Source: https://www.sec.gov/litigation/complaints/comp17642.htm
Timestamp: 2019-04-23 18:40:25+00:00

Document:
1. The SEC brings this action to prevent Defendant Steven Bolla from continuing to act as investment adviser, along with other appropriate relief. Although Defendant Steven Bolla was enjoined by a federal District Court from violating the securities laws and barred by the SEC from acting as an investment adviser, he has continued to do both. After his bar in June of 2000, Defendant Steven Bolla continued to control the finances of Washington Investment Network ("WIN"), an investment adviser, to advise at least two WIN clients, and to receive over $120,000 in compensation from WIN. He also made material misrepresentations to one of his WIN clients in connection with a private placement investment he was soliciting as an unregistered broker-dealer. Defendant Steven Bolla's material misrepresentations violated District Court injunctions issued against him in June of 2000. Defendant WIN allowed Defendant Steven Bolla to continue associating with the firm even though it knew that he had been barred from doing so. Defendant Susan Bolla (Steven Bolla's wife) became a nominal co-owner of WIN in order to conceal her husband's control of the firm. In doing so, she, together with Defendant Robert Radano ("Radano"), facilitated Defendant Steven Bolla's continued improper association with WIN. Although all of the Defendants knew that Steven Bolla had been barred and enjoined, yet continued to associate with WIN, none of the Defendants disclosed Steven Bolla's bar or any other aspect of his disciplinary history to any WIN clients. Since defendants Steven Bolla, Susan Bolla and Radano were the only principals/employees of defendant WIN, investors had no other way of learning this material information.
2. In addition to his activities at WIN, Defendant Steven Bolla also became an employee of Macken Financial Group, a registered investment adviser located in Rosedale, California, just eleven days after his SEC bar.
3. By engaging in such conduct, Steven Bolla has violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a); and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b) and 15 U.S.C. §78o(a)(1) respectively, and Rule 10b-5 thereunder, 17 C.F.R. §240.10b-5. In addition, Defendants Steven Bolla and WIN have violated Sections 203(f) and 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act"), 15 U.S.C. §80b-3(f) and 15 U.S.C. §80b-6(1) and (2) respectively. Further, Defendants Steven Bolla, Susan Bolla and Radano aided and abetted violations of Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §80b-6(1) and (2). Defendants Susan Bolla and Radano aided and abetted violations of Section 203(f) of the Advisers Act, 15 U.S.C. §80b-3(f).
4. The SEC brings this action seeking (a) injunctions against future violations; (b) disgorgement of ill-gotten gains; and (c) civil money penalties.
5. This court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a); Sections 21(e) and 27 of the Exchange Act, 15 U.S.C. §§ 77u(e) and 78aa; and Section 214 of the Advisers Act, 15 U.S.C. § 80b-14.
6. Venue in this Court is proper because Defendant Steven Bolla's actions have violated both injunctions and an SEC bar issued in this District. Moreover, Defendant Steven Bolla was required to register with the SEC as a broker-dealer before acting as such. Defendant Steven Bolla was also required to file an application with the SEC to become re-associated with any investment adviser before doing so. Bolla's failure to make these filings also makes venue in this Court proper.
7. STEVEN BOLLA, age 43, is a resident of Alpharetta, Georgia. On June 19, 2000, the U.S. District Court for the District of Columbia enjoined Bolla from violating various provisions of the federal securities laws. On June 20, 2000, pursuant to Section 203(f) of the Advisers Act, the SEC barred Bolla from associating with any investment adviser. The terms of the SEC's order permitted Bolla to reapply after five (5) years.
8. WASHINGTON INVESTMENT NETWORK ("WIN") of Bethesda, Maryland, is an investment adviser registered with the Commonwealth of Virginia. WIN is not registered with the SEC. Defendants Steven Bolla, Susan Bolla and Robert Radano established WIN in 1997, with Susan Bolla and Radano each owning fifty percent of the firm.
9. SUSAN BOLLA, age 42, is a resident of Alpharetta, Georgia, and is the wife of Steven Bolla. Susan Bolla became a half-owner of WIN when the firm was established in 1997.
10. ROBERT RADANO ("RADANO"), age 46, is a resident of Bethesda, Maryland. Radano is the Managing Director and currently is the sole owner and employee of WIN.
11. Lockwood Financial Services ("Lockwood") is a dually registered broker-dealer and investment adviser located in Malvern, Pennsylvania. Lockwood is a "wrap" fee sponsor that makes professional money managers available to its clients through independent investment advisers, including WIN. At all times relevant to this case, Lockwood paid WIN a quarterly fee based on the amount of WIN client assets invested with Lockwood.
12. Macken Financial Group ("Macken Financial") is a registered investment adviser that, at all times relevant to this case, did business as MFG Advisors. At all times relevant to this case, Macken Financial was a California corporation that wholly owned Macken Securities, a registered broker-dealer, and Macken Advisors, Inc., another registered investment adviser. Macken Advisors terminated its registration with the SEC on August 27, 2001.
13. usAdvisor was at all times relevant to this case an "e-commerce" company that established relationships between certified public accounting ("CPA") firms and Macken Advisors and MFG Advisors. usAdvisor was wholly owned by Macken Financial.
14. Global Genomics Capital, Inc. ("Global Genomics") is a California corporation that conducted a private placement offering in early 2001.
15. Mount Lucas Management ("MLM") is a registered investment adviser located in Princeton, New Jersey. MLM provides managed futures investment programs to WIN clients, and pays WIN a monthly fee based on the amount of WIN client assets invested with MLM.
16. Nancy DeFelice, of Southbury, Connecticut was a client of Steven Bolla and WIN.
17. David Meredith, of Jupiter, Florida, was a client of Steven Bolla and WIN.
18. Karen Grotto, of Weston, Connecticut, is the daughter of David Meredith and was the day-to-day administrator of his WIN accounts. Grotto was also a client of Steven Bolla and WIN.
19. On June 19, 2000, in a case entitled SEC v. James L. Foster, et al., Case No. 00-1192 (D.D.C.), U.S. District Judge Thomas A. Flannery issued a judgment against Defendant Steven Bolla, which "permanently restrained and enjoined" him from violating the anti-fraud provisions of (a) the Securities Act, Section 17(a); (b) the Exchange Act, Section 10(b) and Rule 10(b)(5) thereunder; and (c) the Advisers Act, Sections 206(1), (2) and (4), and Rules 206(4)-1(a)(5) and (4)-2(a)(1) through (5) thereunder.
20. On June 20, 2000, the SEC issued an Order, In the Matter of James L. Foster, et al., Securities Exchange Act. Rel. No. 42963, barring Defendant Steven Bolla from associating with any investment adviser, with the right to apply for association after five years.
21. In February 2000, Defendant Steven Bolla attended a seminar sponsored by usAdvisor in California, where he met Phil Macken, the founder and president of Macken Financial. Defendant Steven Bolla expressed an interest in becoming involved with Macken Financial and usAdvisor, and claimed that his connections with CPA firms could assist Macken Advisors and MFG Advisors establish relationships with CPA firms.
22. In order for Defendant Steven Bolla to play the integral role in the management strategy of Macken Financial that he desired, Macken required Steven Bolla to become an employee of the company. Bolla became an employee of Macken on July 1, 2000, although his employment contract was not signed until November 2000, after continued negotiations.
23. During the course of his employment with Macken Financial, Defendant Steven Bolla never disclosed that he was barred by the SEC from associating with any investment adviser, such as Macken Financial.
24. Before the SEC issued its bar order on June 20, 2000, Defendant Steven Bolla exclusively managed WIN's finances by receiving and depositing WIN fee payments from Lockwood and MLM into WIN's checking account, and by making payments on behalf of WIN from that account to third-parties and to himself and Defendant Robert Radano as compensation.
25. Defendant Steven Bolla was in violation of the bar order from the time the order was issued. Between June 20, 2000 and March 22, 2001, Defendant Steven Bolla continued exclusively to manage WIN's finances by depositing WIN fees from Lockwood and MLM in the firm's checking account and by making payments on behalf of WIN to third-parties and to himself and Defendant Robert Radano as compensation.
26. Before the SEC issued its bar order on June 20, 2000, Defendant Steven Bolla communicated with Lockwood on behalf of WIN, and served as the point of contact for many WIN clients.
27. Between June 20, 2000 and September 2000, Defendant Steven Bolla continued to communicate with Lockwood on behalf of WIN. Defendant Steven Bolla instructed Lockwood regarding the status of certain WIN accounts and regarding the address to which Lockwood should send fee payments. Defendant Steven Bolla received compensation from WIN for client fees accrued between July 1, 2000 and December 31, 2000. In total, Defendant Steven Bolla received $122,889 in compensation from WIN after he was barred. After his bar, Defendant Steven Bolla also continued to serve as the point of contact for many WIN clients.
28. Before the SEC issued its bar order on June 20, 2000, Defendant Steven Bolla had been designated as the investment adviser for WIN clients Nancy DeFelice and David Meredith. In that capacity, Defendant Steven Bolla provided investment advice to DeFelice relating to her WIN accounts, and to Karen Grotto relating to Meredith's WIN accounts.
29. Between June 20, 2000 and April 2001, Defendant Steven Bolla continued to provide investment advice to Nancy DeFelice relating to her WIN accounts and to other investments.
30. Between June 20, 2000 and October 2000, Defendant Steven Bolla continued to provide investment advice to Karen Grotto relating to David Meredith's WIN accounts and to other investments.
31. Following Defendant Steven Bolla's bar, Defendants Susan Bolla and Robert Radano permitted Steven Bolla to continue to maintain financial control over WIN, to receive fee payments from Lockwood and MLM, to make disbursements to third-parties on behalf of WIN, to receive compensation from WIN, to maintain contact with WIN clients, and to act as investment adviser to WIN clients DeFelice and Meredith. None of the defendants informed DeFelice, Meredith or any WIN clients of Steven Bolla's bar and disciplinary history.
32. Global Genomics was a privately held company that was conducting a private placement in early 2001. After learning that Defendant Steven Bolla could introduce investors to Global Genomics, the company agreed to compensate the Defendant for doing so. On March 15, 2001, Global Genomics agreed to pay Defendant Steven Bolla compensation based on the dollar amount of investments he obtained in the company's private placement.
33. At no time during his employment with Global Genomics was Defendant Steven Bolla registered with the Commission as a broker-dealer, nor was he associated with a registered broker-dealer.
34. Defendant Steven Bolla solicited his investment advisory client Nancy DeFelice to invest in the Global Genomics private placement.
35. Defendant Steven Bolla made material misstatements to DeFelice. First, Bolla told DeFelice that the offering price of the price placement was $3 per share, but that he was able to obtain a "preferred rate" for her of $2.50. The offering price for all private placement investors, however, was $2.50.
36. Further, before agreeing to invest, DeFelice asked Defendant Steven Bolla whether he would receive compensation from her investment. Although he already had an agreement with Global Genomics that provided for his compensation for obtaining investors, Defendant Steven Bolla stated that he would not receive any such compensation.
37. DeFelice subsequently agreed to invest in Global Genomics and mailed a check and a signed private placement Subscription Agreement to Defendant Steven Bolla. Pursuant to their agreement, Global Genomics paid Defendant Steven Bolla a $4,000 commission for obtaining DeFelice's investment.
38. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
39. By knowingly or recklessly misrepresenting that he was able to obtain a "preferred rate" for DeFelice's purchase of Global Genomics stock, Defendant Steven Bolla, in the offer or sale of securities, by use of the means or instruments of transportation or communication in interstate commerce, or by the use of the mails, directly or indirectly: (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, not misleading; and (c) engaged in transactions, practices, or courses of business which operated or would have operated as a fraud or deceit upon purchasers of securities.
40. By knowingly or recklessly misrepresenting that he would not receive compensation for her investment, Defendant Steven Bolla, in the offer or sale of securities, by use of the means or instruments of transportation or communication in interstate commerce, or by the use of the mails, directly or indirectly: (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, not misleading; and (c) engaged in transactions, practices, or courses of business which operated or would have operated as a fraud or deceit upon purchasers of securities.
41. By reason of the foregoing, Defendant Steven Bolla violated Section 17(a) of the Securities Act.
42. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
43. By knowingly or recklessly misrepresenting that he was able to obtain a "preferred rate" for DeFelice's purchase of Global Genomics stock, Defendant Steven Bolla, directly or indirectly, by use of the means or instruments of interstate commerce, or of the mails, or of a facility of a national securities exchange, knowingly or recklessly: (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaged in acts, transactions, practices, and courses of business which operated or would have operated as a fraud or deceit upon the purchasers of securities and upon other persons, in connection with the purchase or sale of a security.
44. By knowingly or recklessly misrepresenting that he would not receive compensation for her investment, Defendant Steven Bolla, in the offer or sale of securities, by use of the means or instruments of transportation or communication in interstate commerce, or by the use of the mails, directly or indirectly: (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, not misleading; and (c) engaged in transactions, practices, or courses of business which operated or would have operated as a fraud or deceit upon purchasers of securities.
45. By reason of the foregoing, Defendant Steven Bolla violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
46. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
47. By misrepresenting that he was able to obtain a "preferred rate" for DeFelice's purchase of Global Genomics stock, Defendant Steven Bolla, with the intent to deceive, manipulate or defraud, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly: (a) employed devices, schemes or artifices to defraud his client DeFelice; and (b) engaged in transactions, practices, or courses of business which operated or would have operated as a fraud or deceit upon his client DeFelice.
48. By misrepresenting that he would not receive compensation for her investment, Defendant Steven Bolla, with the intent to deceive, manipulate or defraud, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly: (a) employed devices, schemes or artifices to defraud his client DeFelice; and (b) engaged in transactions, practices, or courses of business which operated or would have operated as a fraud or deceit upon his client DeFelice.
49. Defendant Steven Bolla made these representations to DeFelice while he was acting as her investment adviser.
50. By reason of the foregoing, Defendant Steven Bolla violated Sections 206(1) and (2) of the Advisers Act.
51. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
52. In soliciting DeFelice's investment in the Global Genomics private placement, Defendant Steven Bolla made use of the mails and other means or instrumentalities of interstate commerce to induce the purchase of a security.
53. By executing an agreement with Global Genomics pursuant to which he would receive transaction-based compensation for his sale of stock in the Global Genomics private placement, and by soliciting Nancy DeFelice to invest in the private placement, Defendant Steven Bolla was engaged in the business of effecting transactions for the accounts of others.
54. Defendant Steven Bolla sold stock in the private placement of Global Genomics to Nancy DeFelice, and received $4,000 in compensation from Global Genomics for obtaining this investment.
55. At no time was Defendant Steven Bolla registered with the SEC as a broker-dealer.
56. By reason of the foregoing, Defendant Steven Bolla violated Section 15(a) of the Exchange Act.
57. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
58. By continuing to maintain financial control over WIN, to receive fee payments from Lockwood and MLM, to make disbursements to third-parties on behalf of WIN, to receive compensation from WIN, to maintain contact with WIN clients, and to act as investment adviser to WIN clients DeFelice and Meredith, Defendant Steven Bolla willfully associated with an investment adviser without the consent of the SEC after he had been barred by the SEC.
59. By reason of the foregoing, Defendants Steven Bolla and WIN violated Section 203(f) of the Advisers Act.
60. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
61. By allowing Defendant Steven Bolla to continue to maintain financial control over WIN, to receive fee payments from Lockwood and MLM, to make disbursements to third-parties on behalf of WIN, to receive compensation from WIN, to maintain contact with WIN clients, and to act as investment adviser to WIN clients DeFelice and Meredith, Defendant WIN permitted Defendant Steven Bolla to remain associated with the firm without the consent of the SEC, while it knew the SEC had barred him from associating with an investment adviser.
62. By reason of the foregoing, Defendant WIN violated Section 203(f) of the Advisers Act.
63. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 29, above.
64. In its failure to disclose that Defendant Steven Bolla had been enjoined and barred from acting as an investment adviser to its clients, yet continued to associate with the firm, Defendant WIN, with the intent to deceive, manipulate or defraud, by the use of the mails or any means or instrumentality of interstate commerce, directly or indirectly: (a) employed devices, schemes, or artifices to defraud a client or prospective client; and (b) engaged in transactions, practices, or courses of business which operated as a fraud or deceit upon a client or prospective client.
65. By reason of the foregoing, Defendant >WIN violated Sections 206(1) and (2) of the Advisers Act.
66. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
67. Defendant WIN violated Sections 206(1) and (2) of the Advisers Act by failing to disclose Defendant Steven Bolla's bar and disciplinary history to its clients while he continued to associate with the firm.
68. Defendant Steven Bolla knew of his bar when it was issued, and he knew that he continued to associate with WIN in violation of the bar.
69. Defendant Steven Bolla failed to disclose his bar and disciplinary history to DeFelice, Meredith and the other WIN clients. By doing so, Defendant Steven Bolla knowingly and substantially assisted Defendant WIN in its violation of Sections 206(1) and (2) of the Advisers Act.
70. By reason of the foregoing, Defendant Steve Bolla aided and abetted Defendant WIN's violation of Sections 206(1) and (2) of the Advisers Act.
71. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
72. Defendant WIN violated Sections 206(1) and (2) of the Advisers Act by failing to disclose Defendant Steven Bolla's bar and disciplinary history to its clients while Bolla continued to associate with the firm.
73. Defendants Susan Bolla and Robert Radano knew of Defendant Steven Bolla's bar when it was issued, and knew that he continued to associate with WIN for some months after June 2000 in violation of the bar.
74. In their failure to disclose Defendant Steven Bolla's bar and disciplinary history to any WIN clients, Defendants Susan Bolla and Robert Radano knowingly and substantially assisted WIN in its violation of Sections 206(1) and (2) of the Advisers Act.
75. By reason of the foregoing, Defendants Susan Bolla and Robert Radano aided and abetted WIN's violations of Sections 203(f) and 206(1) and (2) of the Advisers Act.
76. The SEC realleges and incorporates by reference the allegations contained in Paragraphs 1 through 37, above.
77. Defendant WIN violated Section 203(f) of the Advisers Act by permitting Defendant Steven Bolla to continue associating with the firm after the SEC had barred him from doing so, and without the consent of the SEC.
78. Defendants Susan Bolla and Robert Radano knew of Defendant Steven Bolla's bar when it was issued, and knew that he was continuing to associate with WIN for some months after June 2000 in violation of his bar.
79. By permitting Defendant Steven Bolla to continue to maintain financial control over WIN, to receive fee payments from Lockwood and MLM, to make disbursements to third-parties on behalf of WIN, to receive compensation from WIN, to maintain contact with WIN clients, and to act as investment adviser to WIN clients DeFelice and Meredith without the consent of the SEC, Defendants Susan Bolla and Robert Radano knowingly and substantially assisted Defendant WIN in its violation of Section 203(f) of the Advisers Act.
80. By reason of the foregoing, Defendants Susan Bolla and Robert Radano aided and abetted Defendant WIN's violations of Sections 203(f) of the Advisers Act.
1. finding that Steven Bolla has violated Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a); Sections 10(b) and 15(a) of the Exchange Act, 15 U.S.C. § 78j(b) and 15 U.S.C. §78o(a)(1) respectively, and Rule 10b-5 thereunder, 17 C.F.R. §240.10b-5; Sections 203(f) and 206(1) and (2) of the Advisers Act, 15 U.S.C. §80b-3(f) and 15 U.S.C. § 80b-6(1) and (2) respectively; and aided and abetted violations of Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §80b-6(1) and (2).
2. that Washington Investment Network has violated Sections 203(f) and 206(1) and (2) of the Advisers Act, 15 U.S.C. §80b-3(f) and 15 U.S.C. § 80b-6(1) and (2) respectively.
3. that Susan Bolla and Robert Radano aided and abetted violations of Sections 203(f) and 206(1) and (2) of the Advisers Act, 15 U.S.C. §80b-3(f) and 15 U.S.C. § 80b-6(1) and (2) respectively.
9. granting such other relief as the Court deems just and proper.

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