UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SEC Admin Release 34-76897/IA Release 4314/January 14, 2016: The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 (Advisers Act) and Section 15(b)(6) of the Securities Exchange Act of 1934 (Exchange Act) against Richard Scott Everhart, his registered investment adviser firm and another principal owner. Since 2010, the registered investment adviser has principally invested its clients in the mutual funds offered by a single family of mutual funds (the Mutual Fund Complex). This Mutual Fund Complex offers two share classes to investment advisers and the only meaningful difference between them is that one share class charges "12b-1 fees" and the other does not. Despite significantly higher fees, some adviser representatives at the registered investment adviser nearly always invested non-retirement individual advisory accounts in shares that charged a 12b-1 fee, which was paid to the registered investment adviser's principal owners, one of them being Everhart, who also were licensed registered representatives of a registered broker-dealer. Receipt of 12b-1 fees not only created a conflict of interest that was not adequately disclosed to the registered investment adviser's clients, but favoring 12b-1 funds over others was inconsistent with the registered investment adviser's duty to seek best execution for its clients. In addition, the registered investment adviser had several compliance failures, including the lack of annual compliance reviews for several years, and also issued insufficient disclosures regarding the receipt of 12b-1 fees. As a result, Everhart, the registered investment adviser's president and majority owner, willfully violated Sections 206(2) of the Advisers Act and caused violations of Sections 204 and 206(4) and Rules 204-3(a), 204-3(b)(1) and (2), and 206(4)-7 thereunder.

Order

Cease and Desist

Censure

Civil and Administrative Penalty(ies)/Fine(s)

$40,000.00

Disgorgement

$201,985.66

Monetary Penalty other than Fines

$23,422.66

In anticipation of the institution of these proceedings, Everhart has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, which are admitted, Everhart consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 and Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order. In determining to accept the Offers, the Commission considered remedial acts promptly undertaken by Everhart and cooperation afforded the Commission staff. In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Everhart's Offer. Accordingly, pursuant to Sections 203(e), 203(f) and 203(k) of the Advisers Act and Section 15(b)(6) of the Exchange Act, it is hereby ordered that: Everhart is censured and shall cease and desist from committing or causing any violations and any future violations of Sections 204, 206(2), and 206(4) of the Advisers Act and Rules 204-3(a), 204-3(b)(1) and (2), and 206(4)-7 thereunder. Everhart, on a joint and several basis shall, within 14 days of the entry of this Order, pay total disgorgement of $201,985.66 and prejudgment interest of $23,422.66 to the Commission for transfer to the general fund of the United States Treasury. Everhart shall, within 14 days of the entry of this Order, pay a civil penalty in the total amount of $40,000 to the Commission for transfer to the general fund of the United States Treasury.