February 8, 2001

The SEC filed a complaint in a federal New Jersey district court that alleges that Arlett and Associates, Inc., a New Jersey registered adviser, and its principals misappropriated approximately $4.1 million from their advisory clients. The clients had entered into a written arrangement whereby the adviser could deduct its fees from their brokerage accounts. The SEC alleges that the adviser deducted amounts that were far in excess of the fees. In addition, the SEC alleges that the principals used false account statements, correspondence and e-mails to cover up the misappropriation.

The SEC is seeking permanent injunction, disgorgement and civile penalties from the adviser and the principals.