UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 86541 / August 1, 2019

ADMINISTRATIVE PROCEEDING

File No. 3-19301

In the Matter of

KENDALL J. GROOM, CPA,

Respondent.

ORDER DIRECTING PAYMENT OF 

CERTAIN FUNDS RECEIVED BY 

COMMISSION

On August 1, 2019, the Securities and Exchange Commission (“Commission”) issued an 

Order (the “Order”)1that simultaneously instituted and settled public administrative and cease-anddesist proceedings against Kendall J. Groom (“Groom”). The Commission found that, from March 

2012 through January 2016, Groom – who was an investment adviser representative of a registered 

investment adviser, a registered representative of a registered broker-dealer, and the trustee and 

investment adviser for two related trusts (the “Trusts”) – diverted some of the Trusts’ assets to 

brokerage and bank accounts that he owned or controlled in violation of Sections 206(1) and 

206(2) of the Investment Advisers Act of 1940 (the “Advisers Act”). The Commission ordered 

Groom to cease and desist from committing or causing any violations and any future violations of 

Sections 206(1) and 206(2) of the Advisers Act. The Commission also ordered that Groom be

(i) barred from association with any broker, dealer, investment adviser, municipal 

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

rating organization; 

(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; and 

(iii) barred from participating in any offering of a penny stock, including: acting as a 

promoter, finder, consultant, agent or other person who engages in activities with a 

broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or 

inducing or attempting to induce the purchase or sale of any penny stock 

with the right to apply for reentry after five (5) years to the appropriate self-regulatory organization, 

or if there is none, to the Commission. The Commission further ordered Groom to pay a total of 

$485,988.45 to the Commission within twenty (20) days from the date of the Order, comprised of 

 

1

 Securities Exhange Act Rel. No. 86540 (Aug. 1, 2019).
2

disgorgement of $262,498.95, prejudgment interest of $38,489.50, and a civil penalty of $185,000. 

The Commission created a Fair Fund (the “Fair Fund”) pursuant to Section 308(a) of the SarbanesOxley Act of 2002 so the disgorgement, prejudgment interest, and civil penalty could be 

distributed to the beneficiaries of the Trusts or their lawful successors that were harmed by 

Groom’s violations as described in the Order (the “Beneficiaries”). 

The payment of disgorgement, prejudgment interest, and civil penalty constitutes a

qualified settlement fund (“QSF”) under Section of 468B(g) of the Internal Revenue Code (IRC), 

26 U.S.C. § 468B(g), and related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. 

After receipt of the disgorgement, interest, and penalty amounts referenced above, the 

Commission staff will seek the appointment of a tax administrator to establish a reserve for taxes 

and related administrative expenses (the “Reserve”). Upon establishing and withholding the 

Reserve, the Commission staff will cause $300,946.75 to be distributed to the Beneficiaries, 

which is the total loss to the Beneficiaries due to the violations described in the Order as 

determined by the Commission staff, plus reasonable interest.2 The distribution to each 

Beneficiary as determined by the Commission staff is reflected in Exhibit 1. After the 

distribution payments and all taxes and administrative expenses are paid, the Commission staff will 

transfer the remaining funds, if any, to the general fund of the United States Treasury subject to 

Section 21F(g)(3) of the Securities Exchange Act of 1934 (“Exchange Act”).

Accordingly, it is ORDERED that:

A. After the receipt of funds simultaneously ordered in this proceeding, the 

Commission staff shall seek the appointment of a tax administrator to, among 

other things, comply with tax-related obligations of the QSF and establish the 

Reserve; 

B. After withholding the Reserve, the Commission staff shall cause distribution of 

$300,946.75 to the Beneficiaries as set forth in Exhibit 1; and

C. Any amounts remaining in the Fair Fund after completion of A. and B. above, and 

any amounts returned to the Fair Fund in the future, shall be transferred to the 

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

Act.

By the Commission.

Vanessa A. Countryman 

Secretary

 

2 This amount includes reasonable interest calculated using the short-term Applicable Federal 

Rate plus three percentage points, compounded quarterly from October 1, 2018, through July 1, 

2019.
Exhibit 1

Beneficiary Amount

Beneficiary A $54,609.95

Beneficiary B $13,444.75

Beneficiary C $68,054.70

Beneficiary D $68,054.70

Beneficiary E $68,054.70

Beneficiary F $28,727.95

Total $300,946.75