UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934 

Release No. 98049 / August 3, 2023

ADMINISTRATIVE PROCEEDING

File No. 3-20881

In the Matter of

Kathryn Jane Meredith, d/b/a KM 

Advisory Services, 

Respondent.

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NOTICE OF PROPOSED PLAN OF 

DISTRIBUTION AND 

OPPORTUNITY FOR COMMENT

ADMINISTRATIVE PROCEEDING

File No. 3-20882

In the Matter of

John Paul Harnish, d/b/a KM 

Advisory Services,

Respondent.

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Notice is hereby given, pursuant to Rule 1103 of the United States Securities and 

Exchange Commission’s (the “Commission”) Rules on Fair Fund and Disgorgement Plans (the 

“Commission’s Rules”), 17 C.F.R. § 201.1103, that the Division of Enforcement has submitted 

to the Commission a proposed plan of distribution (the “Proposed Plan”) for the distribution of 

monies paid in the above-captioned matters.

On June 6, 2022, the Commission issued separate, but related administrative and ceaseand-desist orders (collectively, the “Orders”) against Kathryn Jane Meredith, d/b/a KM Advisory 
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Services (“Meredith”)1and John Paul Harnish, d/b/a KM Advisory Services (“Harnish”)2

(collectively, the “Respondents”). In the Orders, the Commission found that former registered 

investment adviser KM Advisory Services (“KMA”)—an unincorporated sole-proprietorship 

owned by Meredith from 1994 through February 2020, and purchased by Harnish in February 

2020—breached its fiduciary duties in connection with the receipt of mutual fund fees pursuant 

to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”) and commissions in 

the form of sales “loads” from advisory client investments without fully and fairly disclosing the 

related conflicts of interest.

Since at least January 2016, and continuing through December 2020, KMA invested the 

vast majority of its clients’ assets in certain mutual funds that paid 12b-1 fees and charged sales 

load commissions exclusively through an introducing broker-dealer (the “Introducing BrokerDealer”), with whom Meredith and later Harnish was a registered representative. As a result, 

KMA’s clients paid 12b-1 fees and commissions to the Introducing Broker-Dealer, a portion of 

which were shared with KMA (Meredith and Harnish). KMA failed to disclose fully and 

adequately this arrangement and the attendant conflicts of interest. KMA also breached its duty 

of care by not routinely comparing the Introducing Broker-Dealer’s order execution with other 

broker-dealers, which KMA’s advisory relationship with its clients required. KMA therefore 

caused its advisory clients to invest through the Introducing Broker-Dealer and in share classes 

of mutual funds that charged 12b-1 fees when other broker-dealers made available share classes 

of the same funds to their customers that may have presented a more favorable value for KMA’s 

clients under the particular circumstances in place at the time of the transactions. KMA also 

failed to adopt and implement written compliance policies and procedures reasonably designed 

to prevent violations of the Advisers Act and the rules thereunder in connection with its mutual 

fund share class and broker-dealer selection practices. As a result of the conduct described 

above, KMA willfully violated Sections 206(2) and 206(4) of the Advisers Act and Rule 

206(4)-7 thereunder.

Among other remedies, the Commission ordered Meredith to pay $574,743.53 in 

disgorgement, $77,252.39 in prejudgment interest, and a $100,000.00 civil money penalty, and 

Harnish to pay $220,097.30 in disgorgement, $5,549.69 in prejudgment interest, and a $75,000 

civil money penalty, to the Commission. In each of the Orders, the Commission also created a 

Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 and further ordered the 

Fair Funds to be combined to form the KM Advisory Fair Fund, so the penalties paid, along with 

the disgorgement and interest paid, can be distributed to harmed investors.

The Fair Fund consists of the $1,052,641.99 paid by the Respondents. The assets of the 

Fair Fund are subject to the continuing jurisdiction and control of the Commission. The Fair 

 

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 Corrected Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 15(b) of the 

Securities Exchange Act of 1934 and Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, 

Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order, Exchange Act Rel. No. 95046 

(June 6, 2022), (Admin. Proc. File No. 3-20881).

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 Corrected Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 15(b) of the 

Securities Exchange Act of 1934 and Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, 

Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order, Exchange Act Rel. No. 95047 

(June 6, 2022), (Admin. Proc. File No. 3-20882).
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Fund has been deposited in a Commission-designated account at the U.S. Department of the 

Treasury, and any accrued interest will be added to the Fair Fund.

OPPORTUNITY FOR COMMENT

Pursuant to this Notice, all interested persons are advised that they may obtain a copy of 

the Plan from the Commission’s public website at http://www.sec.gov/litigation/fairfundlist.htm. 

Interested persons may also obtain a written copy of the Proposed Plan by submitting a written 

request to Joshua Braunstein, United States Securities and Exchange Commission, 100 F Street, 

NE, Washington, DC 20549-5876. All persons who desire to comment on the Proposed Plan 

may submit their comments, in writing, no later than thirty (30) days from the date of this 

Notice:

1. to the Office of the Secretary, United States Securities and Exchange 

Commission, 100 F Street, NE, Washington, DC 20549-1090;

2. by using the Commission’s Internet comment form 

(http://www.sec.gov/litigation/admin.shtml); or

3. by sending an e-mail to rule-comments@sec.gov.

Comments submitted by email or via the Commission’s website should include “Administrative 

Proceeding File Nos. 3-20881 and 3-20882” in the subject line. Comments received will be 

publicly available. Persons should submit only information they wish to make publicly available.

THE PROPOSED PLAN

The Net Available Fair Fund3is comprised of the $1,052,641.99 in disgorgement, 

prejudgment interest, and civil money penalties paid by the Respondents, plus any interest and 

income earned thereon, less Administrative Costs. The Proposed Plan seeks to distribute the Net 

Available Fair Fund to compensate investors for excess fees related to mutual fund 12b-1 fees 

and/or sales load commissions paid in accounts managed by KMA from January 1, 2016 through 

December 31, 2020. 

For the Commission, by the Division of Enforcement, pursuant to delegated authority.4

Vanessa A. Countryman

Secretary 

 

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 All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Proposed 

Plan.

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 17 C.F.R. § 200.30-4(a)(21)(iii).