accounting Ethics

pleas solve question 1,2 and 3

Chapter 3 Corporate Governance and Ethical Management 133 conducting an unregistered offering under Section 5 of the Securities Act. Rowzee and Harvey were also charged with investment adviser fraud under Sections 206(1) and 206(2) of the Advisers Act of 1940, and Halstead was charged with aiding and abetting violations of both sections. The commis- sion's complaint seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties against each defendant. In March of 2009, Rowzee submitted an Offer of Settlement that was accepted by the SEC. Rowzee admitted to the SEC's findings. She was suspended from appearing or practicing before the commission as an attorney and was barred from any association with any investment adviser. Questions 1. The case states that the defendants told investors that Rowzee was an experienced securities attorney who per- sonally screened and selected each investment after thor- ough due diligence. Describe the fiduciary obligations of an investment adviser to her client as you see it. Are there any similarities with the responsibilities of members of a board of directors? 2. What are the parallels in this case to that of Bernie Madoff? 3. From an ethical perspective, to what extent should we hold investors responsible for investing their money in schemes that they could have (should have) investigated before committing funds? 2Administrative Proceeding File No. 3-13413. Case 3-4 SEC v. Jeanne M. Rowzee et al.: A Ponzi Scheme On September 15, 2008, the SEC charged an Irvine, California, attorney and two other promoters with conduct- ing a $52.7 million Ponzi scheme in which they sold inves- tors bogus investments, promised unrealistic profits, and misappropriated more than $20 million of investors' funds that were used as their own personal piggy bank. The SEC's complaint alleges that attorney Jeanne M. Rowzee along with James R. Halstead of Santa Ana, California, and Robert T. Harvey of Prosper, Texas, told investors that Rowzee was an experienced securities attorney who personally screened and selected each investment after thorough due diligence. Halstead and Harvey instead used new investor funds to pay principal and returns to earlier investors, and to finance their own personal endeavors such as trips to Las Vegas, property purchases, and alimony payments. Basically, the three of them raised millions of dollars from unsuspecting investors and simply used the funds to enrich themselves. The defendants allegedly solicited business clients and acquaintances and generated word-of-mouth refer- rals. The SEC's complaint alleges that from at least March 2004 through December 2006, the defendants sold the pur- ported investments to investors, promising returns of 19 to 54 percent within 12 to 16 weeks. The defendants were charged with securities fraud under Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and with Litigation Release No. 20719, SEC v. Jeanne M. Rowzee, James R. Halstead, and Robert T. Harvey, www.sec.gov/litigation/ litreleases/2008/Ir20719.htm