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News October 11, 2004 Issue

Small Adviser Sued For Use of Hypothetical Performance

Last week, the SEC sued Market-Timing Technologies, an Atlanta-based adviser, for soliciting advisory clients through websites that cited performance results of up to 91.4%, without disclosing that the returns were based primarily on hypothetical investments, rather than actual results. The alleged conduct occurred from at least November 2002 to September 2004, said the SEC.

The SECís complaint also claimed that the firm failed to maintain records required by the Advisers Act books and records rule, such as ledgers reflecting the firmís assets, liabilities, and other accounts, as well as copies of written communications to clients. In addition, the SEC alleged that the firm violated Advisers Act Section 204 by failing to produce backup documentation for the performance posted on the websites (as required under Advisers Act Rule 204-2(a)(16)), after being asked for the information during a recent SEC examination.

The firmís president, David Perry, was charged with aiding and abetting the firmís violations. Perry could not be reached for comment.