UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No.: 7446 / September 4, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No.: 39015 / September 4, 1997 INVESTMENT ADVISERS ACT OF 1940 Release No.: 1658 / September 4, 1997 INVESTMENT COMPANY ACT OF 1940 Release No.: 22809 / September 4, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9390 ________________________ ) ORDER INSTITUTING PUBLIC In the Matter of ) ADMINISTRATIVE AND CEASE-AND- WILLY KERZINGER, D/B/A ) DESIST PROCEEDINGS, MAKING COMMODITY POOL SERVICE ) FINDINGS AND IMPOSING SANCTIONS ) PURSUANT TO SECTION 8A OF THE ) SECURITIES ACT OF 1933, SECTION 21C Respondent. ) OF THE SECURITIES EXCHANGE ACT OF ) 1934, SECTIONS 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. I. The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest to institute public administrative and cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 (Securities Act), Section 21C of the Securities Exchange Act of 1934 (Exchange Act), Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 (Advisers Act), and Section 9(b) of the Investment Company Act of 1940 (Investment Company Act) against Willy Kerzinger, d/b/a Commodity Pool Service (Kerzinger). In anticipation of the institution of these proceedings, Kerzinger has submitted an Offer of Settlement (Offer), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the Commission's findings, except as to jurisdiction and the finding contained in Paragraph ======END OF PAGE 1====== II.A. below, which are admitted, Kerzinger, by his Offer, consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings and Imposing Sanctions (Order). ACCORDINGLY, IT IS ORDERED that public administrative and cease-and- desist proceedings pursuant to Section 8A of the Securities Act, Section 21C of the Exchange Act, Sections 203(e), 203(f), and 203(k) of the Advisers Act, and Section 9(b) of the Investment Company Act be, and hereby are, instituted. II. On the basis of this Order and the Offer submitted by Kerzinger, the Commission finds that: A. On June 30, 1989, Kerzinger filed a Form ADV with the Commission to register as an investment adviser pursuant to Section 203(c) of the Advisers Act. On August 14, 1989, Kerzinger's registration as an investment adviser became effective. B. Kerzinger failed to amend his Form ADV to correct material information about his disciplinary history. Specifically, Kerzinger failed to amend Form ADV to disclose that, on August 18, 1989, the Michigan Department of Commerce, Corporations and Securities Bureau, entered a cease-and-desist order against him for selling exempt securities and engaging in exempt transactions without registering as an investment adviser. C. Kerzinger failed to file Forms ADV-S for the fiscal years ended December 31, 1990, 1992, 1993, 1994, and 1995. He only filed a Form ADV-S once, in 1991. D. Kerzinger also failed to furnish or offer to his clients a copy of Part II of his Form ADV or a written disclosure statement containing the information in Part II of Form ADV. E. From August 1989 through June 1994, Kerzinger offered and sold interests in an investment pool, the Commodity Pool Service (the Pool), to twenty-two clients. Kerzinger represented to clients that the Pool would open its own trading account and would use client proceeds to invest in commodity futures contracts. Kerzinger assured clients that an investment in the Pool was low risk, promised minimum dividends, ranging from 15% to 30% annually, to at least some clients, and provided each client a "reimbursement check" for the total amount of his or her investment. Kerzinger told clients that the reimbursement check could be used to withdraw their investments from the Pool upon ninety days notice. Kerzinger also represented in writing that he was a licensed Commodity Trading Adviser (CTA). F. Kerzinger's representations relating to the use of client funds and the risks and benefits of the investment were false. He ======END OF PAGE 2====== deposited clients' money in his personal bank accounts, commingling it with money he received from his carpentry business, social security benefits, and income from four rental properties. Instead of investing the Pool's funds in a separate trading account, Kerzinger invested less than ten percent of the funds in four commodities accounts, all in his own name. He used the remainder of client funds to invest in real estate, to pay client dividends, to purchase computer equipment and subscription services, and to pay for his personal living expenses. Kerzinger held himself out as a CTA, but was not licensed as such. G. To conceal his activities, Kerzinger misrepresented the value of the Pool and of individual clients' interests in it. H. Kerzinger failed to make and keep required records relating to the receipt of clients' funds, use of those funds, and the distribution of dividends to clients, including cash receipts and disbursement journals, general ledgers, check books, bank statements, canceled checks, trial balances, financial statements, and internal audit working papers relating to Kerzinger's investment advisory business. I. As a result of conduct described in paragraphs E, F, and G, Kerzinger willfully violated Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. J. As a result of conduct described in paragraphs E, F, and G, Kerzinger willfully violated Sections 206(1) and 206(2) of the Advisers Act. K. As a result of conduct described in paragraph B, Kerzinger willfully violated Section 204 of the Advisers Act and Rule 204- 1(b)(1) thereunder. L. As a result of conduct described in paragraph C, Kerzinger willfully violated Section 204 of the Advisers Act and Rule 204- 1(c) thereunder. M. As a result of conduct described in paragraph H Kerzinger willfully violated Section 204 of the Advisers Act and Rule 204- 2(a) thereunder. N. As a result of conduct described in paragraph D, Kerzinger willfully violated Section 204 of the Advisers Act and Rule 204-3 thereunder. O. Kerzinger has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement of $168,461.67 plus prejudgment interest. The Commission has reviewed the sworn financial statement and other evidence provided by Kerzinger and has determined that Kerzinger does not have the financial ability to pay disgorgement of ======END OF PAGE 3====== $168,461.67 plus prejudgment interest, but does have the ability to pay disgorgement of $15,000. P. Kerzinger has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Kerzinger and has determined that Kerzinger does not have the financial ability to pay a civil penalty. III. In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offer submitted by Kerzinger. ACCORDINGLY, IT IS ORDERED: A. that the investment adviser registration of Kerzinger be, and hereby is, revoked; B. that Kerzinger be, and hereby is, barred from association with any broker, dealer, investment company, investment adviser, or municipal securities dealer; C. that Kerzinger cease and desist from committing or causing any violation, and any future violation, of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Sections 204, 206(1), and 206(2) of the Advisers Act and Rules 204-1(b)(1), 204-2(a), and 204-3 thereunder; D. that Kerzinger pay $168,461.67, plus prejudgment interest, in disgorgement, but that payment of all but $15,000 of such disgorgement and interest is waived based on Kerzinger's demonstrated inability to pay. Within 30 days following the entry of the Order, Kerzinger shall deliver to Christine M. Berry, as an Assistant Regional Director for the Commission, payment in the amount of $15,000. Such payment shall be: (a) made by U.S. postal money orders, certified checks, bank cashier's checks or bank money orders; (b) made payable in the amounts and to the clients set out in the schedule below; (c) delivered by overnight mail to Christine M. Berry, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and (d) submitted under cover letter that identifies Kerzinger's name as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter shall be sent to Mary E. Keefe, Regional Director, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Upon receipt of payment from Kerzinger, Christine M. Berry shall deliver the money orders or checks to the clients set out in the schedule below within 10 ======END OF PAGE 4====== days: NAME AMOUNT Curtis, Jr. Charles B. $ 822.72 Gelder, Andy 481.18 Harley Studio 1,309.92 Houweling, John 1,057.02 Kroepsch, Martin F. 185.10 Miedema, Maria J. 364.44 Schipper, Bernard & Carol 762.04 Strzysewski, Ed 175.93 TenElshof, Gene & Judy 390.15 TenElshof, George & Alice 2,826.66 TenElshof, Harley 244.25 TenElshof, Olive 806.96 Turnbull, Walter R. 4,627.75 Von Hamburg, Bart 763.98 Von Hamburg, Maria 181.90 TOTAL $15,000.00 E. that the Division of Enforcement (Division) may, at any time following the entry of the Order, petition the Commission to: (1) reopen this matter to consider whether Kerzinger provided accurate and complete financial information at the time such representations were made; (2) determine the amount of additional disgorgement and prejudgment interest and the amount of civil penalty to order; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Kerzinger's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Kerzinger was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of additional disgorgement and prejudgment interest and the amount of civil penalty to order and whether any additional remedies should be imposed. Kerzinger may not, by way of defense to any such petition, contest the findings in the Order or the Commission's authority to impose any additional remedies that were available in the original proceeding. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 5====== SERVICE LIST Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings and Imposing Sanctions on each person named as a party in the Order and their legal agent. The attached Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings and Imposing Sanctions pursuant to Section 8A of the Securities Act of 1933, Section 21C of the Securities Exchange Act of 1934, Sections 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 has been sent to the following parties and other persons entitled to notice: Brenda Murray Chief Administrative Law Judge Securities and Exchange Commission 450 Fifth Street, N.W., Stop 11-6 Washington, D.C. 20549 John S. Markle Division of Enforcement Securities and Exchange Commission 450 Fifth Street, N.W., Stop 8-9 Washington, D.C. 20549 Mary E. Keefe Regional Director Securities and Exchange Commission Midwest Regional Office 500 West Madison Street Suite 1400 Chicago, Illinois 60661-2511 Willy Kerzinger 1025 - 32nd Street, S.W. Wyoming, Michigan 49509 Gregory G. Prasher Schenk, Boncher & Prasher 1220 Bridgewater Place 333 Bridge Street, N.W. Grand Rapids, Michigan 49504 (Attorney for Willy Kerzinger, d/b/a Commodity Pool Service)