Investment Advisor Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
Securities and Exchange Commission v. Locke Capital Management, Inc. and Leila C. Jenkins, Civil Action No. 09-CV-100-WES (D.R.I.)
COURT DISMISSES APPEAL OF LEILA C. JENKINS, OWNER OF INVESTMENT ADVISER LOCKE CAPITAL MANAGEMENT, INC.
The Securities and Exchange Commission recently announced that on April 24, 2012, the U.S. Court of Appeals for the First Circuit entered an order dismissing the appeal of Leila C. Jenkins, the principal of Rhode Island-based investment adviser Locke Capital Management. Jenkins had appealed a June 30, 2011 decision by a federal judge in the U.S. District Court for the District of Rhode Island. That decision granted the Commission’s motion for summary judgment and entered final judgments against both Locke and Jenkins. The Court of Appeals dismissed Jenkins’ appeal after she filed a motion to withdraw it.
The Commission’s Complaint against Locke and Jenkins, filed in March 2009, alleged that they invented a billion-dollar client in order to gain credibility and attract legitimate investors. The Complaint further alleged that Jenkins tried to perpetuate her scheme by lying to the Commission staff about the existence of the invented client and furnishing the Commission’s staff with bogus documents in 2008, including fake custodial statements that she created on her laptop. The U.S. District Court ordered that Locke and Jenkins were jointly and severally liable for disgorgement of $1,781,520, representing advisory fees paid to them from 2007-2009, plus prejudgment interest of $110,956. In addition, each defendant was ordered to pay a penalty of $1,781,520. The final judgments permanently enjoined Jenkins and Locke from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940 (Advisers Act”). The final judgment as to Locke also permanently enjoined it from violating Sections 204 and 206(4) of the Advisers Act and Rules 204-2(a)(6), (8), (10), (15), and (16), as wells as 206(4)-1(a)(5) thereunder, and the final judgment as to Jenkins further permanently enjoined her from aiding and abetting violations of the same law sections. The final judgment as to Locke further permanently enjoined it from violating Section 204A of the Advisers Act and Rule 204A-1 thereunder.
In February 2012, in separate administrative proceedings filed by the Commission against Jenkins and Locke, an administrative law judge issued Initial Decisions barring Jenkins from associating with any broker, dealer or investment adviser and barring Locke from acting as an investment adviser. Those Initial Decisions became final in March 2012.