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Relief From "Collateral Bar" Granted; Other Relief Denied

John Gardner Black, Devon Capital Management, IA Rel. 3015, April 13, 2010

In 1998 Black was barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company. Devon Capital's adviser registration was revoked. In 1997 Black and Devon settled a civil action by consenting to injunctive relief. That matter involved allegations of fraud in connection with municipal bond proceeds invested by Pennsylvania school districts. Black consented to pay disgorgement of $3..6 million and a $500,000 penalty. In 1998 Black and Devon consented to the administrative sanctions at issue here. In 2000 Black pled guilty to criminal fraud charges arising from the same conduct. He was sentenced to forty-one months imprisonment and ordered to pay $61.3 million in restitution.

Black argued that the valuation methods he used for the securities at issue are no longer deemed improper. In rejecting Black's request for relief the Commission noted that there is a strong public interest in the finality of its settlement orders. The Commission will consider modification of bars and revocations only in the most compelling situations. It found that Black had made out no such case here.

The Commission did modify Black's sanctions to remove the "collateral" bars applied to his bar from association with any broker, dealer, or municipal securities dealer. It did this because since the original case against Black, the Commission has taken the view that it does not have the statutory authority to sanction persons for conduct unless they were actually functioning in that capacity. Thus, as in this case, an adviser may only be sanctioned under the advisers act unless he actually was functioning in another capacity such as a broker or dealer at the time of his violations. See, Victer Teicher v. SEC, 177 F.3d 1016 (D.C. Cir. 1999).