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notified the U.S. Securities and Exchange Commission (SEC) of
GSC’s accounting problems, and the SEC commenced an investigation
of GSC.
The record does not indicate that the SEC investigation
established anything illegal about GSC’s or petitioner’s use or
management of managed account funds. Gomez, however, was
subsequently prosecuted and pleaded guilty to making certain
false representations in connection with the solicitation of
managed account funds. The SEC investigation did conclude that
GSC's financial situation was not healthy.
On May 12, 1987, either voluntarily or at the insistence of
the Securities Investor Protection Corp. (SIPC), a nonprofit
corporation created by SIPA, GSC entered into a liquidation
proceeding under SIPA in the U.S. Bankruptcy Court for the
Southern District of Florida. In that proceeding, a trustee
(SIPC trustee) was appointed to liquidate GSC. As part of that
liquidation proceeding, managed account investors submitted to
the SIPC trustee claims for repayment of managed account funds.
Also in that proceeding, the SIPC trustee sought damages against
petitioner and Gomez personally on behalf of 28 managed account
investors, seeking to recover the principal amount of outstanding
managed account funds of these 28 investors, plus interest,
costs, and other damages.
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