The SEC brought an administrative action against National Investment Advisors, Inc. (NIA) and its principal, Douglas A. Jimerson. The SEC found that from 2002 to 2005, NIA and Jimerson offered three investment programs that purported to guarantee investors against loss of principal if they kept their assets under NIA's management for a fixed period of time.
The SEC found that each "insured" management program either lacked the appropriate insurance, or lacked insurance entirely, to protect investors against loss of principal. In the first version of the program, Jimerson, according to the SEC, failed to acquire any insurance whatsoever to support NIA's insured management program. In the following two versions, Jimerson, according to the SEC, acquired errors and omissions insurance and falsely marketed those policies as being able to protect investors against a loss of principal. Finally, the SEC found that NIA, which was managed by Jimerson at all relevant times, failed to disclose to its clients material information regarding its precarious financial condition and did not maintain certain books and records required under the Investment Advisers Act of 1940.
Please click http://www.sec.gov/litigation/admin/2007/34-57056.pdf for a copy of the administrative order.