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In the Matter of Account Management Corporation

Investment Advisers Act Release No. 1529 (1995)

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In the Matter of Account Management Corporation

Securities and Exchange Commission
Investment Advisers Act Release No. 1529 (1995)

CS

Facts

From January 1992 through June 1993, Account Management Corporation (AMC), an investment adviser registered with the Securities and Exchange Commission (SEC), purchased, and promptly sold for a profit, shares in 34 so-called hot initial public offerings (IPOs). These were IPOs of stock for which investor demand was so high that sufficient shares were not available to purchase for all eligible accounts. The available shares were allocated among AMC clients at the discretion of AMC’s two principals. Rather than distributing the shares equitably, the principals favored a small group of AMC clients, most of whom were close friends of the principals. The principals did not consider the appropriateness of the investment opportunity for each eligible client, and AMC failed to disclose the factors used by the principals in deciding how to allocate the hot-IPO shares. The SEC brought an administrative proceeding against AMC and its principals for violations of § 206(2) of the Investment Advisers Act of 1940 (Advisers Act).

Rule of Law

Issue

Holding and Reasoning ()

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