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- **Collection:** Agency decision
- **Document type:** Agency decision

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© 2026 Jeremy T. Roseberry. This document may be reproduced, in whole or in part, for non-commercial
purposes with attribution to the Private Attorney General Project (https://www.pagproject.com/).

BEFORE

THE

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.

PETITION FOR RULEMAKING REGARDING
MATERIALLY MISLEADING INVESTMENT FUND
DISCLOSURES AND SYSTEMATIC FALSE FORM 1099DIV REPORTING

FILED UNDER:

Administrative Procedure Act § 553(e)
SEC Rule of Practice 192 (17 C.F.R. § 201.192)

FILED WITH:

The Secretary
U.S. Securities and Exchange Commission
100 F Street NE, Washington, DC 20549

PETITIONER:

Jeremy Thomas Roseberry

DATE:

3.19.2026

Table of Contents
I. INTRODUCTION ..................................................................................................................... 1
A. The Fraud ............................................................................................................................... 1
B. The Mechanism ...................................................................................................................... 3
C. The Fix They Killed ............................................................................................................... 5
D. The Gatekeepers Who Looked Away .................................................................................... 8
E. The Constitution Has Spoken ............................................................................................... 16
F. The Defenses That Aren't ..................................................................................................... 18
G. The Reckoning ..................................................................................................................... 23
II. PETITIONER'S INTEREST AND STANDING ................................................................ 32
A. Injured Investor with Measurable, Ongoing Harm .............................................................. 32
B. Sole Subject-Matter Expert Who Quantified the Harm and Built the Solution ................... 33
C. Protected Whistleblower Under Federal Securities and Tax Law ....................................... 34
D. Fact Witness Who Exposed the Problem to Every Relevant Stakeholder ........................... 35
E. Sworn Attestation Under Penalty of Perjury ........................................................................ 37
F. Standing to Seek These Remedies ........................................................................................ 37
G. Public Interest, Not Private Advantage ................................................................................ 38
H. Why This Factual Record Is Necessary: The Industry's Demonstrated Refusal to SelfCorrect....................................................................................................................................... 39
III. FACTUAL BACKGROUND: HOW 'BUYING A DIVIDEND' WORKS ..................... 41
A. What Is 'Buying a Dividend'? .............................................................................................. 41
B. The Scope of Harm: Who Loses and How ........................................................................... 45
C. Why the Taxation Is Unjust: The Economic Reality ........................................................... 45
D. Illustrative Example: The $100 Share .................................................................................. 47
E. Scaling the Harm: From One Share to One Thousand ......................................................... 49
F. The Timing Lie: Risk Exists Nearly Every Day ................................................................... 50
G. The Fee Extraction: Everyone Wins Except the Investor .................................................... 54
H. The Vicious Feedback Loop: Harm That Never Ends ......................................................... 55
I. Quantifying the Harm: Four Formulas for Investor Loss ...................................................... 57
J. Modeling Fund-Level Losses ................................................................................................ 59
K. Estimating Market-Wide Losses .......................................................................................... 60
L. Why This Demands Commission Action ............................................................................. 61

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IV. COMMISSION-LEVEL INTERPRETIVE GUIDANCE: SIXTEEN QUESTIONS
THAT ADMIT OF ONLY ONE ANSWER ............................................................................. 63
A. The Framework That Compels Truth................................................................................... 63
B. Three Definitions.................................................................................................................. 66
C. The Questions For SEC Interpretive Guidance .................................................................... 67
D. What These Answers Compel .............................................................................................. 77
E. The APA Requires Substantive Engagement ....................................................................... 80
V. LEGAL ANALYSIS: WHY CURRENT DISCLOSURES VIOLATE FEDERAL
SECURITIES LAW .................................................................................................................... 83
A. The Materiality Standard: Certainty, Not Probability.......................................................... 85
B. Half-Truths Are Actionable: The Supreme Court Has Already Decided This Question ..... 87
C. Investment Company Act and Advisers Act Violations ...................................................... 90
D. The Foundational Misrepresentation: The Definition of Price Itself ................................... 93
E. The Twenty-Three Prospectus Deficiencies: A Pattern, Not An Accident .......................... 94
F. The GAAP Compliance Fallacy: Why Accounting Standards Do Not Excuse Securities
Fraud ......................................................................................................................................... 96
G. The Industry Practice Fallacy: Why "Everyone Does It" Is An Indictment, Not A Defense
................................................................................................................................................... 98
H. Scienter: The Industry Knew, And The Record Proves It ................................................. 100
I. The Magnitude of Harm: One Thousand Times Vanguard—Every Year, Forever ............ 102
J. The Law Is Clear. The Facts Are Documented. The Commission Must Act...................... 105
VI. NEARLY EIGHT YEARS OF NOTICE AND INDUSTRY-WIDE COMPLIANCE
FAILURE................................................................................................................................... 107
A. The Record of Engagement: Universal Notice, Universal Silence .................................... 108
B. What Executives Said Behind Closed Doors: Confessions of an Industry ........................ 111
C. The Gatekeeper Breakdown: Every Line of Defense Failed at Once ................................ 115
D. The Securities Law Firms: Converted from Counsel to Witnesses ................................... 119
E. The Cover-Up: Silent Edits That Prove Consciousness of Guilt ....................................... 123
F. The Structural Failure: Why Self-Policing Was Designed to Fail ..................................... 125
G. The Verdict: Unprecedented Failure Requiring Unprecedented Response ....................... 127
H. The Governance Failure: How Management Neutralized the Last Line of Defense ......... 129
I. The Commission's Resource Allocation .............................................................................. 149
VII. TAX LAW IMPLICATIONS: THE SELF-PROVED VIOLATION .......................... 152
A. A Note on What Follows ................................................................................................... 152
B. The Constitutional Framework: What “Income” Means.................................................... 154
C. The Anti-Duplication Principle: One Dollar, One Taxpayer, One Tax ............................. 155
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D. The Statutory Framework: What the Code Actually Says ................................................. 156
E. Treasury Already Applies This Principle: The Bond Precedent ........................................ 158
F. The Industry’s Defense and Why It Fails ........................................................................... 161
G. The Investor Cannot Cure the Filer’s Error ....................................................................... 167
H. The Industry’s Confession: In Their Own Words.............................................................. 169
I. The Industry Created This Problem—And Profits From It ................................................. 169
J. The Devastating Conclusion: The Industry Cannot Dispute What It Has Admitted .......... 172
K. Why Confession Eliminates the Need for Investigation .................................................... 173
L. The Penalty Framework: Mandatory, Not Discretionary ................................................... 174
M. The “Shall” Commands: Why Enforcement Is Mandatory ............................................... 176
N. The Statute of Limitations: Debts Expiring Daily ............................................................. 177
O. The Harm to Investors: 160 Million Americans Overtaxed .............................................. 179
P. Conclusion: The Legal Case Is Complete—And the Industry Has Already Conceded It .. 180
Q. Coordinated Enforcement .................................................................................................. 183
VIII.
COMPETITION AND MARKET INTEGRITY: WHY MARKET FORCES
CANNOT SELF-CORRECT ................................................................................................... 185
A. The Commission’s Statutory Mandate Requires Competition Analysis ........................... 186
B. The Economic Logic: A Hidden Overcharge That Aligns Every Fee-Taker Against
Correction ............................................................................................................................... 187
C. The Technology Existed—And Was Uniformly Refused.................................................. 189
D. The Admissions: What the Industry Confessed in Its Own Words ................................... 190
E. The Structure: Why No Firm Can Break Ranks ................................................................. 194
F. Regulatory Capture: The Pattern Extends Beyond the SEC ............................................... 199
G. What the Pattern Proves ..................................................................................................... 201
H. The Market Structure the Commission's Mission Was Created to Prevent ....................... 203
I. Referral to the Department of Justice .................................................................................. 205
J. The Commission’s Choice .................................................................................................. 208
IX. RELIEF REQUESTED ..................................................................................................... 211
A. Immediate Public Communications to Investors (Within 7 Days) .................................... 216
B. Market-Facing Communications to Registrants and Intermediaries (Within 14 Days) ..... 222
Staff Statement Reminding Registrants of Existing Obligations ............................................ 222
C. Commission-Level Interpretive Guidance (Within 21 Days) ............................................ 228
D. Examination Initiative (Within 30 Days) ........................................................................... 233
E. SRO Coordination and Market Gatekeeper Engagement (Within 7 Days) ........................ 238

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F. Enforcement Action: Referral, Injunctive Relief, Emergency Authority, and Criminal
Transmission (Within 7 Days) ................................................................................................ 247
G. Interagency Coordination and Oversight Body Notification ............................................. 257
G.1 Mandatory Duties Triggered by This Petition ................................................................. 258
G.2 Tax Administration Referrals........................................................................................... 261
G.3 Inspector General and Oversight Body Referrals ............................................................ 263
H. Proposed Rule: Point-of-Sale Risk Disclosure (Emergency Interim Rule Within 60 Days;
Final Rule Within 180 Days) .................................................................................................. 265
I. Procedural Requests ............................................................................................................ 269
J. The Standard of Review: Why Delay Is Already Unreasonable ......................................... 273
X. LEGAL AUTHORITY FOR REQUESTED RELIEF ................................................... 278
A. Procedural Basis for This Petition ..................................................................................... 278
B. Constitutional Protections for This Petition ....................................................................... 279
C. Commission Authority to Grant Every Category of Relief Requested .............................. 279
D. Substantive Legal Standards Governing the Violations .................................................... 280
E. Whistleblower Protections.................................................................................................. 281
F. Judicial Review Authority .................................................................................................. 282
XI. TO THE OFFICERS AND DIRECTORS OF EVERY COMPANY IDENTIFIED IN
THIS PETITION ...................................................................................................................... 282
A. What Is Already True ......................................................................................................... 282
B. What the Government Already Knows .............................................................................. 283
C. What Happens If You Do Not Enter the Program ............................................................. 285
D. A Personal Note to the Professionals Reading This Petition ............................................. 290
E. The Path .............................................................................................................................. 296
F. The Terms That Remain — And Why They Favor the Companies That Move First ........ 300
G. Why the Decision Cannot Wait ......................................................................................... 305
H. The Decision ...................................................................................................................... 310
I. Relief Requested .................................................................................................................. 312
XII. NOTICE REGARDING WHISTLEBLOWER PROTECTIONS AND
RETALIATION ........................................................................................................................ 315
A. This Petition Cannot Be Used Against Petitioner .............................................................. 315
B. Petitioner's Contributions Are Without Precedent ............................................................. 316
C. Structural Retaliation Risk ................................................................................................. 318
D. Whistleblowers Pay With Their Lives ............................................................................... 319
E. Notice to the Industry ......................................................................................................... 320

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F. Partnership Remains Available........................................................................................... 321
XIII. CONSTITUTIONAL CONSIDERATIONS: THE GOVERNMENT'S DUTY UPON
NOTICE OF ILLEGAL EXACTION .................................................................................... 322
A. Two Failures — Two Liabilities — One Constitutional Framework ................................ 322
B. The Constitutional Framework........................................................................................... 323
C. The Industry's Accrued Liability: Two Penalties Per Return, No Cap, No Escape ........... 327
D. The Inescapable Constitutional Box .................................................................................. 328
E. The Calendar ...................................................................................................................... 330
XIV. INDEPENDENT AND SEVERABLE REQUESTS ..................................................... 332
A. The Severability Principle.................................................................................................. 332
B. The Independent Categories ............................................................................................... 333
C. Anticipated Defenses and Their Refutation ....................................................................... 335
D. The Constitutional Floor .................................................................................................... 338
E. Itemized Response Required .............................................................................................. 338
F. The Minimum Acceptable Response .................................................................................. 340
XV. CONCLUSION: THE PUBLIC RECORD AND THE CONSTITUTIONAL
RECKONING ........................................................................................................................... 340
A. The SEC's Founding Mission............................................................................................. 341
B. The Permanent Record ....................................................................................................... 341
C. The Constitutional Architecture: Two Agencies, One Supreme Law................................ 342
D. The Human Stakes: Americans at Their Most Vulnerable ................................................ 345
E. What This Record Enables ................................................................................................. 346
F. The Arithmetic of Inevitability ........................................................................................... 346
G. Petitioner's Position: Partnership Offered, All Remedies Preserved ................................. 347
H. The Whistleblower's Commitment .................................................................................... 348
I. The Landscape This Petition Creates .................................................................................. 348
J. Conclusion ........................................................................................................................... 349
DECLARATION OF JEREMY THOMAS ROSEBERRY ................................................. 351
I. DECLARANT’S IDENTITY AND QUALIFICATIONS .................................................. 351
II. AUTHORSHIP, AUTHENTICATION, AND CERTIFICATION OF THE PETITION . 352
III. WHAT I PERSONALLY DID: SUMMARY OF OUTREACH AND ENGAGEMENT 354
IV. WHAT THEY SAID: THE INDUSTRY'S OWN WORDS ............................................ 359
V. GOVERNMENT OFFICIALS WHO RECEIVED NOTICE ........................................... 363
VI. PROFESSIONAL ESTIMATES AND OPINIONS......................................................... 372
VII. EVIDENCE PRESERVATION AND PRODUCTION.................................................. 372
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VIII. WHISTLEBLOWER PROTECTIONS AND RETALIATION NOTICE .................... 373
IX. EXECUTION ................................................................................................................... 373

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I. INTRODUCTION
A. The Fraud
Every year, the American fund industry files hundreds of millions of tax returns it knows
to be false.
The returns are transmitted via United States mail to investors and via electronic wire to
the Internal Revenue Service. The institutions that file them admit, in their own SEC-filed
prospectuses, that the reported amounts are wrong. They have known for nearly eight years that a
technological correction exists, and they have coordinated to suppress it — because the false
reporting is the necessary instrument of a pricing methodology that inflates fund values, generates
billions in excess advisory fees, and extracts over $100 billion per year from 160 million
Americans whose retirement savings are held in trust by the very institutions defrauding them. The
industry's own executives have explained why the scheme persists: "Our investors don't know it is
happening."
This Petition places the entire evidentiary record on a permanent federal docket —
available to every prosecutor, every class action attorney, every state attorney general, every
pension fund trustee, and every journalist in America. The private remedies are exhausted. The
public reckoning has begun. The only question remaining is whether the Commission leads the
correction — or whether private litigants, state enforcers, and federal courts arrive first.
This harm is not speculative. It is not a theory. It is not a matter upon which reasonable
minds may differ. In nearly eight years of direct engagement with the largest financial institutions
in the world, with three SEC Commissioners, with dozens of Commission staff across multiple
divisions, and with the Internal Revenue Service — not one person has denied the existence of this
harm. Not one has challenged the mathematics. Not one has offered a legal justification for its
continuation. The industry admits it. The SEC knows it. The IRS knows it. The DOJ knows it. Yet
the harm continues. And with each tax cycle that closes, more of it becomes permanently
irrecoverable — not because the evidence was insufficient, but because the applicable limitations
periods expired before corrective action was taken.
The admissions are buried — but they exist, and they are fatal to every defense the industry
will raise. In fine print in SEC-filed prospectuses, the largest financial institutions in the world

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acknowledge what this Petition alleges: that initial distributions to purchasing investors include
amounts that are, in economic substance, return of their capital — not income — and that taxing
those amounts generates what BlackRock calls "an unnecessary tax bill." That is a binding
admission against interest. It concedes the central premise of this Petition: that the Forms 1099DIV these same institutions file with the Internal Revenue Service overstate the taxable income of
160 million Americans. And then, knowing this, they file the forms anyway — reporting every
dollar as fully taxable ordinary dividend income.
Both statements cannot be true. If the distributions include return of capital, as every major
fund complex has stated in documents filed with federal regulators, then the Forms 1099-DIV are
false — hundreds of millions of false federal information returns, transmitted via United States
mail to investors and via electronic wire to the Internal Revenue Service, filed with knowledge of
their falsity, and sustained for decades because correcting them would end the inflated-NAV
pricing from which the enterprise derives its excess fee revenue. If the Forms 1099-DIV are
accurate, then the published admissions are false statements in documents filed with the
Commission — material misrepresentations to a federal regulator on a scale without precedent.
The industry must choose which of its own statements to repudiate. It cannot escape this
contradiction. It can only select which liability to face.
When a filer publishes that a payment is not income and then files a federal information
return reporting it as income — knowing the return is false, filing it anyway, across hundreds of
millions of forms, year after year — the Internal Revenue Code has a name for that conduct:
intentional disregard. Treasury regulations define the standard with precision: a failure is due to
intentional disregard when required information is withheld "voluntarily" rather than "accidentally
or unconsciously." That definition does not require inference here. The industry's own admissions
satisfy it. And intentional disregard carries a consequence Congress designed to be severe —
uncapped penalties of 10% of all amounts required to be reported correctly, under both IRC § 6721
and § 6722, independently, cumulatively, for every false return filed and every false statement
furnished. The industry's exposure is not measured in millions. It is measured in tens of billions
— accruing now, for every year the forms remain uncorrected.

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B. The Mechanism
The prospectus disclosures are no different — admission and concealment in the same
breath. Prospectuses acknowledge the risk of "buying a dividend" and then immediately
mischaracterize it, describing the risk as arising "shortly before" or "just prior to" a distribution —
as though it were a narrow timing window prudent investors can sidestep. That characterization is
materially false. The risk is structural — embedded in every fund's net asset value on every trading
day, calculable to the penny, unavoidable without data the industry refuses to provide. The funds
intentionally withhold the single data point that would allow investors to quantify their exposure:
the per-share amount of embedded realized income that inflates the fund's net asset value ("NAV"),
which will generate an unnecessary tax bill upon distribution. That timing mischaracterization is
only the most visible of twenty-three material misstatements and omissions this Petition identifies
in Section V.
Every fund calculates its realized income — the accumulated dividends and capital gains
embedded in its share price — daily, for its own accounting purposes. It does not share that figure
with investors. This is by design. Disclosing to investors that they are overpaying for fund shares
and will be taxed on income they never earned is not a viable marketing strategy — so the industry
buries the admission in language no investor understands or can act on, omits the data every
investor would need, and continues collecting fees on the inflated NAV. This Petition seeks to end
that asymmetry by compelling disclosure of the data the industry already possesses, so that 160
million Americans can see what they are losing before they lose it.
"Buying a dividend" is the name the industry gave to a risk it manufactured, profits from,
and refuses to correct. Investment funds systematically overstate their share prices by accounting
for 'payable distributions' — money the fund already owes and is obligated to distribute — as
'assets' in the net asset value, inflating the price investors see, the fees the industry charges, and
the taxes the government collects.
Under Subchapter M of the Internal Revenue Code, a regulated investment company must
distribute substantially all of its realized income to shareholders each year to maintain its passthrough tax status — these are not discretionary payments but legal obligations, enforceable
conditions of the fund's existence. Under Generally Accepted Accounting Principles, a liability
exists when an entity has an obligation to transfer assets arising from past events, and the amount
can be reliably estimated. Pending fund distributions satisfy every element of that definition: the

3

obligation is mandated by federal statute, the triggering event — realization of income — has
already occurred, the amount is calculated to the penny every business day, and the fund knows
exactly when the payment will be made. By any rational measure, these are liabilities.
Yet the industry does not account for them as liabilities. It accounts for them as assets —
embedding the largest obligation the fund owes into the price every new investor pays. The result
is a net asset value that is, by definition, overstated: inflated by the precise amount the fund is
legally required to pay out and has no right to retain.
And the concealment begins with the price itself. Every prospectus in America publishes
the same formula: total assets minus total liabilities, divided by shares outstanding. Investors read
that formula and reasonably conclude that the price reflects a complete accounting — that every
obligation the fund owes has been subtracted before the number reaches them. It has not. The
fund's largest known obligation — the realized income it must distribute under federal law — is
not subtracted as a liability. It is embedded in the "assets" figure as though it were portfolio the
investor will retain. The formula that purports to show investors what they are buying is the first
thing that misleads them.
The overvaluation reveals itself the moment a distribution is paid: the fund's net asset value
drops by exactly the amount distributed — a decline that has nothing to do with the performance
of any security the fund owns, and everything to do with the fact that the price included a liability
— money the fund already owed and was obligated to distribute.
What this means for the investor is simple: after purchasing fund shares, her first
distributions — dividends, short-term capital gains, long-term capital gains — simply return a
portion of the money she just invested. She puts money in. The fund sends some of it back.
Receiving your own money back is a return of capital, and because nothing was earned, it is not
taxable. The Internal Revenue Code says so. The Supreme Court has said so for ninety years. The
industry itself says so in its own published materials.
But the investor will receive a Form 1099-DIV reporting it as income, and she will pay
taxes on it.
Consider a single share. An investor pays $100. The fund has a pending $3.00 distribution
baked into that price. Of her $100, only $97 will remain invested in the portfolio — the other $3.00
is earmarked for a distribution she is about to receive. When the fund pays it, the share price drops
from $100 to $97, and the $3.00 she just invested comes back to her — labeled as a distribution.

4

She now holds a $97 share plus $3.00 in cash — exactly what she started with. $100. No income
was earned.
This is a classic shell game. Money moves from the investor's pocket into the fund and
back again. Wall Street knows it simply returned what she put in — it invented the term for this
maneuver. But when her money comes back, it arrives disguised as income: a 1099-DIV in her
mailbox, a tax bill from the IRS, and a liability for earnings that never existed.
C. The Fix They Killed
Beginning in 2018, Petitioner set out to fix this. He did not write a white paper. He did not
convene a panel. He built the technology. He built a product to correct the overvalued NAV —
eliminating both the inflated fees and the false tax forms simultaneously, because they are products
of the same accounting distortion. He built a separate product to correct the overstated Forms 1099DIV for any income-producing security. And when it became clear that no institution in America
would correct either the pricing or the reporting, he built disclosure software — tools that would
at minimum show investors what they were losing, so they could attempt to protect themselves.
Three products. Three paths to compliance. Three chances for the industry to do the right thing.
The technology was plug-and-play. It operated on data that every fund already maintains.
Implementation required uploading existing files and configuring settings. The marginal cost of
adoption approached zero. The barrier to protecting 160 million Americans was not technological.
It was never technological.
The initial response confirmed it. At firm after firm, senior executives described the
solution as "groundbreaking," "revolutionary," something that would "redefine financial markets."
Tax directors engaged with the details. Fund accountants reviewed the mechanics. No one disputed
the analysis. No one questioned the feasibility. No one denied the harm. One senior tax director at
a major fund complex stated what everyone in the room already understood: "If you can get just
one fund to do this, all other funds will be forced to fix this within 12 months.”
One fund. One honest actor. That is all it would have taken. A single firm that chose to
price its shares accurately, file truthful tax returns, and tell its investors the truth. Competitive
pressure would have done the rest — investors would have migrated to the fund complex offering
accurate pricing and honest disclosure, and every competitor would have been forced to follow or

5

explain to its own shareholders why it chose not to. In a functioning market, with fiduciaries legally
bound to act in their clients' interests, rational firms would have raced to be first.
Yet, every firm ran the other way.
Not a single major fund complex adopted the technology. Not one agreed to pilot it on a
test fund. Not one conducted a cost-benefit analysis. Not one brought it to a fund board — the
independent directors who exist, by statute, to protect shareholders from exactly this kind of
conflict. After initial enthusiasm was escalated to senior management — or after gatekeepers
"checked with their clients" — every firm reversed course. The pattern was not varied. It was
identical: engagement, recognition, enthusiasm, then silence.
Behind closed doors, the silence had a voice. One executive at a dominant industry player
reviewed the analysis, did not dispute a word of it, and described the situation as "perfectly fine."
Another explained that the industry does not consider this a problem — "because our investors
don't know it is happening." A senior fund administrator — whose own transfer-agent system
already contained the configuration setting needed to correct the NAV — explained why that
switch would never be flipped: "Investment managers would never go for it. Investment managers
bill on the inflated NAV."
Read those words again, because the Commission will be asked to act on them. "Perfectly
fine" — while 160 million Americans are overtaxed on their own money. "Our investors don't
know it is happening" — from a fiduciary, legally obligated to ensure that investors do know.
"Investment managers bill on the inflated NAV" — a confession that the entire industry profits
from the overvaluation and that no firm will end it because no firm wants to stop profiting from it.
And when Petitioner offered a large registered investment adviser disclosure software that would
reveal, before any trade was executed, exactly how much harm that trade would impose on the
client — a three-second check, automated, requiring no manual calculation, built to give a
fiduciary the one piece of information every fiduciary should demand before placing a client's
money at risk — the firm declined. Not because the software didn't work. Not because the analysis
was wrong. Because, in the firm's judgment, none of its advisors would spend even three seconds
to learn whether a trade would harm the client they are legally obligated to protect. Three seconds.
A fiduciary, sitting across the desk from a client who trusts him with her retirement, will not pause
for three seconds to determine whether the transaction he is about to execute will cost her money
she will never recover. He will execute the trade, collect his fee, and never tell her what he chose

6

not to learn — because learning it would obligate him to act on it, and acting on it would cost him
revenue. These are not the Petitioner's allegations. These are the industry's own words, spoken by
its own executives, in rooms where they believed no accountability would follow. They were
wrong.
At one firm, the pattern was not merely identical — it was personal. Petitioner flew across
state lines, rented a car, and drove to the headquarters of one of the largest fund complexes in the
world — at personal expense, on personal time — to sit across a table from its executives and
explain, with mathematical precision, how their investors were being harmed and how the harm
could be eliminated. The executives did not dispute the problem. They did not challenge the
mathematics. They did not question the feasibility of the fix. They agreed that the harm was real.
Petitioner left that meeting believing he had found the honest actor the industry's own tax director
said was all it would take.
He was wrong. When Petitioner attempted to contact senior executives to follow up — to
set a path forward, to move from agreement to action — the firm's response came not from the
executives eager to protect their investors, but from a corporate attorney. The message was not "let
us investigate." It was not "we need time to consider this." It was: cease further contacts. A citizen
flew a thousand miles, at his own expense, to tell a fiduciary that its clients were being harmed —
and demonstrated how to stop the harm — and the fiduciary's answer, delivered through counsel,
was: stop calling. The executives who agreed the problem was real were walled off. And the firm
— managing trillions of dollars of American retirement savings — went back to collecting fees on
the inflated NAV, filing the false forms, and telling its investors nothing.
The industry did not merely decline to correct the harm. It did not merely refuse three
separate technological solutions. It coordinated to ensure that the one honest actor — the single
defection that would have forced industry-wide correction within twelve months — never
emerged. Instead of uniting to protect investors, the industry united against them. It suppressed the
technology. It blocked the disclosure. It preserved the silence.
And the coordination was structural — the largest fund complexes hold controlling voting
power in the very exchanges, transfer agents, and market utilities that could have forced correction,
ensuring that no intermediary would act without the permission of the firms that profit from
inaction. This was not negligence. This was not a difference of professional judgment. This was a
coordinated enterprise acting to protect its revenue — competitors and gatekeepers organized

7

around a common purpose: maintaining the inflated-NAV pricing from which every participant
profits. The technology suppression was the enterprise's enforcement mechanism. The false Forms
1099-DIV were its operational cost — imposed on 160 million taxpayers because the enterprise's
fee revenue depends on a pricing methodology that mechanically produces false tax forms. The
enterprise chose to impose that cost on others rather than surrender the revenue it generates.
These firms market themselves as putting "investors first." Behind closed doors, they
decided that investors would be last — last to know, last to be told, last to be protected. And they
made that decision because protecting investors would have cost them money.
D. The Gatekeepers Who Looked Away
Congress did not entrust investor protection to a single institution. It constructed a multilayered architecture of oversight — redundant by design — so that if one gatekeeper failed, another
would catch the violation. Petitioner tested every layer. Every layer failed. Not one gatekeeper, in
nearly eight years, at any level of the architecture Congress built, chose to protect a single investor.
The only person who tried to stop the harm is the person who filed this Petition.
What makes this record extraordinary is not merely the universality of the failure. It is the
character of it. Over nearly eight years of engagement with some of the largest financial institutions
in the world — firms controlling over $30 trillion in assets under management, the institutions that
hold America's retirement savings, pension funds, 401(k) plans, and college savings accounts —
Petitioner did not encounter a single expression of concern for the investors being harmed. Not
one executive asked how many Americans were affected. Not one asked what happens to a retiree
who pays taxes on income she never earned. Not one expressed discomfort with the gap between
what their firms promise investors in marketing materials and what they do for investors in
practice. The harm was discussed as one would discuss a rounding convention—clinically,
dispassionately, as though the 160 million Americans on the other end of these false tax forms
were not people but line items. These institutions hold themselves out as fiduciaries. When
presented with proof that their clients were being systematically overtaxed, they expressed no
concern for their clients. Their only concern was maintaining the status quo — and avoiding the
liability the truth would create.
Petitioner presented the mathematics. They did not dispute it. He quantified the harm. They
acknowledged it. He demonstrated the fix. They declined to implement it. He then carried the same

8

evidence, the same mathematics, and the same offer of a technological solution to every other
institution Congress empowered to prevent exactly this kind of harm. What follows is the record
of what each of those institutions chose to do with the truth.
The self-regulatory organizations — the exchanges, the clearing agencies, the frontline
enforcers Congress created to police market integrity — were notified. One exchange escalated
the technology to its executive committee. The executive committee declined to implement it —
not in the interest of the investors the exchange exists to protect, but in the interest of the fund
companies whose fee revenue the technology threatened. Then its executives quietly deleted every
digital connection to Petitioner, the institutional equivalent of destroying the visitor's log. These
are the organizations Congress entrusted with frontline investor protection. Their response to
documented evidence of systematic harm was not an investigation. It was sanitization.
The Big Four accounting firms — the "public watchdogs" the Supreme Court has said owe
"ultimate allegiance" to investors and "complete fidelity to the public trust" — were sent formal
notification. Petitioner met personally with three of them. No inquiry followed. No disclosure
deficiency was flagged. No auditor resigned. No Section 10A report was filed with this
Commission, as the law requires when auditors discover illegal acts and the board fails to take
remedial action. The firms whose entire professional purpose is to detect and report fraud chose,
when confronted with documented evidence of one, to look the other way.
One Big Four accounting executive went further — not merely looking away, but providing
the intellectual justification for the industry's refusal to act. The Supreme Court has held that
independent auditors serve as "public watchdogs" whose "ultimate allegiance" is to the investing
public and whose function demands "complete fidelity to the public trust." This partner's fidelity
ran in the opposite direction. Presented with the mathematics of investor harm — harm he did not
dispute, derived from data he did not challenge — this partner offered a justification that captures
the moral collapse of the entire gatekeeping architecture: "Investors should just 'accept' these losses
because investment funds offer convenience." A public watchdog, charged by the Supreme Court
with ultimate allegiance to investors, told Petitioner that the investors should accept being
overtaxed on their own money as the cost of doing business.
The losses Petitioner documented — taxes on income that was never earned, fees on values
that are deliberately inflated — reframed as a service charge. The price of admission. As though

9

160 million Americans had consented to be overtaxed in exchange for the privilege of participating
in the fund industry. They did not consent. They were not asked. They were not told.
And when Petitioner informed the room that he had met with the Securities and Exchange
Commission and that, in his assessment, the Commission was taking the matter seriously, a senior
executive laughed out loud. That is the sound of an industry that has been protected from
consequences for so long that it cannot imagine consequences arriving. It is the sound of a system
so confident in its own impunity that the mere suggestion of regulatory accountability is a
punchline. The "convenience" the industry offers investors is the convenience of not knowing what
is being done with your money — which is not convenience at all, but the condition on which the
entire scheme depends. And the laughter will echo differently when this Petition is read into the
public record.
Some of the most prominent securities law firms in America — firms that draft these
prospectuses and advise fund complexes on disclosure obligations — were sent formal
notifications. Petitioner met personally with several. Not one advised its clients to correct the
disclosures. Not one reported the violations to this Commission. Several continued drafting the
very prospectuses this Petition identifies as materially false — after receiving written notice of the
falsity. Those firms are no longer counsel. They are fact witnesses. And they face disqualification
from representing the clients they helped mislead, because an attorney cannot simultaneously
defend conduct and testify about her own participation in it.
Fund administrators and transfer agents — the firms that calculate NAV, process
distributions, and generate the very tax forms this Petition proves are false — were notified. But
one firm's response stands apart — not for what it denied, but for what it admitted and then refused
to act on. A dominant market utility reviewed Petitioner's analysis and technology independently.
Its executives did not dismiss the concerns. They did not claim the technology was unworkable.
They acknowledged, in writing, that "the problem is real" and that the industry has "simply ignored
it." This firm could have ended this. A single decision to support the corrective technology would
have carried it across the industry overnight — because when the infrastructure provider that
generates the tax forms decides those forms should be accurate, the forms become accurate.
Instead, the firm declined to implement the technology, declined to support it, declined to distribute
it, and continued generating false Forms 1099-DIV for tens of millions of Americans. An executive
offered an explanation more revealing than any legal brief: "industry perception can kill

10

reputations." A firm with the reach to correct the reporting for virtually every fund in America
understood that doing so would antagonize the fund complexes whose business sustains it. It
weighed investor protection against client relationships, and investors never had a chance.
Then Petitioner tested the last line of defense: the 15,266 chief compliance officers
registered in the SEC's Investment Adviser Registration Depository — every CCO in America
whose sole professional function is to ensure that securities firms comply with the law. Petitioner
sent formal compliance notices to the contact information each officer had filed on SEC Form
ADV — the address each had certified, under penalty of law, as the proper channel for receiving
compliance communications. The notice identified the specific violation. It quantified the harm. It
offered a path to remediation. It was structured to legally require a response.
Not one responded. Not one scheduled a meeting. Not one requested additional
information. Not one initiated an investigation. Not one forwarded the notice to a fund board, as
Rule 38a-1 requires for material compliance matters. So many ‘compliance’ officers marked the
formal compliance notice as junk mail that the email platform suspended Petitioner's account for
triggering spam filters. The compliance officers of the American financial industry — the fifteen
thousand professionals whose entire reason for existence is to prevent exactly this — classified a
formally written fraud warning as spam. Some went further still, flagging it as "inappropriate
content" — a filtering category designed for pornography and other explicit material. A
documented notice that 160 million Americans are being illegally overtaxed on their own money,
classified alongside ‘explicit content’ and blocked from reaching a single person within the
organization. In the judgment of the American fund industry's compliance apparatus, a warning
that their clients are being defrauded is more offensive than pornography.
This is not a compliance failure. This is the compliance architecture performing exactly as
the industry designed it to perform — not as a system for detecting and preventing fraud, but as a
system for ensuring that fraud, once reported, never reaches anyone with the authority or the
inclination to stop it. The architecture is a cartel's immune system. It was engineered not to protect
investors but to protect the institutions that profit from investor ignorance — to ensure that no firm
breaks ranks, no gatekeeper defects, no compliance officer escalates, and no regulator receives
information that would compel action.
The nation learned this lesson at a cost of $18 billion and the shattered lives of 37,000
investors across 136 countries. The Madoff fraud — which Congress called the worst regulatory

11

failure in the Commission's history — involved one man, one fund, and approximately $700
million to $1 billion in actual losses per year sustained over two decades. Harry Markopolos, the
whistleblower who alerted the SEC to the fraud on multiple occasions, was asked on national
television why executives at the biggest investment houses on Wall Street who knew something
was wrong did not go to the SEC. His answer: "Because people in glass houses don't throw stones.
And self-regulation on Wall Street doesn't work." 1
Congress responded with oversight hearings and structural reform. After examining how
documented warnings had gone unaddressed for a decade, Congress mandated creation of the SEC
Whistleblower Program — designed to ensure that the next time a citizen brought the Commission
evidence of fraud, the Commission would act on it promptly. It was the single institutional reform
to emerge from the worst regulatory failure in the Commission's history — a promise, backed by
a new institution, that it would never happen again. The Commission staked its credibility on the
premise that the program would work.
The architect and founding Chief of that program was Sean X. McKessy. He designed it.
He built it. He ran it. He knows precisely how it is supposed to function — what evidence it
requires, what channels it uses, what obligations it triggers.
In June 2020, Sean McKessy, now in private practice, filed Petitioner's whistleblower tip
with the Commission — through the program he created, in the format he designed, supported by
the kind of evidentiary record the program was built to receive. The designer of the post-Madoff
reform hand-delivered the evidence, through his own system, to the institution that promised
Congress it would never ignore documented fraud again.
Nearly six years later, the Commission has not acted on it. Not one member of the
Enforcement Division has contacted Petitioner. Not one subpoena has been issued. Not one
document demand has been served. Three Commissioners were personally briefed — this was not
a written warning lost in the bureaucracy, the way Markopolos's letters were. The evidence reached
the highest level of the institution. And the highest level of the institution did nothing.
Consider what this means. The single institutional reform Congress demanded after Madoff
— the one mechanism built specifically so that documented fraud reported by a credible
whistleblower would not be ignored — was put to its most important test by the man who built it.
The Man Who Figured Out Madoff's Scheme, CBS News (60 Minutes), Feb. 27, 2009,
https://www.cbsnews.com/news/the-man-who-figured-out-madoffs-scheme-27-02-2009/.

1

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And it failed. Not because the tip was deficient. Not because the evidence was ambiguous. Not
because the program lacked the capacity to process it. It failed because the institution on the
receiving end has not acted on it — a sequence that parallels the Commission's documented
handling of the Markopolos submissions, the pattern the Whistleblower Program was specifically
designed to prevent.
Except this time, the comparison is not close. Madoff was $18 billion over two decades —
roughly $1 billion per year, one fund, one man, 37,000 victims. The fraud documented in this
Petition exceeds $100 billion every year. Not one fund — every fund. Not one man — every major
financial institution in the US. Not 37,000 victims — 160 million Americans. Madoff harmed
thousands of investors, many of them wealthy, across 136 countries. This harms every American
with a fund investment — the teacher, the firefighter, the first-generation saver putting away $50
a paycheck.
Madoff's victims have recovered 94% of their principal. The victims here have recovered
nothing — because no one has told them they are victims. The system that failed to catch a single
con man running a single fund has now failed to act on an industry-wide fraud that is, by every
measure — annual harm, number of victims, duration, institutional involvement — one hundred
times larger. And it was not reported by an outsider whose warnings could be dismissed as
eccentric. It was reported by the man the Commission itself chose to build the program — the man
whose professional judgment the Commission trusted to design the architecture of whistleblower
protection for the entire American securities market.
If his tip, filed through his program, supported by this evidence, does not produce action,
then the program has not fulfilled the purpose for which Congress created it, and the promise the
Commission made after Madoff remains unfulfilled.
The glass houses still stand. Self-regulation still does not work. And the only thing that has
changed since 2009 is the scale of the harm, the number of Americans paying for it, and the
certainty with which the Commission knows.
Petitioner then attempted direct outreach — individual phone calls and personal emails to
the CCOs of registered investment advisers, the fiduciaries who recommend these very funds to
their clients and who owe duties of care and loyalty that this conduct breaches with every
transaction. No one returned his calls. No one answered his emails. The one compliance officer
who picked up the phone hung up on Petitioner — after Petitioner identified himself and asked

13

whether he could report a compliance matter adversely affecting the firm's clients. A compliance
officer. Receiving a compliance tip. About harm to the clients he is legally obligated to protect.
Hung up the phone. That moment — a single phone call, a single refusal to listen — captures the
entire architecture in miniature. At every level of the system Congress constructed, the answer was
the same: we do not want to know. Because we do not care. And knowing would obligate us to
act. And acting would cost us money.
Nearly eight years. Thirty trillion dollars in affected assets. Fifteen thousand two hundred
sixty-six compliance officers. National securities exchanges. Clearing agencies. The Big Four
accounting firms. The nation's most prominent securities law firms. Fund administrators. Transfer
agents. Board members. State securities regulators. State attorneys general. Members of Congress.
Firms that admitted in writing that the problem is real, and the industry has simply ignored it.
Universal notice. A ready technological solution, the industry itself called "groundbreaking" and
"revolutionary." A problem so clear that one honest actor would have forced industry-wide
correction within twelve months.
And the result: not one honest actor. Not one. In nearly eight years. Across an industry that
exists, by statute and by solemn promise, to safeguard the financial welfare of the American public.
The industry's own tax director predicted it: "If you can get just one fund to do this, all other funds
will be forced to fix this within 12 months." The prediction was proved correct — in the negative.
The absence of a single honest actor in nearly eight years is not evidence of independent
professional judgment arriving at a common conclusion. It is evidence that no firm was permitted
to break ranks — because the system was designed to ensure that none would.
Not one institution, not one gatekeeper, not one officer, not one director chose to protect a
single investor over a single dollar of fee revenue. The entire system Congress built to protect 160
million Americans failed — not because the evidence was ambiguous, not because the solution
was unavailable, not because the harm was uncertain — but because every gatekeeper looked to
every other gatekeeper, and every gatekeeper saw the same thing: silence. And silence, in an
industry conditioned by decades of consequence-free violation, by a revolving door that makes
regulators and regulated indistinguishable, by the settled expectation that misconduct of this
magnitude will never be prosecuted because it implicates everyone — silence was permission.
Silence was a strategy. Silence was the product.

14

That silence ends with this Petition. Three SEC Commissioners have been personally
briefed. Dozens of Commission staff across multiple divisions have been briefed. Not one has
challenged the factual premises. Not one has disputed the mathematics. Not one has contested that
investors are being harmed. In nearly six years since Petitioner's whistleblower tip was filed, not
a single member of the Commission's Enforcement Division has contacted him. Petitioner is the
fact witness to the industry admissions, the executive statements, the technology demonstrations,
and the coordinated suppression documented in this Petition — and the division responsible for
investigating securities fraud has never asked him a single question. No subpoena has been issued.
No testimony has been requested. No document demand has been served. Petitioner has received
no indication that any enforcement investigation has been opened. It is this absence that compels
this Petition. The Commission has known for nearly six years. During that time, the only person
who has acted to protect investors from this harm is the person filing this Petition. The question is
no longer whether the Commission is aware of these violations. The question is what action the
Commission's awareness requires — a question this Petition is designed to place squarely on the
record.
Somewhere in America, as this Petition is filed, a young woman is investing her first
paycheck in a taxable brokerage account — doing what every financial advisor, every retirement
guide, and every institution in the system tells her to do. She has chosen a diversified fund. She is
starting early. She is being responsible. She does not know that the share price she will pay tonight
is inflated by realized income the fund is obligated to distribute. She does not know that her first
distribution will return a portion of her own investment, disguised as taxable income. She does not
know that the Form 1099-DIV she will receive next January will overstate her earnings by the
precise amount the fund overcharged her today. She does not know any of this — because every
institution in the system described above chose not to tell her. By the time you finish reading this
Petition, she will have paid taxes she does not owe, on income she did not earn, reported on a form
the industry admits is false — and no one in the architecture Congress built to protect her will have
lifted a finger to prevent it.

15

E. The Constitution Has Spoken
Everything described to this point — the industry's fraud, the gatekeepers' silence, and the
government's failure to act on nearly six years of documented evidence — is the factual record.
What follows is the constitutional framework that makes continued inaction unlawful.
The taxation of the return of an investor’s capital as income is unconstitutional. The
Supreme Court settled this seventy years ago. Commissioner v. Glenshaw Glass Co. holds that
income requires "undeniable accessions to wealth, clearly realized." An investor who pays $100,
receives $3 of her own money back, and holds the same $100 she started with has experienced no
accession to wealth. She has received a refund of her purchase price. The Internal Revenue Code
does not tax that. The Supreme Court does not permit it. The industry itself admits it in SEC filings.
And yet hundreds of millions of Forms 1099-DIV report it as taxable income every year — and
the government collects on every one.
When the government collects taxes it knows are not owed, the Constitution has a name
for it: illegal exaction. Justice Owen Roberts: "[T]he unjust retention is immoral and amounts in
law to a fraud on the taxpayer's rights.” Bull v. United States. And McKesson: "the Due Process
Clause requires the State to afford taxpayers meaningful backward-looking relief" — and good
faith reliance on facially valid returns does not excuse continued retention after notice. And Reich:
the government cannot "hold out what plainly appears to be a 'clear and certain' post-deprivation
remedy and then declare, only after the disputed taxes have been paid, that no such remedy exists."
Tyler v. Hennepin County, decided unanimously in 2023 — nine Justices, zero dissents, zero
concurrences limiting the holding: government retention of amounts exceeding what is lawfully
owed is a "classic taking." Chief Justice Roberts traced the principle to Magna Carta: "The
government may not take more from the taxpayer than she owes."
Four cases. Four walls. No door — except corrective action.
These are not recommendations to the executive branch. They are commands of the
supreme law of the land. The Constitution sits above the SEC, above the IRS, above the
Department of Justice, above every enforcement priority, every resource constraint, and every
institutional preference for inaction. When the Fifth Amendment speaks, enforcement discretion
is extinguished. There is no prosecutorial judgment that permits the continued taxation of citizens
on income they did not earn. There is no administrative convenience that justifies retaining funds
that the government has no constitutional authority to hold. There is no enforcement discretion to

16

authorize an ongoing illegal exaction from 160 million Americans. The question is not whether
these agencies should act. The Constitution has answered that question. They shall.
And Congress reinforced the command four times, in language that admits of no ambiguity.
Section 6721(a): filers who fail to file correct returns "shall pay a penalty." Section 6201(a): the
Secretary "is authorized and required" to assess. Section 6301: the Secretary "shall collect."
Section 6303(a): notice and demand "shall" issue within sixty days. The Supreme Court has held
that "shall" creates "an obligation impervious to judicial discretion." Lexecon Inc. v. Milberg
Weiss. The IRS cannot decline to assess these penalties. It cannot forgive them. It cannot let them
expire. Congress did not say "may." Congress said "shall" — and said it four times because
Congress understood that agencies, left to their own preferences, will choose inaction over
confrontation with the industries they regulate. The statute exists to foreclose that choice.
The industry bears liability for every false return filed before the date of this Petition —
under §§ 6721 and 6722, independently, cumulatively, at uncapped penalties of 10% of all amounts
required to be reported correctly, for every form filed and every statement furnished. That liability
is measured in tens of billions of dollars. It exists today.
This Petition shifts the constitutional burden to the government. Before today, the
government processed returns as filed. That was defensible. From today forward, it is not. The
government now possesses irrefutable evidence — supported by the industry's own admissions
and the unanimous precedent of the Supreme Court — that the Forms 1099-DIV are false and that
the taxes collected on them include amounts the Constitution forbids the government to retain.
Every principle identified above — illegal exaction, due process, takings, mandatory enforcement
— attaches with full force from the moment this document is delivered. The government's
exposure accrues prospectively, beginning now, compounding daily, and crystallizing irreversibly
with each tax cycle that closes.
The calendar quantifies what government inaction has already cost. Since Petitioner first
reported these violations in June 2020, five full years of mandatory penalties have expired — tax
years 2017 through 2021 — billions of dollars Congress commanded the Treasury to collect,
forfeited because no agency acted in time. Tax year 2022 expires on March 31, 2026. Weeks from
today. Billions more will be permanently lost. And each expiration does not merely forfeit revenue
owed to the Treasury. It extinguishes the rights of American taxpayers — investors whose refund
claims, amended returns, and legal remedies die with each statute that lapses. Every door that

17

closes, closes on an American who overpaid and will now never be made whole. Not because she
did anything wrong. Because every institution obligated to protect her chose not to act in time.
The consequences of further inaction are not abstract. They are legal, constitutional, and
inescapable. Continued collection on known-false returns is an illegal exaction actionable in the
Court of Federal Claims. Failure to assess mandatory penalties is agency action unlawfully
withheld, compellable under APA § 706(1). Permitting the 2026 tax year to proceed without
corrective guidance — while possessing this Petition — is a due process violation under McKesson
and Reich, a taking under Tyler, and a fraud on the taxpayer's rights under Bull. Petitioner will
pursue each of these claims. The government's choice is not whether to act. It is whether to act on
its own timeline — or on a court-ordered one.
The 2026 tax year has already begun. Investors are purchasing fund shares today, at prices
inflated by the same distortion this Petition documents. They will receive their own capital back,
disguised as income. They will receive false Forms 1099-DIV. They will pay taxes they do not
owe. And for the first time, that entire cycle will occur with the government's full, documented,
undeniable knowledge that it is happening. The IRS can issue corrective guidance now — before
the forms are prepared, before another round of false reporting locks in, before another year of
Americans' rights begins its three-year countdown toward extinction. The statute commands it.
The Constitution requires it. Continued inaction is no longer a policy choice. It is a constitutional
violation — with named plaintiffs, quantified damages, and a record that will not improve with
age.
F. The Defenses That Aren't
The industry's response to nearly eight years of documented fraud was not to correct the
fraud. It was not to fix the tax forms. It was not to implement the technology that would have ended
the harm overnight. It was not to warn a single one of the 160 million Americans whose money it
manages. It was to hire lawyers — and hope the lawyers could confuse a judge.
The lawyers are trying. Having no honest defense to offer — because there is no honest
defense when the client has confessed in its own published materials — counsel has adopted the
only strategy available: make the simple look complicated. Recast a disclosure fraud as an
accounting dispute. Bury a straightforward question under so many layers of jargon that the court

18

loses sight of what is actually being asked. The strategy depends entirely on the assumption that
no one in the courtroom will do the math. This Petition ensures that assumption is no longer safe.
The first industry defense is that GAAP compliance immunizes the filing of false federal
tax returns and excuses the obligation to disclose the consequences to investors. It does not — and
understanding why requires understanding what GAAP actually is, because the industry's lawyers
are counting on courts not knowing. GAAP is a classification system. It tells a fund which numbers
go in which buckets—how to categorize revenue, how to record income, and how to present
financial statements in a standardized format. It does not tell a fund what to disclose to investors
about the consequences of those classifications. It does not override federal securities law. It does
not amend the Internal Revenue Code. And it does not — and has never — granted any registrant
an exemption from the obligation to tell investors the truth about what is being done with their
money. The industry's argument, stated plainly — which is why its lawyers never state it plainly
— is this: because we classify realized income in a manner consistent with GAAP, we are exempt
from the federal laws that require us to tell investors what that classification does to their money.
No court has accepted that theory. No statute supports it. The SEC itself has stated repeatedly that
GAAP compliance does not preclude a finding of materially misleading disclosure. The principle
is obvious: an accounting classification can be technically compliant, and the disclosure of its
consequences to investors can be materially false. Both things are true here. The funds' internal
bookkeeping may satisfy GAAP. The prospectuses that describe what that bookkeeping does to
investors are provably, mathematically, demonstrably wrong — and Petitioner has provided the
funds' own data to prove it. A kindergartner with a calculator can disprove the current disclosures.
The industry has dispatched the most expensive lawyers in America to argue that the kindergartner
is wrong. That is not advocacy. It is an attempt to prevent a court from seeing what every investor
would see if anyone told them the truth.
But the GAAP defense is not merely wrong. It is fraudulent on its own terms — because
GAAP does not require what the industry claims it requires. The industry argues that it must book
realized income to NAV because GAAP compels it. GAAP does no such thing. The fund industry
itself has operated daily dividend accrual accounting — the method that removes realized income
from NAV before investors purchase shares — since the 1970s. Money market funds use it. Certain
bond funds use it. The technology exists. The accounting infrastructure exists. It has existed for
over fifty years. The industry did not reject daily accrual because GAAP prohibited it. The industry

19

chose, from two available and equally GAAP-compliant accounting methods, the one that inflates
the NAV, because a higher NAV generates higher advisory fees. That choice was not compelled
by any accounting standard. It was compelled by revenue. And when a fiduciary selects, from two
available options, the accounting method that harms its clients and enriches itself — and then
conceals the existence of the alternative and the consequences of its choice — that is not an
accounting convention. It is a conflict of interest, undisclosed, that the securities laws have
prohibited since the day they were enacted. The GAAP defense does not merely fail to excuse the
industry's conduct. It illuminates the conduct, because the industry is not arguing that it had no
choice. It is arguing that the choice it made, to enrich itself at the expense of its investors, is none
of its investors' business.
The second industry defense is even worse — not because it is more sophisticated, but
because it is less. Universal practice, the argument goes, proves acceptable practice. Because every
major fund books realized income to NAV, no individual fund can be liable for doing so. Because
every major fund uses substantially identical prospectus language, no individual fund's disclosure
can be materially misleading. These propositions refute themselves the moment they are stated
aloud. The first converts coordinated fraud into standard practice — the more firms that commit
the violation, the stronger the defense becomes. The second converts uniform deception into
adequate disclosure — the more funds that repeat the same misleading language, the less
misleading it becomes. The industry's most sophisticated legal minds, backed by the most
expensive law firms in America, have arrived at the defense every child reaches for when there is
nothing left to say: “Everyone was doing it.” It was not a defense in kindergarten. It is not a
defense in federal court.
A uniformly bad disclosure does not cure the deficiency. It compounds it. It means 160
million Americans received the same misleading information from the same industry using the
same carefully chosen words — and not one of them had access to a truthful alternative, because
the industry ensured that no truthful alternative existed. When every fund uses the same false
characterization — describing a structural, permanent, daily risk as arising "shortly before" a
distribution — the uniformity is not evidence of independent professional judgment arriving at a
common conclusion. It is evidence of a common decision, made at the industry level, to minimize
a risk the industry knows cannot honestly be minimized. The industry's own tax director confirmed
the dynamic: one honest disclosure would have forced every competitor to match it within twelve

20

months. The industry made certain that honest disclosure never appeared — and now sends
lawyers to argue that the absence of honesty proves honesty was never required.
The industry cannot sustain both sides of its own contradiction. It cannot file prospectuses
with the SEC, admitting that distributions include return of capital, and then file Forms 1099-DIV
with the IRS reporting those same amounts as fully taxable income. It cannot tell investors in
buried fine print that they face "an unnecessary tax bill" and then tell federal judges that no one is
being overtaxed. It cannot acknowledge the harm in private and deny it in public. And its lawyers
cannot stand before a court and argue, with a straight face, that filings the industry's own executives
have described as "perfectly fine" — while 160 million Americans are overtaxed on their own
money — filings those executives refused to correct because "our investors don't know it is
happening" — constitute adequate disclosure. The fact that 160 million investors do not know it
is happening is not evidence that the disclosure is adequate. It is proof that it is not. These are not
defenses. They are the same confessions that created the liability, dressed in a suit, delivered in a
courtroom, and billed at $2,000 an hour.
And the industry has already conceded the point — not in words, but in conduct. After
receiving Petitioner's compliance notices, multiple fund complexes quietly stripped the challenged
language from their prospectuses — deleting the very phrases Petitioner had identified as false,
without filing corrective supplements, without issuing press releases, without notifying affected
investors, and without acknowledging the change. Accurate disclosures are not silently deleted.
Confident defendants do not quietly destroy evidence. The silent edits are consciousness of guilt
documented in the industry's own filing history — visible to anyone who compares prospectuses
year over year, undeniable once the comparison is made. And they prove something the industry's
lawyers will wish they did not: the industry received notice, concluded internally that the
challenged language could not be defended, removed it in a manner calculated to avoid creating a
public record — and continued processing sales and collecting fees as though the prior harm had
never occurred. The duty under the securities laws is to correct and warn — not to erase and forget.
If either defense gains acceptance, the damage extends far beyond these investors and this
industry. Any industry that coordinates its noncompliance achieves immunity from the securities
laws. Any disclosure, no matter how misleading, becomes adequate the moment enough firms
adopt it. Any fiduciary that chooses, from two available options, the one that enriches itself and
harms its clients can immunize that choice simply by ensuring every competitor makes the same

21

one. The honest actor who breaks ranks is punished — exposed to liability for admitting the
deficiency while competitors shelter behind the uniformity that conceals it. The securities laws
would protect investors only against aberrant fraud — the lone bad actor, the rogue firm.
Systematic, coordinated, industry-wide fraud — the kind that causes the greatest harm to the
greatest number — would be untouchable. This is precisely why Congress enacted the Racketeer
Influenced and Corrupt Organizations Act — to reach coordinated schemes that individual fraud
statutes cannot adequately address, and to provide treble damages and attorney's fees to private
plaintiffs willing to prosecute what the government will not. When the industry's defense to
individual claims is "everyone was doing it," the industry has identified its own conduct as the
organized, enterprise-level activity that RICO was designed to prosecute. Congress did not
construct the disclosure regime of 1933 so that it would buckle the moment Wall Street presented
a unified front. But that is precisely the regime these defenses would create — and it is precisely
what these lawyers are attempting to build, brief by brief, motion by motion, in courtrooms across
this country — arguments that gain weight with each day they go unrebutted by the agency
Congress charged with enforcing the disclosure laws.
This Petition does not ask the Commission to create new law. It asks the Commission to
defend the law that exists — before these lawyers dismantle it. The industry is not mounting a
defense. It is conducting an assault on the disclosure framework, attempting to establish through
litigation what it could never achieve through legislation: the principle that an accounting
classification excuses disclosure fraud, that a fiduciary's choice to enrich itself at its clients'
expense requires no disclosure if the choice is widespread enough, and that an industry willing to
coordinate its deception can place itself permanently beyond the reach of the securities laws. The
Commission's continued silence is not neutral. Silence, from the agency Congress charged with
enforcing these laws, is indistinguishable from agreement. And every day these arguments go
unrebutted, they gain weight — migrating from desperate motions into cited authority, from cited
authority into settled expectation, from settled expectation into the permanent understanding that
fraud of sufficient scale and sufficient uniformity is simply how business is done. The industry's
attorneys are constructing that reality one filing at a time. The Commission can end it today.
This Petition requests that the Commission issue interpretive guidance on the true nature
and timing of "buying a dividend" risk — so that the public receives what the Commission owes
them and what the industry has spent nearly eight years withholding: the truth. Investors are relying

22

on disclosures that characterize this risk as a narrow timing window they can avoid — a
characterization the industry knows is false, that the funds' own data disproves, and that misleads
160 million Americans into believing a structural, permanent, daily risk rarely exists. A single
interpretive statement — clarifying what the industry's own data already proves — would do more
to protect American investors than every dollar the Commission has spent on enforcement in the
last decade. The obligation to tell investors the truth does not yield to an accounting classification,
does not yield to industry consensus, and does not yield to the collective preference of the most
powerful financial institutions in the world to keep 160 million Americans in the dark about what
is being done with their own money.
G. The Reckoning
In January 2025, the Commission charged Vanguard with securities violations for
misleading disclosures about tax consequences and imposed a $106.41 million penalty. The Chief
of the Enforcement Division's Asset Management Unit stated the governing principle: "Materially
accurate information about capital gains and tax implications is critical to investors saving for their
retirements."
The Commission is right. Now apply it.
The Vanguard violation was episodic — one fund complex, one event, over. The violation
here is continuous — every fund complex, every trading day, no end. The Vanguard harm was
unintentional — a consequence Vanguard failed to anticipate, not a practice it designed and carries
out daily. The harm here is calculated to the penny before the investor purchases the share. The
Vanguard disclosures used general language the Commission found misleading. The disclosures
here use language that is affirmatively false — language the industry has already conceded cannot
be defended, by silently deleting it from its own prospectuses. The Vanguard penalty was $106
million. The annual harm here exceeds $100 billion. One thousand to one. Every year. If the
Commission's reasoning in Vanguard is correct — and it must be, because the Commission stated
it publicly twelve months ago — then the disclosures this Petition challenges are materially
misleading as a matter of law, and the Commission's failure to apply the same standard to harm
one thousand times greater is incoherent. The Commission cannot credibly tell a federal court that
a $106 million episodic disclosure failure warranted emergency enforcement while a $100 billion
annual disclosure failure warranted silence.

23

The Commission will not claim it lacked resources. Two successive administrations found
institutional capacity to pursue ambitious initiatives at the contested periphery of their statutory
authority — climate disclosure rulemaking that consumed years of staff work before being
judicially stayed and withdrawn; a Commission-wide "Project Crypto" initiative that the current
Chairman declared "job one," complete with a dedicated task force, multiple rounds of staff
guidance, proposed amendments to the Exchange Act, and approved listings for tokens such as
DOGE, SOL, and XRP — all for an asset class over which the Commission's jurisdiction remains
actively contested and for which Congress has not enacted enabling legislation. The Commission
built an entirely new regulatory framework for assets it may not have authority to regulate. Yet it
has not issued a single interpretive statement about the false tax reporting documented in this
Petition — false reporting by an industry it has regulated since 1940, an industry that holds the
retirement savings of 160 million Americans, an industry that the Commission's own Enforcement
Division already sanctioned for materially misleading tax-consequences disclosures twelve
months ago in Vanguard. The Commission found ample resources to regulate meme coins. It has
not yet found the resources to protect retirement savings.
The Commission's "job one" is not crypto. Unless Congress has amended the Securities
Exchange Act since the date of this Petition, the Commission's job one — its only job, the reason
it exists — is protecting investors. Any other allocation of institutional priority, while these
violations remain unaddressed, raises questions about institutional consistency that this Petition's
public record will invite oversight bodies to examine.
But the Commission's enforcement discretion on this matter has been extinguished. This is
no longer a question of institutional priorities. The constitutional framework documented in this
Petition — illegal exaction, due process, takings, mandatory statutory commands — does not
permit the Commission to hold this matter in a queue while it builds ‘token taxonomies.’
Constitutional violations are not competing priorities to be balanced against blockchain
roundtables. They are imperatives that override every other consideration, including the
Commission's preference for inaction. Evidence of widespread, ongoing false federal information
returns — the systematic filing of hundreds of millions of forms, admitted by the filers, sustained
for years, generating tens of billions in mandatory statutory penalties — cannot be administered
as one item among many on an enforcement agenda. This is not a disclosure deficiency awaiting
staff review. This is an ongoing abuse of the United States tax system, affecting more Americans

24

than any tax fraud in the nation's history, documented by the industry's own confessions, and
compounding daily.
The Commission's obligations upon receipt of this Petition are not discretionary, and they
are not sequential. They are concurrent, mandatory, and immediate. The Commission must act to
protect investors under the authority Congress vested in it — the authority that is its reason for
existence. The Commission must refer this matter to the Internal Revenue Service, which has
mandatory, non-discretionary duties to assess penalties under the "shall" commands of §§ 6721,
6722, 6201, 6301, and 6303 — duties it cannot decline, defer, or delegate. The Commission must
refer this matter to the Department of the Treasury, which oversees the integrity of the information
reporting system this Petition proves has been systematically compromised. The Commission must
refer this matter to the Department of Justice for evaluation of criminal liability under IRC §§
7206(1) and 7206(2) — because the knowing filing of false federal information returns is not
merely a civil penalty matter; it is a federal crime, and the Commission has an obligation not to sit
on evidence of criminal conduct while statutes of limitations expire. And the Commission must
refer this matter to the relevant Inspectors General — because when a federal agency possesses
documented evidence of systematic fraud affecting 160 million Americans and billions in Treasury
revenue, and has possessed that evidence for nearly six years without acting, the question of why
is one the Inspector General exists to answer.
While these obligations accrue and these referrals await, the human cost compounds.
Public employee pension funds — the retirement security of teachers, firefighters, police officers,
and municipal workers — hold trillions in the funds this Petition documents. Every dollar of
inflated NAV generates advisory fees that flow from those pension funds to the asset managers
that overvalue them — enriching every participant in the asset management food chain at the
direct, daily expense of the workers whose retirement savings are diminished by the very
institutions hired to grow them. Those workers will retire with less. Their pensions will pay less.
Their quality of life in retirement — the reward for decades of public service — is reduced every
day by an industry that profits from the scheme and a regulator that has permitted it for nearly six
years.
Consider what this means for a single American doing the responsible thing — investing
for retirement in a taxable brokerage account, contributing every paycheck, diversified across eight
funds as every financial advisor recommends. Each contribution purchases shares at an inflated

25

NAV. Each fund makes distributions — ordinary dividends, short-term capital gains, long-term
capital gains — that include return of her own capital. Across twenty-six bi-weekly contributions
and a portfolio of eight funds, with three distribution types each, she receives six hundred
and twenty-four separate phantom tax charges per year. Six hundred and twenty-four. None
of them owed. Every one of them reported to the IRS as taxable income on a Form 1099-DIV the
industry admits is false. She will not know they are false. She will not know they are avoidable.
She will pay them — because the industry chose not to tell her, and no one has required them to.
How is this acceptable?
Americans are struggling to put food on the table. They are choosing between groceries
and prescriptions, between rent and retirement, between heating their homes and saving for their
children. While they make those choices — while they do the responsible thing, the thing every
institution tells them to do, the thing the securities laws were designed to make safe — the fund
industry collects fees on deliberately inflated values and files tax forms it has admitted are false.
And the Commission hosts blockchain roundtables.
Working Americans saving for retirement did not ask for token taxonomies. Crypto
lobbyists did. They did not ask for innovation exemptions or crypto task forces. They asked for
one thing — the thing the securities laws promise, and the Commission's mission statement
guarantees: the truth. Accurate prices. Honest tax forms. Disclosures that do not mislead them into
losing money they cannot afford to lose. The industry has refused to provide it. Every gatekeeper
has refused to demand it. And the Commission — for nearly six years, across two administrations,
while Americans' savings are extracted through false reporting and inflated fees — has directed its
institutional energy elsewhere. The Commission must now direct it here. Not because Petitioner
demands it. Because the Constitution commands it, the statutes require it, the industry's own
admissions compel it, and 160 million Americans — who trusted every institution in this system
to do its job — deserve at least one institution that will.
This Petition is now public. The facts it documents — the admissions, the mathematics,
the industry's own words — are permanently available, to any person, for any lawful purpose. That
single fact changes everything. For every participant in the system this Petition has exposed, the
calculus that governed the last nearly eight years — silence is safe, inaction is costless, no one will
ever know — has inverted. Silence is now the most dangerous option available. And the clock has
started.

26

The industry's executives face personal criminal exposure under IRC §§ 7206(1) and
7206(2) for the knowing filing of false federal information returns — and under the mail and wire
fraud statutes, 18 U.S.C. §§ 1341 and 1343, for the transmission of those false returns via United
States mail and electronic wire. The industry faces civil liability under multiple bodies of federal
law — including federal racketeering and antitrust statutes — for the coordinated suppression of
the only technology capable of correcting the harm. The conduct constitutes a group boycott: the
industry excluded the sole market participant offering corrective technology, blocked investorprotective innovation from reaching the market, and preserved an anticompetitive pricing structure
that benefits every incumbent at the expense of every investor. Petitioner holds the evidence to
prove it — years of contemporaneous emails, meeting notes, and documented admissions from
some of the most senior executives in the financial services industry. That evidence, once filed on
a public docket, will be available to every class action firm in America.
That exposure cannot be indemnified. It cannot be insured. It cannot be resolved by
corporate settlement or absorbed as a cost of doing business.
The directors-and-officers liability insurance every executive assumes will protect them
may already be compromised. Standard D&O policies contain prior-knowledge exclusions and
notice-of-circumstances provisions that the industry's years of concealment have almost certainly
triggered. Firms that received Petitioner's compliance notices in 2023 and renewed their policies
without disclosing them may have procured coverage through material misrepresentation — a
basis for rescission that voids the policy from inception, leaving every insured without coverage
for any claim during that period.
The contemporaneous records — the emails, the meeting notes, the documented
admissions from senior executives — once part of the public record, will provide carriers with
proof of prior knowledge sufficient to rescind. The industry's silence did not merely create the
liability. It simultaneously destroyed the insurance that was supposed to cover it. Directors and
officers who assumed they were protected will discover they are not.
The independent fund directors and the independent directors of the management
companies that advise them face a choice with only one rational answer. Act now — retain
personal counsel, demand the information this Petition documents, notify the D&O carrier, request
a formal Section 15(c) review, cooperate with any examination — and establish good faith,
preserve whatever coverage remains, earn the cooperation credit the Commission's framework

27

provides, and set the standard against which every other director will be measured. Or wait — and
explain to a federal court why documented evidence of harm to 160 million Americans did not
constitute a "material compliance matter" requiring board action. The first director to act writes
the standard. The last director to act fails it. There is no third option. There is no safe middle
ground. There is only the mathematics of a prisoner's dilemma in which every rational player
moves first — because every day of delay compounds personal exposure, erodes insurance
coverage, and narrows the distance between "uninformed fiduciary" and "complicit participant."
The same mathematics cascade through every level of the system. The first fund complex
to adopt the corrective technology captures the competitive advantage that the industry's own tax
director predicted and forces every competitor to match it or explain, under oath, why it chose not
to. The first CCO to escalate this Petition to a fund board fulfills the duty that 15,266 others
abandoned — and earns the protection that cooperation confers. The first auditor to file a Section
10A report honors the "public watchdog" function the Supreme Court described — and shifts the
liability to every firm that continued certifying. The first law firm to advise its clients to correct
the disclosures fulfills the obligation Part 205 imposes — and escapes the disqualification that
awaits every attorney who kept drafting after notice. At every node, the dominant strategy is
identical: move first. The prisoner's dilemma this Petition creates has one rational move, and every
game theorist, every litigator, every D&O carrier, and every criminal defense attorney who
examines this matrix will reach the same conclusion. The first to cooperate defines the standard.
The last to cooperate faces it.
This Petition does not depend on the industry's voluntary correction — because nearly eight
years have established, beyond any doubt, that voluntary correction will not come. This Petition
was built to ensure it is no longer needed. Every class action firm in America now holds a threehundred-page evidentiary roadmap — fact-heavy, opinion-lite, constructed on the industry's own
admissions — sufficient to survive any motion to dismiss.
The exposure is not limited to class actions. Section 7434 of the Internal Revenue Code
provides every individual American with a private right of action against any person who willfully
files a fraudulent information return with respect to that taxpayer — with damages of the greater
of $5,000 or actual damages sustained, plus costs and reasonable attorney's fees. The industry has
filed hundreds of millions of Forms 1099-DIV that its own published materials acknowledge
overstate taxable income. Each form is a separate willful act. Each affected investor is a separate

28

plaintiff. The arithmetic is not complicated: 160 million Americans, each holding a federal
statutory cause of action, each entitled to a minimum of $5,000, plus costs, plus fees. The industry's
total exposure under § 7434 alone — before penalties, before class actions, before state
enforcement, before RICO — is measured not in billions but in hundreds of billions.
Every FINRA arbitrator now has access to mathematical proof that investor losses are not
speculative but calculable to the penny before the trade executes. Every public pension fund —
every state teachers' retirement system, every municipal workers' fund, every first responders'
pension board — now possesses documented evidence that the advisory fees it pays are calculated
on deliberately inflated values and that the fiduciaries it hired to protect its members' retirement
have been extracting from it instead. Every state attorney general and every state securities
regulator now holds the factual record to pursue enforcement under state consumer protection and
blue sky laws — actions that require no federal cooperation, cannot be blocked by federal inaction,
and will proceed whether or not a single federal agency lifts a finger.
This Petition was structured so that the failure of every institution Petitioner has already
tried — and every institution has failed — does not leave 160 million Americans without recourse.
The American legal system has other doors. This Petition opens all of them.
The federal agencies, however, do not have the option of watching from the sidelines while
private litigants and state enforcers do their work. This Petition has placed the SEC, the IRS, the
Department of the Treasury, and the Department of Justice on formal constitutional notice of an
ongoing illegal exaction from 160 million American citizens. The duties that attach are not
discretionary. They are not agenda items. They are not competing priorities to be ranked against
crypto task forces and blockchain roundtables. They are constitutional commands — and
constitutional commands do not wait.
The SEC must act to protect investors — not eventually, not when resources permit, but
now, because investors are being harmed today, this trading day, and the Commission has
possessed the evidence for nearly six years. The IRS must assess the mandatory penalties that four
separate "shall" commands of the Internal Revenue Code require — penalties that are accruing
now, expiring year by year, billions already forfeited through inaction, billions more weeks from
permanent extinction. The Department of Justice must evaluate criminal liability for the systematic
falsification of hundreds of millions of federal information returns — because when an entire
industry knowingly files false returns with the United States Treasury, admits the falsity, rejects

29

available corrections, and coordinates to suppress the truth, that is not a civil regulatory matter. It
is an ongoing criminal abuse of the American tax system, and no agency has discretion to look the
other way.
The relevant Inspectors General must examine why agencies possessing this evidence for
nearly six years did not act — a question that falls squarely within their statutory mandate and that
the passage of time has made unavoidable. And each of these referrals — to the IRS, to Treasury,
to the DOJ, to the Inspectors General — must be made promptly, because evidence of systematic
false federal information returns cannot remain in a single agency's possession while statutes of
limitations expire and the harm compounds. The obligation to refer is not subordinate to the
obligation to investigate. It is concurrent with it. Both begin today.
For the removal of all doubt, Petitioner includes with this Petition a Declaration under
penalty of perjury, executed pursuant to 28 U.S.C. § 1746, attesting to the events described in this
introduction and throughout this document — including the industry meetings, the executive
admissions, the gatekeeper engagements, the technology demonstrations, the universal rejection,
and Petitioner's extensive, years-long efforts to convince multiple federal agencies to act before
this Petition became necessary. The Declaration is attached as Exhibit 1 and incorporated by
reference in its entirety. Unless otherwise noted, factual assertions in this Petition regarding
Petitioner's personal outreach, industry statements, government engagement, and direct
observations are supported by the sworn testimony set forth therein.
Petitioner does not ask the Commission to take his word for it. He swears to it — under the
same penalties for false statement that the industry has exposed itself to by filing the very returns
this Petition challenges. The difference is that Petitioner's declaration is voluntary, made in the
service of truth, and offered to facilitate enforcement. The industry's false filings were involuntary
to no one — made knowingly, sustained deliberately, and designed to extract wealth from the
Americans they were supposed to protect.
The sections that follow provide the factual record, the legal analysis, and the specific relief
requested. They exceed three hundred pages. They cite the industry's own documents, the
industry's own admissions, and the industry's own data. They identify twenty-three material
misstatements and omissions in current prospectus disclosures. They provide the mathematical
proof that the Forms 1099-DIV are false — proof the industry cannot rebut because it is derived
from the industry's own numbers. They offer a technological solution the industry itself called

30

"groundbreaking" and "revolutionary" and then suppressed. They present a constitutional
framework built from unanimous Supreme Court precedent that no lower court can distinguish and
no agency can ignore. And they are designed to be used — by the Commission, by the IRS, by the
Department of Justice, by state regulators, by class action counsel, by arbitrators, by pension fund
trustees, by members of Congress, and by any American who believes that the law means what it
says and that the institutions created to enforce it should do their jobs.
The Government's choice is not whether to act. The Constitution has made that choice. The
Government's choice is whether to act now — on its own terms, in a manner of its choosing, with
the cooperation Petitioner has offered for nearly six years and continues to offer today — or to act
later, on a court-ordered timeline, after litigation that will be more costly, more public, and more
damaging to every institution involved than anything this Petition requests. Petitioner does not
prefer litigation. Petitioner prefers the outcome litigation would produce — delivered faster, at
lower cost, through the coordinated federal enforcement this Petition makes possible, and that this
moment demands.
But if the agencies Congress created to protect American investors will not protect them
— if the institutions designed to enforce the law will not enforce it — then Petitioner will assume
the role the law itself provides for exactly this circumstance: the Private Attorney General. It is a
role as old as the Republic — the citizen who stands up when the government stands down, who
enforces the law the government will not enforce, who carries into court the claims the public
cannot bring on its own behalf. It is the role for which Petitioner founded the Private Attorney
General Project — built for this case, for this moment, for the possibility, now confirmed, that
every institution in the system would fail and that a citizen would have to do what the government
would not. Petitioner will take these matters to the federal courts as a Private Attorney General
and as a United States Marine who swore an oath to support and defend the Constitution of the
United States against all enemies, foreign and domestic — an oath that carries no expiration date.
The enterprises documented in this Petition — enterprises that file hundreds of millions of false
federal returns, suppress corrective technology, and extract wealth from the Americans whose
savings they hold in trust — are the domestic threat that oath contemplates. Petitioner intends to
honor it.
The record is public. The truth is established. The Constitution has spoken. Congress has
commanded.

31

The agencies may act, or the courts will compel. But the outcome is no longer in question
— only the mechanism of its arrival.

II. PETITIONER'S INTEREST AND STANDING
Petitioner brings this action in four capacities: as an injured investor who has suffered the
harm firsthand, as a subject-matter expert who quantified the problem and built the solution, as a
protected whistleblower under federal securities and tax law, and as a fact witness who spent nearly
eight years documenting the industry's knowing refusal to protect investors. Each capacity
independently supports standing. Together, they establish something more: a record so thorough,
and Commission engagement so extensive, that no claim of ignorance or surprise can be credibly
advanced.
The record Petitioner built over nearly six years of Commission engagement — across
multiple Commissioners, dozens of staff, and hundreds of pages of documentation — establishes
with precision what the Commission was told, when it was told, and what it was given to evaluate.
No element of this Petition will be new to the Commission. The details are set forth below.
The Commission knows. The industry knows. What follows documents the record that
establishes both.
A. Injured Investor with Measurable, Ongoing Harm
Petitioner is an investor who has experienced a lifetime of the harm described in this
Petition. Like more than 160 million Americans who own funds, Petitioner has purchased
securities while relying on prospectuses that describe "buying a dividend" risk using timinglimited language—language suggesting the risk arises only "shortly before" distributions while
omitting the material consequences that exist continuously throughout the year.
The injury satisfies every requirement for standing. It is direct: Petitioner paid taxes on
amounts that were, in economic substance, return of his own invested capital—not income earned.
It is measurable: the tax loss is quantifiable to the penny using the formulas set forth in Section III
of this Petition. It is ongoing: the practice continues every trading day, the deficient disclosures
remain in circulation, and Petitioner—like millions of other Americans—remains exposed to
identical harm with each subsequent investment.
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This is not a generalized grievance about regulatory policy. It is a concrete, particularized,
personal injury that Petitioner has suffered, that he can quantify, and that the requested relief would
prevent.
B. Sole Subject-Matter Expert Who Quantified the Harm and Built the Solution
Petitioner is also the CEO of FairShares, Inc., a technology firm that first quantified
"buying a dividend" harm across the entire fund industry and developed a turnkey technological
solution to correct it. He is the sole inventor of multiple U.S. and international patents covering
the technology required to eliminate this harm. To Petitioner's knowledge, no other person or
institution has conducted this analysis or developed comparable solutions. He is the sole subjectmatter expert on this problem worldwide. The research exists. The researcher has been sitting
across the table from Commissioners for nearly six years. The solution exists — patented, turnkey,
and demonstrated to the Commission's staff. Every element the Commission would need to act has
been provided.
This dual perspective—injured investor and technical expert—provides knowledge that
few possess. Petitioner understands both how the harm feels to those who suffer it and how the
accounting mechanics that cause it actually operate. He has first-hand knowledge of how
widespread the disclosure failure is, how much investors lose annually, and—critically—how
readily the problem can be solved.
The technology Petitioner developed accomplishes three things that current industry
practice fails to do: it enables funds to trade at fair value by segregating embedded realized income
from the tradeable share price; it generates accurate Forms 1099-DIV that properly characterize
return of capital rather than misreporting it as dividend income; and it delivers real-time point-ofsale disclosure—a simple data field showing investors the per-share amount of embedded realized
income and their estimated tax exposure before they click "buy."
The solution exists. It works. It was demonstrated to industry executives controlling
trillions of dollars in assets. It was offered for licensing and adoption.
The industry refused—not because the technology fails, but because it succeeds.
Implementing it would expose decades of overvaluation, end the fee extraction enabled by it, and
create a public record of what the industry has long known and concealed. That refusal,
documented extensively in Exhibit 1, is itself evidence of scienter.

33

Petitioner does not ask the Commission to mandate an untested remedy or impose
speculative burdens. The remedy is built, proven, and ready. The only missing element is the will
to require its use.
C. Protected Whistleblower Under Federal Securities and Tax Law
Petitioner is a protected SEC whistleblower under Exchange Act § 21F (15 U.S.C. § 78u6). In separate capacities, Petitioner is also an IRS whistleblower under 26 U.S.C. § 7623(b), a
DOJ whistleblower under the Department of Justice Whistleblower Awards Pilot Program (28
U.S.C. § 530C), and has filed a separate submission with the Antitrust Division of the Department
of Justice. See Exhibit 1, Declaration of Jeremy Thomas Roseberry ("Roseberry Decl.").
Four agencies. Four independent bodies of law. One set of facts.
The securities violations are complete at the moment of purchase: the investor acquires a
fund share at a price inflated by an undisclosed embedded tax liability, in reliance on a prospectus
that contains materially misleading statements about the tax consequences of purchasing fund
shares and omits the information necessary to evaluate them — that the investor will receive a
distribution consisting in part of the investor's own money back, reported as taxable ordinary
income on a federal information return the industry admits overstates the investor's tax obligation,
at a purchase price inflated by the very liability the prospectus fails to quantify. These are
disclosure failures under the Securities Act and the Investment Company Act — materially
misleading statements and omissions in connection with the offer and sale of securities.
The tax violations are analytically and temporally independent. They occur after the
securities transaction is complete, when the fund — in a separate act, through a separate
instrument, governed by a separate body of law — transmits a false Form 1099-DIV through
United States mail to the investor and via electronic wire to the Internal Revenue Service. The
Form 1099-DIV is a federal information return required under the Internal Revenue Code, not a
securities filing. The false statement is the mischaracterization of return of capital as taxable
ordinary dividend income — a false statement about tax classification on a tax document,
triggering tax obligations on income the investor never earned. Each false Form 1099-DIV is an
independent act of mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343), and hundreds
of millions are filed annually. These predicate acts establish the pattern of racketeering activity
under the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. §§ 1961–1968).

34

The antitrust violations are structural and ongoing: an industry controlling more than $30
trillion in assets has coordinated to suppress corrective technology that has existed since the 1970s,
refused to license solutions that would eliminate the false reporting, and maintained inflated net
asset values on which advisory fees are calculated — because accurate accounting would reduce
the assets on which every participant bills.
Different instruments. Different agencies. Different victims. Different injuries. Different
statutes. Different penalties. Each standing independently. Each documented independently. Each
filed independently. The Commission's decision on this Petition will not affect the pendency or
outcome of the other three submissions, but the other three submissions ensure that the conduct
documented in this Petition will be examined by federal authorities, whether or not the
Commission acts.
Petitioner asserts all rights and protections afforded under federal whistleblower statutes.
Any attempt to impede, intimidate, or retaliate against Petitioner for this Petition or related speech
— whether by the industry, by counsel, or by any other party — violates federal law, including
Exchange Act § 21F(h)(1)(A), Rule 21F-17, Sarbanes-Oxley § 806 (18 U.S.C. § 1514A), and 26
U.S.C. § 7623(d). Petitioner will refer any such conduct to the appropriate enforcement authorities.
D. Fact Witness Who Exposed the Problem to Every Relevant Stakeholder
Petitioner is a fact witness with direct, first-hand knowledge of the events,
communications, and industry practices documented in this Petition. This is not speculation,
hearsay, or secondhand reporting. It is testimony from someone who identified the problem, spent
nearly eight years alerting every relevant stakeholder, and meticulously documented both the
responses and the silence.
Engagement with the Securities and Exchange Commission. Petitioner has met
personally with three SEC Commissioners regarding this matter: Chairman Paul Atkins,
Commissioner Hester Peirce—both currently serving—and former Commissioner Allison Herren
Lee. Petitioner has also met with the SEC's FinHub group, with the Commission's Office of the
Chief Accountant, and with counsel to individual Commissioners and senior advisors to the Chair.
In these meetings, the materially false and misleading disclosures at issue were discussed at length
and in detail. This list is not exhaustive.

35

In total, Petitioner estimates he has interacted with approximately fifty SEC staff members
across multiple divisions over the past six years. He provided every document the Commission
requested. He answered every question posed. When Commissioners asked Petitioner to develop
a comprehensive action plan to remediate the harm and protect investors, he did so—and
transmitted that plan to SEC Commissioners and staff in 2022. The Commission did not merely
receive a complaint; it actively shaped the remediation proposal it was given.
Throughout these interactions — spanning years, dozens of meetings, and hundreds of
pages of documentation — not a single Commissioner or staff member challenged the factual
accuracy of Petitioner's analysis, disputed the mathematical formulas demonstrating investor harm,
or contested the premise that current disclosures are materially incomplete. That record speaks for
itself.
Engagement with the financial services industry. In parallel, Petitioner engaged
exhaustively with the private sector. He met with executives at firms controlling over $30 trillion
in assets under management. He presented to self-regulatory organizations, fund administrators,
transfer agents, auditors, custodians, compliance consultancies, and securities law firms. He
transmitted formal fraud and compliance notices to 15,266 chief compliance officers—every CCO
registered in the SEC's Form ADV database. He offered practical tools, demonstrated working
technology, and provided a clear, low-cost path to remediation.
The industry's response was uniform: acknowledgment of the problem, followed by a
deliberate refusal to act. Executives admitted the harm was real. They conceded the fix was
feasible. And they declined to implement it — because, as one candidly explained, "investment
managers bill on the inflated NAV."
The documented record. Petitioner preserved this engagement meticulously. The record
includes contemporaneous meeting notes, formal correspondence, certified mail receipts, email
delivery confirmations, internal communications, and recorded statements. This documentation is
compiled in Exhibit 1, the Declaration of Jeremy Thomas Roseberry, and the supporting exhibits
referenced therein. The record is available for Commission review, enforcement use, and—where
appropriate—public disclosure.

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E. Sworn Attestation Under Penalty of Perjury
What this Petition alleges will challenge belief. Major financial institutions—fiduciaries
entrusted with Americans' retirement savings—systematically failing to disclose material tax
consequences. An entire industry refusing to correct known deficiencies despite years of formal
notice. Investors losing tens of billions of dollars annually while every gatekeeper stands down.
Regulators receiving detailed warnings but taking no public action. These allegations invite
skepticism. They should.
To overcome that skepticism, Petitioner submits Exhibit 1: a comprehensive declaration
under penalty of perjury pursuant to 28 U.S.C. § 1746. The declaration attests to eight years of
events, identifies individuals and institutions by name, and documents the breadth of fiduciary
failure across the nation's largest financial firms. It provides dates, documents, communications,
and specific facts—not characterizations, but evidence.
The declaration is offered not as advocacy but as proof. It is subject to the penalties of
perjury—up to five years' imprisonment under 18 U.S.C. § 1621—and to the full scrutiny of the
Commission's investigative authority. Petitioner submits it precisely because the facts are as stated
and because the Commission and the investing public are entitled to a record they can rely upon.
F. Standing to Seek These Remedies
Petitioner has standing to petition for rulemaking and related agency action under the
Administrative Procedure Act. The constitutional and statutory requirements are satisfied:
Concrete injury. Petitioner has paid measurable taxes on amounts that were, in economic
substance, return of his own capital—not income. The dollars left his account. The harm is not
hypothetical.
Particularization. Petitioner experienced this injury personally, in his own investment
accounts, with his own money. He is not asserting a generalized grievance on behalf of the public
at large; he is among the injured.
Traceability. The injury is directly traceable to the challenged conduct: materially
misleading prospectuses that omit the data investors need to assess their exposure and make
informed decisions.

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Redressability. The requested relief—interpretive guidance clarifying disclosure
obligations and rulemaking requiring point-of-sale transparency—would prevent the injury by
enabling investors to see their exposure before committing capital.
Beyond Article III standing, Petitioner possesses the equitable interest that every investor
holds: the right to receive truthful, complete information about securities offered for sale. That
right is the foundation of the disclosure regime Congress enacted in 1933. This Petition seeks to
vindicate it—not for Petitioner alone, but for every American who invests while relying on
prospectuses that do not tell the whole truth.
G. Public Interest, Not Private Advantage
Although Petitioner has a direct interest as an injured investor and market participant, the
relief requested is

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Adfa57ed108fa6527. Public record. Not legal advice.