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Federal regulators have ordered cease-and-desist proceedings against a Utah investment advisory company and two residents for various alleged violations of securities laws, including recommending clients buy shares in a company without disclosing the two men controlled a majority of its shares.
The Securities and Exchange Commission issued the order against Belsen Getty of Bountiful, a registered investment advisory firm, and Terry M. Deru and Andrew W. Limpert.
Deru, 56, Layton, is managing member of Belsen Getty, which handled some 950 client accounts with about $65 million in assets. Limpert, 41, Sandy, is former member and owner of Belsen Getty and chairman of the board of another company called Nine Mile Software Inc. that was involved in the alleged violations.
According to the order, issued Tuesday, Limpert and Deru, and Deru's son, Damon, formed Nine Mile in 2006 to develop and market software for the financial and brokerage industry. Damon Deru was CEO of the company located in Layton.
Nine Mile began an initial public offering of its shares in November of 2007. Terry Deru and Limpert recommended Nine Mile shares to Belsen Getty clients, failing to disclose that they controlled 92 percent of the outstanding nonrestricted shares, the order said.
In addition, Terry Deru ordered that Belsen Getty accounts be used to buy and sell Nine Mile shares without informing clients of risks or conflicts of interest, the SEC order states.
"By placing these orders on both sides of the transactions, Belsen Getty, through Deru, was able to artificially set the price higher than the $0.70 IPO price and create the artificial appearance of trading volume and investor interest," the agency said.
The SEC ordered a public hearing on the alleged violations 30 to 60 days from the date of the order.
Mark Pugsley, a Salt Lake City attorney representing Belsen Getty, Terry Deru and Limpert, said SEC's action meant only that it had began a process to examine the allegations.
"The SEC initiated proceedings only, the case is just starting and the company intends to vigorously defend the case," Pugsley said in an email "There are no findings and no order."
The SEC order also alleges other violations:
• Terry Deru hired his son, who had only a high school education, to manage a company called Axxess Funding Group after telling investors who put $3 million into it that he, Limpert and Damon Deru would run it. Terry Deru also arranged for the son to receive fees of close to $300,000 for the work and also used investor funds to loan himself up to $500,000, the agency said.
• In recommending an investment, Terry Deru falsely told a Belsen Getty client that a company called Vermillion Holdings owned a gold mine in Mexico when another Mexican company owned by Deru actually owned the mine.
• Terry Deru recommended Belsen Getty buy shares in a company called ProFire without disclosing he had arbitrarily set the price of the shares or that the client could have purchased other shares on the open market possibly at a lower price.
• Terry Deru recommended or purchased shares in risky investments for clients in their 60s and 70s, despite them saying they wanted only conservative investing.
• Terry Deru and Limpert failed to properly fill out required SEC forms, including conflict of interest disclosures, and failed to have or enforce insider-trading policies.
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