UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES EXCHANGE ACT OF 1934

Release No. 95045 / June 6, 2022

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6043 / June 6, 2022

ADMINISTRATIVE PROCEEDING 

File No. 3-20880

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 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 Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) 

and Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) 

against Kahn Brothers Advisors, LLC (“KIA”) and Thomas Kahn (“Kahn”) (collectively, 

“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

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

Pursuant to Section 15(b) of the Securities Exchange Act of 1934, and Sections 203(e), 203(f),

In the Matter of 

Kahn Brothers Advisors, LLC 

and Thomas Kahn,

Respondents. 
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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. 

III.

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

Summary

1. This matter primarily concerns misstatements and omissions by registered 

investment adviser KIA and its principal owner and president, Kahn, to KIA advisory clients and 

prospective clients relating to brokerage services provided by KIA’s affiliated broker-dealer, 

Kahn Brothers LLC (“KBD”). Specifically, KIA and Kahn (a) failed to fully and fairly disclose 

to advisory clients all material facts related to the conflict that arose from KIA’s use of an 

affiliated broker-dealer to execute client transactions; and (b) made misleading statements to 

clients and prospective clients that KIA would aggregate client transactions to reduce 

commissions. KIA and Kahn also failed to seek best execution for advisory clients, failed to 

conduct a best execution review of KBD, and failed to adopt and implement written policies and 

procedures reasonably designed to prevent violation of the Advisers Act and its rules. According 

to KIA’s policies and procedures, Kahn was responsible for all aspects of KIA’s compliance 

program and its implementation, as well as the firm’s disclosure obligations.

Respondents

2. Kahn Brothers Advisors, LLC is a registered investment adviser located in New 

York, New York. KIA was founded in 1978, and is a wholly owned subsidiary of Kahn Brothers 

Group, Inc., an entity that is majority owned and controlled by Kahn. According to its Form 

ADV filed March 31, 2022, KIA has approximately $689 million in assets under management, of 

which approximately $676.7 million is managed on a discretionary basis. The majority of KIA’s 

clients execute transactions through its affiliated broker-dealer, KBD.

3. Thomas Kahn, age 79, resides in New York, New York. He serves as the chief 

investment officer, chairman, director, president, treasurer, and chief compliance officer of KIA 

and KBD, and he holds Series 4, 14, 16, 63 and 65 securities licenses. Through Kahn Brothers 

Group, Kahn majority owns and controls KIA and KBD. Kahn is the primary investment 

manager at KIA, and he was responsible for all investment decisions and recommendations for 

client accounts.

Other Relevant Entities

4. Kahn Brothers Group, Inc. (“KBG”), is based and incorporated in New York, 

New York, and it is the parent entity through which Kahn owns and controls KIA and KBD. 

Kahn majority owns and controls KBG, and serves as its chairman, president, chief compliance 

officer, director, and stockholder.
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5. Kahn Brothers LLC is a registered broker-dealer located in New York, New 

York. Its predecessor entity was first registered in 1978, and it is a wholly owned subsidiary of 

KBG. KBD exists principally to service KIA advisory clients, although it also executes trades 

for a small number of broker-dealer customers that are not KIA advisory clients. 

Facts

Kahn Brothers Advisors Background

6. KIA is an investment adviser primarily serving individual and family accounts, the 

majority of which have invested assets of less than $1 million. KIA pursues a long-term buy and 

hold value investing strategy in which it targets a relatively small number of companies whose 

securities Kahn believes are undervalued. Based on this investment approach, KIA client 

accounts tend to buy and sell the same securities at the same time, and the accounts trade 

infrequently. KIA typically charges clients an advisory fee of 1% of assets under management, 

but certain of its clients pay less than 1% and/or only pay a fee on invested assets under 

management, i.e., excluding cash and cash equivalents.

KIA Brokerage Practices

7. KIA typically utilizes its affiliated broker-dealer, KBD, to execute trades for its 

advisory clients, except when a client explicitly directs KIA to use a different broker. The vast 

majority of KBD’s brokerage business comes from KIA’s advisory clients. The brokerage 

services KBD offers its customers are limited to introducing trades to its clearing broker, which 

also custodies client assets. 

8. KIA’s advisory agreements with its clients describe clients’ brokerage commission 

rates. Although some of KIA’s clients – typically larger and more sophisticated clients – pay 

$0.05 or $0.10 per share in commission to KBD, the majority of its clients pay based on what 

KIA and Kahn characterize as KBD’s “regular” or “prevailing” commission rate. The “regular” 

commission rate KBD charges advisory clients is the standard commission rate that all brokerdealers charged prior to May 1, 1975 (the “Pre-1975 rate” or “schedule”).

1

 Under the Pre-1975

schedule KIA clients regularly pay hundreds or even thousands of dollars per transaction in 

commissions to KBD, or as much as $0.80 or $0.90 per share or more. Because the Pre-1975

schedule leads to lower commission rates as trade sizes increase, KIA client accounts that engage 

in smaller sized transactions – typically its smaller sized accounts – pay a higher overall 

commission costs on a per-share basis, as compared to client accounts that engage in larger 

 

1 Prior to May 1, 1975, all brokers were required to charge a fixed-rate commission, and 

total commission costs could be hundred or even thousands of dollars for a single transaction. In 

January 1975, the Commission adopted Rule 19b-3 under the Exchange Act, which eliminated 

fixed commission rates as of May 1, and allowed for competition among brokers, which led to 

lower commission rates.
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transactions. Moreover, as described below, KIA’s failure to aggregate client transactions caused 

clients to pay more in commissions, because they could not take advantage of the Pre-1975 rate 

volume discounts. 

Misstatements and Omissions Relating to KBD Brokerage Services

Failure to Disclose All Material Facts Regarding Conflicts

9. KIA and Kahn failed to fully and fairly disclose to advisory clients all material 

facts related to the conflict that arose from its use of its affiliated broker-dealer, including that 

KBD charged brokerage commissions that were higher than other brokers charged for similar 

services, i.e., introducing customer trades to a clearing broker. During the relevant period, KIA 

provided clients with two primary disclosure documents: the advisory agreement and KIA’s 

Form ADV Part 2A (“Brochure”). 

10. The Brochure stated that: “Brokerage commissions in the United States are 

negotiable, [... and] [i]ncoming clients are advised that if they commence a relationship with the 

affiliated broker-dealer, they will, in all likelihood, not receive the absolute lowest execution 

charge available.” The standard KIA advisory agreement stated only that KBD will execute 

client transactions at its “prevailing” or “regular” commission rates, which “may not be the 

lowest available,” and that KBD commission rates “are not the lowest commission rates 

available.” [Emphasis added throughout.]

11. These disclosures that commission rates charged by KBD “may” not be the 

“lowest,” the “absolute lowest,” or even “not the lowest” failed to fully and fairly disclose all 

material facts concerning the conflicts that arose from KIA’s use of an affiliated broker-dealer to 

execute advisory client transaction. These disclosures fail to inform clients that the fees charged 

to clients on the Pre-1975 schedule are in fact much higher than other broker-dealers charges for 

similar services, and omit to tell clients that lower commission arrangements were freely available 

at other broker-dealers, or that KBD charged some clients a much lower flat fee of $0.05 or $0.10 

per share. The disclosure also did not disclose to clients the conflict that, by recommending that 

clients use KBD and pay commissions based on the Pre-1975 schedule, Kahn would receive 

greater compensation than he would if the clients paid commissions to KBD based on a flat per 

share based commission rate of $.05 or $.10 per share. 

Representations that KBD Commissions were “Reasonable”

12. The KIA Brochure states that “the Firm's principals believe that the combined 

amount of advisory fees [] and commissions [] is reasonable,” and the standard KIA advisory 

agreements states, “In our opinion, the aggregate compensation to be earned by us in respect to 

your account is reasonable.” Neither KIA nor Kahn conducted any systematic best execution 

review of the execution quality KBD provided nor compared the cost and brokerage services 

KBD offered KIA clients to the costs and services offered by other broker-dealers. As a result, 

there was no basis upon which to claim Kahn believed the brokerage fees KBD charged KIA 

clients were reasonable. 
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KIA’s Trade Aggregation Practices

13. KIA and Kahn stated in its annual Brochures that, where KBD had “multiple 

client orders in the same security,” KBD “may aggregate these orders if it believes that doing so 

may effectuate a more favorable execution for the client.” KIA’s internal policies and 

procedures went further, stating the “aggregating or blocking of client transactions allows an 

adviser to execute transactions in a more timely, equitable, and efficient manner and seeks to 

reduce overall commission charges to clients [and our] firm’s policy is to aggregate client 

transactions where possible and when advantageous to clients.” 

14. Aggregating client transactions would have been particularly advantageous to any 

KIA client that paid brokerage commissions to KBD based on the Pre-1975 schedule, because the 

Pre-1975 schedule reduced the per share commission charges as the number of shares per trade 

increases. Moreover, given KIA’s value investment style, a significant percentage of its clients 

regularly transacted in the same stock, on the same day, in the same direction, and were eligible for 

an aggregated or blocked trade.

15. Contrary to statements in its Brochure and to its own internal policies and procedures 

– and notwithstanding that aggregating would have benefited KIA clients that paid KBD 

commissions based on the Pre-1975 rate – KIA and Kahn virtually never directed KBD to aggregate 

eligible client transactions. Indeed, KIA as a matter of practice did not seek to aggregate client 

transactions. 

16. By failing to aggregate client transactions, KIA caused advisory clients to pay greater 

commissions to KBD. As a result of the staff’s investigation, KIA re-scoped its advisory 

relationship with clients, including by revising its client disclosures to state that the firm does not 

aggregate.

KIA’s Best Execution and Aggregation Policies, Procedures, and Practices

17. As chief investment officer, chairman, director, president, treasurer, and chief 

compliance officer for KIA, and in accordance with KIA’s written policies and procedures, Kahn 

was responsible for developing, enforcing, and reviewing annually KIA’s compliance policies and 

procedures. 

18. KIA’s investment adviser policies and procedures manual in effect during the 

relevant period adopted the Commission’s best execution definition as the “execution of securities 

transactions for clients in such a manner that the clients’ total cost or proceeds in each transaction is 

the most favorable under the circumstances,” and stated that KIA “as a matter of policy and practice, 

seeks to obtain best execution [and to] periodically review[] the services provided by broker-dealers, 

the quality of executions, research, commission rates, and overall brokerage relationship.”

19. Despite KIA’s written policy and procedure manual, Kahn did not take any steps to

seek best execution for KIA advisory clients. Kahn never performed a comparative cost analysis to 
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determine how KBD’s commission rates fared relative to what other broker-dealers charged for 

similar service, and did not take any other steps to assess whether KBD provided clients with best 

execution, or, as stated in the advisory agreement, that KBD’s commission rate was “reasonable” in 

relation to the total services provided. 

20. As described above, KIA’s investment adviser policies and procedures manual stated 

that the policy was to aggregate client transactions where possible and advantageous to clients. 

Again, contrary KIA’s policies and procedures, Kahn and KIA virtually never aggregated client 

transactions, notwithstanding that doing so would have been particularly advantageous to clients 

who paid commissions based on the Pre-1975 schedule.

Violations

21. As a result of the conduct described above, Respondents willfully2violated Section

206(2) of the Advisers Act, which makes it unlawful for any investment adviser, directly or 

indirectly, to “engage in any transaction, practice or course of business which operates as a fraud 

or deceit upon any client or prospective client.” Scienter is not required to establish a violation of 

Section 206(2) of the Advisers Act. SEC v. Steadman, 967 F.2d 636, 643 n.5 (D.C. Cir. 1992).

22. As a result of the conduct described above, KIA willfully violated, and Kahn

caused KIA’s violations of, Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, 

which require registered investment advisers to adopt and implement written policies and 

procedures reasonably designed to prevent violations of the Adviser Act and its rules. 

Disgorgement

23. The disgorgement and prejudgment interest ordered in Section IV., paragraph C., 

below, is consistent with equitable principles and does not exceed Respondent’s net profits from 

its violations, and will be distributed to harmed investors to the extent feasible. The Commission 

will hold funds paid pursuant to Section IV., paragraph C. in an account at the United States 

Treasury pending distribution. Upon approval of the distribution final accounting by the 

Commission, any amounts remaining that are infeasible to return to investors, and any amounts 

returned to the Commission in the future that are infeasible to return to investors, may be 

 

2

“Willfully,” for purposes of imposing relief under Sections 203(e) or 203(f) of the 

Advisers Act “‘means no more than that 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)). The decision in The Robare Group, Ltd. v. SEC, which construed the 

term “willfully” for purposes of a differently structured statutory provision, does not alter that 

standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish 

that a person has “willfully omit[ed]” material information from a required disclosure in violation 

of Section 207 of the Advisers Act).
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transferred to the general fund of the U.S. Treasury, subject to Section 21F(g)(3) of the Exchange 

Act.

Undertakings

24. Steps Taken to Date. Respondents have certified that they have evaluated, 

updated, and reviewed for the effectiveness of their implementation, Respondents’ policies and 

procedures so that they are reasonably designed to prevent violations of the Advisers Act and the 

rules thereunder in connection with its practices described herein.

25. Notice to Advisory Clients. Within 30 days of the entry of this Order, 

Respondents shall notify advisory clients of the settlement terms of this Order by sending a copy 

of this Order to each advisory client via mail, email, or such other method not unacceptable to 

the Commission staff, together with a cover letter in a form not unacceptable to the Commission 

staff.

26. Disclosure Documents. Within 45 days of the entry of this order, Respondents 

shall review and correct as necessary all relevant disclosure documents relating to the conflict of 

interest presented by its affiliated broker-dealer, KBD, including (a) full and fair disclosure of (i)

how KBD calculates brokerage commissions, (ii) how the costs and services offered by KBD 

compare to the costs and services offered by other broker-dealers, (iii) the greater compensation 

Respondents receive when clients use KBD, and (iv) that clients may elect to use other brokerdealers for execution, and that doing so will not cause the client to pay more in advisory fees to 

KIA; and (b) full and fair disclosure that KBD does not aggregate client transactions, even when 

doing so could result in more favorable execution for clients. 

27. Brokerage Charges. Within 60 days of the entry of this order, Respondents shall 

undertake a review of the services KBD provides to KIA clients, and (i) perform a comparative 

cost analysis to determine how KBD’s commission rates fare relative to what other brokerdealers charged for similar service, (ii) assess whether KBD provided clients with best execution,

and (iii) evaluate whether it is in the best interest of existing clients to continue to use KBD for 

execution, and where relevant, continue to pay brokerage commissions to KBD based on the Pre1975 schedule. 

28. Certificate of Compliance. Respondents shall certify, in writing, compliance with 

the undertakings set forth in paragraphs 25 through 27, above. The certification shall identify the 

undertakings, provide written evidence of compliance in the form of a narrative, and be 

supported by exhibits sufficient to demonstrate compliance. The Commission staff may make 

reasonable requests for further evidence of compliance, and Respondents agree to provide such 

evidence. The certification and supporting material shall be submitted to Adam S. Aderton, CoChief, Asset Management Unit, Division of Enforcement, Securities and Exchange Commission, 

100 F St., NE, Washington, DC 20549-5012, or such other person or address as the Commission 

staff may provide, no later than sixty (60) days from the completion of each of the undertakings.

29. Deadlines. The staff of the Commission may extend any of the procedural dates 

set forth in paragraphs 25 through 28, above, for good cause shown. The procedural dates shall 
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be counted in calendar days, except that if the last day falls on a weekend or federal holiday the 

next business day shall be considered to be the last day.

IV. 

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

to impose the sanctions agreed to in Respondents’ Offers. 

Accordingly, pursuant to Section 15(b) of the Exchange Act, and Sections 203(e), 203(f)

and 203(k) of the Advisers Act, it is hereby ORDERED that: 

A. Respondents KIA and Kahn cease and desist from committing or causing any 

violations and any future violations of Sections 206(2) and 206(4) of the Advisers Act, and Rule 

206(4)-7 promulgated thereunder. 

B. Respondents KIA and Kahn are censured.

C Respondents shall within ten (10) days of the issuance of this Order pay 

disgorgement of $701,799 and prejudgment interest of $146,100, on a joint and several basis, to 

the Securities and Exchange Commission. If timely payment is not made, additional interest shall 

accrue pursuant to SEC Rule of Practice 600.

D. Respondents shall within ten (10) days of the issuance of this Order pay a civil 

penalty in the amount of $250,000, on a joint and several basis, 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) Respondents may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request; 

(2) Respondents 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) Respondents 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 

KIA and Kahn as Respondents in these proceedings, and the file number of these proceedings; a 
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copy of the cover letter and check or money order must be sent to Adam S. Aderton, Co-Chief, 

Asset Management Unit, Division of Enforcement, Securities and Exchange Commission, 100 F 

St., NE, Washington, DC 20549-5012, or such other person or address as the Commission staff 

may provide.

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

Fund is created for the penalties, disgorgement, and prejudgment interest described 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 it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of their 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 this proceeding. 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 this 

proceeding.

F. Respondents shall comply with the undertakings enumerated in Section III, paragraphs 

25 through 28, above.

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 Kahn, 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. 

Vanessa A. Countryman

Secretary