Securities and Exchange Commission v. Timothy J. Roth, et al., Civil Action No. 11-cv-02079 (C.D. Ill.)

The Securities and Exchange Commission recently announced that on March 21, 2013, the Honorable Michael M. Mihm of the United States District Court for the Central District of Illinois entered a judgment against Timothy J. Roth (“Roth”), a former investment adviser who misappropriated millions of dollars from the accounts of his advisory clients. The judgment permanently enjoins Roth from violating the antifraud provisions of the federal securities laws. Roth consented to the judgment. In addition, the Court entered an order granting the Commission’s motion to dismiss its monetary claims against Roth based on Roth’s conviction in a parallel criminal proceeding that included an order requiring him to pay restitution of over $16 million to his victims.

The SEC filed an emergency against Roth on March 21, 2011. On that same day, the Court issued an order freezing Roth’s assets and those of several companies he controlled. On March 31, 2013, the Court appointed a Receiver over Roth’s assets and those of the companies he controlled. The SEC’s complaint alleged that Roth worked for Comprehensive Capital Management, Inc. (“Comprehensive”), a New Jersey-based registered investment adviser. The SEC’s complaint alleged that from October 2010 through February 2011, Roth stole more than $6 million worth of mutual fund shares from several deferred compensation plans (“Plans”) for whom he provided investment advice. Roth’s theft of client assets was later determined to have been over $16 million. The SEC alleged that Roth, who worked out of Comprehensive’s office near Urbana, Illinois, secretly caused his victims’ mutual fund shares to be transferred to an account under his control, even though no such transfer had been requested or authorized by the clients. The SEC alleges that after selling the clients’ shares, Roth funneled the cash proceeds to various accounts and companies under his control or for his benefit. According to the SEC’s complaint, at the time he was engaging in his scheme, Roth did not tell the clients about the transfers. As a result of his conduct, the SEC’s complaint charged Roth with violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and with aiding and abetting violations of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-2 thereunder.

In a parallel criminal proceeding arising out of the same facts that were the subject of the SEC’s civil action against him, Roth pled guilty in October 2011 to one count of mail fraud and one count of money laundering. On January 31, 2013, Roth was sentenced to 151 months of incarceration and was ordered to pay $16,151,964 in restitution to his victims.

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