Terry's Tips - Busted

Discussion in 'Options' started by theta636, Jun 15, 2006.

  1. theta636


    Litigation Release No. 19725 / June 13, 2006
    SEC v. Terry's Tips and Terry F. Allen, (United States District Court for the District of Vermont, Docket No. 2:05-CV-188)
    SEC and the State of Vermont Simultaneously Settle Proceedings Against Terry's Tips, Inc. and Terry F. Allen Involving Autotrading Programs
    The Honorable William K. Sessions, III, United States District Judge for the District of Vermont, has entered final judgments against Terry F. Allen (Allen) and Terry's Tips, Inc. (Terry's Tips) in the Commission's pending civil action. Terry's Tips and Allen were permanently enjoined from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Allen was also permanently enjoined from aiding and abetting violations of Sections 206(1) and 206(2) of the Investment Advisers Act and ordered to pay disgorgement of $100,000 and a civil penalty of $120,000. The disgorged funds will be returned to investors.

    The Complaint alleged that since mid 2003, Terry's Tips and Allen used false and misleading performance projections to encourage hundreds of subscribers to enroll in an autotrading program that allowed subscribers to designate Terry's Tips to automatically direct trades in the subscriber's personal brokerage account.

    Concurrently with settlement of the Commission's civil action, the State of Vermont, Department of Banking, Insurance, Securities and Health Care Administration entered an Order Imposing Administrative Sanctions and Consent to the Same against Terry F. Allen, Terry's Tips, Inc. and Vermont Option Advisors, LLC. The State of Vermont Order finds that Allen violated the Vermont Securities Act by failing to register as an investment adviser before he began soliciting investors to purchase options trading investment advice from him on the Terry's Tips website. The Department also found that Allen violated the anti-fraud provisions of the Vermont Securities Act by, among other things:

    Using misleading performance projections and testimonials on the Website;
    Failing to inform investors of the risks associated with his investment strategies;
    Failing to disclose the arrangements between Allen /Terry's Tips and the brokers, including the fact that Allen and/or Terry's Tips received substantial monthly payments from the brokers as consideration for Allen's referral of clients to the brokers; and
    Making misrepresentation to investors that his affiliated entity, Vermont Options Advisors, LLC, was registered with the Department as an investment adviser.
    In addition, the State formally denied Allen's application to have Vermont Options Advisors, LLC registered in Vermont as an investment advisor. Allen must tender $10,000 in civil penalties to the State of Vermont and make restitution in the amount of $220,000 as set out in the Final Judgment entered by the Court in SEC v. Terry's Tips et al. In addition, Allen cannot seek registration in Vermont as an investment adviser or investment adviser representative for 36 months.


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  2. nlslax


    I wonder how the penalty compares to the amount he actually took in from fees over that period of time (2003). I'm guessing he is still net ahead.
  3. He obviously looked at his payoff diagram and found he had a good risk/reward graph when he first embarked on his venture, lol. He now has 36 months of vacation time to set up a new business (or maybe just go to another state?).
    daddy's boy
  4. nlslax


    There's one born every minute.
  5. hefft


    Interesting judgment which should get the interest of other state securities officials.

    Thus far, the SEC and states have kept their hands off investment/advisory newsletter services as they don't deliver personalized investment advice (resulting from an '85 Supreme Court ruling).

    If Vermont has succeeded in penalizing Allen for failure to register as an IA for deliverying such services, then all advisories doing business in the state may be required to register.

    If other states follow suit, it could clean up that whole racket.
  6. The SEC keeps its hands off advisory services and newsletters because they are protected as long as the appropriate disclosures are printed.

    However automated services where your brokerage account is linked to the newsletter picks and it is automated is akin to handing your money over to the author to manage and therefore, the SEC finally realized that those set-ups are no different than what occurs between a registered investment advisor and a client. So these automated services should be held to the same standard and those people need to be registered and held to the same standard. It is easier to make that argument than to go after newsletter writers in general.

    The basic argument protecting them is freedom of speech. They are allowed to write about the market and stocks in general but they need the disclaimers that tell the reader that they are not registered reps, it is for educational purposes, please contact a professional, yada yada yada.

    Only time they can nail them is if they start using false return info and Terry seemed to get naile don both counts. False return info and his automated services being held to a registered rep standard. Hopefully this will end all those automated services or at least make them go through the same hoops registered reps go through or the same oversight, better said.

  7. hefft


    Agreed. The '85 ruling was a freedom of speech issue, and auto-trading has brought in a whole new dynamic that the states and SEC have yet to fully weigh in on.
  8. well , its have been only 21 years , give them a chance :)
  9. ginux


    Why is this not allowed while Collective2's autotrading program is allowed?