SEC v. : 03 Civ. 2943 (WHP)

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
                                                Plaintiff,                                    :            Civil            Action            No.            
        : 
                        -against-                                                            :            03            Civ.            2943            (WHP)            
        : 
UBS SECURITIES LLC, f/k/a    : 
UBS            WARBURG            LLC,                                                            :            
        : 
    Defendant.   : 
________________________________________________: 
 
ORDER REGARDING INVESTOR EDUCATION 
 On October 31, 2003, the Court signed a Final Judgment As To Defendant UBS 
Securities LLC, f/k/a UBS Warburg LLC (“Final Judgment”).
1
  Section IX.D of the Final 
Judgment states that “[s]pecific provisions concerning restrictions and limitations on use of the 
UBS Securities LLC Investor Education Fund Account and the Investor Education Fund, 
payment of taxes on interest earned by such Account and Fund, the structure and operations of 
the Investor Education Entity, an Investor Education Plan, and other matters relating to this 
Section of this Judgment will be set forth in a further order of the Court.”  This Order sets forth 
those provisions.  The provisions of this Order are in addition to the provisions regarding 
investor education contained in the Final Judgment.  All provisions of the Final Judgment 
regarding investor education shall remain in effect and are incorporated by reference as if fully 
set forth herein. 
            A.                        
Further Provisions Regarding Uses and Limitations on the Use of the UBS Securities 
LLC Investor Education Fund Account and the Investor Education Fund. 
                                                
 
1
 All defined terms from the Final Judgment apply to this Order. 

 1. The UBS Securities LLC Investor Education Fund Account in this action 
(“Investor Education Fund Account”) and the Investor Education Fund, and any grants awarded 
from the Investor Education Fund, shall not be used: 
 (a)  to benefit, directly or indirectly: 
 (i) beyond any payments authorized by the Court, the Chairman, 
Executive Director, Board of Directors, and employees of the Investor Education Entity 
(described below), any other person involved in the review or approval of applications for grants 
from the Investor Education Fund; any entity that employs such a person, any entity that has 
contributed to the Investor Education Fund, or any entity affiliated with any such contributor; 
 (ii) Defendant, its predecessors, successors, or their subsidiaries, affiliates, 
present or former officers, directors, or their employees, agents, assigns, members of their 
immediate households, or those persons in active concert or participation with them, through 
subrogation or otherwise; 
 (iii)any person who has been convicted of a crime substantially related to 
any act or practice, or the types of acts or practices, identified in the Complaint; 
 (iv) any person who has been enjoined by a court or sanctioned by the 
Commission or any other regulatory authority for any act or practice, or the types of acts or 
practices, identified in the Complaint; or 
 (v) any person named as a defendant in a pending federal criminal or civil 
enforcement action for any act or practice, or the types of acts or practices, identified in the 
Complaint; 
 (b) to promote, directly or indirectly, the products or services of any single 
firm or entity; provided, however, that monies from the Investor Education Fund Account and 
- 2 - 

the Investor Education Fund may in the first instance be directed exclusively to the Investor 
Education Entity for use and disposition in accordance with the Final Judgment and this Order; 
 (c) for any unlawful or unethical purpose; or 
 (d) for any non-educational purpose. 
 2. Monies in the Investor Education Fund may also be used to pay any taxes on 
income earned by such Fund.  The Investor Education Fund Account and Fund are intended to be 
“qualified settlement funds” pursuant to Section 468B(g) of the Internal Revenue Code and 
regulations thereunder.  The Executive Director of the Investor Education Entity is designated 
the administrator of such Account and Fund as defined in and for the purpose of Treas. Reg. § 
1.468B-2(k)(3)(i), and shall satisfy the administrative requirements imposed by Treas. Reg. § 
1.468B-2 by, e.g., (1) obtaining a taxpayer identification number; (2) timely filing applicable 
federal, state, and local tax returns and paying taxes reported thereon; and (3) satisfying any 
information reporting or withholding requirements imposed on distributions from such Account 
or Fund.  Defendant shall provide the Executive Director of the Investor Education Entity with 
relevant information and otherwise cooperate with him in fulfilling such Account’s or Fund’s 
obligations under Treas. Reg. § 1.468B-2. 
            B.            
The Investor Education Plan. 
 1. As soon as is practicable, but in no event more than ninety (90) days after 
entry of this Order, the Commission shall submit a proposed Investor Education Plan to the 
Court for its consideration and approval. 
 2. The Investor Education Plan shall describe a non-profit grant administration 
organization (the “Investor Education Entity”) to fund worthy and cost-efficient programs 
designed to equip investors with the knowledge and skills necessary to make informed 
- 3 - 

investment decisions.  Subject to the Court’s approval, there shall be a single Investor Education 
Entity with respect to this action and the Related Actions, and the Investor Education Entity shall 
administer a single Investor Education Fund.  Pending further order of the Court, the Investor 
Education Fund Account in this action shall be separate from the Investor Education Fund 
Accounts established in the Related Actions. 
 3.  The Investor Education Plan shall state the means by which Defendant shall 
make all remaining installment payments required by the Final Judgment; may authorize, if not 
previously authorized or ordered by the Court, the transfer of the funds in the Investor Education 
Fund Accounts in this action and in the Related Actions to one or more interest-bearing accounts 
opened and maintained by the Investor Education Entity; shall include all provisions necessary to 
implement the Investor Education Plan; and shall be consistent in all respects with the terms of 
the Final Judgment and this Order. 
 4. The Investor Education Plan may provide for the Investor Education Entity to 
remain in existence for an indeterminate period.  In such case, the Investor Education Plan shall 
contain provisions for the cessation of the Court’s oversight of the Investor Education Entity as 
soon as practicable after Defendant’s payment of the last of the Federal Investor Education 
Payments and in a manner consistent with the purposes of the Final Judgment and this Order. 
 5. The Investor Education Plan shall provide for audit procedures sufficient to 
ensure that the expenditures and activities of the Investor Education Entity are consistent with 
the Final Judgment, this Order, and any further applicable orders of the Court. 
 6. The Executive Director of the Investor Education Entity shall promptly begin 
to implement the Investor Education Plan (including establishing the tax exempt organization) 
after the Plan has been approved by the Court. 
- 4 - 

            C.            
The Investor Education Entity. 
 1. The Investor Education Entity described in the Investor Education Plan shall 
be organized as a tax exempt organization pursuant to Section 501(c) of the Internal Revenue 
Code and will be structured so that it can receive additional money from sources other than the 
Federal Investor Education Payments.  It may be incorporated and located in any state or the 
District of Columbia.  The Investor Education Entity shall have a Board of Directors in 
accordance with the law of the jurisdiction in which the Entity is incorporated.  The Board will 
define the vision and mission of the Entity and will make all funding decisions on individual 
grants.  The Entity will also have an Executive Director, who shall be responsible for the day-to-
day operations of the Entity and shall have the responsibilities, powers, and rights described 
below. 
 2. As soon as is practicable, the Court shall appoint a Chairman of the Board of 
Directors and an Executive Director of the Investor Education Entity, both of whom the 
Commission shall recommend.  The Commission shall recommend at least three candidates for 
Executive Director.  The Investor Education Plan shall contain provisions regarding the selection 
of the remaining members of the Board of Directors. 
 3. All fees, costs, and expenses incurred by the Investor Education Entity, 
including all fees, costs, and expenses incurred by the Chairman of the Board of Directors, the 
Board of Directors, and the Executive Director in connection with and incidental to the 
performance of their duties under the Final Judgment or this Order, as well as the fees, costs, and 
expenses of any persons engaged to assist them and all administrative fees, costs, and expenses 
related to the Investor Education Plan described below, shall be paid out of the Investor 
Education Fund in this Action and/or the Related Actions. 
- 5 - 

            D.            
Responsibilities, Powers and Rights of the Executive Director. 
 1. The Executive Director shall: 
 (a) be responsible for the day-to-day operations of the Investor Education 
Entity in accordance with the Final Judgment and this Order, the Investor Education Plan, and 
further orders of the Court; 
 (b) distribute monies from the Investor Education Fund pursuant to the 
Investor Education Plan or as otherwise authorized or ordered by the Court; 
 (c) file all required tax returns on behalf of the Investor Education Fund; 
 (d) commencing ninety (90) days after entry of this Order and continuing 
through the period that the Court has oversight over the Investor Education Fund, submit 
quarterly reports to the Court and the Commission providing detailed information on the 
progress of the implementation of the Investor Education Fund (including a description of all 
grant applications received and all grants approved), fees and expenses incurred, and other 
matters relevant to the status of the Investor Education Fund; after the Investor Education Fund 
is no longer subject to the Court’s oversight, the Executive Director shall continue to submit 
quarterly reports containing such information to the Commission, and such reports shall be 
available to the public; and 
 (e) commencing ninety (90) days after entry of this Order and continuing 
through the period that the Court has oversight over the Investor Education Fund, file with the 
Court on a quarterly basis, with copies to the Commission staff, applications for payment of all 
fees and expenses described in Section C.3 above that were incurred during the quarterly period.  
At least thirty (30) days before making each such application to the Court, the Executive Director 
shall submit the application to the Commission staff, and the Commission may advise the Court 
- 6 - 

whether it has any objection.  Upon approval of any such application by the Court, the Clerk of 
the Court or the Executive Director, as the case may be, shall authorize payment of the fees and 
expenses.  After the Investor Education Fund is no longer subject to the Court’s oversight, the 
quarterly reports described in Section D.1.d above shall contain detailed information concerning 
all fees and expenses incurred by the Fund. 
 2. The Executive Director shall have all appropriate powers and authority to 
perform his duties as set forth in the Final Judgment and this Order, including, without 
limitation, the following powers: 
 (a) to retain and engage such personnel as he deems necessary, including, 
without limitation, legal counsel, relevant experts, and other personnel to assist in the 
administration of the Investor Education Plan and the operation of the Investor Education Entity; 
and 
 (b) to delegate to such persons such duties as he deems appropriate. 
 3. The Executive Director, his agents, attorneys and all persons acting on his 
behalf shall be held harmless against liabilities, claims and demands, whether civil, 
administrative, or investigative arising from or relating to any act or omission to act in the course 
of performing his duties, except and to the extent that it is found that such person acted 
criminally, or in bad faith, or with gross negligence, or with reckless disregard of his duties, or in 
a manner that he knew was contrary to the terms of the Final Judgment or this Order. 
 4. Defendant shall indemnify, defend, and hold harmless the Executive Director, his 
agents, and his attorneys from and against liabilities, claims, and demands, whether civil, 
administrative, or investigative, judgments, fines, and amounts paid in settlement, and costs and 
expenses (including attorneys’ fees), arising from or relating to any act or omission to act in the 
- 7 - 

course of performing his duties, except and to the extent that the Court finds that such person 
acted criminally, or in bad faith, or with gross negligence, or with reckless disregard of his 
duties, or in a manner that he knew was contrary to the terms of the Final Judgment or this 
Order.  Defendant’s obligation under this paragraph shall continue only until the amount 
expended in connection with the Investor Education Fund exceeds the total of all Federal 
Investor Education Payments in the Related Actions.  For purposes of this paragraph, the 
Investor Education Fund shall use the first in, first out method of accounting such that all 
expenditures from the Investor Education Fund will be deemed to come from the Federal 
Investor Education Payments in the Related Actions and not from other sources, until the Federal 
Investor Education Payments have been exhausted. 
 5. While the Investor Education Fund is subject to Court oversight, the Court 
may remove the Chairman of the Board, the Executive Director, or any Board member sua 
sponte or, for good cause shown, upon application of the Commission.  If the Chairman, the 
Executive Director, or any Board member decides to resign, he shall first give sixty (60) days 
written notice to the Commission and the Court of his intention.  Such resignation shall not 
become effective until the Court has appointed a successor.  If any such person is removed by the 
Court, becomes incapacitated due to illness or death, is otherwise unable to serve, or resigns, the 
Court shall appoint a successor.  In the case of the Chairman, such person shall be recommended 
by the Commission; in the case of the Executive Director or a Board member other than the 
Chairman, such person shall be recommended by the remaining members of the Board of 
Directors of the Investor Education Entity following at least thirty (30) days’ notice to the 
Commission. 
- 8 - 

 6. The Investor Education Entity, including the Executive Director, is entitled to 
rely on all rules of law and court orders, and shall not be liable to anyone for its own good faith 
compliance with any order, rule, law, judgment, or decree.  Nor shall it be liable by virtue of its 
compliance with the orders of this Court.  In no event shall it be liable to Defendant for its good 
faith compliance with its duties and responsibilities under the Final Judgment or this Order. 
 7. The Chairman, Executive Director, other members of the Board of Directors, 
any firm with which any such person is affiliated or of which he is a member, and any person 
engaged to assist the Executive Director in the performance of his duties under the Final 
Judgment or this Order shall not, without the Commission’s prior written consent, enter into any 
employment, consulting, or attorney-client relationship with Defendant, or any of its present or 
former parents, subsidiaries, directors, officers, employees, or agents acting in their capacity as 
such for the period of the engagement and for a period of one year from the completion of his 
engagement.  
            E.            
Stay of Proceedings.  For the purposes of implementing and effectuating the Final 
Judgment and this Order, and upon a finding hereby made that a stay of any proceedings against 
the Chairman, Executive Director, and other members of the Board of Directors in their official 
capacities, the Investor Education Fund Account, the Investor Education Fund, and the Investor 
Education Entity during the pendency or the existence of such Fund Account, Fund, and Entity is 
necessary to effectuate the Final Judgment and this Order, all creditors or claimants of 
Defendant, and other persons acting on behalf of such creditors, claimants, or other persons, 
including sheriffs, marshals, other officers, deputies, servants, agents, employees, and attorneys, 
be and the same hereby are restrained and enjoined during the pendency or the existence of the 
Investor Education Fund Account, Investor Education Fund, and Investor Education Entity from:  
- 9 - 

(1) commencing, prosecuting, continuing, or enforcing any suit or proceeding against the 
Chairman, Executive Director, and other members of the Board of Directors in their official 
capacities or the Investor Education Fund Account, Investor Education Fund, or Investor 
Education Entity; (2) using self-help or executing or issuing or causing the execution or issuance 
of any court attachment, subpoena, replevin, execution, or other process for the purpose of 
impounding or taking possession of or interfering with or creating or enforcing a lien upon any 
monies or property, wheresoever situated, owned by or in the possession of or to be transferred 
to the Investor Education Fund Account, Fund, or Entity or the Chairman, Executive Director, or 
other members of the Board of Directors in their official capacities pursuant to the Final 
Judgment or this Order; and/or (3) doing any act or thing whatsoever to interfere with the taking 
control, possession, or management by the Executive Director, in his official capacity, of the 
monies that are or may be transferred to the Investor Education Fund Account, Fund, or Entity, 
or in any way to interfere with or harass said Chairman, Executive Director, or other members of 
the Board of Directors in their official capacities, or to interfere in any manner with the exclusive 
jurisdiction of this Court over the Investor Education Fund Account, Fund, and Entity.  The 
provisions of this Section E of this Order shall be in addition to, not in lieu of, the provisions of 
Section IX.C of the Final Judgment. 
            SO            ORDERED.            
 
Dated: New York, New York 
            October            31,            2003            
                                                                        ____________________________________            
                                                                        WILLIAM            H.            PAULEY            III            
                                                                                    UNITED            STATES            DISTRICT            JUDGE            
- 10 - 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
    Plaintiff,   : Civil Action No. 
        : 
  -against-     : 03 Civ. 2943 (WHP) 
        : 
UBS SECURITIES LLC, f/k/a    : 
UBS WARBURG LLC,     : 
        : 
    Defendant.   : 
________________________________________________: 
 

ORDER REGARDING INVESTOR EDUCATION 

 On October 31, 2003, the Court signed a Final Judgment As To Defendant UBS 

Securities LLC, f/k/a UBS Warburg LLC (“Final Judgment”).1  Section IX.D of the Final 

Judgment states that “[s]pecific provisions concerning restrictions and limitations on use of the 

UBS Securities LLC Investor Education Fund Account and the Investor Education Fund, 

payment of taxes on interest earned by such Account and Fund, the structure and operations of 

the Investor Education Entity, an Investor Education Plan, and other matters relating to this 

Section of this Judgment will be set forth in a further order of the Court.”  This Order sets forth 

those provisions.  The provisions of this Order are in addition to the provisions regarding 

investor education contained in the Final Judgment.  All provisions of the Final Judgment 

regarding investor education shall remain in effect and are incorporated by reference as if fully 

set forth herein. 

 A.  Further Provisions Regarding Uses and Limitations on the Use of the UBS Securities 

LLC Investor Education Fund Account and the Investor Education Fund. 
                                                 

1 All defined terms from the Final Judgment apply to this Order. 



 1. The UBS Securities LLC Investor Education Fund Account in this action 

(“Investor Education Fund Account”) and the Investor Education Fund, and any grants awarded 

from the Investor Education Fund, shall not be used: 

 (a) to benefit, directly or indirectly: 

 (i) beyond any payments authorized by the Court, the Chairman, 

Executive Director, Board of Directors, and employees of the Investor Education Entity 

(described below), any other person involved in the review or approval of applications for grants 

from the Investor Education Fund; any entity that employs such a person, any entity that has 

contributed to the Investor Education Fund, or any entity affiliated with any such contributor; 

 (ii) Defendant, its predecessors, successors, or their subsidiaries, affiliates, 

present or former officers, directors, or their employees, agents, assigns, members of their 

immediate households, or those persons in active concert or participation with them, through 

subrogation or otherwise; 

 (iii)any person who has been convicted of a crime substantially related to 

any act or practice, or the types of acts or practices, identified in the Complaint; 

 (iv) any person who has been enjoined by a court or sanctioned by the 

Commission or any other regulatory authority for any act or practice, or the types of acts or 

practices, identified in the Complaint; or 

 (v) any person named as a defendant in a pending federal criminal or civil 

enforcement action for any act or practice, or the types of acts or practices, identified in the 

Complaint; 

 (b) to promote, directly or indirectly, the products or services of any single 

firm or entity; provided, however, that monies from the Investor Education Fund Account and 

- 2 - 



the Investor Education Fund may in the first instance be directed exclusively to the Investor 

Education Entity for use and disposition in accordance with the Final Judgment and this Order; 

 (c) for any unlawful or unethical purpose; or 

 (d) for any non-educational purpose. 

 2. Monies in the Investor Education Fund may also be used to pay any taxes on 

income earned by such Fund.  The Investor Education Fund Account and Fund are intended to be 

“qualified settlement funds” pursuant to Section 468B(g) of the Internal Revenue Code and 

regulations thereunder.  The Executive Director of the Investor Education Entity is designated 

the administrator of such Account and Fund as defined in and for the purpose of Treas. Reg. § 

1.468B-2(k)(3)(i), and shall satisfy the administrative requirements imposed by Treas. Reg. § 

1.468B-2 by, e.g., (1) obtaining a taxpayer identification number; (2) timely filing applicable 

federal, state, and local tax returns and paying taxes reported thereon; and (3) satisfying any 

information reporting or withholding requirements imposed on distributions from such Account 

or Fund.  Defendant shall provide the Executive Director of the Investor Education Entity with 

relevant information and otherwise cooperate with him in fulfilling such Account’s or Fund’s 

obligations under Treas. Reg. § 1.468B-2. 

 B. The Investor Education Plan. 

 1. As soon as is practicable, but in no event more than ninety (90) days after 

entry of this Order, the Commission shall submit a proposed Investor Education Plan to the 

Court for its consideration and approval. 

 2. The Investor Education Plan shall describe a non-profit grant administration 

organization (the “Investor Education Entity”) to fund worthy and cost-efficient programs 

designed to equip investors with the knowledge and skills necessary to make informed 

- 3 - 



investment decisions.  Subject to the Court’s approval, there shall be a single Investor Education 

Entity with respect to this action and the Related Actions, and the Investor Education Entity shall 

administer a single Investor Education Fund.  Pending further order of the Court, the Investor 

Education Fund Account in this action shall be separate from the Investor Education Fund 

Accounts established in the Related Actions. 

 3.  The Investor Education Plan shall state the means by which Defendant shall 

make all remaining installment payments required by the Final Judgment; may authorize, if not 

previously authorized or ordered by the Court, the transfer of the funds in the Investor Education 

Fund Accounts in this action and in the Related Actions to one or more interest-bearing accounts 

opened and maintained by the Investor Education Entity; shall include all provisions necessary to 

implement the Investor Education Plan; and shall be consistent in all respects with the terms of 

the Final Judgment and this Order. 

 4. The Investor Education Plan may provide for the Investor Education Entity to 

remain in existence for an indeterminate period.  In such case, the Investor Education Plan shall 

contain provisions for the cessation of the Court’s oversight of the Investor Education Entity as 

soon as practicable after Defendant’s payment of the last of the Federal Investor Education 

Payments and in a manner consistent with the purposes of the Final Judgment and this Order. 

 5. The Investor Education Plan shall provide for audit procedures sufficient to 

ensure that the expenditures and activities of the Investor Education Entity are consistent with 

the Final Judgment, this Order, and any further applicable orders of the Court. 

 6. The Executive Director of the Investor Education Entity shall promptly begin 

to implement the Investor Education Plan (including establishing the tax exempt organization) 

after the Plan has been approved by the Court. 

- 4 - 



 C. The Investor Education Entity. 

 1. The Investor Education Entity described in the Investor Education Plan shall 

be organized as a tax exempt organization pursuant to Section 501(c) of the Internal Revenue 

Code and will be structured so that it can receive additional money from sources other than the 

Federal Investor Education Payments.  It may be incorporated and located in any state or the 

District of Columbia.  The Investor Education Entity shall have a Board of Directors in 

accordance with the law of the jurisdiction in which the Entity is incorporated.  The Board will 

define the vision and mission of the Entity and will make all funding decisions on individual 

grants.  The Entity will also have an Executive Director, who shall be responsible for the day-to-

day operations of the Entity and shall have the responsibilities, powers, and rights described 

below. 

 2. As soon as is practicable, the Court shall appoint a Chairman of the Board of 

Directors and an Executive Director of the Investor Education Entity, both of whom the 

Commission shall recommend.  The Commission shall recommend at least three candidates for 

Executive Director.  The Investor Education Plan shall contain provisions regarding the selection 

of the remaining members of the Board of Directors. 

 3. All fees, costs, and expenses incurred by the Investor Education Entity, 

including all fees, costs, and expenses incurred by the Chairman of the Board of Directors, the 

Board of Directors, and the Executive Director in connection with and incidental to the 

performance of their duties under the Final Judgment or this Order, as well as the fees, costs, and 

expenses of any persons engaged to assist them and all administrative fees, costs, and expenses 

related to the Investor Education Plan described below, shall be paid out of the Investor 

Education Fund in this Action and/or the Related Actions. 

- 5 - 



 D. Responsibilities, Powers and Rights of the Executive Director. 

 1. The Executive Director shall: 

 (a) be responsible for the day-to-day operations of the Investor Education 

Entity in accordance with the Final Judgment and this Order, the Investor Education Plan, and 

further orders of the Court; 

 (b) distribute monies from the Investor Education Fund pursuant to the 

Investor Education Plan or as otherwise authorized or ordered by the Court; 

 (c) file all required tax returns on behalf of the Investor Education Fund; 

 (d) commencing ninety (90) days after entry of this Order and continuing 

through the period that the Court has oversight over the Investor Education Fund, submit 

quarterly reports to the Court and the Commission providing detailed information on the 

progress of the implementation of the Investor Education Fund (including a description of all 

grant applications received and all grants approved), fees and expenses incurred, and other 

matters relevant to the status of the Investor Education Fund; after the Investor Education Fund 

is no longer subject to the Court’s oversight, the Executive Director shall continue to submit 

quarterly reports containing such information to the Commission, and such reports shall be 

available to the public; and 

 (e) commencing ninety (90) days after entry of this Order and continuing 

through the period that the Court has oversight over the Investor Education Fund, file with the 

Court on a quarterly basis, with copies to the Commission staff, applications for payment of all 

fees and expenses described in Section C.3 above that were incurred during the quarterly period.  

At least thirty (30) days before making each such application to the Court, the Executive Director 

shall submit the application to the Commission staff, and the Commission may advise the Court 

- 6 - 



whether it has any objection.  Upon approval of any such application by the Court, the Clerk of 

the Court or the Executive Director, as the case may be, shall authorize payment of the fees and 

expenses.  After the Investor Education Fund is no longer subject to the Court’s oversight, the 

quarterly reports described in Section D.1.d above shall contain detailed information concerning 

all fees and expenses incurred by the Fund. 

 2. The Executive Director shall have all appropriate powers and authority to 

perform his duties as set forth in the Final Judgment and this Order, including, without 

limitation, the following powers: 

 (a) to retain and engage such personnel as he deems necessary, including, 

without limitation, legal counsel, relevant experts, and other personnel to assist in the 

administration of the Investor Education Plan and the operation of the Investor Education Entity; 

and 

 (b) to delegate to such persons such duties as he deems appropriate. 

 3. The Executive Director, his agents, attorneys and all persons acting on his 

behalf shall be held harmless against liabilities, claims and demands, whether civil, 

administrative, or investigative arising from or relating to any act or omission to act in the course 

of performing his duties, except and to the extent that it is found that such person acted 

criminally, or in bad faith, or with gross negligence, or with reckless disregard of his duties, or in 

a manner that he knew was contrary to the terms of the Final Judgment or this Order. 

 4. Defendant shall indemnify, defend, and hold harmless the Executive Director, his 

agents, and his attorneys from and against liabilities, claims, and demands, whether civil, 

administrative, or investigative, judgments, fines, and amounts paid in settlement, and costs and 

expenses (including attorneys’ fees), arising from or relating to any act or omission to act in the 

- 7 - 



course of performing his duties, except and to the extent that the Court finds that such person 

acted criminally, or in bad faith, or with gross negligence, or with reckless disregard of his 

duties, or in a manner that he knew was contrary to the terms of the Final Judgment or this 

Order.  Defendant’s obligation under this paragraph shall continue only until the amount 

expended in connection with the Investor Education Fund exceeds the total of all Federal 

Investor Education Payments in the Related Actions.  For purposes of this paragraph, the 

Investor Education Fund shall use the first in, first out method of accounting such that all 

expenditures from the Investor Education Fund will be deemed to come from the Federal 

Investor Education Payments in the Related Actions and not from other sources, until the Federal 

Investor Education Payments have been exhausted. 

 5. While the Investor Education Fund is subject to Court oversight, the Court 

may remove the Chairman of the Board, the Executive Director, or any Board member sua 

sponte or, for good cause shown, upon application of the Commission.  If the Chairman, the 

Executive Director, or any Board member decides to resign, he shall first give sixty (60) days 

written notice to the Commission and the Court of his intention.  Such resignation shall not 

become effective until the Court has appointed a successor.  If any such person is removed by the 

Court, becomes incapacitated due to illness or death, is otherwise unable to serve, or resigns, the 

Court shall appoint a successor.  In the case of the Chairman, such person shall be recommended 

by the Commission; in the case of the Executive Director or a Board member other than the 

Chairman, such person shall be recommended by the remaining members of the Board of 

Directors of the Investor Education Entity following at least thirty (30) days’ notice to the 

Commission. 

- 8 - 



 6. The Investor Education Entity, including the Executive Director, is entitled to 

rely on all rules of law and court orders, and shall not be liable to anyone for its own good faith 

compliance with any order, rule, law, judgment, or decree.  Nor shall it be liable by virtue of its 

compliance with the orders of this Court.  In no event shall it be liable to Defendant for its good 

faith compliance with its duties and responsibilities under the Final Judgment or this Order. 

 7. The Chairman, Executive Director, other members of the Board of Directors, 

any firm with which any such person is affiliated or of which he is a member, and any person 

engaged to assist the Executive Director in the performance of his duties under the Final 

Judgment or this Order shall not, without the Commission’s prior written consent, enter into any 

employment, consulting, or attorney-client relationship with Defendant, or any of its present or 

former parents, subsidiaries, directors, officers, employees, or agents acting in their capacity as 

such for the period of the engagement and for a period of one year from the completion of his 

engagement.  

 E. Stay of Proceedings.  For the purposes of implementing and effectuating the Final 

Judgment and this Order, and upon a finding hereby made that a stay of any proceedings against 

the Chairman, Executive Director, and other members of the Board of Directors in their official 

capacities, the Investor Education Fund Account, the Investor Education Fund, and the Investor 

Education Entity during the pendency or the existence of such Fund Account, Fund, and Entity is 

necessary to effectuate the Final Judgment and this Order, all creditors or claimants of 

Defendant, and other persons acting on behalf of such creditors, claimants, or other persons, 

including sheriffs, marshals, other officers, deputies, servants, agents, employees, and attorneys, 

be and the same hereby are restrained and enjoined during the pendency or the existence of the 

Investor Education Fund Account, Investor Education Fund, and Investor Education Entity from:  

- 9 - 



(1) commencing, prosecuting, continuing, or enforcing any suit or proceeding against the 

Chairman, Executive Director, and other members of the Board of Directors in their official 

capacities or the Investor Education Fund Account, Investor Education Fund, or Investor 

Education Entity; (2) using self-help or executing or issuing or causing the execution or issuance 

of any court attachment, subpoena, replevin, execution, or other process for the purpose of 

impounding or taking possession of or interfering with or creating or enforcing a lien upon any 

monies or property, wheresoever situated, owned by or in the possession of or to be transferred 

to the Investor Education Fund Account, Fund, or Entity or the Chairman, Executive Director, or 

other members of the Board of Directors in their official capacities pursuant to the Final 

Judgment or this Order; and/or (3) doing any act or thing whatsoever to interfere with the taking 

control, possession, or management by the Executive Director, in his official capacity, of the 

monies that are or may be transferred to the Investor Education Fund Account, Fund, or Entity, 

or in any way to interfere with or harass said Chairman, Executive Director, or other members of 

the Board of Directors in their official capacities, or to interfere in any manner with the exclusive 

jurisdiction of this Court over the Investor Education Fund Account, Fund, and Entity.  The 

provisions of this Section E of this Order shall be in addition to, not in lieu of, the provisions of 

Section IX.C of the Final Judgment. 

 SO ORDERED. 

 
Dated: New York, New York 
 October 31, 2003 
      ____________________________________ 
      WILLIAM H. PAULEY III 
       UNITED STATES DISTRICT JUDGE 

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