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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23108 / October 8, 2014

Securities and Exchange Commission v. Paul T. Mannion, Jr., et al., Civil Action No. 1:10-cv-03374-WSD (N.D. Ga.)

SEC Obtains Final Judgment Against Paul T. Mannion, Jr., Andrew S. Reckles, Pef Advisors LLC, and Pef Advisors Ltd.

The Securities and Exchange Commission announced today that on September 29, 2014, the Honorable William S. Duffey, Jr. of the United States District Court for the Northern District of Georgia entered a final judgment finding that defendants Paul T. Mannion, Jr., Andrew S. Reckles, and PEF Advisors LLC and PEF Advisors Ltd. (Adviser Entities), two investment advisers Mannion and Reckles co-owned, violated Section 206(2) of the Investment Advisers Act of 1940 (Advisers Act) by personally exercising stock warrants that belonged to the Palisades Master Fund, L.P. (Fund), a hedge fund client defendants advised.  The Court did not impose further relief in light of relief to be imposed in a SEC administrative proceeding.

The Commission initiated its action against Mannion, Reckles, and the Adviser Entities (collectively, Defendants) on October 19, 2010 by filing a complaint alleging that Defendants violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Advisers Act by fraudulently overvaluing certain assets held by the Fund and by misappropriating assets from the Fund.  The Commission further alleged that Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by making a material misrepresentation to a selling stockholder in connection with a stock purchase.

On March 25, 2013, the Court entered summary judgment in the Commission’s favor with respect to the Commission’s claim that Defendants’ misappropriation of certain warrants belonging to the Fund violated Section 206(2) of the Advisers Act.  Conversely, the Court granted Defendants summary judgment with respect to the Commission’s claims under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder that related to the allegedly fraudulent overvaluations of Fund assets and to the alleged material misrepresentation in connection with the stock purchase.  In addition, the Court granted Defendants summary judgment limiting the Commission’s valuation claims under Sections 206(1) and 206(2) of the Advisers Act and dismissing certain misappropriation claims under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and under Sections 206(1) and 206(2) of the Advisers Act.  The Court’s March 25, 2013 ruling preserved remaining claims for trial. 

On July 1, 2014, the Court granted the Commission’s motion to dismiss the claims preserved for trial and to proceed to a determination of remedies.  In advance of the scheduled remedies hearing, the parties reached a settlement agreement.

Consistent with the parties’ settlement agreement, on October 3, 2014, the Commission issued an order instituting administrative and cease-and-desist proceedings that found that Mannion and Reckles willfully violated Section 206(2) of the Advisers Act, ordered them to cease and desist from committing or causing any violations and any future violations of Section 206(2) of the Advisers Act, required each of them to pay a penalty of $75,000, and

  • barred each of them from association with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent;
  • prohibited each of them 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
  • barred each of them 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 two (2) years to the appropriate self-regulatory organization, or if there is none, to the Commission.  See In the Matter of Paul T. Mannion, Jr. and Andrew S. Reckles, Release No. 34-73297 (Oct. 3, 2014).

For further information, see Release No. 34-73297 (Oct. 3, 2014) and Litigation Release No. 21699 (Oct. 19, 2010)

 

http://www.sec.gov/litigation/litreleases/2014/lr23108.htm


Modified: 10/08/2014