The Rockies Fund, Inc., Stephen G. Calandrella, Charles M. Powell, Clifford C. Thygesen, John C. Power

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 48590 / October 2, 2003

INVESTMENT COMPANY ACT OF 1940
Rel. No. 26202 / October 2, 2003

Admin. Proc. File No. 3-9615

In the Matter of THE ROCKIES FUND, INC., STEPHEN G. CALANDRELLA, CHARLES M. POWELL, CLIFFORD C. THYGESEN, and JOHN C. POWER and TERESSA L. CAWLEY

ORDER IMPOSING SANCTIONS

On the basis of the Commission's opinion issued this day, it is

ORDERED that Stephen G. Calandrella be, and he hereby is, barred from serving or acting as an employee, office, 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, depositor, or principal underwriter; and it is further

ORDERED that Charles M. Powell and Clifford C. Thygesen are barred from serving or 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, depositor, or principal underwriter, subject to a right to reapply after three years; and it is further

ORDERED that The Rockies Fund, Inc. cease and desist from committing or being a cause of any violations or future violations of Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, and 13a-13; and it is further

ORDERED that Stephen G. Calandrella cease and desist from committing or being a cause of any violations or future violations of Section 10(b) of the Exchange Act and Rule 10b-5, and of Section 57(k)(1) of the Investment Company Act of 1940; and from being a cause of any violations or future violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13; and it is further

ORDERED that Charles M. Powell and Clifford C. Thygesen cease and desist from committing or being a cause of any violations orfuture violations of Section 10(b) of the Exchange Act and Rule 10b-5; and from being a cause of any violations or future violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13; and it is further

ORDERED that John C. Power shall cease and desist from committing or being a cause of any violations or future violations of Section 10(b) of the Exchange Act and Rule 10b-5; and it is further

ORDERED that Stephen G. Calandrella is assessed a civil money penalty of $500,000; and it is further

ORDERED that Charles M. Powell and Clifford C. Thygesen each are assessed a civil penalty of $160,000.

Respondents payments of civil money penalties shall be: (i) made by United States postal money order, certified check, bank cashier's check, or bank money order; (ii) made payable to the Securities and Exchange Commission; (iii) mailed or delivered by hand to the Office of Financial Management, Securities and Exchange Commission, 6432 General Green Way, Alexandria, VA 22312 within thirty days of the date of this order; and (iv) submitted under cover letter which identifies Respondents in this proceeding, and the file number of this proceeding. A copy of this cover letter and check shall be sent to Robert M. Fusfeld, Counsel for the Division of Enforcement, Securities and Exchange Commission, Central Regional Office, 1801 California Street, Suite 4800, Denver, Colorado 80202-2648.

By the Commission.

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Endnotes

1 / 15 U.S.C. § 78j(b).

2 / 17 C.F.R. § 240.10b-5.

3 / 15 U.S.C. § 78m(a).

4 / 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-3.

5 / 17 C.F.R. § 210.

6 / 15 U.S.C. § 80a-56(k)(1).

7 / 15 U.S.C. § 80a-2(a)(48). The Rockies Fund withdrew this election in December 1999.

8 / When the discussions concerning the acquisition of Impostors began, Premier was named Silver State Casinos, Inc. The company changed its name to Premier Concepts, Inc. on February 21, 1994.

Silver State Casinos, Inc. had operated real estate and gaming businesses. Before acquiring Impostors, the company abandoned these activities. Thus, after March 1994, Premier was involved solely in the retail jewelry business.

9 / The record indicates that Premier sought information about acquiring a listing on The Nasdaq SmallCap Market in late 1993. At that time, the Nasdaq SmallCap Market required total stockholder equity of $2 million. Premier finally met the requirements to obtain a listing on Nasdaq in April 1997.

10 / The trades occurred as follows:

Date	Customer	Acct At	Buy/Sell	# of Shares	Price
6/10	R. Butchard	McDermid	S	50,000	1.100
6/15	N. Katz	Hanifen	B	25,000	1.125
6/15	Power Curve	McDermid	B	25,000	1.125
6/17	R. Butchard	McDermid	S	25,000	1.000
6/17	Huebner	Hanifen	B	8,000	1.000
6/17	Brian Power	Hanifen	B	7,000	1.03125
6/17	Neon Rainbow	McDermid	B	10,000	1.03125
6/21	R. Butchard	McDermid	S	50,000	1.000
6/22	Barr	McDermid	B	1,000	1.010
6/22	K. Phillips	McDermid	B	19,000	1.010
6/22	B. Butchard	McDermid	B	30,000	1.010
6/29	B. Butchard	McDermid	S	20,000	1.250
6/29	K. Phillips	McDermid	S	17,000	1.250
6/29	Gecko Holdings	McDermid	B	35,000	1.250
6/29	J. Crone	McDermid	B	1,000	1.250
6/29	M. Butchard	McDermid	B	1,000	1.250
6/23	B. Butchard	McDermid	S	25,000	1.040
6/23	Redwood	Hanifen	B	25,000	1.050
6/28	R. Butchard	McDermid	S	10,000	1.250
6/30	N. Katz	Hanifen	B	10,000	1.250
8/9	R. Butchard	McDermid	S	10,000	1.500
8/19	N. Katz	Hanifen	B	10,500	1.53125
8/23	R. Butchard	McDermid	S	10,000	1.750
8/30	A. Nacht	Cohig	B	10,000	1.78125

There is no evidence, and the Division does not argue, that the June 17 trade of Richard Huebner, a compliance officer at Hanifen, was part of the manipulative scheme.

11 / The record does not make clear if the orders were actually placed as limit orders.

12 / The trades occurred as follows:

Date	Customer	Acct At	Buy/ Sell	Buyer/ Seller	# of Shares	Price
7/6	B. Power	Hanifen	S	Hanifen	5,000	1.4375
7/8	Power Curve	McDermid	S	Hanifen	14,000	1.5000
7/8	J. Power	Hanifen	B	Hanifen	19,000	1.5150
7/25	J. Power	Hanifen	S	McDermid	17,000	1.5000
7/25	Power Curve	McDermid	B	McDermid	17,000	1.5000
8/17	Power Curve	McDermid	S	Hanifen	14,000	1.7500
8/17	B. Power	Hanifen	B	Hanifen	14,000	1.7500
8/25	B. Power	Hanifen	S	McDermid	14,500	1.7500
8/25	J. Power	McDermid	B	McDermid	14,500	1.7500
9/19	B. Power	Hanifen	S	Hanifen	1,500	1.87500
9/19	Power Curve	McDermid	B	Hanifen	1,500	2.00000
10/21	J. Power	McDermid	S	Hanifen	4,250	2.50000
10/21	J. Power IRA	YDSA	B	Hanifen	2,500	2.56250
10/21	A. Power	Hanifen	B	Hanifen	1,750	2.50000

13 / See Swartwood, Hesse, Inc., 50 S.E.C. 1301, 1307 n. 14 (1992) (and cases cited therein). Specifically, the manipulative conduct proscribed by Section 9 of the Exchange Act, 15 U.S.C. § 78i, pertaining to securities registered on a national securities exchange, is deemed to be prohibited by Section 10 and Rule 10b-5 thereunder. Id.

14 / Edward J. Mawod & Co., 46 S.E.C. 865, 869 (1977), aff'd 591 F.2d 588 (10th Cir. 1979) (defining matched order as "one placed with the knowledge that an offsetting order on the other side has already been or is about to be placed"). See also Exchange Act Section 9 (describing a matched order as the entering of an order for the purchase of a security with the knowledge that an order of substantially the same size, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties).

15 / Ernst & Ernst v. Hochfelder, 425 U.S. 185, 205 n. 25 (1976) (defining wash sales as "transactions involving no change in beneficial ownership"). Similarly, Exchange Act Section 9 prohibits, for the purpose of creating a false or misleading appearance of active trading in a security or of the market for a security, any person from effecting a transaction in such a security which involves no change in the beneficial ownership thereof.

16 / Exchange Act Section 9(a)(1).

17 / See United States v. Charnay, 537 F.2d 341, 350 (9th Cir. 1976). J. Power's contention that the Division must prove a manipulative purpose to increase the price of Premier to find a violation under Section 10(b) and Rule 10b-5 is incorrect.

Junius Peake, Respondents' expert witness, asserted that market manipulation is evidenced when: (1) one or more insiders promote the sale of their own securities to public investors at overvalued prices or when insiders sell their securities at higher prices unrelated to those obtained in the open market; and (2) such promotion is accompanied by written or oral communications. Because these factors were not present here, Peake concluded that no manipulation occurred.

There is nothing in the relevant case law to support Peake's narrow definition of manipulation. In fact, on cross examination, Peake stated that he was not a lawyer and was not "responding to the legal definition of insider trading." He demonstrated a lack of familiarity with several landmark Commission cases addressing manipulation and disagreed with the statutory definition of wash sales in Exchange Act Section 9. He offered no facts to substantiate his conclusions. As a whole, his testimony was unpersuasive.

18 / Mawod, 46 S.E.C. at 871 ("The evil sought to be remedied is not victimization but deception. When investors and prospective investors see activity, they are entitled to assume that it is real activity.").

19 / Hochfelder, 425 U.S. at 193 n.12.

20 / SEC. v. U.S. Envtl., Inc., 155 F.3d 107 (2d Cir. 1998) (finding allegation of reckless participation in a market manipulation sufficient to state a claim of violation of 10(b)).

21 / Sunstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1045 (7th Cir. 1977) (quoting Franke v. Midwestern Okla. Dev. Auth., 428 F. Supp. 719, 725 (W.D. Okl. 1976)). SEC v. Ogle, 2000 WL 45260, at *7 (N.D.Ill. 2000) cited by Respondents for the proposition that "[r]ecklessness is not sufficient to state a market manipulation claim; unintentional false representations are not actionable," is inconsistent with this longstanding Seventh Circuit precedent.

22 / Peake conceded that the trades at issue here were matched orders although he used the term "crossed order," but did not concede that they were part of a manipulative scheme. We agree with his factual analysis, but disagree with the legal conclusion based on these facts.

23 /Pagel, Inc., 48 S.E.C. 223, 226 (1985), aff'd 803 F.2d 942 (8th Cir. 1986).

24 / Castle Sec. Corp., 53 S.E.C. 406, 410 (1998); Dlugash v. SEC, 373 F.2d 107, 109 (2d Cir. 1967) (finding that "rapidly rising prices in absence of any demand are well-known symptoms of" manipulation).

Cf. Swartwood,50 S.E.C. at 1307 (finding manipulation even though hallmarks of a classic manipulation were absent).

25 / Butchard claims that he sold the stock to his customer accounts at McDermid through Hanifen because Neuman, Premier's counsel, had advised him that he had to sell the shares in a market sale to eliminate the restriction. Neuman was not questioned on this point.

26 / See supra note 17.

27 / 17 C.F.R. § 240.10b-5.

28 / See Basic Inc. v. Levinson, 485 U.S. 224, 231 (1988) (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).

29 / See discussion of requisite mental state, supra notes 19-21 and accompanying text.

30 / The Fund's Form 10-Q for the period ending September 30, 1995 correctly classified the Fund's Premier holdings as restricted in the Schedule of Investments portion of the Form 10-Q, but in another section of the Form, the Notes to the Financial Statements, the Rockies Respondents continued to describe the Premier shares as unrestricted. The Form 10-K for the year ended December 31, 1995 finally classified the Premier shares correctly as restricted throughout the Form.

31 / See Financial Accounting Standards Board Concept Doc. No. 2 ¶ 128(c) (1980).

32 / Respondents contend that the misclassification of the Premier shares was not material since the market price of Premier reported in the Fund's Forms 10-Q and 10-K incorporated an "illiquidity discount." We discuss the impact of the misclassification on valuation infra. Respondents ignore the impact on the financial statements of falsely informing investors that shares are freely tradeable.

33 / The Premier holdings at issue constituted between 10 and 40% of the Fund's portfolio for each periodic report.

34 / See Restricted Securities, Accounting Series Rel. No. 113, at 4 (Oct. 21, 1969) ("ASR-113").

35 / Demand registration rights typically obligate an issuer to file a registration statement with the Commission and to use its best efforts to have the statement declared effective. See Kers & Co. v. ATC Communications Group, Inc., 9 F. Supp. 2d 1267, 1269 (D. Kan. 1998).

36 / We note that the Forms 10-Q and 10-K that were filed after the misclassification error was corrected describe the reported value of Premier securities as the "quoted market price." We believe this reflects continued indifference to the distinction between restricted and unrestricted securities.

37 / This language is drawn from the statutory definition of value in Investment Company Act Section 2(a)(41), 15 U.S.C. § 80a-2(a)(41).

38 / This language is drawn from Accounting for Investment Securities by Registered Investment Companies, Accounting Series Rel. No. 118 ("ASR-118"). The AICPA Audit and Accounting Guide: Audits of Investment Companies, (hereinafter"AAG"), is the source for GAAP regarding investment companies. The AAG references ASR-113 and ASR-118 as GAAP for valuation of securities for which market quotations are not readily available. AAG § 2.33.

39 / The prospectus did not specify whether the bid to be used consists of a high, low, mean, closing, or some other possible bid price for the security to be valued. However, a Valuation Policy adopted by the Board clarified that the lowest bid price should be used.

40 / This language is also consistent with ASR-113, which notes that the restriction on sale in the public market makes restricted securities less valuable than their unrestricted counterparts and also that the price of unrestricted securities reflects the cost to the issuer of registration. ASR-113 concludes that "[c]onsequently, the valuation of restricted securities at the market quotations for unrestricted securities of the same class would, except for the most unusual situations, be improper."

41 / All of the reports provided value based on the last trading day of the reporting period.

	Low Bid	High Bid	Reported Value	Ask
6/30/94	1.250	1.375	1.500	1.750
9/30/94	1.875		1.875	2.375
12/30/94	2.000	2.250	2.250	2.750
3/31/95	1.000		1.500	2.000
6/30/95	1.000		1.500	2.000
9/29/95	.250	.750	.875	1.250
12/29/95	.250	.375	.630	1.625

 

42 / ASR-118 provides that, in determining market price, an issuer can elect to use either the bid, or some calculation between the bid and the ask, as long as the methodology is consistent.

43 / This trend continued throughout 1995, as well.

44 / The only contemporaneous evidence in the record regarding the Fund's valuation of portfolio securities are the Rockies Fund Board's Consent Resolutions in which the Board "ratified, adopted and approved" the portfolio valuations, provided by Calandrella, to be included in the quarterly and annual filings. The Consent Resolutions contained an "Exhibit A" which listed each portfolio security and provided one or two sentences stating the security's value, often explaining the value as the "quoted market price." The Consent Resolutions did not reference the valuation policies. Moreover, neither the Consent Resolutions nor the Board Minutes reveal any discussions the independent directors may have had with Calandrella regarding the valuations he presented. The law judge credited the testimony of a Commission examiner who said that during a March 1994 examination Calandrella stated that the Board generally approved the valuations he submitted to them with very little discussion.

45 / This conclusion holds true even after the misclassification of Premier as unrestricted was corrected, and the term "quoted market price" was not used in the Forms 10-Q and 10-K, since the only record evidence suggests that there was no change in valuation methodology at this point.

46 / ASR-113 states that "extraordinary circumstances" may provide an exception to this requirement. Respondents argue that Premier's thinly traded market constituted such an extraordinary circumstance. We disagree. Many companies have thinly traded markets, especially in the over-the-counter market.

47 / ASR-118 at 5.

48 / Robert F. Lynch, 46 S.E.C. 5 (1975) (finding the valuation of restricted securities at the price of free trading securities to be fraudulent). Moreover, even the market price for Premier was artificially inflated for much of the period at issue due to Calandrella's manipulative conduct. Thygessen and Powell, who were not charged with liability for the manipulation, bear no responsibility for the extent to which Premier was overvalued due to that scheme. As discussed in the text, however, Premier was substantially overvalued even assuming the market prices were valid.

49 / Graham v. SEC, 222 F.3d 994, 1001 n.15 (D.C. Cir. 2000); Schellenbach v. SEC, 989 F.2d 907, 913 (7th Cir. 1993); SEC v. Blavin, 760 F.2d 706, 711 (6th Cir. 1985).

50 / We note, furthermore, that Calandrella knew that the market price for Premier that he submitted to his fellow Board members was an artificial price because of the manipulative scheme engaged in by Calandrella and J. Power.

51 / We recently disciplined Wallace pursuant to our Rule of Practice 102(e), 17 C.F.R. § 201.102(e), finding that he recklessly violated Generally Accepted Auditing Standards in his 1994 and 1995 audits of the Fund. Carroll A. Wallace, Exchange Act Rel. No. 48372 (Aug. 20, 2003), __ SEC Docket ___.

52 / Because we do not find the testimony of Wallace and Hein to be particularly useful, we need not address the Rockies Respondents' contention that the law judge improperly discounted Hein's testimony because he has a disciplinary history and because he was associated with Premier as its auditor.

53 / Whether ownership of other blocks of Premier shares was reported properly was at issue in the initial proceeding. The law judge's conclusions about the ownership of these otherblocks are no longer contested.

54 / Although J. Power's signature on behalf of Redwood is dated November 11, 1995, the printed date on the first page of the agreement is September 30, 1995.

55 / Although this was the price the Fund paid for its shares, the Fund's reported value of its Premier shares for the third quarter of 1995 was $0.875. Thus, the effect of the purchase was to transform a $50,000 cash asset (the total purchase price of the 200,000 shares) to a $175,000 securities asset (the total reported value of those shares).

56 / ASR-118 provides further guidance for unrestricted securities purchased or sold other than through a broker-dealer, stating that the date an investment company obtains an enforceable right to demand securities is "difficult to determine" and suggesting that, in instances where a question may arise about the propriety of an ownership claim, an investment companyshould obtain a legal opinion to be made available to the company's independent accountant. The Rockies Fund did not secure such an opinion.

57 / Colo. Rev. Stat. § 4-8-319, repealed by Laws 1996, S.B. 96-132 § 2, effective July 1, 1996.

58 / Thus, arguably, an oral agreement meeting the requirements of then-existing Colo. Rev. Stat. § 4-8-319 would fall within the narrow exception contemplated by ASR-113 for oral agreements to purchase securities sanctioned under state law. On appeal, the Fund and Calandrella argue that the law judge erred by ignoring the testimony of J. Power and Neuman that an oral agreement existed. The law judge did, in fact, find that no oral agreement existed on the grounds that the only evidence to support it was Calandrella's "self-serving" testimony.

59 / 15 U.S.C. § 78m(a).

60 / 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-3.

61 / See SEC v. IMC Int'l Inc., 384 F. Supp. 889, 893 (N.D. Tex. 1974), aff'd, 505 F.2d 733 (5th Cir. 1974) (Table, No. 74-1170).

62 / 17 C.F.R. § 210.

63 / Liability for aiding and abetting a violation requires that a principal committed a primary violation, that the aider and abettor provided substantial assistance to the primary violator, and that the aider and abettor rendered such assistance knowingly or recklessly. See Graham v. SEC, 222 F.3d 994, 1000 (D.C. 2000). Thygesen and Powell were not charged with aiding and abetting the misstatements concerning the ownership of the 200,000 shares of Premier in the September 30, 1995 Form 10-Q; our finding that they aided and abetted Premier's violations does not encompass that particular misstatement.

64 / Sharon M. Graham, 53 S.E.C. 1072, 1085 n.35 (1998), aff'd, 222 F.3d 994 (D.C. Cir. 2000).

65 / Stanz's 85,000 shares were derived from: (1) half of the 35,000 (17,500) shares Mirage had acquired in the 1994 Private Placement (which Stanz received as half owner of Mirage); and (2) half of the 135,000 (67,500) shares Premier had agreed to pay Mirage to acquire Mirage. Because Premier ultimately paid only 100,000 Premier shares to acquire Mirage, Stanz had merely 50,000 shares to sell. Power Curve and Calandrella gave a total of 17,500 shares to the Fund to make up the difference.

66 / The Fund made payment for the shares by checks dated October 4, 1994, and December 19, 1994.

67 / The settlement agreement was signed by Calandrella, for the Rockies Fund and for himself individually, by Greenberg, for Premier, by J. Power, for Redwood and for himself individually, and by Stanz, for himself.

68 / 15 U.S.C. § 80a-56(k)(1).

69 / Cf. Goldberg v. Meridor, 567 F.2d 209, 219 (2d Cir. 1977) (finding that the complaint sufficiently stated a Section 10(b) claim where a member of management did not disclose a conflict of interest in a corporate decision); Monetta Financial Services, Inc., Securities Exchange Act Rel. No. 48001 (June 9, 2003), 80 SEC Docket 1437, 1448, appeal pending, No. 03-3073 (7th Cir.) (explaining that where a conflict of interest exists which could compromise the judgment of an independent director, the conflict initially should be disclosed and approved by theother independent directors).

70 / Calandrella insists that the execution of the release was at the behest of Stanz, who initially requested the release, and Neuman, who recommended releases as a general practice. Calandrella argues that Neuman's knowledge of the agreement, and Neuman's obligation to "look out for the Fund's interests" satisfied the need for independent review of the transaction. Section 57(k)(1) prohibits the receipt of compensation regardless of whether counsel or anyone else independently reviewed the transaction for which compensation was received. For purposes of the Rule 10b-5 violation, the issue is disclosure to the Fund's independent board members. Nothing in the record suggests that Calandrella had a basis for believing that Neuman, or anyone else, told Thygesen and Powell about the litigation release Calandrella received in exchange for the Fund's purchase of the shares.

71 / This interview was conducted pursuant to a Memorandum of Understanding between the Commission and the British Columbia Securities Commission.

72 / Harry Gliksman, Exchange Act Rel. No. 41628 (Dec. 20, 1999), 71 SEC Docket 892, 901, aff'd, 24 Fed. Appx. 702 (9th Cir. 2001).

73 / Charles D. Tom, 50 S.E.C. 1142, 1145 (1992).

74 / Respondents argue that Katz's transcript is not reliable because of the animus which existed between Calandrella and Katz. Calandrella, however, corroborated all of the significant relevant statements made by Katz.

75 / We also reject Respondents' contention that they were wrongly denied the introduction of evidence regarding how other BDCs value their portolio holdings. The practice of other BDCs is not helpful in addressing the issue of the accuracy of Respondents' valuations. See Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 274 (3d Cir. 1998) (finding that universal industry practices may be fraudulent).

76 / Respondents also complain that the law judge did not weigh the evidence in the record correctly, that she placed too much importance on the deposition transcripts of Katz and Butchard, and that she did not adequately articulate how she evaluated all of this evidence to arrive at her legal conclusions. We conduct a de novo review of the record and make our own findings of fact. Keith Springer, Exchange Act Rel. No. 45944 (May 16, 2002), 77 SEC Docket 2087, 2089 n.4; Kenneth C. Krull, 53 S.E.C. 1101, 1109 (1998), aff'd, 248 F.3d 907 (9th Cir. 2001).

77 / Keith Springer, Exchange Act Rel. No. 45439 (Feb. 13, 2002), 76 SEC Docket 2726, 2734-35.

78 / United States v. Hook, 195 F.3d 299, 306 (7th Cir. 1999), citation omitted.

79 / William H. Gerhauser, Sr., 53 S.E.C. 933, 940 (1998) (quoting Variable Inv. Corp., 46 S.E.C. 1352, 1354 n. 6 (1978)).

80 / Patricia H. Smith, 52 S.E.C. 346, 348 (1995). See also Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 187 (1973).

81 / KPMG Peat Marwick LLP, Exchange Act Rel. No. 43862 (Jan. 19, 2001), 74 SEC Docket 384, 436, reh'g denied, Exchange Act Rel. No. 44050 (Mar. 8, 2001), 74 SEC Docket 1351, petition denied, 289 F.3d 109 (D.C. Cir. 2002).

82 / A valid defense of reliance on counsel must be predicated on a showing of the four elements: (i) a request for advice on the legality of a proposed action; (ii) full disclosure of the relevant facts; (iii) receipt of advice that the action to be taken will be legal, and (iv) reliance in good faith on counsel's advice. SEC v. Savoy Indus., Inc., 665 F.2d 1310, 1314 n. 28 (D.C. Cir. 1981). Respondents failed to prove any of these elements.

83 / The Division did not seek a civil money penalty against the Fund.

84 / 15 U.S.C. § 80a-9(d).

85 / 15 U.S.C. § 80a-9(d)(2).

86 / We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed in this opinion.