 

any policies or procedures regarding field visits or branch audits of either its high-risk IARs until 

March 2017 or its IARs generally until November 2017 and did not begin conducting field visits 

or branch audits until August 2017. Horter Investment never conducted a field visit or branch 

audit of Hannan or his office.

C. Third-Party Distribution Requests

46. Prior to June 2016, Horter Investment had not adopted written policies and 

procedures regarding distributions from Horter Investment clients to third parties. 

47. In 2016, Horter Investment and Horter specifically considered implementing 

procedures that would have increased scrutiny of third-party distributions or stopped such 

distributions altogether, but decided against doing so because they would “get too much backlash 

from advisers . . . .” 

48. Following an incident in which Horter Investment mistakenly distributed more 

than $300,000 from a client’s account to a third-party in response to a fraudulent email that did 

not involve Hannan, in June 2016, Horter Investment began requiring verbal confirmation from 

clients for third-party distributions and logging of such distributions. However, Horter 

Investment and Horter required no review of the distribution log and established no further 

procedures and no written instructions for the “Client Distribution Request Log” at the time. 

49. As discussed below, those practices were miscommunicated or misinterpreted, not 

consistently followed, and not monitored by Horter Investment’s management, including Horter. 

Horter Investment did not adopt written policies and procedures for third-party distributions until 

October 2017, eight months after Hannan was terminated, and the Compliance Officer did not 

begin monitoring compliance with Horter Investment’s third-party distribution log and 

procedures until December 2017.

50. By engaging in this conduct, Horter Investment and Horter failed to adopt and

implement written policies and procedures reasonably designed to prevent violations of the

Advisers Act and failed reasonably to supervise Hannan.

Horter Investment and Horter Fail Reasonably to Implement Policies and Procedures.

51. Horter Investment and Horter also failed to implement policies and procedures it 

had adopted to prevent violations of the Advisers Act with respect to OBAs, supervisory 

reviews, third-party distributions, and the due diligence review of Hannan.

A. Outside Business Activities

52. During Hannan’s tenure, Horter Investment’s only policy regarding OBAs was in 

the firm’s April 1, 2016 Policies and Procedures Manual. That policy required, among other 

things, that “any business other than an IAR’s Horter investment advisory business[]” be 

reported and established various other requirements, including prior approval of the OBA, 

signoff from the CCO, written notice, and consideration of whether the OBA could be confused 
9

with Horter Investment’s business. Both Horter Investment and Horter failed to follow a number 

of requirements established by Horter Investment’s OBA policy.

53. Despite the requirement in Horter Investment’s OBA policy that IARs get prior 

approval for outside business activities and signoff from the CCO, Horter Investment and Horter 

allowed Hannan to operate HR Resources as outside businesses without either.

54. Horter Investment also failed to adhere to the requirement in its OBA policy that 

Hannan submit written notice describing HR Resources as a proposed OBA. 

55. Most significantly, neither Horter Investment nor Horter followed firm procedures 

in the OBA policy, which required them to consider: (a) whether HR Resources might be viewed 

by clients, customers, or the public as being part of Horter Investment’s investment advisory 

business; and (b) whether such OBA should be restricted or prohibited. 

56. Although clients, customers, or the public could potentially view HR Resources 

as being a Horter Investment product or associated with Horter Investment, neither Horter 

Investment nor Horter considered whether to put any restrictions on it or to disallow it as 

required by Horter Investments policies and procedures.

B. Supervisory Review

57. Horter Investment’s policies and procedures provide for supervisory reviews and 

sanctions for violations of the firm’s policies in order to “monitor and ensure the firm’s 

supervision policy is observed, implemented properly and amended or updated as appropriate.” 

58. Nevertheless, Horter Investment had no formal supervisory review process and 

there are no records that Horter Investment or Horter conducted any supervisory reviews of 

Hannan.

C. Third-Party Distribution Request Log and Distribution Procedures

59. In June 2016, after Horter Investment learned that it processed the distribution of 

more than $300,000 from a client’s account to a third party based on a fraudulent email, Horter 

Investment began requiring that Horter Investment get verbal confirmation from clients for thirdparty distributions and that such distributions be logged. 

60. On June 1, 2016, the Compliance Officer sent an email to two Horter Investment 

executives prior to distributing it to Horter Investment IARs. In the email, the Compliance 

Officer explained that “[d]istributions to third parties are the highest risk transaction that our 

organization faces[]” and requests for third-party distributions “should never be executed unless 

verbally confirmed by the client. . . . There will be no exceptions to this requirement.”

61. However, on at least one occasion, Horter Investment processed a third-party 

distribution request without speaking to the client as required and may have done so on other 

occasions. 
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62. Horter Investment also failed to log all third-party distributions as required. From 

the time the log was instituted in June 2016 through Hannan’s termination in March 2017, more 

third-party distributions from Horter Investment clients to Hannan Properties were not logged (7) 

than were logged (6).

63. The third-party distribution log was intended to be something Horter Investment 

could audit each month as part of its compliance program, but no one in compliance reviewed 

the log from its implementation in June 2016 until March 2017. 

64. Despite acknowledging Horter Investment began the third-party distribution log 

“to be able to better watch over third-party distributions[,]” Horter never reviewed or monitored 

the log, did not even know where it was kept, and did nothing to ensure the compliance 

department reviewed or monitored the log. Horter acknowledged that had he reviewed the log, 

which contained approximately 50 entries between June 2016 and March 2017, he would have 

seen the half dozen distributions from Horter Investment clients to Hannan Properties. 

65. Further, the person responsible for processing distributions was never instructed 

to watch for any particular types of distributions, including distributions to an IAR from his or 

her clients, nor did Horter Investment have any procedures for compliance to be notified of any 

third-party distributions from a client to an IAR. 

66. At no time did Horter Investment inquire of its clients why they were transferring 

funds to third parties, whether the transferee was offering them anything in return, or if the 

transferee made any promises to them, even if the transferee was their IAR.

D. Onboarding of Hannan

67. Horter Investment’s due diligence review of Hannan was rushed and, ultimately, 

ignored by Horter. 

68. Although Horter Investment’s onboardings of IARs, including due diligence

review, typically took 30-45 days, according to the Compliance Officer, Hannan’s onboarding 

only took seven days and was one of the fastest onboardings at Horter Investment. 

69. After learning of FINRA’s inquiry regarding Hannan, the Compliance Officer 

suggested to Horter that Hannan may have tried to rush through his onboarding before any 

disclosures were added to his public disclosure report. 

70. Based on Hannan’s updated IAPD public disclosure report, the Compliance 

Officer believed Hannan failed the Horter Investment due diligence process and recommended to 

Horter that he terminate Hannan.

71. Rejecting this advice, Horter directed the Compliance Officer to get Hannan’s 

self-serving explanation of his departure from his prior firm, which Horter accepted without 

question or any further inquiry. Horter, who is the only person at Horter Investment who could 

authorize hiring IARs who failed to meet the firm’s due diligence standards, made the ultimate 

decision to retain Hannan.
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72. By failing to follow its own policies and procedures reasonably designed to

prevent violations of the Advisers Act, Horter Investment and Horter failed reasonably to 

supervise Hannan.

Horter Investment and Horter Fail Reasonably to Follow up on Red Flags.

73. Horter Investment and Horter failed reasonably to investigate a number of red 

flags regarding Hannan’s conduct. 

74. First, Horter Investment and Horter failed reasonably to follow up on FINRA’s

inquiry regarding Hannan, which was a red flag. As described above, the Compliance Officer 

specifically warned Horter that Hannan may have tried to conceal what happened and retrieved a 

new IAPD public disclosure report for Hannan, which according to the Compliance Officer, 

looked different than the one Horter Investment had reviewed as a part of its due diligence of 

Hannan and which only had one disclosure from 5-10 years earlier.

75. Based on the updated report, the Compliance Officer concluded that Hannan 

failed Horter Investment’s due diligence and recommended to Horter that Hannan be terminated. 

Horter rejected this recommendation and instead accepted Hannan’s self-serving explanation, 

which neither Horter nor Horter Investment verified. 

76. Second, Horter Investment and Horter failed reasonably to monitor Hannan’s 

conduct as a high-risk adviser, another red flag. Despite identifying Hannan as a high-risk 

adviser, neither Horter Investment nor Horter imposed any restrictions, required any heightened 

supervision, or did anything to ensure Hannan was monitored more closely.

77. Third, Horter Investment failed reasonably to follow up for a period of over a year 

and a half on the red flags raised by the 17 distribution requests, 13 of which occurred in 2015 

and 2016, from Hannan’s Horter Investment clients to Hannan Properties it received, processed,

and executed. Horter Investment did nothing to investigate those distributions beyond confirming 

the distribution with the client. Moreover, neither Horter Investment nor Horter followed up even 

when half a dozen of those distributions were logged and subject to supervisory review. 

78. Finally, Horter Investment and Horter knew Hannan was aggressively attempting 

to raise money for HR Resources, but did nothing to more closely supervise Hannan or 

investigate whether he was soliciting Horter Investment clients for funds for his OBA.

79. With each of these red flags, Horter Investment and Horter failed reasonably to 

investigate in order to detect and prevent violations of the federal securities laws. To the 

contrary, Horter Investment and Horter ignored indications of wrongdoing or conducted minimal 

inquiry, thereby allowing Hannan’s misconduct to continue.

Horter Unreasonably Delegated Supervisory Authority.

80. Horter had ultimate supervisory responsibility for Horter Investment’s policies 

and procedures, as well as for Horter Investment’s IARs generally and Hannan specifically.
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81. Horter purported to delegate his supervisory responsibilities to others at Horter 

Investment, but those delegations were not reasonable. Horter’s delegations of supervisory 

responsibility were ad hoc and not followed up on or monitored. 

82. Nowhere was this approach more apparent than in the required annual review of 

Horter Investment’s policies and procedures. Horter delegated responsibility to the Compliance 

Officer for the annual reviews in 2016 and 2017 and to an outside consultant and the Compliance 

Officer for the 2015 annual review, but did not remember or did not know anything he did 

specifically to oversee those delegations and to supervise the reviews. If the Compliance Officer 

did not come to him with an issue, Horter did not ask if there were any issues.

83. Horter delegated supervisory responsibility for individual policies and procedures 

in a similar manner. Horter did not directly confirm whether his delegatee was following Horter 

Investment’s specific policies and procedures, such as the OBA policy and the procedures for the 

third-party distribution log and requests, and he was not aware of any problems or issues unless 

the delegatee raised them. 

84. Horter did nothing to follow up and proactively determine what delegatees were 

doing or if there were any issues. Horter could not recall anything specifically he did to oversee 

his delegation of supervisory responsibility to Horter Investment’s compliance department to 

ensure it was adequately supervising Hannan and did not even recall working with compliance 

regarding Hannan.

VIOLATIONS

85. As a result of the conduct described above, Hannan, an investment adviser 

representative with Horter Investment, fraudulently misappropriated client assets in violation of 

Sections 206(1) and 206(2) of the Advisers Act.

86. As a result of the conduct described above, Respondents failed reasonably to 

supervise Hannan. Respondent Horter Investment willfully violated Section 206(4) of the Advisers

Act and Rule 206(4)-7 thereunder, and Respondents Horter Investment and Horter failed 

reasonably to supervise, within the meaning of Sections 203(e)(6) and 203(f) of the Advisers 

Act.

III.

In view of the allegations made by the Division of Enforcement, the Commission deems it 

necessary and appropriate in the public interest that public administrative proceedings be 

instituted to determine:

(a) Whether the allegations set forth in Section II hereof are true and, in connection 

therewith, to afford Respondents Horter Investment and Horter an opportunity to establish any

defenses to such allegations; and
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(b) What, if any, remedial action is appropriate in the public interest against 

Respondents Horter Investment and Horter pursuant to Section 203(f) of the Advisers Act 

including, but not limited to, civil penalties pursuant to Section 203 of the Advisers Act.

IV.

IT IS ORDERED that a public hearing before the Commission for the purposes of taking 

evidence on the questions set forth in Section III hereof shall be convened not earlier than 30 days 

and not later than 60 days from service of this Order at a time and place to be fixed by further 

order of the Commission, pursuant to Rule 110 of the Commission’s Rules of Practice, 17 C.F.R. 

§ 201.110.

IT IS FURTHER ORDERED that Respondents Horter Investment and Horter shall each 

file an Answer to the allegations contained in this Order within twenty (20) days after service of 

this Order, as provided by Rule 220 of the Commission’s Rules of Practice, 17 C.F.R. § 201.220.

IT IS FURTHER ORDERED that the Division of Enforcement and Respondent shall 

conduct a prehearing conference pursuant to Rule 221 of the Commission’s Rules of Practice, 17 

C.F.R. § 201.221, within fourteen (14) days of service of the Answer. The parties may meet in 

person or participate by telephone or other remote means; following the conference, they shall 

file a statement with the Office of the Secretary advising the Commission of any agreements 

reached at said conference. If a prehearing conference was not held, a statement shall be filed 

with the Office of the Secretary advising the Commission of that fact and of the efforts made to 

meet and confer.

If any Respondent fails to file the directed Answer, or fails to appear at a hearing or 

conference after being duly notified, the Respondent may be deemed in default and the proceedings 

may be determined against him upon consideration of this Order, the allegations of which may be 

deemed to be true as provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission’s Rules 

of Practice, 17 C.F.R. §§ 201.155(a), 201.220(f), 201.221(f), and 201.310.

This Order shall be served forthwith upon Respondents by any means permitted by the 

Commission’s Rules of Practice.

The Commission finds that it would serve the interests of justice and not result in 

prejudice to any party to provide, pursuant to Rule 100(c) of the Commission’s Rules of Practice, 

17 C.F.R. § 201.100(c), that notwithstanding any contrary reference in the Rules of Practice to 

service of paper copies, service to the Division of Enforcement of all opinions, orders, and 

decisions described in Rule 141, 17 C.F.R. § 201.141, and all papers described in Rule 150(a), 

17 C.F.R. § 201.150(a), in these proceedings shall be by email to the attorneys who enter an 

appearance on behalf of the Division, and not by paper service.

Attention is called to Rule 151(a), (b) and (c) of the Commission’s Rules of Practice, 17 

C.F.R. § 201.151(a), (b) and (c), providing that when, as here, a proceeding is set before the 

Commission, all papers (including those listed in the following paragraph) shall be filed 

electronically in administrative proceedings using the Commission’s Electronic Filings in 
14

Administrative Proceedings (eFAP) system access through the Commission’s website, 

www.sec.gov, at http://www.sec.gov/eFAP. Respondent also must serve and accept service of 

documents electronically. All motions, objections, or applications will be decided by the 

Commission.

The Commission finds that it would serve the interests of justice and not result in 

prejudice to any party to provide, pursuant to Rule 100(c) of the Commission’s Rules of Practice, 

17 C.F.R. § 201.100(c), that notwithstanding any contrary reference in the Rules of Practice to 

filing with or disposition by a hearing officer, all filings, including those under Rules 210, 221, 

222, 230, 231, 232, 233, and 250 of the Commission’s Rules of Practice, 17 C.F.R. §§ 201.210, 

221, 222, 230, 231, 232, 233, and 250, shall be directed to and, as appropriate, decided by the 

Commission. This proceeding shall be deemed to be one under the 120-day timeframe specified 

in Rule of Practice 360(a)(2)(i), 17 C.F.R. § 201.360(a)(2)(i), for the purposes of applying Rules 

of Practice 233 and 250, 17 C.F.R. §§ 201.233 and 250. 

The Commission finds that it would serve the interests of justice and not result in 

prejudice to any party to provide, pursuant to Rule 100(c) of the Commission’s Rules of Practice, 

17 C.F.R. § 201.100(c), that the Commission shall issue a decision on the basis of the record in 

this proceeding, which shall consist of the items listed at Rule 350(a) of the Commission’s Rules 

of Practice, 17 C.F.R. § 201.350(a), and any other document or item filed with the Office of the 

Secretary and accepted into the record by the Commission. The provisions of Rule 351 of the 

Commission’s Rules of Practice, 17 C.F.R. § 201.351, relating to preparation and certification of 

a record index by the Office of the Secretary or the hearing officer are not applicable to this 

proceeding.

The Commission will issue a final order resolving the proceeding after one of the 

following: (A) The completion of post-hearing briefing in a proceeding where the public hearing 

has been completed; (B) The completion of briefing on a motion for a ruling on the pleadings or a 

motion for summary disposition pursuant to Rule 250 of the Commission’s Rules of Practice, 17 

C.F.R. § 201.250, where the Commission has determined that no public hearing is necessary; or 

(C) The determination that a party is deemed to be in default under Rule 155 of the Commission’s 

Rules of Practice, 17 C.F.R. § 201.155, and no public hearing is necessary. 

In the absence of an appropriate waiver, no officer or employee of the Commission engaged 

in the performance of investigative or prosecuting functions in this or any factually related 

proceeding will be permitted to participate or advise in the decision of this matter, except as witness 

or counsel in proceedings held pursuant to notice. Since this proceeding is not “rule making” within 

the meaning of Section 551 of the Administrative Procedure Act, it is not deemed subject to the 

provisions of Section 553 delaying the effective date of any final Commission action.

By the Commission.

Vanessa A. Countryman

Secretary