UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940

Release No. 4875 / April 5, 2018

INVESTMENT COMPANY ACT OF 1940 

Release No. 33067 / April 5, 2018

ADMINISTRATIVE PROCEEDING

File No. 3-18423

In the Matter of

CLAYBORNE GROUP, LLC, 

and DEAN A. HEINEMANN,

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 SECTION 9(b) 

OF THE INVESTMENT COMPANY 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(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”), and Section 9(b) of the Investment Company Act of 1940 (“Investment 

Company Act”) against Clayborne Group, LLC (“Clayborne”) and Dean A. Heinemann 

(“Heinemann,” and together with Clayborne, “Respondents”). 

II.

In anticipation of the institution of these proceedings, Respondents have submitted Offers 

of Settlement (the “Offers”) 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 
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consent to the entry of this 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 

Section 9(b) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial 

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

III.

On the basis of this Order and Respondent’s Offers, the Commission finds that:

Summary

These proceedings arise out of Clayborne’s improper registration with the Commission as 

an investment adviser, as well as its violation of a Commission rule concerning the custody of 

advisory client assets (known as the “Custody Rule”) and recordkeeping rules that apply to 

investment advisers. Clayborne also made misrepresentations in the form that is used by investment 

advisers to register with the Commission and that provides to the Commission and to the public 

information about an investment adviser and its business operations (known as the Form ADV). 

From 2005 through 2016, Clayborne was registered with the Commission as an investment adviser 

solely on the basis that it had the requisite amount of regulatory assets under management (“AUM”) 

to make it eligible for SEC registration. From 2012 to 2016, Clayborne claimed more than $100 

million in regulatory AUM, but approximately $100 million of the AUM was no longer 

continuously and regularly supervised or managed. Because Clayborne did not have the requisite 

AUM, Clayborne was ineligible to register as an investment adviser with the Commission. In 

addition, Clayborne violated the Custody Rule by exercising custody over client assets without 

providing quarterly statements to clients and without arranging for an annual surprise verification of 

those assets by an independent public accountant. As a result, Clayborne’s Form ADV filings 

contained false statements of material fact regarding Clayborne’s eligibility to register with the 

Commission and failed to reflect Clayborne’s custody of client assets. Clayborne also failed to 

make, keep, and make available to the Commission’s staff certain books and records required under 

the Advisers Act. Clayborne’s owner, Heinemann, was responsible for all of Clayborne’s filings, 

compliance procedures, and recordkeeping, and he aided and abetted and caused Clayborne’s

violations.

Respondents

1. Clayborne is a Delaware limited liability company formed by Heinemann in 2005. 

Clayborne’s headquarters are in Danbury, Connecticut. On January 25, 2005, Clayborne registered 

with the Commission as an investment adviser by filing a Form ADV. Clayborne remained 

registered with the Commission through March 10, 2017, when it withdrew its registration by filing 

a Form ADV-W. In all of its Form ADV filings from 2005 through 2016, Clayborne represented 

that its regulatory AUM satisfied the requisite minimum amounts to register with the Commission. 
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2. Heinemann, 47 years old, is a resident of Hopewell Junction, New York. 

Heinemann is the sole owner, managing member, and chief compliance officer of Clayborne.

Other Relevant Entities

3. CG Income Fund, LLC (“CGIF”), is a Delaware limited liability company formed 

as an investment fund or hedge fund by Heinemann on April 5, 2010. Clayborne managed, and 

provided investment advisory services to, CGIF. On August 2, 2010, CGIF conducted a private 

placement (a sale of securities or investments to a limited number of investors), stating that the 

proceeds would be used to acquire accounts receivable and similar payment obligations from other 

companies with the intent of selling them at a profit, and for working capital. The fund’s stated 

objective was to achieve a return on the portfolios, before expenses and redemptions, of at least 

12%, which would be passed on to investors.

Clayborne Registered with the Commission as an Investment Adviser

on the Basis that It Had the Requisite Regulatory Assets Under Management

4. Heinemann formed Clayborne in 2005. Heinemann is and always has been the sole 

owner and managing member of Clayborne. Heinemann also acts as the chief compliance officer 

for Clayborne, and he is the only person who has ever offered investment advisory services on 

behalf of Clayborne. Clayborne has never had any members other than Heinemann.

5. Heinemann was responsible for all of Clayborne’s filings with the Commission. 

Heinemann caused Clayborne to file all of its Forms ADV, and he signed them as chief 

compliance officer and managing member of Clayborne.

6. On January 25, 2005, Heinemann caused Clayborne to register as an investment 

adviser with the Commission by filing an initial Form ADV, which he signed. In that filing, 

Clayborne represented that it expected to be eligible for SEC registration within 120 days. On 

May 27, 2005, Heinemann caused Clayborne to file a supplemental Form ADV, which he signed. 

In that filing, Clayborne represented that it had AUM of $25 million or more. Clayborne repeated 

that representation in Forms ADV filed from 2006 through 2011. On May 24, 2012, Heinemann 

caused Clayborne to file a supplemental Form ADV, which he signed. In that filing, Clayborne 

represented that it had AUM of more than $100 million.1 Clayborne repeatedly represented in

Forms ADV filed on March 28, 2013, March 24, 2014, March 10, 2015, April 1, 2016, November 

1, 2016, and November 4, 2016, that it had AUM of more than $100 million.

 

1 The Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC rules 

increased the threshold above which all investment advisers must register with the SEC. Prior to 

July 2011, an investment adviser was prohibited from registering with the SEC unless the adviser 

had at least $25 million of AUM. After July 21, 2012, the threshold for SEC registration was 

increased to $100 million.
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7. On March 10, 2017, Heinemann caused Clayborne to file a Form ADV-W, 

withdrawing its registration with the Commission.

Clayborne Had No Basis for Registering with the Commission as an Investment Adviser

8. From at least 2012 through 2016, Clayborne was ineligible to register with the 

Commission as an investment adviser because it did not have the requisite AUM, as defined in 

Form ADV.

9. Heinemann was responsible for Clayborne’s registration with the Commission and 

knew or should have known that Clayborne was ineligible to register with the Commission as an 

investment adviser.

Clayborne Had Custody of Client Assets, But Failed to Provide

Quarterly Statements to Clients and Failed to Arrange a Surprise

Verification of Client Assets by an Independent Public Accountant

10. Between August 2010 and September 2011, CGIF raised $630,000 from seven 

investors, six of whom were also clients of Clayborne. Clayborne, as manager of CGIF,

maintained and had access to CGIF assets in connection with the private placement offering and 

after it invested CGIF funds .

11. Because Clayborne maintained and had access to CGIF client funds, Clayborne 

had custody of client funds within the meaning of Rule 206(4)-2 under the Advisers Act (the 

“Custody Rule”). 

12. Because Clayborne was registered with the Commission as an investment adviser, 

even though it was ineligible to be so registered, it was subject to the Custody Rule.

13. Clayborne never caused account statements to be provided at least quarterly to its 

clients for which it maintained funds or securities, as required under the Custody Rule.

14. Clayborne never caused an examination by an independent public accountant to 

verify client funds and securities as required under the Custody Rule.

15. Heinemann was responsible for Clayborne’s compliance efforts and knew or 

should have known that Clayborne failed to provide account statements or to arrange for an 

annual verification of client funds and securities by an independent public accountant. 

Clayborne and Heinemann Misrepresented Material Facts

in Clayborne’s Form ADV Filings
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16. In all of its Forms ADV filed with the Commission from 2012 through 2016, 

Clayborne misrepresented its AUM, because during said period, approximately $100 million of 

its stated AUM was not continuously and regularly supervised or managed. In all of its Forms 

ADV from 2011 through 2016, Clayborne misrepresented that it did not have custody of client 

funds or securities. None of the subsequent Forms ADV updated the prior misrepresentations 

regarding regulatory AUM or custody of client funds or securities. 

17. Heinemann was solely responsible for preparing, signing, and filing Clayborne’s 

Forms ADV with the Commission. Heinemann knowingly caused Clayborne to file Forms ADV 

on March 31, 2011, May 24, 2012, March 28, 2013, March 24, 2014, March 10, 2015, April 1, 

2016, November 1, 2016, and November 4, 2016, each of which contained materially false 

representations regarding Clayborne’s custody of client funds, and Heinemann knowingly caused 

Clayborne to file Forms ADV on May 24, 2012, March 28, 2013, March 24, 2014, March 10, 

2015, April 1, 2016, November 1, 2016, and November 4, 2016, each of which contained 

materially false representations regarding the amounts of regulatory AUM. Heinemann also 

knowingly caused Clayborne to fail to amend the Forms ADV containing materially false 

representations.

Clayborne Failed to Make and Keep Required Books and Records

18. Clayborne failed to make and keep certain books and records required by 

Commission rules relating to its investment advisory business, including (i) written 

communications relating to recommendations made or proposed to be made and advice given or 

proposed to be given as required by Rule 204-2(a)(7) under the Advisers Act and (ii) written 

agreements entered into with any client as required by Rule 204-2(a)(10) under the Advisers Act.

19. Heinemann was responsible for Clayborne’s books and records and knew or 

should have known that Clayborne failed to make and keep these records. 

Violations

20. As a result of the conduct described above, Clayborne willfully2violated Section 

203A of the Advisers Act by improperly registering with the Commission. Heinemann willfully 

aided and abetted and caused Clayborne’s violations.

21. As a result of the conduct described above, Clayborne and Heinemann willfully 

violated Section 207 of the Advisers Act which makes it “unlawful for any person willfully to 

 

2 A willful violation of the securities laws means merely “‘the person charged with the 

duty knows what he is doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting 

Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that the actor 

“‘also be aware that he is violating one of the Rules or Acts.’” Id. (quoting Gearhart & Otis, Inc. 

v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)).
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make any untrue statement of a material fact in any registration application or report filed with the 

Commission . . . or willfully to omit to state in any such application or report any material fact 

which is required to be stated therein.”

22. As a result of the conduct described above, Clayborne willfully violated Section 

206(4) of the Advisers Act and Rule 206(4)-2(a)(3) and (a)(4) promulgated thereunder, which 

require, among other things, that an investment adviser send an account statement, at least 

quarterly, to each client for which it maintains funds or securities, and have client funds and 

securities of which the adviser has custody verified by an independent public accountant at least 

once a year without prior notice to the investment adviser. Heinemann willfully aided and 

abetted and caused Clayborne’s violations.3

23. As a result of the conduct described above, Clayborne willfully violated Section 

204(a) of the Advisers Act and Rules 204-2(a)(7) and 204-2(a)(10) promulgated thereunder, 

which require an investment adviser to make and keep certain records, including, among other 

things, “all written communications received and copies of all written communications sent by 

such investment adviser relating to: . . . [a]ny recommendation made or proposed to be made and 

any advice given or proposed to be given,” and “[a]ll written agreements (or copies thereof) 

entered into by the investment adviser with any client or otherwise relating to the business of 

such investment adviser as such,” and to furnish copies of such records to the Commission 

during examinations by representatives of the Commission. Heinemann willfully aided and 

abetted and caused Clayborne’s violations. 

IV.

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

impose the sanctions agreed to in Respondents Clayborne and Heinemann’s Offers.

Accordingly, pursuant to Sections 203(e), 203(f), and 203(k) of the Advisers Act and 

Section 9(b) of the Investment Company Act, it is hereby ORDERED that:

A. Respondents Clayborne and Heinemann shall cease and desist from committing or 

causing any violations and any future violations of Sections 203A, 204, 206(4) and 207 of the 

Advisers Act and Rules 204-2 and 206(4)-2 promulgated thereunder.

B. Respondent Heinemann be, and hereby is:

i. suspended from association with any broker, dealer, investment adviser, 

municipal securities dealer, municipal advisor, transfer agent, or nationally recognized 

statistical rating organization for a period of twelve months effective on the second 

 

3

Proof of scienter is not required to establish a violation of Section 206(4) of the Advisers 

Act and Rule 206(4)-2 thereunder; a showing of negligence is adequate. See SEC v. Steadman, 

967 F.2d 636, 647 (D.C. Cir. 1992).
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Monday following the entry of this Order; and

ii. prohibited from serving or acting as an employee, officer, director, member of 

an advisory board, investment adviser or depositor of, or principal underwriter for, a registered 

investment company or affiliated person of such investment adviser, depositor, or principal 

underwriter for a period of twelve months, effective on the second Monday following the entry 

of this Order.

C. Respondent Heinemann shall provide to the Commission, within 30 days after the end 

of the twelve month suspension and prohibition period described above, an affidavit that he has 

complied fully with the suspension and prohibition.

D. Respondent Heinemann shall pay a civil penalty of $20,000 to the Securities and 

Exchange Commission. Payment shall be made in the following installments:

(1) $1,674 within 30 days of the entry of this Order;

(2) $1,666 within 60 days of the entry of this Order;

(3) $1,666 within 90 days of the entry of this Order;

(4) $1,666 within 120 days of the entry of this Order;

(5) $1,666 within 150 days of the entry of this Order;

(6) $1,666 within 180 days of the entry of this Order;

(7) $1,666 within 210 days of the entry of this Order;

(8) $1,666 within 240 days of the entry of this Order;

(9) $1,666 within 270 days of the entry of this Order;

(10) $1,666 within 300 days of the entry of this Order;

(11) $1,666 within 330 days of the entry of this Order; and

(12) $1,666 within 360 days of the entry of this Order.

If any payment is not made by the date the payment is required by this Order, the entire 

outstanding balance of civil penalties, plus any additional interest accrued pursuant to 31 U.S.C. 

§3717, shall be due and payable immediately, without further application. 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request; 

(2) Respondent 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 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: 
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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 Dean A. 

Heinemann 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 John Dugan, Associate Director, 

Division of Enforcement, Securities and Exchange Commission, Boston Regional Office, 33 Arch 

Street, 24th Floor, Boston, MA 02110-1424.

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

Fund is created for the penalties referenced in paragraph C above. Regardless of whether any such 

Fair Fund distribution is made, 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, Respondents agree 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 these proceedings. For purposes of this paragraph, a 

"Related Investor Action" means a private damages action brought against Respondents 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 these proceedings.

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 

Respondent Heinemann, and further, any debt for disgorgement, prejudgment interest, civil penalty 

or other amounts due by Respondent 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 Respondent 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