UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940

Release No. 4225 / October 13, 2015

ADMINISTRATIVE PROCEEDING

File No. 3-16892

In the Matter of

JAMES T. BUDDEN and

ALEXANDER W. BUDDEN,

Respondents.

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 203(f) AND 203(k) 

OF THE INVESTMENT ADVISERS ACT OF 

1940, MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASEAND-DESIST ORDER

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(f) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against James T. Budden (“J. Budden”) and Alexander W. Budden (“A. 

Budden”) (collectively, “Respondents”). 

II.

In anticipation of the institution of these proceedings, Respondents each have submitted an 

Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over them and the subject matter of these 

proceedings, which are admitted, and except as provided herein in Section V, Respondents consent

to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to 

Sections 203(f) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and 

Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 
2

III.

On the basis of this Order and Respondents’ Offers, the Commission finds1that:

SUMMARY

Respondents failed reasonably to supervise Douglas E. Cowgill (“Cowgill”), the former 

Chief Compliance Officer (“CCO”) of Professional Investment Management, Inc. (“PIM”), an 

investment adviser registered with the Commission, within the meaning of Sections 203(e)(6) and 

203(f) of the Advisers Act, with a view to preventing and detecting Cowgill’s violations of the 

federal securities laws. Cowgill violated several antifraud provisions of the federal securities laws 

by misappropriating more than $840,000 in client assets. Respondents also caused2PIM to violate 

Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder (the “Compliance Rule”). 

J. Budden further caused PIM to violate Section 206(4) of the Advisers Act and Rule 206(4)-2 

thereunder (the “Custody Rule”).

RESPONDENTS

1. James T. Budden, age 73, is a former 50.2% shareholder of PIM. J. Budden was 

the President and a Director of PIM from approximately 1973 through approximately July 22, 

2013, the date he sold all of his interest in PIM to Cowgill. While associated with PIM, J. Budden

supervised several employees, including Cowgill. J. Budden resides in Columbus, Ohio. 

2. Alexander W. Budden, age 68, is a former 48.7% shareholder of PIM. A. Budden

was the Vice President and Secretary and a Director of PIM from approximately April 1981 

through approximately July 22, 2013, the date he sold all of his interest in PIM to Cowgill. While 

associated with PIM, A. Budden supervised several employees, including Cowgill. A. Budden

resides in Cleveland, Ohio.

OTHER RELEVANT PARTIES

3. Professional Investment Management, Inc. is an Ohio corporation with its 

principal place of business in Columbus, Ohio. At all times relevant to this proceeding, PIM was 

owned by J. Budden (50.2%), A. Budden (48.7%), and Cowgill (1.1%). PIM was registered with 

the Commission as an investment adviser from 1978 through September 30, 2013. PIM reregistered with the Commission on June 24, 2014. PIM provides third-party administration 

services and investment advisory services to approximately fifteen retirement plan clients (which 

consist of approximately 325 participants who, in turn, own approximately 425 individual 

retirement accounts that PIM advises), and also provides investment advisory services to 

 

1 The findings herein are made pursuant to each Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 

2

“Negligence is sufficient to establish ‘causing’ liability . . ., at least in cases in which a person is 

alleged to ‘cause’ a primarily violation that does not require scienter.” KPMG Peat Marwick, LLP, Rel. 

No. 43862, 2001 WL 47245, *19 (Jan. 19, 2001), pet. denied, 289 F.3d 109 (D.C. Cir. 2002).
3

approximately twenty-five individual clients for their own (non-retirement plan) accounts. PIM 

has approximately $120 million of regulatory assets under management, and has custody of client 

assets through three omnibus accounts. PIM has been operating under the control of a courtappointed receiver since on or about May 15, 2014.

4. Douglas E. Cowgill, age 60, began working for PIM in July 1981. Cowgill became 

the sole owner and President of PIM on or about July 22, 2013, when he purchased all of 

Respondents’ interest in PIM. Cowgill remained the President of PIM until on or about May 15, 

2014, when a court-appointed receiver took control of PIM. Cowgill resides in Columbus, Ohio.

5. The Commission filed suit against Cowgill and PIM in the United States District 

Court for the Southern District of Ohio on April 29, 2014 in Securities and Exchange Commission 

v. Douglas E. Cowgill, et al., Case No. 2:14-CV-396, alleging that Cowgill and PIM violated the 

antifraud provisions of the U.S. securities laws by hiding a shortfall of more than $700,000 in 

client assets by sending false account statements to clients, and that PIM violated, and Cowgill 

aided and abetted and caused PIM’s violations of, the registration provisions of the Advisers Act, 

and the Custody Rule. The Commission filed an Amended Complaint on August 7, 2014 that 

included additional counts against Cowgill and PIM. On August 21, 2014, the Court entered a 

Judgment by Consent against Cowgill as to all counts asserted in the Amended Complaint and 

permanently restrained and enjoined Cowgill from violating and/or aiding and abetting violations 

of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 

thereunder, Sections 203(a), 204(a), 206(1), (2), and (4), and 207 of the Advisers Act, and Rules 

204-2, 206(4)-2, and 206(4)-7 thereunder.

6. On September 8, 2014, the Commission entered an order barring Cowgill from 

associating with any broker, dealer, investment adviser, municipal securities dealer, municipal 

advisor, transfer agent, or nationally recognized statistical rating organization.

7. On July 2, 2015, a Grand Jury sitting in the United States District Court for the 

Southern District of Ohio indicted Cowgill in United States v. Cowgill, Case No. 2:15-CR-160, on 

thirteen counts of wire fraud, five counts of engaging in monetary transactions in property derived 

from specified unlawful activity, two counts of theft or embezzlement from an employee benefit 

plan counts, and one count of perjury. Each of these counts stemmed from the conduct alleged in

the Commission’s civil lawsuit against Cowgill. Cowgill’s criminal matter is ongoing.

FACTS

Failure to Supervise Cowgill

8. At all times from July 1981 through approximately July 22, 2013, Cowgill reported 

to Respondents and Respondents were Cowgill’s supervisors. For instance, Respondents promoted 

Cowgill from Accounting Clerk to Vice President and Treasurer in 1983, and designated Cowgill 

as PIM’s CCO on or about September 28, 2004.
4

9. As explained above, the United States District Court for the Southern District of 

Ohio entered an order on August 21, 2014 in Securities and Exchange Commission v. Douglas E. 

Cowgill, et al. that permanently restrained and enjoined Cowgill from violating and/or aiding and 

abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Sections 

203(a), 204(a), 206(1), (2), and (4), and 207 of the Advisers Act, and Rules 204-2, 206(4)-2, and 

206(4)-7 thereunder.

10. Respondents failed to adopt or implement any policies or procedures regarding their 

supervision of Cowgill. In fact, Respondents merely assumed, without ever confirming, that 

Cowgill performed his responsibilities in compliance with the federal securities laws.3

Violations of the Compliance Rule

11. After Respondents designated Cowgill as PIM’s CCO, they never provided any 

funding, training, or resources to support Cowgill in the CCO role.

12. Respondents, as the majority owners of PIM and as required by the Compliance 

Rule, participated in annual compliance reviews with Cowgill in 2004, 2006, and 2007.4 

Respondents knew or should have known that Cowgill stopped performing compliance reviews 

after 2007, but took no steps to ensure that Cowgill or anyone else at PIM resumed conducting 

compliance reviews at least annually after 2007.

13. Respondents took no steps to ensure that PIM was complying with the federal 

securities laws after 2007, and did nothing after 2007 to ensure that Cowgill carried out his 

responsibilities as PIM’s CCO.

14. Respondents did not ensure that PIM established policies or procedures to prevent 

client assets from being misappropriated via checks or wire transfers or to ensure that client 

statements were reviewed for accuracy. No such policies or procedures were ever established at 

PIM. During the period 2008 through 2013, Cowgill secretly wrote numerous checks and initiated 

numerous wire transfers from PIM’s client asset-holding bank account and sent false account 

statements to PIM’s clients to hide his misappropriation of client assets.

Violations of the Custody Rule

15. At all relevant times, PIM maintained client funds in an omnibus checking account 

held on an agency basis at Custodian 1, and client securities in two omnibus accounts held on an 

agency basis at Custodian 2 and Custodian 3. All client funds were initially deposited into the 

omnibus checking account held at Custodian 1. PIM then transferred these client funds for 

investment to various firms, including Custodians 2 and 3. PIM had custody of all of the client 

 

3

“Liability for failure to supervise may be imposed when a supervisor fails ‘to learn of improprieties 

when diligent application of supervisory procedures would have uncovered them.’” In the Matter of Stephen 

Jay Mermelstein, Advisers Act Rel. No. 2961 (Dec. 14, 2009).

4

PIM did not conduct an annual compliance review in 2005.
5

assets held at Custodian 1, 2, and 3 because it had the authority to obtain possession of these assets.

16. Each year from 1999 to 2009, J. Budden had, as required by the Custody Rule,

engaged an independent accountant on behalf of PIM to conduct annual surprise examinations to 

verify all client assets of which PIM had custody and required the accountant to file Form ADV-E 

with the Commission within a prescribed amount of time. J. Budden delegated that responsibility

to Cowgill during the summer of 2009 after J. Budden had engaged the accountant in May 2009 to 

perform the 2009 annual surprise examination. J. Budden continued to supervise Cowgill during 

this time period, but did not follow up with Cowgill to ensure that Cowgill had fulfilled this

responsibility.

17. J. Budden knew from past experience that, in order to comply with the Custody 

Rule, PIM was obligated to, among other things, require the accountant to file Form ADV-E with 

the Commission. Cowgill failed to require PIM’s accountant to file Form ADV-E with the 

Commission in connection with the 2009 surprise examination, and J. Budden did nothing to 

ensure that that Cowgill had done so. J. Budden did nothing to confirm that Form ADV-E had 

been filed with the Commission or that PIM had complied with the Custody Rule in 2009. PIM 

violated the Custody Rule in 2009 by failing to ensure that the accounting firm filed with the 

Commission Form ADV-E.

18. Cowgill engaged these same accountants in 2010 and again in 2011 to perform 

annual surprise examinations in accordance with the Custody Rule. Cowgill did not cooperate with 

the accounting firm, and, ultimately, the accounting firm did not complete either of these annual 

surprise examinations. J. Budden did nothing to confirm that these annual surprise examinations 

had been completed, that Form ADV-E had been filed with the Commission in connection with 

either of these annual surprise examinations, or that PIM had complied with the Custody Rule in 

2010 and 2011. PIM violated the Custody Rule in 2010 and 2011 by failing to have annual 

surprise examinations completed in each of those years.

19. Cowgill did not engage any accountants in 2012 to perform an annual surprise 

examination in accordance with the Custody Rule. J. Budden did nothing to confirm that Cowgill 

had engaged an accountant to complete the annual surprise examination in 2012, that the annual 

surprise examination had been completed, that Form ADV-E had been filed with the 

Commission in connection with the annual surprise examination, or that PIM had complied with 

the Custody Rule in 2012. PIM violated the Custody Rule in 2012 by failing to have an annual 

surprise examination completed that year.

20. In 2013, J. Budden realized that he had not seen any accountants at PIM for “some 

time,” and sought to learn the status of PIM’s compliance with the Custody Rule. Respondents 

spoke with the principal of the accounting firm that historically had completed annual surprise 

examinations for PIM. Respondents learned that the accounting firm was terminating its 

relationship with PIM because, among other reasons, Cowgill had not sufficiently cooperated with 

the accounting firm in 2010 and 2011 to enable it to complete the annual surprise exams during 

those two years as required by the Custody Rule. Respondents further learned that Cowgill had not 

engaged the accounting firm to perform any work on behalf of PIM since 2011. 
6

21. In July 2013, Respondents spoke with an attorney to determine how to address 

PIM’s delinquent ADV-E filings.

22. However, neither Respondent took any disciplinary action against Cowgill.

23. Instead, on July 22, 2013, each Respondent executed a stock purchase agreement in 

which they each agreed to sell all of their interest in PIM to Cowgill.

24. Respondents both knew at the time of the sale that PIM was not in compliance with 

the federal securities laws, including specifically, the Compliance Rule and the Custody Rule.

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

supervise Cowgill within the meaning of Section 203(e)(6) of the Advisers Act, with a view to 

preventing and detecting Cowgill’s violations of Section 10(b) of the Exchange Act and Rule 

10b-5 thereunder, and Sections 203(a), 204(a), 206(1), (2), and (4), and 207 of the Advisers Act

and Rules 204-2, 206(4)-2, and 206(4)-7 thereunder. 

26. As a result of the conduct described above, Respondents caused PIM’s violation of 

Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require, among other 

things, that a registered investment adviser adopt and implement written policies and procedures 

reasonably designed to prevent violation of the Advisers Act and the rules thereunder by the 

adviser and its supervised persons, and review, no less frequently than annually, the adequacy of 

such policies and procedures.

27. As a result of the conduct described above, J. Budden caused PIM’s violation of 

Section 206(4) of the Advisers Act and Rule 206(4)-2 thereunder, which require, among other 

things, that a registered investment adviser have client assets over which it has custody verified by 

an independent public accountant at least once a year without prior notice to the investment adviser

and that the investment adviser require the accountant to file Form ADV-E with the Commission 

within a prescribed amount of time.
7

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in each Respondent’s Offer.

Accordingly, pursuant to Sections 203(f) and 203(k) of the Advisers Act, it is hereby 

ORDERED that:

Respondent J. Budden

A. Respondent J. Budden cease and desist from committing or causing any violations 

and any future violations of Section 206(4) of the Advisers Act and Rules 206(4)-2 and 206(4)-7

thereunder.

B. Respondent J. Budden be, and hereby is:

barred from association in a supervisory or compliance capacity with any 

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

advisor, transfer agent, or nationally recognized statistical rating 

organization

with the right to apply for reentry after three (3) years to the appropriate selfregulatory organization, or if there is none, to the Commission.

C. Any reapplication for association by Respondent J. Budden will be subject to the 

applicable laws and regulations governing the reentry process, and reentry may be conditioned 

upon a number of factors, including, but not limited to, the satisfaction of any or all of the 

following: (a) any disgorgement ordered against Respondent J. Budden, whether or not the 

Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award 

related to the conduct that served as the basis for the Commission order; (c) any self-regulatory 

organization arbitration award to a customer, whether or not related to the conduct that served as 

the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, 

whether or not related to the conduct that served as the basis for the Commission order.

D. Respondent J. Budden shall, within ten (10) days of the entry of this Order, pay a 

civil money penalty in the amount of $125,000 to the Securities and Exchange Commission. If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 

Payment must be made in one of the following ways: 

(1) Respondent J. Budden may transmit payment electronically to the 

Commission, which will provide detailed ACH transfer/Fedwire

instructions upon request; 
8

(2) Respondent J. Budden may make direct payment from a bank account via 

Pay.gov through the SEC website at 

http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent J. Budden may pay by certified check, bank cashier’s check, or 

United States postal money order, made payable to the Securities and 

Exchange Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

Respondent J. Budden as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Paul Montoya, 

Assistant Director, Division of Enforcement, Securities and Exchange Commission, Chicago 

Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, IL 60604-2908. 

Respondent A. Budden

E. Respondent A. Budden cease and desist from committing or causing any violations 

and any future violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.

F. Respondent A. Budden be, and hereby is:

barred from association in a supervisory or compliance capacity with any 

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

advisor, transfer agent, or nationally recognized statistical rating 

organization

with the right to apply for reentry after two (2) years to the appropriate selfregulatory organization, or if there is none, to the Commission.

G. Any reapplication for association by Respondent A. Budden will be subject to the 

applicable laws and regulations governing the reentry process, and reentry may be conditioned 

upon a number of factors, including, but not limited to, the satisfaction of any or all of the 

following: (a) any disgorgement ordered against Respondent A. Budden, whether or not the 

Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award 

related to the conduct that served as the basis for the Commission order; (c) any self-regulatory 

organization arbitration award to a customer, whether or not related to the conduct that served as 

the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, 

whether or not related to the conduct that served as the basis for the Commission order.
9

H. Respondent A. Budden shall, within ten (10) days of the entry of this Order, pay a 

civil money penalty in the amount of $75,000 to the Securities and Exchange Commission. If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 

Payment must be made in one of the following ways: 

(1) Respondent A. Budden may transmit payment electronically to the 

Commission, which will provide detailed ACH transfer/Fedwire 

instructions upon request; 

(2) Respondent A. Budden may make direct payment from a bank account via 

Pay.gov through the SEC website at 

http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent A. Budden may pay by certified check, bank cashier’s check, or 

United States postal money order, made payable to the Securities and 

Exchange Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

Respondent A. Budden as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Paul Montoya, 

Assistant Director, Division of Enforcement, Securities and Exchange Commission, Chicago 

Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, IL 60604-2908. 

I. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair 

Fund is created for the penalties referenced in paragraphs IV.D and IV.H, above. Amounts ordered 

to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the 

government for all purposes, including all tax purposes. To preserve the deterrent effect of the 

civil penalty, Respondents agree that in any Related Investor Action, they shall not argue that they 

are entitled to, nor shall they benefit by, offset or reduction of any award of compensatory damages 

by the amount of any part of Respondents’ payment of a civil penalty in this action (“Penalty 

Offset”). If the court in any Related Investor Action grants such a Penalty Offset, Respondent 

agrees that they shall, within 30 days after entry of a final order granting the Penalty Offset, notify 

the Commission’s counsel in this action and pay the amount of the Penalty Offset to the Securities 

and Exchange Commission. Such a payment shall not be deemed an additional civil penalty and 

shall not be deemed to change the amount of the civil penalty imposed in this proceeding. For 

purposes of this paragraph, a “Related Investor Action” means a private damages action brought 

against any Respondent by or on behalf of one or more investors based on substantially the same 

facts as alleged in the Order instituted by the Commission in this proceeding.
10

V.

It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 

523 of the Bankruptcy Code, 11 U.S.C. § 523, the findings in this Order are true and admitted by 

Respondents, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 

amounts due by Respondents under this Order or any other judgment, order, consent order, decree 

or settlement agreement entered in connection with this proceeding, is a debt for the violation by 

Respondents of the federal securities laws or any regulation or order issued under such laws, as set 

forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19).

By the Commission.

Brent J. Fields

Secretary