In the Matter of Sarkauskas & Associates, Inc. and James M. Sarkauskas
Recently, the Securities and Exchange Commission issued a settled Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Section 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (Order) against Sarkauskas & Associates, Inc. (the Adviser) and James M. Sarkauskas (Sarkauskas).
The Order finds that the Adviser, a Wisconsin-based investment adviser, and its principal, Sarkauskas, violated Sections 206(1) and (2) of the Advisers Act when they purchased unit investment trust (UIT) units bearing transactional sales charges in their clients’ accounts without disclosing that identical no-load UIT units sold at net asset value with no transactional sales charges were available for purchase, and that the Adviser’s purchases of the units bearing transactional sales charges substantially increased the Respondents’ compensation, thereby creating a conflict of interest. The Order further finds that between August 2009 and August 2012, the Adviser, through Sarkauskas, collected $331,433.98 in such sales charges in addition to the Adviser’s asset management fees.
Without admitting or denying the Commission’s findings, the Adviser consented to the entry of an Order: (1) requiring the Adviser to cease and desist from committing or causing violations of Sections 206(1) and 206(2) of the Advisers Act; (2) ordering the Adviser to pay disgorgement of $331,433.98 and prejudgment interest of $18,403.22, for a total of $349,837.20, plus post Order interest, jointly and severally with Sarkauskas; and (3) requiring the Adviser to comply with its undertaking to cease operations and wind down its business within 90 days of the entry of the Order. Additionally, without admitting or denying the Commission’s findings, Sarkauskas consented to the entry of an Order: (1) requiring him to cease and desist from committing or causing violations of Sections 206(1) and 206(2) of the Advisers Act; (2) ordering him to pay disgorgement of $331,433.98 and prejudgment interest of $18,403.22, for a total of $349,837.20, jointly and severally with the Adviser, plus a $100,000 civil penalty; and (3) barring him from association with a broker, dealer, investment adviser, municipal securities dealer, transfer agent, municipal advisor, or nationally recognized statistical rating organization, or from participating in an offering of penny stock, and prohibiting him from acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser or depositor or principal underwriter. The Order creates a Fair Fund for the disgorgement, interest and civil penalty, which shall be paid pursuant to a one year payment plan.
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