In re FFL PARTNERS

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No.  4610 / January 17, 2017 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-17781 
 
 
In the Matter of 
 
FFL PARTNERS, LLC 
 
Respondent. 
 
ORDER INSTITUTING ADMINISTRATIVE AND 
CEASE-AND-DESIST PROCEEDINGS 
PURSUANT TO SECTIONS 203(e) AND 203(k) OF 
THE INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-AND-
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) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”) against FFL Partners, LLC (“FFL” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has 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 it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) 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 Respondent’s Offer, the Commission finds
1
 that: 
                                         
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding. 

 
 2 
A. SUMMARY 
 
1. These proceedings involve violations of the Commission’s “pay-to-play” rule for 
investment advisers by Respondent FFL, an investment adviser to private equity funds that 
primarily invest in U.S. middle market companies.  Rule 206(4)-5, promulgated under Section 
206(4) of the Advisers Act, is a prophylactic rule designed to address pay-to-play abuses 
involving campaign contributions made by certain investment advisers or their covered 
associates to government officials who are in a position to influence the selection of investment 
advisers to manage government client assets, including public pension fund assets.  Among other 
things, Rule 206(4)-5 prohibits certain investment advisers from providing investment advisory 
services for compensation to a government client (or to an investment vehicle in which a 
government entity invests) for two years after the adviser or certain of its executives or 
employees (known as covered associates) makes a campaign contribution to certain elected 
officials or candidates who can influence the selection of certain investment advisers.    
 
2. In 2012, a covered associate of Respondent made a campaign contribution to a 
candidate for elected office in the state of Wisconsin, which office had the authority to appoint 
persons who had influence over selecting investment advisers for the Wisconsin state public 
pension funds.  Within two years of this contribution, Respondent provided advisory services for 
compensation to one of these public pension funds.  By providing those advisory services for 
compensation, Respondent violated Section 206(4) of the Advisers Act and Rule 206(4)-5 
thereunder. 
 
B. RESPONDENT 
 
3. FFL Partners, LLC is a Delaware limited liability company located in San 
Francisco, California.  In July 2016, FFL changed its name from “Friedman Fleischer & Lowe, 
LLC.”   FFL has been registered with the Commission as an investment adviser since March 2012.  
In its Form ADV filed with the Commission on July 29, 2016, FFL reported regulatory assets under 
management of approximately $3.982 billion.   
 
C. BACKGROUND  
 
 4. In 2008, a Wisconsin state public pension plan, the Core Retirement Investment 
Trust (the “Wisconsin pension plan”), committed to invest approximately $50 million in Friedman 
Fleischer & Lowe Capital Partners III, L.P. (the “Fund”), a private equity fund advised by 
Respondent.  Upon making its commitment as a limited partner, the Wisconsin pension plan was 
contractually committed to invest approximately $50 million in the Fund, and the Wisconsin 
pension plan subsequently made this investment over time.  During the relevant times, the 
Wisconsin pension plan remained invested in the Fund.  The Fund was a closed-end fund and 
investors were generally prohibited from withdrawing their money for the life of the fund.      
 
 

 
 3 
 
 
5. In March 2012, a covered associate
2
 of Respondent (the “Covered Associate”) made 
a campaign contribution totaling $10,000 to a candidate for the office of the Governor of 
Wisconsin.
3
   
 
6. The office of the Governor of Wisconsin had the ability to influence the selection 
of investment advisers for the Wisconsin pension plan.  Specifically, the Governor of Wisconsin 
appoints several members of the board of trustees of the investment board managing the 
Wisconsin pension plan.  The trustees have influence over investments by the pension plan and 
the selection of investment advisers and pooled investment vehicles for the pension plan. 
 
7. During the two years after the contribution, Respondent continued to provide 
investment advisory services for compensation to the Fund.   
 
8. Advisers Act Rule 206(4)-5(a)(1) prohibits any investment adviser registered with 
the Commission, investment adviser required to be registered with the Commission, foreign 
private adviser, or exempt reporting adviser from providing investment advisory services for 
compensation to a government entity
4
 within two years after a contribution to an official
5
 of a 
government entity made by the investment adviser or any covered associate of the investment 
adviser.  Advisers Act Rule 206(4)-5 also applies to investment advisers, including exempt 
reporting advisers, to a covered investment pool in which a government entity invests or is 
solicited to invest as though the adviser were providing or seeking to provide investment 
                                         
2
  Covered associates are defined to include:  (i) any general partner, managing member or executive 
officer, or other individual with a similar status or function; (ii) any employee who solicits a government 
entity for the investment adviser and any person who supervises, directly or indirectly, such employee; and 
(iii) any political action committee controlled by the investment adviser or by any of its covered associates.  
See Rule 206(4)-5(f)(2).   
 
3
  Rule 206(4)-5 has a de minimis exception, which permits covered associates to make aggregate 
contributions without triggering the two-year time out of up to $350, per election, to an elected official or 
candidate for whom the covered associate is entitled to vote,
 
and up to $150, per election, to an elected 
official or candidate for whom the covered associate is not entitled to vote.  See Rule 206(4)-5(b)(1).  
 
4
  See Rule 206(4)-5(f)(5). 
 
5
  “Official” includes any person who, at the time of the relevant contribution, was an incumbent, 
candidate or successful candidate for elective office of a government entity if the office is directly or 
indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a 
government entity or has authority to appoint any person who is directly or indirectly responsible for, or can 
influence the outcome of, the hiring of an investment adviser by a government entity.  See Rule 206(4)-
5(f)(6).   
 

 
 4 
advisory services directly to the government entity.
6
  Advisers Act Rule 206(4)-5 does not require 
a showing of quid pro quo or actual intent to influence an elected official or candidate.    
 
9. As a public pension plan, the Wisconsin pension plan was a government entity as 
defined in Advisers Act Rule 206(4)-5(f)(5).  The contributor was a covered associate of 
Respondent as defined in Advisers Act Rule 206(4)-5(f)(2).  The candidate who received the 
contribution was an official as defined in Advisers Act Rule 206(4)-5(f)(6) of a government 
entity because the office that the candidate was seeking to become associated with had authority 
to influence the hiring of investment advisers by the government entity.  The Fund was a covered 
investment pool as defined in Advisers Act Rule 206(4)-5(f)(3) because it would be an 
investment company under Section 3(a) of the Investment Company Act but for the exclusion 
from the definition of investment company provided by Section 3(c)(7) of the Investment 
Company Act.    
 
10. Under Advisers Act Rule 206(4)-5, the contribution triggered a two-year “time-out” 
on Respondent providing advisory services to the Wisconsin pension plan for compensation.  
During the two years after the contribution, Respondent continued to provide advisory services for 
compensation to the Fund and, therefore, received advisory fees attributable to the investments of 
the Wisconsin pension plan in the Fund.   
 
D. VIOLATIONS 
  
 11. As a result of the conduct described above, Respondent FFL willfully
7
 violated 
Section 206(4) of the Advisers Act and Rule 206(4)-5 thereunder, which makes it unlawful for 
any investment adviser registered (or required to be registered) with the Commission, or 
unregistered in reliance on the exemption available under Section 203(b)(3) of the Advisers Act, 
or that is an exempt reporting adviser, to provide investment advisory services for compensation 
                                         
6
  See Rule 206(4)-5(c).  A “covered investment pool” is defined as (i) an investment company 
registered under the Investment Company Act of 1940 (“Investment Company Act”) that is an investment 
option of a plan or program of a government entity; or (ii) any company that would be an investment 
company under Section 3(a) of the Investment Company Act, but for the exclusion provided from that 
definition by either Section 3(c)(1), Section 3(c)(7) or Section 3(c)(11) of that Act.  See Rule 206(4)-
5(f)(3).  Rule 206(4)-5 applies to investment advisers even if the government entity was already invested in 
the covered investment pool at the time of the contribution.  
 
7
  A willful violation of the securities laws means merely “‘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)).  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)). 
 

 
 5 
to a government entity within two years after a contribution to an official of the government 
entity is made by the investment adviser or any covered associate of the investment adviser. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent FFL’s Offer. 
 
 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 
ORDERED that: 
 
  A. Respondent FFL Partners, LLC shall 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)-5 
thereunder.   
 
 B. Respondent FFL Partners, LLC is censured. 
 
 C. Respondent FFL Partners, LLC shall, within 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 
for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 
21F(g)(3).  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 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:  
  
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
  Oklahoma City, OK 73169 

 
 6 
 
 
Payments by check or money order must be accompanied by a cover letter identifying FFL 
Partners, LLC as the Respondent in these proceedings, the file number of these proceedings; a 
copy of which cover letter and check or money order must be sent to LeeAnn Ghazil Gaunt, 
Chief, Public Finance Abuse Unit, Securities and Exchange Commission, Boston Regional 
Office, 33 Arch Street, 23
rd
 Floor, Boston, MA 02110. 
 
 D. 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, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s 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 it 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 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. 
 
 By the Commission. 
 
 
 
       Brent J. Fields  
       Secretary  

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 
 

INVESTMENT ADVISERS ACT OF 1940 

Release No.  4610 / January 17, 2017 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-17781 
 

 
In the Matter of 
 

FFL PARTNERS, LLC 
 

Respondent. 
 

ORDER INSTITUTING ADMINISTRATIVE AND 

CEASE-AND-DESIST PROCEEDINGS 

PURSUANT TO SECTIONS 203(e) AND 203(k) OF 

THE INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-AND-

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

(“Advisers Act”) against FFL Partners, LLC (“FFL” or “Respondent”).  

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has 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 it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) 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 Respondent’s Offer, the Commission finds
1
 that: 

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

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



 

 2 

A. SUMMARY 

 

1. These proceedings involve violations of the Commission’s “pay-to-play” rule for 

investment advisers by Respondent FFL, an investment adviser to private equity funds that 

primarily invest in U.S. middle market companies.  Rule 206(4)-5, promulgated under Section 

206(4) of the Advisers Act, is a prophylactic rule designed to address pay-to-play abuses 

involving campaign contributions made by certain investment advisers or their covered 

associates to government officials who are in a position to influence the selection of investment 

advisers to manage government client assets, including public pension fund assets.  Among other 

things, Rule 206(4)-5 prohibits certain investment advisers from providing investment advisory 

services for compensation to a government client (or to an investment vehicle in which a 

government entity invests) for two years after the adviser or certain of its executives or 

employees (known as covered associates) makes a campaign contribution to certain elected 

officials or candidates who can influence the selection of certain investment advisers.    

 

2. In 2012, a covered associate of Respondent made a campaign contribution to a 

candidate for elected office in the state of Wisconsin, which office had the authority to appoint 

persons who had influence over selecting investment advisers for the Wisconsin state public 

pension funds.  Within two years of this contribution, Respondent provided advisory services for 

compensation to one of these public pension funds.  By providing those advisory services for 

compensation, Respondent violated Section 206(4) of the Advisers Act and Rule 206(4)-5 

thereunder. 

 

B. RESPONDENT 

 

3. FFL Partners, LLC is a Delaware limited liability company located in San 

Francisco, California.  In July 2016, FFL changed its name from “Friedman Fleischer & Lowe, 

LLC.”   FFL has been registered with the Commission as an investment adviser since March 2012.  

In its Form ADV filed with the Commission on July 29, 2016, FFL reported regulatory assets under 

management of approximately $3.982 billion.   

 

C. BACKGROUND  

 

 4. In 2008, a Wisconsin state public pension plan, the Core Retirement Investment 

Trust (the “Wisconsin pension plan”), committed to invest approximately $50 million in Friedman 

Fleischer & Lowe Capital Partners III, L.P. (the “Fund”), a private equity fund advised by 

Respondent.  Upon making its commitment as a limited partner, the Wisconsin pension plan was 

contractually committed to invest approximately $50 million in the Fund, and the Wisconsin 

pension plan subsequently made this investment over time.  During the relevant times, the 

Wisconsin pension plan remained invested in the Fund.  The Fund was a closed-end fund and 

investors were generally prohibited from withdrawing their money for the life of the fund.      

 

 



 

 3 

 

 

5. In March 2012, a covered associate
2
 of Respondent (the “Covered Associate”) made 

a campaign contribution totaling $10,000 to a candidate for the office of the Governor of 

Wisconsin.
3
   

 

6. The office of the Governor of Wisconsin had the ability to influence the selection 

of investment advisers for the Wisconsin pension plan.  Specifically, the Governor of Wisconsin 

appoints several members of the board of trustees of the investment board managing the 

Wisconsin pension plan.  The trustees have influence over investments by the pension plan and 

the selection of investment advisers and pooled investment vehicles for the pension plan. 

 

7. During the two years after the contribution, Respondent continued to provide 

investment advisory services for compensation to the Fund.   

 

8. Advisers Act Rule 206(4)-5(a)(1) prohibits any investment adviser registered with 

the Commission, investment adviser required to be registered with the Commission, foreign 

private adviser, or exempt reporting adviser from providing investment advisory services for 

compensation to a government entity
4
 within two years after a contribution to an official

5
 of a 

government entity made by the investment adviser or any covered associate of the investment 

adviser.  Advisers Act Rule 206(4)-5 also applies to investment advisers, including exempt 

reporting advisers, to a covered investment pool in which a government entity invests or is 

solicited to invest as though the adviser were providing or seeking to provide investment 

                                         
2
  Covered associates are defined to include:  (i) any general partner, managing member or executive 

officer, or other individual with a similar status or function; (ii) any employee who solicits a government 

entity for the investment adviser and any person who supervises, directly or indirectly, such employee; and 

(iii) any political action committee controlled by the investment adviser or by any of its covered associates.  

See Rule 206(4)-5(f)(2).   

 
3
  Rule 206(4)-5 has a de minimis exception, which permits covered associates to make aggregate 

contributions without triggering the two-year time out of up to $350, per election, to an elected official or 

candidate for whom the covered associate is entitled to vote,
 

and up to $150, per election, to an elected 

official or candidate for whom the covered associate is not entitled to vote.  See Rule 206(4)-5(b)(1).  

 
4
  See Rule 206(4)-5(f)(5). 

 
5
  “Official” includes any person who, at the time of the relevant contribution, was an incumbent, 

candidate or successful candidate for elective office of a government entity if the office is directly or 

indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a 

government entity or has authority to appoint any person who is directly or indirectly responsible for, or can 

influence the outcome of, the hiring of an investment adviser by a government entity.  See Rule 206(4)-

5(f)(6).   

 



 

 4 

advisory services directly to the government entity.
6
  Advisers Act Rule 206(4)-5 does not require 

a showing of quid pro quo or actual intent to influence an elected official or candidate.    

 

9. As a public pension plan, the Wisconsin pension plan was a government entity as 

defined in Advisers Act Rule 206(4)-5(f)(5).  The contributor was a covered associate of 

Respondent as defined in Advisers Act Rule 206(4)-5(f)(2).  The candidate who received the 

contribution was an official as defined in Advisers Act Rule 206(4)-5(f)(6) of a government 

entity because the office that the candidate was seeking to become associated with had authority 

to influence the hiring of investment advisers by the government entity.  The Fund was a covered 

investment pool as defined in Advisers Act Rule 206(4)-5(f)(3) because it would be an 

investment company under Section 3(a) of the Investment Company Act but for the exclusion 

from the definition of investment company provided by Section 3(c)(7) of the Investment 

Company Act.    

 

10. Under Advisers Act Rule 206(4)-5, the contribution triggered a two-year “time-out” 

on Respondent providing advisory services to the Wisconsin pension plan for compensation.  

During the two years after the contribution, Respondent continued to provide advisory services for 

compensation to the Fund and, therefore, received advisory fees attributable to the investments of 

the Wisconsin pension plan in the Fund.   

 

D. VIOLATIONS 

  

 11. As a result of the conduct described above, Respondent FFL willfully
7
 violated 

Section 206(4) of the Advisers Act and Rule 206(4)-5 thereunder, which makes it unlawful for 

any investment adviser registered (or required to be registered) with the Commission, or 

unregistered in reliance on the exemption available under Section 203(b)(3) of the Advisers Act, 

or that is an exempt reporting adviser, to provide investment advisory services for compensation 

                                         
6
  See Rule 206(4)-5(c).  A “covered investment pool” is defined as (i) an investment company 

registered under the Investment Company Act of 1940 (“Investment Company Act”) that is an investment 

option of a plan or program of a government entity; or (ii) any company that would be an investment 

company under Section 3(a) of the Investment Company Act, but for the exclusion provided from that 

definition by either Section 3(c)(1), Section 3(c)(7) or Section 3(c)(11) of that Act.  See Rule 206(4)-

5(f)(3).  Rule 206(4)-5 applies to investment advisers even if the government entity was already invested in 

the covered investment pool at the time of the contribution.  

 
7
  A willful violation of the securities laws means merely “‘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)).  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)). 

 



 

 5 

to a government entity within two years after a contribution to an official of the government 

entity is made by the investment adviser or any covered associate of the investment adviser. 

 

IV. 
 

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

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

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

ORDERED that: 

 

  A. Respondent FFL Partners, LLC shall 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)-5 

thereunder.   

 

 B. Respondent FFL Partners, LLC is censured. 

 

 C. Respondent FFL Partners, LLC shall, within 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 

for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 

21F(g)(3).  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 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:  
  

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

  Oklahoma City, OK 73169 



 

 6 

 

 

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

Partners, LLC as the Respondent in these proceedings, the file number of these proceedings; a 

copy of which cover letter and check or money order must be sent to LeeAnn Ghazil Gaunt, 

Chief, Public Finance Abuse Unit, Securities and Exchange Commission, Boston Regional 

Office, 33 Arch Street, 23
rd

 Floor, Boston, MA 02110. 
 

 D. 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, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s 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 it 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 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. 

 

 By the Commission. 

 

 

 

       Brent J. Fields  

       Secretary