UNITED STATES OF AMERICA
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UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
ADMINISTRATIVE PROCEEDING
File No. 3-20954
In the Matter of
Richard Keith Robertson,
Respondent.
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ADMINISTRATIVE PROCEEDING
File No. 3-20955
In the Matter of
IFP Advisors, LLC,
Respondent.
I.
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PROPOSED PLAN OF
DISTRIBUTION
OVERVIEW
1.
The Division of Enforcement submits this Proposed Plan of Distribution (the
“Plan”) to the United States Securities and Exchange Commission (the “Commission”) pursuant
to Rule 1101 of the Commission’s Rules on Fair Fund and Disgorgement Plans (the
“Commission’s Rules”), 17 C.F.R. § 201.1101. This Plan provides for the distribution of a Fair
Fund (the “Fair Fund”) comprised of disgorgement, prejudgment interest, and civil money
penalties, paid by Richard Keith Robertson (“Robertson”)1 and IFP Advisors, LLC (“IFP”)2
(collectively, the “Respondents”) in the above-captioned matters (“Orders”).
2.
As described more specifically below, the Plan seeks to compensate investors
who were harmed by the Respondents’ conduct described in the Orders, in connection with a
1
See Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the
Securities Exchange Act of 1934, Sections 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section
9(b) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-andDesist Order, Exchange Act Rel. No. 95462 (Aug. 10, 2022).
2
See 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, Advisers Act Rel. No. 6086 (Aug. 10, 2022).
cherry-picking scheme involving the unfair allocation of profitable trades. Based on information
obtained by the Commission staff during and after its investigation and the review and analysis
of applicable records, the Commission staff and the Fund Administrator have reasonably
concluded that they have sufficient records necessary to calculate each investor’s harm. As a
result, the Fair Fund is not being distributed according to a claims-made process, so procedures
for making and approving claims in accordance with Rule 1101(b)(4) of the Commission’s
Rules, 17 C.F.R. § 201.1101(b)(4), are not applicable.
3.
As calculated using the methodology detailed in the Plan of Allocation (attached
as Exhibit A), investors will be compensated for their losses between January 2011 through
October 2020 (the “Relevant Period”) due to the misconduct of Robertson in allocating trades to
client accounts and IFP Advisors’ failure to supervise Robertson and other violations.
4.
In the view of the Commission staff, this methodology constitutes a fair and
reasonable allocation of the Fair Fund.
5.
The Commission has custody of the Fair Fund and shall retain control of the
assets of the Fair Fund. The Plan is subject to approval by the Commission, and the Commission
retains jurisdiction over its implementation.
II.
BACKGROUND
6.
On August 10, 2022, the Commission issued the Orders instituting and
simultaneously settling cease-and-desist proceedings against the Respondents. The Commission
found that from January 2011 to October 2020, Robertson engaged in a cherry-picking scheme
whereby he unfairly allocated purchases of securities between his personal and family accounts
and his other IFP clients’ accounts. Robertson disproportionately allocated profitable trades to
his personal and family accounts and disproportionately allocated unprofitable trades to his other
advisory clients. IFP failed to supervise Robertson, failed to implement policies and procedures
reasonably designed to prevent violations of the Advisers Act and its rules by its supervised
persons, and made false and misleading statements in its Forms ADV concerning supposed
safeguards it had to prevent investment adviser representatives from placing their own interests
ahead of those of its advisory clients.
7.
In their respective Orders, the Commission ordered Robertson to pay
disgorgement of $592,437.00, prejudgment interest of $28,173.12, and a civil money penalty of
$300,000; and IFP to pay a civil money penalty of $400,000, for a collective total of
$1,320,610.12 to the Commission.
8.
In each of the Orders, the Commission also created a Fair Fund, pursuant to
Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalties collected, along with the
disgorgement and prejudgment interest collected, can be distributed to harmed investors, and
further ordered that it may be combined with the monies paid in a parallel proceeding arising out
of the same facts that are the basis for the violations in this matter, and that it is expected for the
monies collected pursuant to the Orders to be distributed together.
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9.
The Respondents have paid in full. In accordance with the Orders, the
$1,322,615.07 paid by the Respondents has been combined (collectively, the “Fair Fund”) and
deposited in a Commission-designated account at the U.S. Department of the Treasury, and any
accrued interest will be added to the Fair Fund.
III.
DEFINITIONS
As used in this Plan, the following definitions will apply:
10.
“Administrative Costs” shall mean any administrative costs and expenses,
including without limitation tax obligations, the fees and expenses of the Tax Administrator and
the Fund Administrator, bond premium expenses, and investment and banking costs.
11.
“Certification Date” means the date established in accordance with this Plan by
which a Preliminary Claimant’s Certification Form must be postmarked or submitted
electronically in order to receive consideration under the Plan. The Certification Date shall be
sixty (60) days from the mailing of the Plan Notice.
12.
“Certification Form” means the form that will be emailed or mailed to each
Preliminary Claimant. The Certification Form will require confirmation of the name and mailing
address of the Payee to which a Distribution Payment should be issued. The Certification Form
will require tax identification information from the Preliminary Claimant and a certification that
the Preliminary Claimant is not an Excluded Party. The Certification Form may be accompanied
by tax forms, as required, relating to the tax treatment of any distribution.
13.
“Determination Notice” means the notice sent by the Distribution Agent within
forty-five (45) days of the Certification Date to all Preliminary Claimants that submitted a
deficient Certification Form. The Determination Notice will provide to each Preliminary
Claimant whose claim is deficient, in whole or in part, the reason(s) for the deficiency and in the
event the claim is denied, the Determination Notice will state the reason(s) for such denial. The
Determination Notice will also notify the Preliminary Claimant of the opportunity to cure any
deficiency, request reconsideration, or dispute the determination made by the Fund
Administrator and provide instructions regarding what is required to do so.
14.
“Distribution Payment” means a payment from the Fair Fund to a Payee in
accordance with the terms of this Plan.
15.
“Eligible Claimant” means a Preliminary Claimant, who is determined to have
suffered a Recognized Loss, pursuant to the Plan of Allocation, and who is not an Excluded
Party or an Unresponsive Preliminary Claimant.
16.
“Excluded Party” shall mean:
(a)
The Respondents;
(b)
Any past or present director or officer of IFP, or any of IFP’s past or
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present affiliates who served in such a capacity during the Relevant Period
and were directly involved in the conduct detailed in the Orders;
(c)
Any employee or former employee of IFP or of any of its past or present
affiliates who has been terminated for cause in connection with the
conduct described in the Orders or any related Commission action, or who
was otherwise terminated or has resigned in connection with the conduct
described in the Orders or any related SEC or criminal action;
(d)
Any affiliates, assigns, creditors, heirs, distributees, spouses, parents,
children, or controlled entities of any of the foregoing persons or entities
described in (a)–(c), above;
(e)
The Fund Administrator, its employees, and those Persons assisting the
Fund Administrator in its role as the Fund Administrator; and
(f)
Any purchaser or assignee of another Person’s right to obtain a recovery
from the Fair Fund for value; provided, however, that this provision shall
not be construed to exclude those Persons who obtained such a right by
gift, inheritance or devise.
17.
“Fair Fund” means the fund created by the Commission pursuant to Section
308(a) of the Sarbanes-Oxley Act of 2002, for the benefit of investors harmed by Respondents’
violations described in the Order.
18.
“Final Determination Notice” means the written notice sent by the Fund
Administrator to (a) all Preliminary Claimants who timely submitted a Certification Form,
notifying the Preliminary Claimants of the Fund Administrator’s eligibility determination; (b)
any Preliminary Claimant who timely submitted a written dispute of his, her, or its calculated
Recognized Loss notifying the Preliminary Claimant of its resolution of the dispute; and (c)
those Preliminary Claimants who have not responded to the Plan Notice as described in
paragraph 46, except for those whose Plan Notice were returned as “undeliverable,” notifying the
Preliminary Claimant that he, she, or it has been deemed an Unresponsive Preliminary Claimant.
The Final Determination Notice will constitute the Fund Administrator’s final ruling regarding
the status of the claim.
19.
“Net Available Fair Fund” means the Fair Fund, plus any interest or earnings,
less Administrative Costs.
20.
“Payee” means an Eligible Claimant whose distribution amount is equal to or
greater than $10.00, as calculated in accordance with the Plan of Allocation, who will receive a
Distribution Payment.
21.
“Person” means natural individuals as well as legal entities such as corporations,
partnerships, or limited liability companies.
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22.
“Plan Notice” means a written notice from the Fund Administrator to each
Preliminary Claimant regarding the Commission’s approval of the Plan, including, as
appropriate: a statement characterizing the distribution; a link to the approved Plan posted on the
Commission’s website and instructions for requesting a copy of the Plan; the Certification Form,
along with specification of any information needed from the Preliminary Claimant to prevent
him, her, or it from being deemed an Unresponsive Preliminary Claimant; his, her, or its
preliminary Recognized Loss (if known); a description of the tax information reporting and other
related tax matters; the procedure for the distribution as set forth in the Plan; and the name and
contact information for the Fund Administrator as a resource for additional information or to
contact with questions regarding the distribution.
23.
“Plan of Allocation” means the methodology by which a Preliminary Claimant’s
Recognized Loss is calculated. The Plan of Allocation is attached as Exhibit A.
24.
“Preliminary Claimant” means a Person, or their lawful successors, identified
by the Fund Administrator based on its review and analysis of applicable records obtained by the
Commission staff during its investigation.
25.
“Recognized Loss” means the amount of loss calculated for a Preliminary
Claimant in accordance with the Plan of Allocation.
26.
“Relevant Period” is between January 2011 through October 2020.
27.
“Unresponsive Preliminary Claimant” means a Preliminary Claimant whose
address the Fund Administrator has not been able to verify and/or who does not timely respond
to the Fund Administrator’s attempts to obtain information, including any information sought in
the Plan Notice and Certification Form. Unresponsive Preliminary Claimants will not be eligible
for a distribution under the Plan.
IV.
TAX COMPLIANCE
28.
On March 21, 2023, the Commission appointed Heffler, Radetich & Saitta, LLP
as the tax administrator (the “Tax Administrator”) for the Fair Fund to handle the tax obligations
of the Fair Fund.3 The Tax Administrator will be compensated for reasonable fees and expenses
from the Fair Fund in accordance with its 2022-2024 Engagement Letter Agreement with the
Commission.4
29.
The Fair Fund constitutes a Qualified Settlement Fund (“QSF”) under Section
468B(g) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. § 468B(g), and related
regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. The Tax Administrator is the
administrator of such QSF for purposes of Treas. Reg. § 1.468B-2(k)(3)(I) and shall satisfy the
tax-related administrative requirements imposed by Treas. Reg. § 1.468B-2, including, but not
limited to:
3
See Order Appointing Tax Administrator, Exchange Act Rel. No. 97175 (Mar. 21, 2023).
See Omnibus Order Directing the Engagement of Two Tax Administrators for Appointment on a Case-By-Case
Basis in Administrative Proceedings that Establish Distribution Funds, Exchange Act Rel. No. 94845 (May 4, 2022).
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(a)
Obtaining a taxpayer identification number;
(b)
Requesting funds necessary for the timely payment of all applicable taxes,
the payment of taxes for which the Tax Administrator has received funds,
and the filing of applicable returns; and
(c)
Fulfilling any information reporting or withholding requirements imposed
on distributions from the Fair Fund.
30.
All tax obligations will be paid from the Fair Fund, subject to the review and
approval of Commission staff.
V.
FUND ADMINISTRATOR
31.
On July 25, 2024, the Commission appointed SS&C GIDS, Inc. (“SS&C”) as the
fund administrator for the Fair Fund (the “Fund Administrator”), and the Fund Administrator has
obtained a bond in the amount of $1,320,610, as ordered.5 Pursuant to Rule 1105(a) of the
Commission’s Rules, 17 C.F.R. § 201.1105(a), the Fund Administrator may be removed at any
time by order of the Commission or hearing officer.
32.
The Fund Administrator will be responsible for administering the Fair Fund in
accordance with the Plan. This will include, among other things, taking reasonable steps to
obtain accurate mailing information for Preliminary Claimants; establishing a website and
staffing a call center to address inquiries regarding the Plan; disseminating the Plan Notice;
preparing accountings; cooperating with the Tax Administrator appointed by the Commission to
satisfy any tax liabilities and to ensure compliance with income tax reporting requirements,
including but not limited to Foreign Account Tax Compliance Act (FATCA); disbursing the Fair
Fund in accordance with this Plan, as ordered by the Commission; and researching and
reconciling errors and reissuing payments, when possible.
33.
To carry out the purposes of this Plan, the Fund Administrator is authorized to
make and implement immaterial changes to the Plan upon agreement of the Commission staff. If
a change is deemed to be material by the Commission staff, Commission approval is required
prior to implementation by amending the Plan.
34.
The Fund Administrator may extend any procedural deadline contained in the
Plan for good cause shown, if agreed upon by the Commission staff.
35.
When administering this Plan, the Fund Administrator, and/or each of its
designees, agents and assigns, may rely on: all applicable law; orders issued by the Commission,
including orders issued by delegated authority; orders issued by an administrative law judge, if
any, appointed in this proceeding; and any records, including records containing investor
information, provided by Commission staff.
See Order Appointing Fund Administrator, Setting Administrator’s Bond Amount, and Authorizing the Approval
and Payment of Fees and Expenses of Administration, Exchange Act Rel. No. 100598 (July 25, 2024).
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36.
The Fund Administrator is authorized to enter into agreements with third parties
as may be appropriate or necessary in the administration of the Fair Fund, provided such third
parties are not excluded pursuant to other provisions of this Plan. In connection with such
agreements, the third parties shall be deemed to be agents of the Fund Administrator under this
Plan.
37.
The Fund Administrator will be entitled to payment from the Fair Fund of
reasonable fees and expenses, including the bond premium, incurred in the performance of its
duties (including any such fees and expenses incurred by agents, consultants or third parties
retained by the Fund Administrator in furtherance of its duties).
VI.
PLAN PROCEDURES
Specification of Preliminary Claimants
38.
Using information obtained during and after its investigation, the Commission has
identified the Preliminary Claimants. Preliminary Claimants are limited to only those Persons
who may have suffered a loss during the Relevant Period.
Procedures for Locating and Notifying Preliminary Claimants
39.
Within thirty (30) days of Commission approval of the Plan, the Fund
Administrator will:
(a)
Establish and maintain a website devoted solely to the Fair Fund,
www.ifpadvisorsfairfund.com. The Fair Fund’s website will make
available a copy of the approved Plan, include a copy of the Plan Notice,
the Certification Form and related materials in downloadable form, and
such other information that the Fund Administrator believes will be
beneficial to Preliminary Claimants.
(b)
Establish and maintain a toll-free telephone number, 844-373-0978, for
Preliminary Claimants to call and speak to a live representative of the
Fund Administrator during its regular business hours or, outside of such
hours, to hear pre-recorded information about the Fair Fund.
(c)
Establish and maintain a traditional mailing address, PO Box 219096,
Kansas City, MO 64121-9096, and an email address,
ecprocessing@sscinc.com, which will be listed on all correspondence
from the Fund Administrator to Preliminary Claimants as well as on the
Fair Fund’s website.
(d)
Establish and maintain a case specific database of all Preliminary
Claimants based upon information provided to and obtained by the Fund
Administrator, including the last known physical and email addresses.
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(e)
Run a National Change of Address search to retrieve updated addresses
for all records in the database, thereby ensuring the mailing information
for Preliminary Claimants is up-to-date; and
(f)
Send a Plan Notice to each Preliminary Claimant’s last known email
address (if known) and/or mailing address.
40.
The Commission staff retains the right to review and approve any material posted
on the Fair Fund’s website, any communication with investors, and any scripts used in
connection with communications with investors.
Undeliverable Mail
41.
The Fund Administrator will attempt to locate any Preliminary Claimant whose
mailing is returned as undeliverable by the U.S. Postal Service or otherwise, including an
advanced address search using commercially available resources, if feasible, and will document
all such efforts. If another address is obtained, the Fund Administrator will then resend it the
Preliminary Claimant’s new address within fourteen (14) days of receipt of the returned mail. If
the mailing is returned again, and the Fund Administrator, despite best practicable efforts, is
unable to find a Preliminary Claimant’s correct address, the Fund Administrator, in its discretion,
may deem such Preliminary Claimant an Unresponsive Preliminary Claimant.
42.
The Fund Administrator, with Commission staff approval, may engage a thirdparty search firm to conduct more rigorous searches for Persons whose mailings are returned as
undeliverable.
43.
Any Preliminary Claimant who relocates or otherwise changes contact
information after receipt of the Plan Notice must promptly communicate any change in address
or contact information to the Fund Administrator.
Procedures to Request Plan Notice
44.
Any Person who does not receive a Plan Notice, as described in paragraphs 39(f),
but who is aware of this Plan (e.g., through other Preliminary Claimants or on www.sec.gov) and
believes they should be included as a Preliminary Claimant should contact the Fund
Administrator, in writing, within sixty (60) days from the approval of the Plan to establish that
they should be considered a Preliminary Claimant. Such Person should include documentation
sufficient to support their claim that they should be considered a Preliminary Claimant, as well as
contact information (physical address, telephone number, and email address, if available) for
responsive communications.
45.
The Fund Administrator will send the Person a Plan Notice and Certification
Form within twenty (20) days of receiving the Person’s documentation and proof of address
ownership, if the Fund Administrator determines that the Person should have received a Plan
Notice.
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Certification Requirement and Failure to Respond to Plan Notice
46.
In order to maintain classification as a Preliminary Claimant, a completed
Certification Form, together with all required supporting documentations, must be signed by the
Preliminary Claimant under penalty of perjury under the laws of the United States and returned
to the Fund Administrator by the deadline stated in the Plan Notice, the Certification Date. The
Certification Form must be executed by the Preliminary Claimant, unless the Fund Administrator
accepts such Certification Form from a successor, heir, administrator, or other Person authorized
to act on the Preliminary Claimant’s behalf. Those authorized to act on behalf of Preliminary
Claimants will be eligible to participate in the distribution to the same extent the original investor
would have been eligible under the terms of the Plan.
47.
The Fund Administrator will review all Certification Forms. Each Preliminary
Claimant will have the burden of proof to establish their identity as a Preliminary Claimant, or
his, her, or its successor. The Fund Administrator will have the right to request, and the
Preliminary Claimant will have the burden of providing to the Fund Administrator, any
additional information and/or documentation deemed relevant by the Fund Administrator.
48.
If a Preliminary Claimant fails to return the Certification Form and fails to
respond within thirty (30) days from the initial mailing of the Plan Notice, the Fund
Administrator will make no fewer than two (2) attempts to contact the Preliminary Claimant by
telephone or email. The second attempt will in no event take place more than sixty (60) days
from the initial mailing of the Plan Notice. If a Preliminary Claimant fails to respond to the
Fund Administrator’s contact attempts as described in this paragraph, the Fund Administrator, in
its discretion, may deem such Preliminary Claimant an Unresponsive Preliminary Claimant.
Review of Certification Forms and Deficiency Process
49.
The Fund Administrator will provide a Determination Notice within forty-five
(45) days of the Certification Date to each Preliminary Claimant who has filed a deficient
Certification Form with the Fund Administrator. The Determination Notice will provide to each
Preliminary Claimant whose claim is deficient, in whole or in part, the reason(s) for the
deficiency (e.g., failure to provide required information or documentation). In the event the
claim is denied, in whole or in part, the Determination Notice will state the reason(s) for such
denial. The Determination Notice will also notify the Preliminary Claimant of the opportunity to
cure any deficiency, request reconsideration, or dispute the determination made by the Fund
Administrator and provide instructions regarding what is required to do so.
50.
Any Preliminary Claimant with a deficient claim will have thirty (30) days from
the date of the Determination Notice to cure any deficiencies identified in the Determination
Notice.
51.
Any Preliminary Claimant seeking reconsideration of a denied claim must advise
the Fund Administrator in writing within thirty (30) days of the date of the Determination
Notice. All requests for reconsideration must include the necessary documentation to
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substantiate the basis upon which the Preliminary Claimant is requesting reconsideration of his,
her, or its claim.
52.
The Fund Administrator will have the authority, in its sole discretion, to waive
technical claim deficiencies and approve claims on a case-by-case basis, or in groups of
claims. All determinations made by the Fund Administrator in accordance with the Plan in any
dispute, request for reconsideration, or request to cure a deficient claim will be final and not
subject to appeal.
Dispute Process
53.
Disputes will be limited to the amount of the Preliminary Claimant’s calculated
Recognized Loss. Within sixty (60) days of the mailing of the Plan Notice and Certification
Form, the Fund Administrator must receive a written communication detailing any dispute along
with any supporting documentation. The Fund Administrator will investigate the dispute, and
such investigation will include a review of the written dispute as well as any supporting
documentation.
Final Determination Notices
54.
Within one hundred seventy-five (175) days of the initial mailing of the Plan
Notices, the Fund Administrator will send a Final Determination Notice to (a) all Preliminary
Claimants who timely submitted a Certification Form, notifying the Preliminary Claimants of the
Fund Administrator’s eligibility determination, (b) any Preliminary Claimant who timely
submitted a written dispute of his, her , or its calculated Recognized Loss. notifying the
Preliminary Claimants of the Fund Administrator’s resolution of the dispute; and (c) those
Preliminary Claimants who have not responded to the Plan Notice, as described in paragraph 46
above, notifying the Preliminary Claimant that he, she, or it has been deemed an Unresponsive
Preliminary Claimant. The Fund Administrator will not send a Final Determination Notice to a
Preliminary Claimant, if his, her, or its Plan Notice was returned as “undeliverable.” The Final
Determination Notice will further provide each Preliminary Claimant that is determined to be an
Eligible Claimant with his, her, or its Recognized Loss (if known). The Final Determination
Notice will constitute the Fund Administrator’s final ruling regarding the eligibility status of the
claim.
Distribution Methodology
55.
The Fund Administrator will calculate each Preliminary Claimant’s Recognized
Loss in accordance with the Plan of Allocation. All Preliminary Claimants who are determined
to have a Recognized Loss, and who are not deemed an Excluded Party or an Unresponsive
Preliminary Claimant will be deemed an Eligible Claimant. All Eligible Claimants whose
distribution amount is equal to or greater than $10.00, as calculated in accordance with the Plan
of Allocation, will be deemed a Payee and receive a Distribution Payment.
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Establishment of a Reserve
56.
Before determining the amount of funds available for distribution and calculating
each Payee’s Distribution Payment, the Fund Administrator, in conjunction with the Tax
Administrator, will establish a reserve to pay Administrative Costs and to accommodate any
unexpected expenditures (the “Reserve”).
57.
After all Distribution Payments are made and Administrative Costs paid, any
remaining amounts in the Reserve will become part of the Residual described in paragraph 77
below.
Preparation of the Payment File
58.
Within two hundred ten (210) days of Commission approval of the Plan, the Fund
Administrator will compile and send to the Commission staff the Payee information, including
the name, address, calculated Recognized Loss, and the amount of the Distribution Payment for
all Payees (the “Payee List”). The Fund Administrator will also provide a Reasonable
Assurances Letter to the Commission staff, representing that the Payee List: (a) was compiled in
accordance with the approved Plan; (b) is accurate as to Payees’ names, addresses, Recognized
Losses and amounts of their Distribution Payment; (c) includes the number of Payees
compensated; (d) the percentage of the Payee’s Recognized Loss being compensated by the
disbursement from the Fair Fund, and if applicable, the total percentage to include all prior
disbursements; (e) the total amount of funds to be disbursed; and (f) provides all information
necessary to make a payment to each Payee.
The Escrow Account
59.
Prior to the disbursement of funds from the Net Available Fair Fund, the Fund
Administrator will establish an escrow account (the “Escrow Account”) with a United States
commercial bank that is a well-capitalized financial institution as defined by the Federal Reserve
Act, Subpart D, 12 C.F.R. § 208.43 and that is not unacceptable to the Commission staff (the
“Bank”), pursuant to an escrow agreement (the “Escrow Agreement”) to be provided by
Commission staff.
60.
The Fund Administrator, pursuant to the Escrow Agreement, shall also establish
with the Bank a separate deposit account (e.g. controlled distribution account, managed
distribution account, linked checking and investment account) (the “Distribution Account”),
insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the guaranteed FDIC pass
through limit. The Distribution Account shall be linked with the Escrow Account and shall be
named, and records maintained, in accordance with the Escrow Agreement.
61. During the term of the Escrow Agreement, the portions of the Fair Fund transferred
to the Escrow Account (the “Escrow Property”) shall be invested and reinvested in short-term
U.S. Treasury securities backed by the full faith and credit of the United States Government or
an agency thereof. The investment shall be, of a type and term necessary to meet the cash
liquidity requirements for payments to Payees and Administrative Costs, including investment or
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reinvestment in a bank account insured by the FDIC up to the guaranteed FDIC limit, or in
money market mutual funds registered under the Investment Company Act of 1940 that invest
100% of their assets in direct obligations of the United States Government.
62. The Fund Administrator shall provide duplicate original bank and/or investment
statements on any accounts established by the Fund Administrator to the Tax Administrator on a
monthly basis and shall assist the Tax Administrator in obtaining mid-cycle statements, as
necessary.
63. The Fund Administrator, in consultation with the Commission staff, shall work
with the Bank on an ongoing basis to deposit or invest funds in the Escrow and Distribution
Accounts so as to result in the maximum reasonable net return, taking into account the safety of
such deposits or investments and tax implications; and to determine an allocation of funds
between the Escrow and Distribution Account.
64.
All interest, dividends, and/or income earned by the Escrow Property will accrue
for the benefit of the Escrow Property. All Administrative Costs associated with the Escrow and
Distribution Accounts will be the responsibility of the Fund Administrator, who may be
reimbursed for said costs as provided in this Plan. No such Administrative Costs may be paid to
the Bank, its agents, and/or its affiliates from the Escrow Property.
Distribution of the Fair Fund
65.
Upon the Commission’s staff’s receipt, review, and acceptance of the Payee List
and Reasonable Assurances Letter from the Fund Administrator, the Commission staff will seek
an order from the Commission pursuant to Rule 1101(b)(6) of the Commission’s Rules, 17
C.F.R. § 210.1101(b)(6), to disburse funds from the Net Available Fair Fund to the Bank for
distribution by the Fund Administrator in accordance with the Plan. All disbursements will be
made pursuant to a Commission Order.
66.
Upon issuance of an order to disburse, the Commission staff will direct the
transfer of funds in accordance with the Payee List to the Bank. The Fund Administrator will
then use its best efforts to commence mailing Distribution Payment checks and/or effect
electronic payments within fourteen (14) business days of the release of the funds into the
Escrow Account. All efforts will be coordinated to limit the time between the Escrow Account’s
receipt of the funds and the issuance of Distribution Payments.
67.
All checks will be issued by the Fund Administrator from the Distribution
Account. All checks will bear a stale date of one hundred twenty (120) days from the date of
issuance. Checks that are not negotiated by the stale date will be voided, and the Bank will be
instructed to stop payment on those checks. A Payee’s claim will be extinguished if he, she, or it
fails to negotiate his, her or its check by the stale date, and the funds will remain in the Fair
Fund, except as provided in paragraph 71.
68.
All Distribution Payments will be preceded or accompanied by a communication
that includes, as appropriate: (a) a statement characterizing the distribution; (b) a statement that
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the tax treatment of the distribution is the responsibility of each Payee and that the Payee should
consult his, her or its tax advisor for advice regarding the tax treatment of the distribution; (c) a
statement that checks will be void and cannot be reissued after one hundred twenty (120) days
from the date the original check was issued; and (d) contact information for the Fund
Administrator for questions regarding the Distribution Payment. The letter or other mailings to
Payees characterizing a Distribution Payment will be submitted to the Tax Administrator and
Commission staff for review and approval.
69.
All Distribution Payments, either on their face or in the accompanying mailing,
will clearly indicate that the money is being distributed from the Fair Fund established by the
Commission to compensate investors for harm as a result of securities law violations.
Post Distribution; Handing of Returned or Uncashed Checks; and Reissues
70.
The Fund Administrator shall use its best efforts to make use of commercially
available resources and other reasonably appropriate means to locate all Payees whose checks
are returned to the Fund Administrator as “undeliverable.” If new address information becomes
available, the Fund Administrator will repackage the distribution check and send it to the new
address. If new address information is not available after a diligent search (and in no event no
later than one hundred twenty (120) days after the initial mailing of the original check) or if the
distribution check is returned again, the check shall be voided and the Fund Administrator shall
instruct the issuing financial institution to stop payment on such check. If the Fund
Administrator is unable to find a Payee’s correct address, the Fund Administrator, in its
discretion, may remove such Payee from the distribution and the allocated Distribution Payment
will remain in the Fair Fund for distribution, if feasible, to the remaining Payees.
71.
The Fund Administrator will reissue checks or electronic payments to Payees
upon the receipt of a valid, written request from the Payee if prior to the initial stale date. In
cases where a Payee is unable to endorse a Distribution Payment check as written (e.g., name
changes, IRA custodian changes, or recipient is deceased) and the Payee or a lawful
representative requests the reissuance of a Distribution Payment check in a different name, the
Fund Administrator will request, and must receive, documentation to support the requested
change. The Fund Administrator will review the documentation to determine the authenticity
and propriety of the change request. If, in the discretion of the Fund Administrator, such change
request is properly documented, the Fund Administrator will issue an appropriately redrawn
Distribution Payment to the requesting party. Reissued checks will be void at the later of one
hundred twenty (120) days from issuance of the original check or thirty (30) days from the
reissuance, and in no event will a check be reissued after one hundred twenty (120) days from
the date of the original issuance without the approval of Commission staff.
72.
The Fund Administrator will work with the Bank and maintain information about
uncashed checks and any returned items due to non-delivery, insufficient addresses, and/or other
deficiencies. The Fund Administrator is responsible for researching and reconciling errors and
reissuing payments when possible. The Fund Administrator is also responsible for accounting
for all payments. The amount of all uncashed and undelivered payments will continue to be held
in the Fair Fund.
13
73.
The Fund Administrator will make and document its best efforts to contact Payees
to follow-up on the status of uncashed distribution checks over $100 (other than those returned
as “undeliverable”) and take appropriate action to follow-up on the status of uncashed checks at
the request of Commission staff. The Fund Administrator may reissue such checks, subject to
the time limits detailed herein.
74.
At the discretion of the Fund Administrator, certain costs that were not factored
into the Reserve, such as bank fees for the return of a payment, may reduce the Payee’s
Distribution Payment. In such situations, the Fund Administrator will immediately notify the
Tax Administrator of the reduction in the Distribution Payment.
Receipt of Additional Funds
75.
Should any additional funds be received pursuant to Commission or Court order,
agreement, or otherwise, prior to the Commission’s termination of the Fair Fund, such funds will
be added to the Fair Fund and distributed, if feasible, in accordance with the Plan, pursuant to the
Commission’s Rules.
Disposition of Undistributed Funds
76.
If funds remain following the initial distribution and payment of all
Administrative Costs, the Fund Administrator, in consultation with the Commission staff, may
seek subsequent distribution(s) of any available remaining funds, pursuant to the Commission’s
Rules. All subsequent distributions shall be made in a manner that is consistent with this Plan.
77.
A residual within the Fair Fund will be established for any amounts remaining
after the final disbursement to Payees from the Fair Fund and the payment of all Administrative
Costs (the “Residual”). The Residual may include funds from, among other things, amounts
remaining in the Reserve, distribution checks that have not been cashed, checks or electronic
payments that were not delivered or were returned to the Commission, and tax refunds for
overpayment of taxes or for waiver of IRS penalties.
78.
All funds remaining in the Residual that are infeasible to distribute to investors
will be returned to the Commission and transferred to the U.S. Treasury, subject to Section
21F(g)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), after the final
accounting is approved by the Commission.
Administrative Costs
79.
All Administrative Costs will be paid from the Fair Fund in accordance with the
Commission’s Rules.
14
Accountings
80.
In accordance with Rule 1105(f) of the Commission’s Rules, during the first ten
(10) days of each calendar quarter after funds have been transferred to the Bank, the Fund
Administrator will file with the Commission, on a standardized accounting form provided by the
Commission staff, an accounting of all monies earned or received and all monies spent in
connection with the administration of the Plan.
81.
Upon completion of all distributions to Payees pursuant to the procedures
described above, the Fund Administrator shall arrange for the payment of all Administrative
Costs, transfer all remaining funds to the Commission, and submit a final accounting for
approval by the Commission on a standardized form provided by the Commission staff. The
Fund Administrator will also submit a report to the Commission staff containing the final
distribution statistics regarding distributions to individuals and entities, and such other
information requested by the Commission staff.
Wind-down and Document Retention
82.
The Fund Administrator will shut down the website, P.O. Box and customer
service telephone line(s) established specifically for the administration of the Fair Fund six (6)
months after the transfer of any remaining funds to the Commission, or at such earlier time as the
Fund Administrator determines with the concurrence of the Commission staff.
83.
The Fund Administrator will retain all materials submitted by Preliminary
Claimants in either paper or electronic form for a period of six (6) years from the date of
approval of a final fund accounting. Materials maintained in electronic form must be accessible
and readable for the duration of retention. Pursuant to the Commission staff's direction, the Fund
Administrator will either turn over to the Commission or destroy all materials, including
documents in any media, upon expiration of this period.
Termination of the Fair Fund
84.
The Fair Fund will be eligible for termination and the Fund Administrator will be
eligible for discharge after all of the following have occurred (a) a final accounting, in a standard
accounting format provided by the Commission staff, has been submitted by the Fund
Administrator and approved by the Commission; (b) all Administrative Costs have been paid;
and (c) any amount remaining in the Fair Fund has been returned to the Commission for transfer
to U.S. Treasury. Once the Commission has approved the final accounting, the Commission
staff will seek an order from the Commission authorizing: (a) the transfer of the Residual that is
infeasible to return to investors, and any amounts returned to the Fair Fund in the future that is
infeasible to return to investors, to the general fund of the U.S. Treasury, subject to Section
21F(g)(3) of the Exchange Act; (b) discharge of the Fund Administrator; (c) cancellation of the
Fund Administrator’s bond; and (d) termination of the Fair Fund.
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VII.
NOTICE AND COMMENT PERIOD
85.
The Notice of Proposed Plan of Distribution and Opportunity to Comment (the
“Notice”) will be published on the Commission’s website at
http://www.sec.gov/litigation/fairfundlist.htm. Any Person wishing to comment on the Plan
must do so in writing by submitting their comments to the Commission within thirty (30) days of
the publication of the Notice: (a) to the Office of the Secretary, United States Securities and
Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090; (b) by using the
Commission’s Internet comment form (www.sec.gov/litigation/admin.shtml); or (c) by sending
an email to rule-comments@sec.gov. Comments submitted by email or via the Commission’s
website should include “Administrative Proceeding File Numbers 3-20954 and 3-20955” in the
subject line. Comments received will be available to the public. Persons should only submit
comments that they wish to make publicly available.
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Exhibit A
PLAN OF ALLOCATION
This Plan of Allocation1 is designed to compensate investors based on their losses
between January 2011 through October 2020 (the “Relevant Period”) due to the misconduct of
Robertson in allocating trades to client accounts and IFP’s failure to supervise Robertson and
other violations. Investors who did not suffer losses during the Relevant Period, or who are an
Excluded Party, are ineligible to recover under this Plan.
I.
The Methodology
The Fund Administrator will calculate the amount of loss (“Recognized Loss”) as
follows:
1.
Calculate First-Day Losses: First-Day Losses are calculated for each position
allocated by Robertson to a client’s account as a) the realized loss (or profit)
resulting from the opening and closing of a position on the same trading day, or b)
the unrealized loss (or profit) from the opening of the position until the time the
position was allocated to the client’s account. A loss is recorded as a negative
number and a profit is recorded as a positive number.
2.
Calculating But-for-Losses: But-For Losses are calculated for each opening
position allocated by Robertson to a client’s account as the principal amount of
the opening position multiplied by the average return on all trades allocated by
Robertson during the Relevant Period.
3.
Calculate Recognized Loss: The Recognized Loss for each client is the sum of
his, her or its But-For Losses minus the sum of his, her or its First-Day Losses.
For example, if a client’s First-Day Losses sum to –$100 and her But-For Losses
sum to –$10, then her Recognized Loss is –$10 – (–$100) or $90.
If the Recognized Loss calculates to a gain, then the Recognized Loss will be $0.00. For
example, if a client’s First Day Losses sum to –$100 and her But-For Losses sum to –$120, then
her Recognized Loss is –$120 – (–$100) or –$20, which is considered to be $0 for purposes of
this distribution.
To avoid payment of a windfall, the Recognized Loss will be reduced by the amount of
any compensation for the loss that resulted from the conduct described in the Orders that was
received from another source (e.g., class action settlement), to the extent known by the Fund
Administrator.
Any Preliminary Claimant who suffered a Recognized Loss pursuant to this Plan of
Allocation, and who is not an Excluded Party or an Unresponsive Preliminary Claimant, as
defined in the Plan, will be deemed an Eligible Claimant.
1
All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Plan.
II.
Additional Provisions
Allocation of Funds
If the Net Available Fair Fund, as defined in the Plan, is equal to or exceeds the sum of
Recognized Losses of all Eligible Claimants, each Eligible Claimant’s distribution amount will
equal his, her or its Recognized Loss, plus “Reasonable Interest” if applicable. If the Net
Available Fair Fund is less than the sum of the Recognized Losses of all Eligible Claimants, each
Eligible Claimant’s distribution amount will equal his, her or its “Pro Rata Share” of the Net
Available Fair Fund (and no Reasonable Interest). In either case, the distribution amount will be
subject to the “Minimum Distribution Amount.”
Reasonable Interest
If the Net Available Fair Fund exceeds that necessary to pay all Eligible Claimants their
Recognized Losses in full, the Fund Administrator, in consultation with the Commission staff, may
include interest in the distribution amount to compensate Eligible Claimants for the time value of their
respective Recognized Losses. Reasonable interest will be calculated using the Short-term Applicable
Federal Rate plus three percent (3%), compounded quarterly from the end of the Relevant Period
through the approximate date of the disbursement of the funds. If there are insufficient funds to pay
Reasonable Interest in full to all Eligible Claimants, each Eligible Claimant will receive his, her or its
Pro Rata Share of the excess funds as the Reasonable Interest amount.
Pro Rata Share
A Pro Rata Share computation is intended to measure Eligible Claimants’ Recognized Losses
against one another. The Fund Administrator shall determine each Eligible Claimant’s Pro Rata Share
as the ratio of his, her, or its Recognized Loss to the sum of Recognized Losses of all Eligible
Claimants.
Minimum Distribution Amount
The Minimum Distribution Amount will be $10.00 (inclusive of Reasonable Interest, if
any). If an Eligible Claimant’s distribution amount is less than the Minimum Distribution
Amount, that Eligible Claimant will be deemed ineligible to receive a Distribution Payment and
his, her, or its distribution amount will be reallocated on a pro-rata basis to Eligible Claimants
whose distribution amounts are greater than or equal to the Minimum Distribution Amount.
Payee
An Eligible Claimant whose distribution amount equals or exceeds the Minimum
Distribution Amount will be deemed a Payee and receive a Distribution Payment equal to his,
her, or its distribution amount. In no event will a Payee receive from the Fair Fund more than
his, her, or its Recognized Loss, plus Reasonable Interest, if applicable.
2
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.