SEC v. PINNACLE ADVISORS

ANTONIA M. APPS*
REGIONAL DIRECTOR
Sheldon L. Pollock*
Hane L. Kim*
Todd D. Brody (Bar Number 3264636)
Danielle R. Srour*
Gwen A. Licardo*
Andrew Sporkin*
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street, Suite 20-100
New York, NY 10004-2616
212-336-0080 (Brody)
[email protected]
*Not admitted in the Northern District of New York
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
-against-
PINNACLE ADVISORS, LLC,
ROBERT F. CUCULICH,
BENJAMIN R. QUILTY,
MARK E. WADACH, and
LAWTON A. WILLIAMSON,
Defendants.
COMPLAINT
23 Civ. _____ (       )
JURY TRIAL DEMANDED
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
Defendants Pinnacle Advisors, LLC (“Pinnacle”), Robert F. Cuculich (“Cuculich”), Benjamin R.
Quilty (“Quilty”), Mark E. Wadach (“Wadach”), and Lawton A. Williamson (“Williamson”)
(collectively, “Defendants”), alleges as follows:
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:23-cv-547 (FJS/ATB)

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SUMMARY
1. This case involves the failure of a registered open-end investment company (the
“NYSA Fund” or the “Fund”) to comply with Rules 22e-4 (the “Liquidity Rule”) and 30b1-10
under the Investment Company Act of 1940 (the “Investment Company Act”).
2. From June 2019 to June 2020, more than 15% of the NYSA Fund’s net assets
were invested in the restricted shares of a medical device company and the Fund failed to comply
with applicable reporting and filing requirements or to bring its position in the restricted shares
of the medical device company under the 15% threshold as required by SEC rules.
3. The NYSA Fund’s adviser, Pinnacle, and its principals, Cuculich and Quilty,
were primarily responsible for monitoring the liquidity of the Fund’s investments, classifying the
liquidity of such investments in accordance with the Liquidity Rule, and making the required
reports to the Fund’s board of trustees (“Board”) and related filings with the Commission.
Pinnacle, Cuculich, and Quilty aided and abetted the Fund’s violations by not classifying the
medical device company restricted shares as an “illiquid investment” when the underling
restrictions, transfer limitations, and lack of any market for the shares required that classification.
Pinnacle, Cuculich, and Quilty also disregarded the advice of the Fund’s counsel who resigned
over this issue, as well as the advice of the Fund’s auditors. In addition, they made false and
misleading statements and omissions about the basis for their improper classification to the
Commission’s Division of Investment Management (“SEC staff”). Finally, they aided and
abetted the NYSA Fund’s violations by failing to have the Fund timely submit required reports
to the Fund’s board of trustees and to the Commission.
4. The NYSA Fund’s Board, including the independent trustees Wadach and
Williamson, had their own oversight responsibilities regarding the Fund’s compliance with the

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Liquidity Rule. Wadach and Williamson aided and abetted the Fund’s violations of Rule 22e-
4(b)(1) because they were keenly aware of the facts that rendered the shares illiquid –
information they learned as members of the Fund’s Valuation and Audit Committees of the Fund
– as well as the advice of the Fund’s counsel and auditors, yet they allowed the Fund to
improperly classify the shares as a “less illiquid” investment instead of an “illiquid investment.”
5. While the NYSA Fund deregistered with the Commission on September 9, 2020
and transferred its assets to a liquidating trust (the “NYSA Liquidating Trust”), this illiquid
investment in the shares of the medical device company still has not been sold. As such, more
than two-and-a-half years after deregistering, the NYSA Fund investors have yet to receive a
distribution of any kind relating to these shares.
VIOLATIONS
6. By virtue of the foregoing conduct and as alleged further herein, Defendants
Pinnacle, Cuculich, Quilty, Wadach, and Williamson aided and abetted the NYSA Fund’s
violations of Rule 22e-4(b)(1) [17 C.F.R. § 270.22e-4(b)(1)] of the Investment Company Act,
and Defendants Pinnacle, Cuculich, and Quilty aided and abetted the Fund’s violations of Rule
30b1-10 [17 C.F.R. § 270.30b1-10] of the Investment Company Act.
7. Unless Defendants are restrained and enjoined, they will engage in the acts,
practices, transactions, and courses of business set forth in this Complaint or in acts, practices,
transactions, and courses of business of similar type and object.
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
8. The Commission brings this action pursuant to the authority conferred upon it by
Investment Company Act Sections 42(d), 42(e), and 48(b)[15 U.S.C. §§ 80a-41(d), 80a-41(e),
80a-47(b)].

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9. The Commission seeks a final judgment: (a) permanently enjoining Defendants
from violating the federal securities laws and rules this Complaint alleges they have violated; (b)
ordering Defendants to pay civil money penalties pursuant to Investment Company Act Section
42(e) [15 U.S.C. § 80a-41(e)]; and (c) ordering any other and further relief the Court may deem
just and proper.
JURISDICTION AND VENUE
10. This Court has jurisdiction over this action pursuant to Investment Company Act
Section 44 [15 U.S.C. § 80a-43].
11. Defendants, directly and indirectly, have made use of the means or
instrumentalities of interstate commerce or of the mails in connection with the transactions, acts,
practices, and courses of business alleged herein.
12. Venue lies in this District under Investment Company Act Section 44 [15 U.S.C.
§ 80a-43]. Defendants are inhabitants of and transact business in the Northern District of New
York, and Pinnacle’s and the Fund’s principal place of business are, and were, respectively, in
this District. In addition, certain of the acts, practices, transactions, and courses of business
alleged in this Complaint occurred within this District, including actions taken to improperly
classify an illiquid portfolio investment as “less liquid” rather than “illiquid.”
DEFENDANTS
13. Pinnacle is a limited liability company organized in 1996 in New York State, with
its principal place of business in East Syracuse, New York. Pinnacle has been registered as an
investment adviser with the Commission since 1996. Pinnacle is owned by six individuals,
including Quilty and Cuculich. Since 1996, Pinnacle’s sole client has been the NYSA Series
Trust, a formerly-registered investment company with one investment portfolio, the NYSA Fund.

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As of March 2023, Pinnacle claimed to manage approximately $529,368.
14. Cuculich, age 65, is a resident of Liverpool, New York. Cuculich started his
career in the financial services industry in 1980. Since at least 2008, he has been an investment
advisory representative and a registered representative associated with Pinnacle Investments,
LLC (“Pinnacle Investments”), a dually registered investment adviser/broker-dealer that is an
affiliate of Pinnacle. Since 2013, Cuculich has been the President of Pinnacle and holds an
estimated 30% equity interest in Pinnacle. From 2013 to September 2020, Cuculich was
President and portfolio manager of the NYSA Fund. Since 2020, Cuculich has been President of
the NYSA Liquidating Trust. Cuculich holds the Series 7, 24 52, 53, and 63 securities licenses,
and held a Series 6 license.
15. Quilty, age 41, is a resident of Jamesville, New York. Quilty started his career in
the financial services industry in 2005. In 2010, he became an investment advisory representative
and a registered representative associated with Pinnacle Investments, and in 2019, he became
CEO of Pinnacle Investments. Since 2013, he has been Pinnacle’s Chief Compliance Officer
(“CCO”). In 2015, he acquired a ten percent equity interest in Pinnacle. From 2013 to 2020,
Quilty was the Chief Financial Officer, Vice President, and Treasurer of the NYSA Fund and
from 2014 to 2020, he was CCO of the NYSA Fund. Since 2020, he has been the CCO, Vice
President, and Treasurer of the NYSA Liquidating Trust.
16. Wadach, age 71, is a resident of Syracuse, New York. He was an independent
trustee of the NYSA Fund from 1997 to 2020 and, since 2020, has been an independent trustee
of the NYSA Liquidating Trust. In addition, he is a trustee on the board of a registered
investment company managed by a Pinnacle affiliate. From at least March 2013 to September
2020, Williamson served on the NYSA Fund’s Valuation Committee and Audit Committee.

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17. Williamson, age 66, is a resident of Liverpool, New York. He was an independent
trustee of the NYSA Fund from 2013 to 2020 and, since 2020, has been an independent trustee
of the NYSA Liquidating Trust. From March 2013 to September 2020, Williamson served on the
Fund’s Valuation Committee and Audit Committee.
OTHER RELEVANT INDIVIDUALS AND ENTITIES
18. The NYSA Fund was the sole series of the NYSA Series Trust, a Massachusetts
business trust established in 1996. The NYSA Fund was an open-end
1
 registered investment
company until September 2020. In an annual shareholder report filed with the Commission in
July 2019 for the fiscal year ending March 31, 2019, the NYSA Fund reported total assets of
approximately $1.89 million. On September 8, 2020, the NYSA Fund sold all of its liquid assets,
and on September 9, 2020, filed with the Commission a Notice of Application for Deregistration
under Section 8(f) of the Investment Company Act. On September 29, 2020, the Commission
issued a deregistration order. The NYSA Fund is now the NYSA Liquidating Trust.
19. Trustee A, age 73, was a trustee of the NYSA Fund from 1997 to 2021 and the
CEO of Pinnacle Capital Management, LLC, a registered investment adviser and affiliate of
Pinnacle and Pinnacle Investments, LLC. Trustee A was an attorney licensed (inactive) in New
Jersey, but was not legal counsel to the NYSA Fund and did not provide legal services to the
Fund.
20. The Company is a private company that develops intellectual property for use in
medical devices. The Company’s shares were not traded on any securities exchange or over-the-

1
 An open-end investment company is a management investment company that offers or has outstanding redeemable
securities of which it is an issuer. See Section 5(a)(1) of the Investment Company Act [15 U.S.C. § 80a-5(a)(1)]. The
term “redeemable security” is defined in Section 2(a)(32) of the Investment Company Act [15 U.S.C. § 80a-
2(a)(32)] as any security, other than short-term paper, that confers a right upon the holder to receive in return for
shares an amount proportionate to the value that those shares represent in the total investment assets of the fund.

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counter market. During the relevant period of time, Cuculich regularly communicated with the
Company’s President.
FACTS
I. THE LIQUIDITY RULE AND LIQUIDITY RISK MANAGEMENT PROGRAMS
21. Section 22(e) of the Investment Company Act requires a registered investment
company to satisfy a shareholder’s redemption request within seven days.
22. In 2016, the Commission adopted Rule 22e-4 under the Investment Company Act,
commonly referred to as the Liquidity Rule, “to promote effective liquidity risk management
throughout the open-end investment company industry, thereby reducing the risk that funds will
be unable to meet their redemption obligations and mitigating dilution of the interests of fund
shareholders.”
23. Section (b)(1)(ii) of the Liquidity Rule requires open-end funds to manage
liquidity risk by, among other things, establishing a written program to classify the liquidity of
each of the fund’s portfolio investments according to defined categories “using information
obtained after reasonable inquiry and taking into account relevant market, trading, and
investment-specific considerations.” The Liquidity Rule refers to this written program as a
Liquidity Risk Management Program (“LRMP”).
24. A fund’s board and the administrator of the LRMP (the “Administrator”) are both
responsible for managing the fund’s liquidity risk. As described in the October 2016 Adopting
Release for the Liquidity Rule (“Adopting Release”), “the role of the board under the rule is one
of general oversight, and consistent with that obligation [the Commission] expect[s] that
directors will exercise their reasonable business judgment in overseeing the program on behalf of
the fund’s investors.”

8
25. In addition to the board’s general oversight obligations, Section (b)(2) of the
Liquidity Rule expressly requires the board to (a) initially approve the LRMP; (b) approve the
designation of the Administrator; and (c) review, no less frequently than annually, a written
report prepared by the Administrator. As stated by the Commission in the Adopting Release:
Given the board of directors’ historical oversight role, the Commission continues
to believe it is appropriate to require a fund’s board to oversee the fund’s liquidity
risk management program. The rule’s requirements are designed to facilitate the
board’s oversight of the adequacy and effectiveness of the fund’s liquidity risk
management program.

26. The Liquidity Rule contains four liquidity classifications for investment assets
held by an investment company: “highly liquid investment,” “moderately liquid investment,”
“less liquid investment,” and “illiquid investment.”
27. Section (a)(8) of the Liquidity Rule defines an “illiquid investment” as “any
investment the fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without significantly changing the market value of the
investment . . . .”
28. Section (a)(10) of the Liquidity Rule defines a “less liquid investment” as an
investment that can be sold or disposed of in seven calendar days or less “but where the sale or
disposition is reasonably expected to settle in more than seven calendar days.”
29. Section (b)(1)(iv) of the Liquidity Rule limits the amount of illiquid investments
that can be held by a fund. If a fund holds more than 15% of its net assets in illiquid investments,
Section (b)(1)(iv)(A) requires the fund to cause the Administrator to report the occurrence to the
fund board within one business day along with an explanation of the extent and causes of the
occurrence and to explain how the fund plans to bring its illiquid assets under the 15% limit
within a reasonable period of time. Rule 30b1-10 [17 C.F.R. § 270. 30b1-10] of the Investment

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Company Act also requires the fund to report the breach in a confidential filing with the
Commission on Form N-RN.
2

30. Section (b)(1)(iv)(B) of the Liquidity Rule provides that if the fund’s illiquid
investments remain above 15% of net assets 30 days from the occurrence (and at each
consecutive 30 day period thereafter), the fund’s board is required to assess whether the plan
presented to it by the Administrator to reduce the illiquid investments continues to be in the best
interest of the fund.
31. The original date pursuant to which smaller entities (like the NYSA Fund) had to
comply with all of the provisions of the Liquidity Rule was June 1, 2019. On February 2, 2018,
the Commission adopted an interim final rule that extended the compliance date for certain
aspects of the Liquidity Rule for smaller entities until December 1, 2019.
32. Under the interim final rule, the NYSA Fund was required to adopt and
implement a LRMP and appoint an Administrator by June 1, 2019. The Fund’s Board, however,
was not required to approve the LRMP until December 1, 2019.
33. The NYSA Fund was also required by June 1, 2019 to determine which of its
investments were “illiquid,” as defined in the rule, for purposes of complying with the rule’s
15% limit on illiquid investments.
34. As such, if on June 1, 2019 or at any time thereafter, the NYSA Fund’s illiquid
investments exceeded 15% of net assets, the Fund was required, within one business day, to
report such an occurrence to the board—“with an explanation of the extent and causes of the
occurrence, and how [the Fund] plan[ned] to bring the illiquid investments to or below 15% of
net assets within a reasonable period of time”—and also make a confidential filing with the

2
 During all relevant times referred to herein, Form N-RN was known as Form N-LIQUID. In August 2022, the
Commission renamed Form N-LIQUID to Form N-RN.

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Commission on Form N-LIQUID.
35. Starting on December 1, 2019, the Fund had to review its portfolio investment
liquidity classifications on at a monthly basis.
II. THE COMPANY SHARES HELD BY THE FUND WERE ILLIQUID, WERE
RESTRICTED SECURITIES, AND ALSO WERE SUBJECT TO
CONTRACTUAL TRANSFER RESTRICTIONS

36. From June 1, 2019 through at least June 16, 2020, the NYSA Fund held
approximately 21% to 26.38% of its net assets in illiquid investments.
37. The largest illiquid investment held by the NYSA Fund was 84,332 shares of the
Company that the Fund purchased in private placement transactions between 2007 and 2009 (the
“Company Shares”).
38. In the private placement memoranda (“PPM”) pursuant to which the NYSA Fund
purchased the shares, the Company disclosed as a “risk factor” that “[t]here is no market for the
Units, and there can be no assurance that any market will ever develop.” The Company
specifically warned in the PPM that “[i]nvestors should be prepared to hold their investment in
the Units indefinitely and cannot expect to be able to liquidate their investment readily, even in
the case of emergency.”
39. The subscription agreement pursuant to which the NYSA Fund purchased the
Company Shares, and signed by Fund’s then portfolio manager, likewise disclosed that the
shares were not registered under the Securities Act of 1933 (the “Securities Act”) and could not
be resold or transferred unless they were subsequently registered under the Securities Act or an
exemption from such registration was available.
40. The subscription agreement further stated that purchasers were “aware and
acknowledge that, because of the substantial restrictions on the transferability of the [shares], it

11
may not be possible for you to liquidate your investment in the Company readily even in the case
of an emergency.”
41. The subscription agreement also stated that “neither this Agreement nor any rights
which may accrue to you hereunder may be transferred or assigned.”
42. The subscription agreement also stated that purchasers “will not, directly or
indirectly, assign transfer, offer, sell, pledge, hypothecate or otherwise dispose of all or any part
of your Securities or Warrant Units (or solicit any offers to buy, purchase, or otherwise acquire
or take a pledge of all or any part of the Securities or Warrant Units) except in accordance with
the registration provisions of the Securities Act or an exemption from such registration
provisions . . . and with the terms of the Operating Agreement.”
43. As of June 1, 2019, the NYSA Fund’s investment in the Company Shares
represented approximately 23.45% of the Fund’s net assets.
44. At all times before and after June 1, 2019, the NYSA Fund reported the Company
Shares as “illiquid” in its shareholder reports and financial statements.
45. In shareholder reports, the NYSA Fund disclosed that “market quotations . . . are
not readily available” for the Company Shares.
46. In addition to the fact that the Company Shares were restricted from resale under
the Securities Act, contractual provisions in the Company’s operating agreement further limited
the transferability of the Company Shares. Both the Company and its shareholders had a right of
first refusal (“ROFR”) that required any shareholder proposing to sell their shares to first make
the shares available for purchase by the Company (with an exercise period of fifteen business
days).
47. If the Company did not intend to exercise its right to purchase the shares, within

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three business days after the end of its exercise period, the Company had to inform the remaining
shareholders of the proposed sale. The remaining shareholders then had a ten business day
exercise period in which to purchase the offered shares.
48. In sum, the ROFR potentially prevented any sale of the Company Shares by any
shareholder for twenty-eight business days.
49. Moreover, pursuant to a “co-sale provision” in the Company’s operating
agreement, all shareholders had the right to join in the selling opportunity by selling a pro rata
portion of their own shares to the prospective buyer, on the same terms and conditions as agreed
to between the selling shareholder and the prospective buyer.
50. The practical effect of the co-sale provision was that, even if a selling shareholder
found a purchaser willing to purchase its shares of the Company, the selling shareholder would
have no certainty of the number of shares it would be able to sell until the remaining
shareholders decided whether or not to exercise their co-sale rights.
51. As the Fund’s President and portfolio manager, Cuculich knew that the Company
Shares were restricted and also subject to contractual limitations on transferability.
52. As the Fund’s Chief Compliance Officer, Chief Financial Officer, Vice President,
and Treasurer, Quilty knew that the Company Shares were restricted and also subject to
contractual limitations on transferability.
III. WADACH AND WILLIAMSON, THE INDEPENDENT TRUSTEES, ALSO
KNEW THAT THE COMPANY SHARES WERE ILLIQUID INVESTMENTS

53. The NYSA Fund’s independent trustees made up the Board’s Valuation
Committee and Audit Committee. The independent trustees, the Valuation Committee, and the
Audit Committee typically met in executive session each quarter with Quilty (as CCO of the
Fund) and with the Fund’s counsel.

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54. As members of the Board’s Valuation Committee and Audit Committee, Wadach
and Williamson were responsible for, among other things, valuing the Company Shares every
month according to generally accepted accounting principles (“GAAP”) and meeting with the
Fund’s auditor at the conclusion of every annual audit, respectively.
55. The Fund’s written valuation procedures stated that all restricted securities are
deemed to be illiquid.
56. Wadach and Williamson frequently discussed the challenges of valuing the
Company Shares during the quarterly meetings of the independent trustees, the Valuation
Committee, and the Audit Committee.
57. Through their valuation work on the Company Shares, Wadach and Williamson
both knew that the Company Shares were illiquid, as there was no identifiable market for the
Company Shares, and were subject to numerous transfer restrictions.
58. At the conclusion of each annual audit of the NYSA Fund, the NYSA Fund’s
auditors met with Wadach and Williamson in their capacity as members of the Fund’s Audit
Committee.
59. At the 2017 audit meeting, the auditors expressed concern to Wadach and
Williamson that the Company Shares, an illiquid investment, were the second largest portfolio
holding (then 22.75%).
60. At the 2018 audit meeting, Wadach and Williamson acknowledged to the auditors
that the Fund had “no exit strategy” for its investment in the Company Shares.
IV.       FUND       COUNSEL       REPEATEDLY       ADVISED DEFENDANTS THAT THE
COMPANY SHARES WERE ILLIQUID AND THAT THE BOARD NEEDED TO
COMPLY WITH THE LIQUIDITY RULE

61. From at least 2013 until June 14, 2019, the NYSA Fund was represented by an

14
attorney with significant experience in the investment management industry (“Fund Counsel”).
62. At NYSA Fund Board meetings on June 16, 2017 and September 17, 2018,
attended by all Defendants, Fund Counsel explained the newly-adopted Liquidity Rule, the
reporting obligations that would take effect in June 2019, and the importance of developing a
strategy for the Fund’s compliance with the Liquidity Rule.
63. At a meeting of the independent trustees and the Audit Committee on June 16,
2017, Wadach stated that he and Williamson had recently met with the Fund’s auditors. Wadach
stated several times that the auditors were concerned about the Company Shares investment (the
second largest investment in the Fund) because it was an illiquid investment.
64. Wadach and Williamson stated that the auditors were “uncomfortable” about the
Company Shares and the largest position in the portfolio “because if something goes wrong with
those holdings it could sink the ship.” Wadach reported that he had told the auditors that the
Board was aware of this.
65. At the same meeting, Fund Counsel asked Quilty how the Fund could rectify the
issue. Quilty responded that the Company Shares were restricted securities and could not be sold
or transferred in the absence of an exemption from the registration requirements.
66. Quilty also stated that it is very difficult to transfer shares that have been issued in
a private placement.
67. On June 11, 2018, the NYSA Fund filed with the Commission on Form N-CSR
3

its annual shareholders report for the year ended March 31, 2018. In the report, signed by
Cuculich and Quilty, the Fund stated that the Company Shares, which represented more than

3
 Sections 30(a), (b), and (e) of the Investment Company Act [15 U.S.C. §§ 80a-29(a), (b), and (e)] require
registered investment companies to file and/or provide annual and semi-annual reports to their shareholders. Form
N-CSR must be filed within ten days after the transmission to shareholders of any annual or semi-annual report that
is required pursuant to Rule 30e-1 under the Investment Company Act [17 C.F.R. § 270.30e-1].

15
20% of the Fund’s net assets, “are subject to restrictions such as transferability and market
quotations that are not readily available for the purpose of valuing this portfolio holding.” The
report also stated that the Company Shares were illiquid securities and that while the Fund “may
not invest more than 15% of its net assets in illiquid securities . . . the 15% limitation is not
violated unless the excess results immediately and directly from the acquisition of any security.”
68. At the combined meeting of the independent trustees, Audit Committee, and
Valuation Committee on June 18, 2018, Wadach reported to the Audit Committee that he and
Williamson had met with the Fund’s auditors to discuss the most recent annual audit, and the
auditors had asked why the Fund had held onto the Company Shares for over thirteen years.
Wadach explained that the reason was because the Company had the potential to be bought out
or taken over.
69. Fund Counsel responded to Wadach that it was unusual for a company trying to
position itself to be taken over to not have audited financial statements and reminded Wadach
and Williamson “that they play a watchdog role, a risk oversight role—for the Fund.” She stated
that the more information that the Trustees have, then the better they can fulfill their obligations
for the Fund.”
70. At this June 18, 2018 combined meeting, Fund Counsel also stated that she was
concerned that the Fund was so concentrated in a few securities and advised the Fund to have a
plan in place to adopt and implement an LRMP. Fund Counsel informed the trustees, when
Williamson asked, that the Fund would need to have an LRMP in place by June 2019.
71. At the NYSA Fund’s quarterly Board meeting on September 17, 2018, attended
by all Defendants, Fund Counsel stated that the Fund would have to comply with the Liquidity
Rule by June 1, 2019, and that “now is the time to look at the rule and develop a strategy for the

16
Fund.”
72. At the combined meeting of the independent trustees, Audit Committee, and
Valuation Committee on December 14, 2018, Fund Counsel told Wadach, Williamson, and
Quilty that there “continues to be a concern for the percentage of illiquid securities within the
Fund.”
73. On February 20, 2019, the SEC staff communicated to Fund Counsel their
comments on the NYSA Fund’s June 11, 2018 Form N-CSR filing:
It appears that the Fund invests significantly in illiquid securities [Company
Shares]. Given the liquidity profile of these investments, please explain how the
Fund determined that its investment strategy is appropriate for the open-end
structure. Your response should include general market data on the types of
investments and information concerning the relevant factors referenced in the
release adopting 22e-4 under the 1940 Act. See Investment Company Liquidity
Risk Management Programs, Rel. No. IC-32315. October 13, 2016 (Adopting
Release) at pages 154-155.

74. On the same day she received the SEC staff’s comments, Fund Counsel sent a
memorandum to Cuculich, Quilty, and Trustee A, providing the SEC staff’s comments and
stating: “Let’s discuss this request at the [quarterly compliance] meeting tomorrow, and again
once you have had an opportunity to look at Rel. No. IC-32315 [the Liquidity Rule Adopting
Release], especially pages 154 and 155.”
75. On February 21, 2019, Fund Counsel met with Cuculich, Quilty, and Trustee A
for the quarterly compliance meeting.
76. Fund Counsel explained that SEC staff was asking for a response in the next 30
days as to how Fund management had determined that the illiquid Company Shares and other
illiquid investments were appropriate for an open-end investment company. Fund Counsel stated
“if we read between the lines of the SEC’s questioning, we can conclude that these illiquid
investments are not appropriate for the Fund.”

17
77. Fund Counsel recommended that the Fund develop an exit strategy for the illiquid
securities by June 1, 2019, and noted that the LRMP needed to be in place by June 1, 2019.
78. On February 24, 2019, Fund Counsel sent a second memorandum to the Fund’s
Board in which she wrote:
We will focus a significant amount of time during the [Board’s March 7, 2019
annual self-assessment] meeting on the requirements of Rule 22e-4 relating to the
Mutual Fund Liquidity Risk Management Programs . . . . The Board of Trustees
will be required to approve the LRM Program, as well as the Administrator of the
LRM Program, and will have oversight responsibility for the program. We will
discuss the responsibilities of the Board of Trustees for the LRM Program at our
meeting on March 7, 2019.

79. In an email dated February 26, 2019, Fund Counsel recommended to Cuculich
and Quilty that they become familiar with the Liquidity Rule and the Commission’s FAQs on
liquidity risk management programs, and provided a link to the FAQs.
80. At the NYSA Fund’s quarterly Board meeting on March 8, 2019, attended by all
Defendants, Fund Counsel stated that the percentage of the Fund’s net assets invested in illiquid
securities was well over 15%, and noted that, if the portfolio included over 15% of net assets in
illiquid securities on June 1, Fund management would be required to provide the trustees with a
plan for restructuring the portfolio to bring that percentage down to 15%.
V. IN APRIL AND MAY 2019, THE FUND SPECIFICALLY TOLD THE
COMMISSION THAT THE COMPANY SHARES WERE ILLIQUID
INVESTMENTS

81. On April 2, 2019, in response to the SEC staff’s comments to Fund Counsel in
February 2019, the NYSA Fund sent a letter to the SEC staff stating that 22.75% of the Fund’s
net assets were in illiquid securities. At that time, the Company Shares represented
approximately 21.41% of the Fund’s net assets.
82. The letter stated that “Management also recognizes that [the Company Shares] are

18
subject to restrictions on transfer, and that, accordingly . . . would be appropriately classified as
‘restricted’ securities which, by definition, are illiquid securities in the absence of any trading
market.” Cuculich and Quilty signed the letter.
83. On April 3, 2019, Fund Counsel emailed Cuculich, Quilty, and Trustee A, stating
that the SEC staff had informed her that the Fund’s April 2, 2019 letter did not address the
specific factors described in the Liquidity Rule and the Adopting Release for determination of
the appropriate liquidity classification of the Company Shares and also asked that the Fund
provide a supplemental response.
84. In early May 2019, Fund Counsel, Cuculich, Quilty, and Trustee A exchanged
multiple emails to formulate a response to the SEC staff’s questions and also participated in at
least one conference call to discuss this issue.
85. In connection with the discussions to formulate the response, on May 6, 2019,
Trustee A emailed Cuculich, Quilty and Fund Counsel, stating:
Identifying a potential purchaser of a portion of NYSA’s [Company Shares] at
this time would be difficult given the uncertainty over the terms and conditions of
the [Company’s intellectual property sale]; the timing of the sale; exactly how
[the Company] intends to dispose of the proceeds from the sale; and the number
of shares Nysa [Fund] would actually want to sell.

86. Fund Counsel agreed by email, and suggested that the Fund could still “scope out
the parameters of such a sale” and “do the math” to determine the number of shares the Fund
would need to sell to comply with the 15% limit on illiquid investments.
87. On May 9, 2019, Quilty sent a letter to the Company with questions from Fund
Counsel. The letter also stated that the Fund intended to inform the SEC of an impending sale of
intellectual property from the Company to a third-party.
88. On May 13, 2019, Trustee A emailed Cuculich, Quilty, and Fund Counsel.

19
Trustee A stated that, in response to Quilty’s letter, the Company replied that it “wants no public
disclosure of its pending transaction.” Trustee A continued that “[g]iven that the pending
transaction was the essence of our argument to the SEC to allow the Nysa Fund to maintain
ownership of [the Company Shares], it looks like we’ll need to reconsider our position.”
89. In a separate email on May 13, 2019, Trustee A circulated a draft letter to SEC
staff to Cuculich, Quilty, and Fund Counsel.
90. The following day, on May 14, 2019, Fund Counsel emailed comments on the
draft letter to SEC staff to Cuculich, Quilty, and Trustee A:
I think that the letter would be stronger if we could categorically state (1) that the
Fund is currently seeking a purchaser or purchaser for a portion of the [Company
Shares] position, (2) that we have identified an exemption from the registration
requirements of the Securities Act of 1933 pursuant to which shares of [the
Company] could be sold, and (3) that we expect that the sale of those shares
would occur much sooner than the target disposition date. I say that because the
Fund has known since October of 2016 that it would have to pare down its
position in illiquid securities. I also believe that the staff would consider two and
a half years an ample period of time to divest all or a portion of the position in
order to be in compliance with the rule by its compliance date which has been
extended to June 1, 2019 for smaller Funds. That is, regulators could take the
position that the Fund has been on notice that it needed to restructure its portfolio
since 2016 and, if the Fund has not divested a sufficient portion of its illiquid
investments by June 1, the Fund will be viewed as having disregarded the rule.

(emphasis in original).

91. On May 14, 2019, Cuculich replied to Quilty and Trustee A, leaving Fund
Counsel off of the email: “I am finding avenues to dispose of some of the [Company Shares]. I
am not at this time seeking a purchaser. I do not want to be boxed into a date.”
92. On May 17, 2019, the NYSA Fund sent a letter to SEC staff noting that the
Company Shares comprised approximately 23.45% of the Fund’s net assets and that “[t]he Trust
considers its position in [the Company Shares] to be an illiquid investment as that term is defined
in Rule 22e-4.” The NYSA Fund proposed that it be allowed to retain the Company Shares until

20
November 1, 2019 in light of the anticipated intellectual property transaction between the
Company and a third-party. The letter also proposed that if the Fund continued to hold more than
15% of net assets in illiquid securities by November 1, 2019, the Fund would “expeditiously take
all appropriate and necessary steps to reduce the amount of illiquid investments in its portfolio to
the limit prescribed by Rule 22e-4.” Cuculich and Quilty signed the letter.
93. On May 20, 2019, Fund Counsel suggested that Quilty ask the Company whether
it would exercise the ROFR and on May 21, Quilty attempted to contact the Company President.
94. On May 22, 2019, the Company’s President emailed Quilty in response to
Quilty’s voicemail message from the prior day “regarding transferability of securities” and
attached the Company’s operating agreement, subscription agreement, and private placement
memorandum. The Company’s President specifically referred Quilty to Article XI, “Transfer of
Securities,” in the operating agreement, and paragraph 8(f) on page 7, “Transfers and
Transferability,” of the subscription agreement. These sections outline, respectively, the ROFR
and co-sale provisions, which limited the resale and transfer of the Company Shares, and the
requirement to register any resale or transfer under the Securities Act, unless an exemption from
such registration was available.
95. During this time frame, Cuculich also asked the Company’s President if the
Company could help the Fund sell some of its shares but was told that the Company could not
provide this assistance.
96. On May 24, 2019, Fund Counsel emailed a memorandum to Cuculich, Quilty, and
Trustee A, summarizing her discussions with SEC staff who had told her that the NYSA Fund’s
response was not satisfactory. Fund Counsel stated that the SEC staff wanted the Fund to explain
“why the proposed timeline described in your draft letter is a ‘reasonable period of time.’”

21
97. Fund Counsel noted these issues had to be discussed “sooner rather than later”
given that “[t]he Fund’s portfolio has been under scrutiny by [SEC staff] for several years now.”
98. On May 28, 2019, Fund Counsel emailed an agenda to Cuculich, Quilty, and
Trustee A for a meeting later that day. The agenda topics included: “Review and Discussion of
[Fund Counsel’s] Memorandum dated as of 05-25-19”; developing a response to SEC staff’s
inquiry; “Formulation of Plan of Divestiture” for the Company Shares, including a discussion of
the implications of Rule 22e-4(b), actions to be taken before and after June 1, 2019, and
“Discussions with [the Company] – Counsel’s Recommendations”; disclosures relating to
investments in illiquid securities for the Fund’s registration statement; and the upcoming
quarterly meeting of the Board on June 14, 2019.
99. In a separate email on the same day, Fund Counsel emailed Cuculich, Quilty, and
Trustee A a chart of compliance dates for the Liquidity Rule.
VI. DEFENDANTS CLASSIFY THE COMPANY SHARES AS “LESS LIQUID,”
REJECTING THE ADVICE OF FUND COUNSEL AND THE AUDITORS

100. On May 29, 2019 at 11:31a.m., Trustee A emailed Cuculich, Quilty, and Fund
Counsel, questioning for the first time whether the Company Shares, in fact, met the definition of
an “illiquid investment” under the Liquidity Rule.
101. That night, at 7:44 p.m., Fund Counsel emailed her response to Cuculich, Quilty,
Trustee A, and added the Fund’s auditors, concluding that “[w]here, as here, there is no trading
market for the portfolio security in question, and where there appear to be restrictions on trading
and also contractual limitations on transfer, I believe that [the Company Shares are] properly
classified as an illiquid investment for purposes of financial statement disclosure, prospectus
disclosure and Rule 22e-4.”
102. Later that night, at 9:20 p.m., Cuculich forwarded Trustee A’s 11:31 a.m. email to

22
Williamson without also forwarding the responsive email from Fund Counsel.
103. On May 30, 2019, Trustee A emailed Fund Counsel, copying Cuculich, Quilty,
and the Fund’s auditors, stating that it appeared reasonable to him that the Company Shares were
a less liquid investment and “[a]s for the position the Fund should take with the SEC, I think that
should be dictated by the language of Rule 22e-4 and how the Fund’s management, board,
outside counsel and auditors apply that language to the [Company] holding.”
104. On May 31, 2019, Fund Counsel emailed Cuculich, Quilty, Trustee A, and the
Fund’s auditors recommending that the NYSA Fund retain the “illiquid” classification for the
Company shares.
105. In this email, Fund Counsel added that, since her 7:44 p.m. email on May 29,
2019:
I have received a copy of a [Company] Share Certificate from Ben [Quilty] which
evidences both legal restrictions on transfer, as evidenced by the standard 1933
Act legend, and contractual restrictions on transfer, resulting from the reference to
the agreement which gives [the Company] a right of first refusal in the event that
a member of the company wishes to sell his, her or its shares. Moreover, Bob
Cuculich has told me that he has spoken with [the Company’s President], and that
[the Company] has no interest in re-purchasing shares owned by the Fund. I do
not believe that there is any trading market for shares of [the Company], and the
fact that we have already signaled to the SEC that we cannot readily sell a
sufficient number of shares to bring the total percentage of illiquid investments to
below 15% also favors a conclusion that the [Company] investment is an illiquid
investment.

106. Fund Counsel also expressed a concern about the “optics of attempting to re-
classify the [Company Shares] as a ‘less liquid’ investment just as the Fund must comply with
Rule 22e-4.”
107. Fund Counsel further advised that “if the board were to consider a
reclassification, it would be very important to document a conclusion to re-classify the
[Company Shares]. What would be the date of the re-classification? Would the auditors be asked

23
to re-classify the holding for purposes of the Annual Report to Shareholders?”
108. On June 2, 2019, Fund Counsel circulated a draft LRMP to the trustees,
Cuculich, Quilty, and the auditors, noting that Cuculich and Quilty had only asked her
two days prior to draft the LRMP for the Fund and stated:
Given the fact that the effective date of the Program is June 1, 2019, and that we
have been requested to provide a copy of it to the SEC this week, we really do not
have the luxury of time to go back and forth with rounds of comments . . . Note
also that management must provide the divestiture plan to the trustees by
tomorrow.

109. The draft LRMP also contained the following:
While the Board of Trustees has appointed the Administrator to implement the Program,
the Board of Trustees acknowledges that it has oversight responsibility for this Program
as well as general oversight responsibility for the risks attendant to operations of the
Fund. . . .

110. The language in Fund Counsel’s draft LRMP concerning the oversight
responsibility of the Board relating to the liquidity program was similar to statements made in
the Fund’s July 27, 2018 and July 29, 2019 Statements of Additional Information, issued as a
part of the Fund’s registration statements, that “[u]nder the supervision of the Board of Trustees,
the Adviser [Pinnacle] determines the liquidity of the Fund’s investments.”
111. The draft LRMP circulated by Fund Counsel included numerous references to the
fact that the Fund held positions in illiquid securities that were in excess of 15% of the Fund’s
net assets and stated that on June 3, 2019, the Administrator would provide the Board with a
written report explaining the extent and causes of the occurrence and a plan to bring the illiquid
investments to or below 15% of net assets, and would file the Form N-LIQUID with the
Commission.
112. On June 3, 2019, Trustee A emailed his edits to the draft LRMP to Fund Counsel,
Cuculich, and Quilty. At each reference of the existence of illiquid investments in the Fund’s

24
portfolio, or that the illiquid investments exceeded 15% of the Fund’s net assets, Trustee A
added comments questioning whether the Board or Fund management had reached these
conclusions.
113. Fund Counsel replied to Trustee A, asking whether he had discussed these issues
with Williamson and Wadach in light of the SEC staff’s question how the trustees had concluded
that the proposed November timeframe to dispose some of the Company Shares was
“reasonable.”
114. Fund Counsel also asked also whether there was any news from the Fund’s
auditors on their views regarding the Liquidity Rule classification for the Company Shares.
115. On June 3, 2019, Quilty emailed Fund Counsel seeking clarification on the
mechanics of filing the Form N-LIQUID (which would be required if the Fund’s net assets
included more than 15% of illiquid investments), to which Fund Counsel replied:
Here’s the thing. Why even file [the Form N-LIQUID] if you accept [Trustee A’s]
position that [the Company Shares are] not an illiquid investment? But then if you
take that position, how will you respond to the SEC’s most recent comment which
encompasses both [the Company Shares and another portfolio investment] . . . I
am recommending that [Trustee A] call [the Fund’s auditor] to get his opinion . . .
I have given my opinion that [the Company Shares are] an illiquid security, and I
am standing behind it.

116.  On June 4, 2019, Fund Counsel emailed Quilty, copying Cuculich and Trustee A:
Ben, Rule 30b1-10 requires open-end Funds to file, on a nonpublic basis, Form N-
LIQUID to report (a) holdings of Illiquid Investments in excess of the Illiquid
Investments threshold at any time . . . The form is to be filed, as applicable, within one
business of day (sic) of a final determination that the Fund is not in compliance with the
applicable limit. See attached, and give me a call to discuss. Compliance date—June 1,
2019.

117. Quilty replied to Fund Counsel’s email on the same day, attaching a draft Form
N-LIQUID: “Here’s what I have for Form N-LIQUID, if we deem the security illiquid.”
118. On June 6, 2019, Quilty sent a revised unanimous written consent to the trustees.

25
The revised consent stated that the Board appointed Pinnacle as Administrator effective June 3,
2019, and approved the Administrator’s delegation of responsibility for implementing the LRMP
to Cuculich and Quilty.
119. On June 6, 2019, Fund Counsel circulated a revised draft LRMP to Cuculich,
Quilty, and Trustee A, reiterating that Fund management needed to acknowledge the necessity of
managing the portfolio in accordance with applicable regulations, including the Liquidity Rule.
120. Fund Counsel also wrote “I see no reason to strike the sentence [stating that the
portfolio includes securities currently classified as illiquid] and I would recommend that it not be
eliminated, especially in view of the fact that the Fund has not yet resolved issues relating to
liquidity raised by the staff of the SEC over three months ago. I believe that this sentence
illustrates a reality that needs to be addressed, and that the inclusion of the sentence will be
viewed favorable (sic) by the staff.”
121. Fund Counsel added a comment to the draft LRMP asking what conclusion has
been reached with regard to the illiquid investments in the portfolio.
122. Fund Counsel also advised against deleting a statement in the LRMP that stated
that “it will not be sufficient to rely on the definitions of each classification found in Rule 22e-
4(a). For example, as noted in the Adopting Release, the Fund also must consider the
investment’s market depth in classifying the investment.” In her comments, Fund Counsel
explained that “in the adoption of Rule 22e-4, the SEC placed much of the important information
for Funds in the Adopting Release, and later in the FAQs.”
123. In an exchange of emails on June 7, 2019, between Fund Counsel, Cuculich,
Quilty, and Trustee A, Trustee A asked Fund Counsel to hold off providing the LRMP to the
SEC staff and expressed his understanding that the classification presented to the SEC staff

26
would be the Administrator’s preliminary classification, and not a classification actually adopted
by the board. Trustee A also stated that the auditors believed that the Company Shares should be
classified as illiquid. Trustee A also reported that he spoke with Wadach that morning and that
Wadach was “inclined to agree with the auditors and outside counsel on the [Company Shares]
classification, but wanted to know what Charlie’s [Williamson’s] opinion was.” Trustee A stated
that he would call Williamson the same day.
124. Also on June 7, 2019, Quilty emailed a draft Form N-LIQUID to Trustee A.
Trustee A replied, adding Cuculich, that “[t]his is no longer the appropriate filing.”
125. On June 10, 2019 at 8:54 a.m., Trustee A emailed Cuculich and Quilty: “Are you
available for a call this morning at 10:00 about NYSA? My understanding is that Nysa’s LRMP
Administrator has decided to classify [the Company Shares] as illiquid, as opposed to less liquid,
which is contrary to what I reported to the Nysa independent trustees on Friday [June 7, 2019].”
126. On June 10, 2019 at 11:21 a.m., Quilty sent Cuculich and Trustee A a draft letter
addressed to SEC staff regarding the “less liquid” classification for the Company Shares. The
draft letter stated that the Administrator concluded that the Company Shares “could be expected
to be sold or disposed of within seven calendar days or less without the sale or disposition
significantly changing the market value of the investment,” based upon recent sales of the
Company Shares, investor interest at the Fund’s affiliated broker-dealer, the positive news that
the Company was closing on a sale of its intellectual property (a medical device) to a third-party,
and the stated preference by the Company’s President that the Fund not re-sell its shares at a
price less than the Company’s then-offering price of $5.50/share.
127. Trustee A provided Quilty with edits on the draft letter, adding that the
Company’s ROFR, combined with its preference that the Fund not re-sell its own shares at a

27
price of less than $5.50/share, “presents another potential buyer for the Fund ion (sic) the event it
sought to sell some or all of its [Company Shares].”
128. Later that day, at 4:06 p.m., Cuculich forwarded the revised draft letter to Fund
Counsel.
129. That night, Fund Counsel emailed Cuculich, Quilty, and Trustee stating: “I have
repeatedly said that I see no basis for classifying [the Company Shares] as a ‘less liquid’
investment under Rule 22e-4.”
130. On June 10, 2019, against the advice of Fund Counsel, Cuculich, Quilty, and
Trustee A had the Fund send the SEC staff a letter, signed by Cuculich, stating that the LRMP
Administrator concluded that the Company Shares were a “less liquid” investment (the “June 10
Letter”).
131. The June 10 Letter claimed that the NYSA Fund could sell the Company Shares
within seven calendar days or less, but omitted to disclose the transfer restrictions, or to address
the fifteen-day and ten-day ROFR exercise periods or the co-sale provision.
132. The June 10 Letter claimed that the ROFR provision represented another potential
buyer for the Company Shares held by the Fund, which was misleading because the letter did not
disclose that the Company’s President had expressly told Cuculich, Quilty, and the board, on or
around May 16, 2019, that the Company would not purchase any of the Fund’s shares.
133. The June 10 Letter claimed that the Company had “recently sold its shares” at a
price higher than the Fund’s valuation of the Company Shares, which was false or misleading
because, as Quilty, Cuculich, and Trustee A knew or recklessly disregarded, the Company had
last issued shares in August 2018, almost one year prior.
134. The June 10 Letter claimed that customers of the Fund’s affiliated broker-dealer

28
had expressed interest in purchasing the Company’s shares, which was false or misleading
because, in fact, none had done so, which Cuculich, Quilty, and Trustee A knew or recklessly
disregarded.
135. The June 10 Letter claimed that the news of an impending sale of intellectual
property by the Company to a third-party had “stimulated interest in the company,” which was
false or misleading because the potential sale had not been publicly disclosed, which Cuculich,
Quilty, and Trustee A knew or recklessly disregarded.
136. On June 11, 2019, Fund Counsel sent a revised LRMP (the “June 2019 LRMP”)
to Cuculich, Quilty, and Trustee A. In her email, Fund counsel commented, “I did not realize
until yesterday, that the re-classification of investments currently classified as ‘illiquid’ would
occur with (sic) a discussion of the Board of Trustees. I strongly encourage management to
discuss these issues with the Board at the meeting scheduled for this week (June 14).”
137. Also on June 11, 2019, Fund Counsel resent her June 7, 2019 email to Trustee A,
Cuculich, and Quilty, reiterating that a full board discussion would be needed to change the
classification of the Company Shares from “illiquid” to “less liquid.”
138. Trustee A replied to Fund Counsel on the same day, copying Cuculich and Quilty,
objecting to her claim that she had repeatedly advised that there was no basis for the “less liquid”
classification, and describing the reasoning for the Fund’s “less liquid” classification as had been
articulated in the June 10 letter that the Fund sent to the SEC staff.
139. On June 13, 2019, Fund Counsel responded to Trustee A, copying Cuculich and
Quilty, stating that “[f]or the reasons that we have discussed, I have not agreed with the analysis.
The four corners of the rule includes much more than the definition [in the Liquidity Rule] to
which you refer. Reasonable people can disagree. For now, I will just note that the advice that

29
you provided is not advice that I would have given.”
140. On June 13, 2019, Fund Counsel sent Wadach, Williamson, and Quilty an agenda
for the combined meetings of the independent trustees, the Audit Committee, and the Valuation
Committee, to be held the following day. The agenda included: a review of fund governance
standards, a discussion of the responsibilities of the independent trustees under the LRMP, a
discussion of the risk profile of the fund, and a discussion of the SEC staff’s inquiry.
141. On June 13, 2019, and in connection with the Board meeting scheduled for the
following day, the Board’s Secretary emailed the trustees the June 2019 LRMP. The document
included the following statement: “While the Board of Trustees has appointed the Administrator
to implement the Program, the Board of Trustees acknowledges that it has oversight
responsibility for this Program as well as general oversight responsibility for the risks attendant
to operations of the Fund.”
VII.     FUND COUNSEL RESIGNS AT THE JUNE 2019 BOARD MEETING

142. On June 14, 2019, the NYSA Fund Board met at Pinnacle’s offices for its
regularly scheduled quarterly meeting (the “June 2019 meeting”). The June 2019 meeting was
attended by all Defendants.
143. Before any of the agenda items were discussed, Fund Counsel announced her
resignation and distributed a letter of resignation.
144. Fund Counsel then met privately with Wadach and Williamson. At the conclusion
of the private meeting, Fund Counsel excused herself from the boardroom and left the office.
145. In the full Board meeting, Wadach and Williamson declined to disclose what they
had privately discussed with Fund Counsel.
146. Wadach and Williamson were required to meet in an executive session with

30
Quilty as independent trustees and as members of the Valuation Committee and Audit
Committee. At Quilty’s recommendation, they decided not to hold the executive session.
147. Quilty informed the Board that the “less liquid” classification for the Company
Shares had been presented to SEC staff, and that he and Cuculich, as the LRMP Administrators,
would present the classification and would also discuss the LRMP at the September 2019 Board
meeting.
148. Notwithstanding Fund Counsel’s advice that a full Board discussion be had before
changing the classification of the Company Shares from “illiquid” to “less liquid,” there was no
discussion concerning the change in classification at the June 2019 meeting.
149. At the June 2019 meeting, Quilty also stated that the “auditors are focused on the
valuation of the private placements [largely comprised of the Company Shares] in the portfolio.”
150. On the same day, the Board appointed Pinnacle as Administrator, effective June
3, 2019, and approved the Administrator’s delegation of responsibility for implementing the
LRMP to Cuculich and Quilty.
151. On June 14, 2019, Fund Counsel emailed the SEC staff “to advise that my firm
has terminated its engagement with Nysa Series Trust (811-07963), effective as of this date (06-
14-19)” and asked that her firm’s “name be removed from the Trust’s registration statement on
Form N-1A.”
152. On June 24, 2019, Cuculich sent the SEC staff a second letter (drafted by him,
Quilty, and Trustee A) (the “June 24 Letter”), that was virtually identical to the June 10 Letter,
stating that Pinnacle, as the Administrator, had concluded that the Company Shares were a “less
liquid” investment. The June 24 Letter attached a copy of the June 2019 LRMP, and stated that
the Administrator would present its preliminary classification of the Fund’s investments to the

31
board at the September 2019 board of trustees meeting, and “[a]t that time, the Board’s
assessment of the investment liquidity classifications will be taken into account by the
Administrator for final determination.” Cuculich signed the letter as President of the NYSA
Fund.
VIII    LIQUIDITY    DISCUSSIONS    AFTER FUND COUNSEL RESIGNS
A. The September 2019 Board Meeting
153. On September 13, 2019, the NYSA Fund Board met at Pinnacle’s offices for its
regularly scheduled quarterly meeting. The meeting was attended by all Defendants.
154. The materials provided to the Board prior to the meeting included the June 2019
LRMP, which included the language: “While the Board of Trustees has appointed the
Administrator to implement the Program, the Board of Trustees acknowledges that it has
oversight responsibility for this Program as well as general oversight responsibility for the risks
attendant to operations of the Fund.”
155. The first item discussed at the meeting was the fee structure for the Fund’s new
counsel (“New Counsel”) who subsequently appeared by telephone and was introduced to the
board of trustees.
156. At the meeting, Trustee A reviewed for the Board the sequence of events that led
to the “less liquid” classification for the Company Shares.
157. New Counsel, who had just been engaged, expressed that he did not have an
opinion as to the liquidity classification for the Company Shares.
158. Wadach stated that the Fund’s auditors opined to him that the Company Shares
were “illiquid,” and requested an update from the auditors, who were not in attendance at the
meeting, as to their opinion on the classification.

32
159. New Counsel and Quilty told the Board that they would discuss the liquidity
classification issue with the Fund’s auditors and report back to the Board. New Counsel and
Quilty did not speak to the auditors about the liquidity classification, however, until December
30, 2019.
B. The December 2019 Board Meeting
160. On or around October 11, 2019, the third-party terminated the asset purchase
agreement with the Company, declining to purchase the Company’s intellectual property. This
impending sale, and the alleged investor interest in the Company resulting from this agreement,
purported to be one of the factors relied upon by the NYSA Fund and Defendants as the basis for
the “less liquid” classification” of the Company Shares.
161. Shortly thereafter, the Company’s President informed Cuculich in a phone call of
the termination of the Company’s intellectual property asset purchase agreement.
162. On December 13, 2019, the NYSA Fund Board met at Pinnacle’s offices for its
regularly scheduled quarterly meeting. The meeting was attended by all Defendants except
Quilty.
163. At the meeting, the Board approved a revised LRMP for the Fund (the “December
2019 LRMP”).
164. The December 2019 LRMP required the Administrator to review the NYSA
Fund’s liquidity classifications on the last business day of each month using an “Asset Liquidity
Classification Evaluation Form” designed for that purpose.
165. At no time did Cuculich, or Quilty ever complete any Asset Liquidity
Classification Form concerning the Company Shares.
166. The December 2019 LRMP provided that in the event that an investment

33
classified as “illiquid” held by the NYSA Fund exceeded 15% of the Fund’s net assets, the
Administrator was required to report this occurrence to the board within one business day and
file a Form N-LIQUID with the Commission.
167. The December 2019 LRMP removed the references to the Board’s oversight
responsibility for the LRMP that were in the June 2019 LRMP.
C. The December 22, 2019 Liquidity Memorandum
168. On December 20, 2019, Trustee A emailed Quilty, copying New Counsel,
Wadach, and Williamson, and stated that he, New Counsel, and the independent trustees had a
conference call that morning where the primary discussion was the liquidity classification of the
Company Shares. Trustee A informed Quilty that a second call was scheduled for December 23
and that they wanted Quilty to distribute a memo in advance of the call presenting and explaining
management’s position and also to present management’s position at the December 23 call.
169. On December 22, 2019, Cuculich and Quilty sent a memorandum to the Board
regarding the liquidity classification of the Company Shares (the “December 22, 2019 Memo”).
The memorandum described Quilty and Cuculich as “Administrators of the Liquidity Risk
Management Program,” and stated that they had concluded that the Company Shares satisfy the
requirements of the “less liquid” classification under the Liquidity Rule.
170. The December 22, 2019 Memo restated mostly verbatim the rationale for the “less
liquid” classification provided to the SEC Staff in the June 10, 2019 and June 24, 2019 Letters,
but failed to disclose that the Company’s intellectual property asset purchase agreement had been
terminated in October.
171. On December 23, 2019, the Board met to discuss the liquidity classification for
the Company Shares. This was not a regularly scheduled Board meeting.

34
172. On December 30, 2019, New Counsel and Quilty had a phone call with the
Fund’s auditors to discuss the liquidity classification, at which time the auditors continued to
express their belief that the Company Shares were illiquid.
173. On February 10, 2020, New Counsel asked Quilty to provide him with copies of
the Company’s private placement memorandum and operating agreement.
174. On February 20, 2020, New Counsel emailed Quilty:
I looked at the Sect. 17a exemptions which might afford the Fund the opportunity
to liquidate the holdings and I don’t believe we will be able to make it happen
given the fact that we may not have an ‘independent valuation’ which meets Sect.
17a-7 at this time. Therefore, we may be stuck with just keeping the holdings
notwithstanding the growing position of possible illiquid assets until the company
either makes another offering or the company is sold. I am going to run my
thoughts by a colleague of mine and get his take on it. I do have other options
which I will get to you shortly.

D. At the February 2020 Board Meeting, New Counsel Advises that the Fund
Should Consider Classifying the Company Shares as Illiquid

175. On February 21, 2020, the NYSA Fund Board of trustees met at Pinnacle’s
offices. The meeting was attended by all Defendants.
176. At the Board meeting, New Counsel advised that the Fund needed to consider
classifying the Company Shares as “illiquid” because the Fund could not likely sell the shares
within a seven day period. He further advised that he would research and determine how the
Fund should proceed.
177. The minutes from the Board meeting do not reflect any decision made to
reclassify the Company Shares as illiquid investments.
E. The NYSA Fund’s Auditors Resign
178. On April 23, 2020, the Fund’s auditors resigned due to concerns about the
valuations of the Company Shares NYSA Fund’s illiquid securities, which were primarily the

35
Company Shares, and material weakness in the Fund’s internal controls based primarily on
Quilty’s “gross negligence” in performing asset diversification tests in 2018 and 2019, resulting
in the Fund losing its regulated investment company status under Subchapter M of the Internal
Revenue Code over a period of six months.
179. The NYSA Fund’s refusal to follow Fund Counsel’s advice on the liquidity
classification for the Company Shares was an additional consideration in the auditors’
determination of a weakness in the NYSA Fund’s internal controls and in the auditors’ decision
to resign.
F. The NYSA Fund Changes the Liquidity Classification
180. On May 22, 2020, New Counsel emailed Quilty and suggested that Quilty review
the LRMP to determine whether the Fund needed to file a Form N-LIQUID and suggested that
they discuss the matter the following week. Quilty acknowledged the suggestions.
181. At some point between May 22 and June 2, 2020, Quilty, Cuculich, and Trustee A
decided that the Company Shares should be classified as an illiquid investment. On June 2, New
Counsel emailed Quilty asking whether Quilty had scheduled a call with the trustees to discuss
the Form N-LIQUID filing, necessitated by the “illiquid” classification of the Company Shares.
182. On May 29, 2020, Trustee A for the NYSA Fund contacted the SEC staff. Trustee
A informed the SEC staff that the Fund would be unable to timely file its annual shareholders’
report and audited financial statements because the Fund’s auditors had resigned and, therefore,
the Fund was going to file a “notification of late filing” on Form 12b-25. Trustee A explained
that the auditors resigned because of concerns relating to the valuation of the Company Shares.
Trustee A also stated that fund management and the Board were considering winding the Fund
down.

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183. On June 9, 2020, Trustee A again spoke with the SEC staff concerning the
resignation of the Fund’s auditors. He told the SEC staff that the Fund expected to file the Form
12b-25 the following day but indicated again that the “longer term plan” was to wind down the
Fund. (The NYSA Fund, in fact, filed the Form 12b-25 later that same day.)
184. Trustee A also informed the SEC staff on the June 9 call that the NYSA Fund was
now classifying the Company Shares as an illiquid investment. When asked by the SEC staff
about the reasons for the reclassification from “less liquid” to “illiquid,” Trustee A responded
that in 2019, the Fund was aware of sales of shares made by the Company at prices higher than
the price at which the Fund carried those shares, but that more recently, through discussions with
the portfolio manager and others, it had become apparent that the investment was illiquid. The
SEC staff asked Trustee A when the change in classification had taken place. Trustee A also
suggested to the SEC staff that the Fund might need to attribute zero value to the Company
Shares.
185. On June 9, 2020, Trustee A emailed Wadach, Williamson, Cuculich, and Quilty
to inform them about his conversation with SEC staff. Trustee A also asked Cuculich and Quilty
for an update as to the status of the Form N-LIQUID filing, and asked them for the date that the
Fund changed its classification of the Company Shares from “less liquid” to “illiquid.”
186. On June 11, 2020, Quilty emailed a draft Form N-LIQUID to Cuculich and
Trustee A, which stated that June 1, 2020 was the date that the Fund’s illiquid investments
exceeded 15% of net assets. In a series of emails, Trustee A questioned Quilty about the basis for
the June date.
187. On June 15, 2020, Cuculich, Quilty, and Trustee A had a conference call in which
they discussed that the Company Shares were determined to be “illiquid” at the February 21,

37
2020 Board meeting and that the Form N-LIQUID would be filed on June 16, 2020.
188. Later that day, Quilty emailed Cuculich and Trustee A that the date the Fund
changed the liquidity classification from “less liquid” to “illiquid” was February 21, 2020.
189. On June 16, 2020, Quilty provided the Form N-LIQUID to the NYSA Fund’s
service provider for filing. The Form N-LIQUID stated that the Fund’s illiquid investments
exceeded 15% of net assets on February 21, 2020, and that 23.84% of the then-current net assets
were illiquid investments, comprised entirely of the Company Shares.
190. On June 16, 2020, Quilty also emailed the Board and Cuculich informing them of
the filing, and stating that the Administrator would provide more information, at or before the
next Board meeting, about this matter and the plan going forward for this investment.
G. Notwithstanding the Classification of the Company Shares from June 2019
through July 2020 as “Less Liquid” for Purposes of the Liquidity Rule,
Shareholder Reports During this Period Describe the Investment as Illiquid

191. At all relevant periods of time, the NYSA Fund provided annual, semi-annual,
and quarterly reports to Fund shareholders, which included financial statements.
192. The Fund’s annual and semi-annual shareholder reports were filed with the
Commission on Form N-CSR. The Fund’s quarterly reports were filed with the Commission on
Form N-Q. All shareholder reports filed with the Commission were available publicly on the
Commission’s website.
193. The shareholder reports were also provided to Wadach and Williamson in the
“board books” distributed prior to Board meetings.
194. On July 25, 2019, the Fund filed with the Commission its annual shareholder
report on Form N-CSR for the year ending March 31, 2019.
195. Despite the fact that the Fund had classified the Company Shares as “less liquid”

38
for purposes of Rule 22e-4, the Fund described the Company Shares as “illiquid” in the annual
shareholder report and audited financial statements.
196. The Fund reported that 22.56% of net assets were represented by illiquid
securities as of March 31, 2019 (of which 21.23% were the Company Shares).
197. Cuculich and Quilty signed and certified the Fund’s Form N-CSR for the year
ending March 31, 2019, and pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”), attested that the information contained in the Form N-CSR
“fairly presents, in all material respects, the financial condition and results of operations of the
Registrant.”
198. On August 22, 2019, the Fund filed with the Commission its quarterly shareholder
report on Form N-Q for the quarter ending June 30, 2019. The Fund reported that 24.19% of net
assets were represented by illiquid securities (comprised entirely of the Company Shares).
199. Cuculich and Quilty signed and certified the Fund’s Form N-Q for the quarter
ending June 30, 2019, and pursuant to Section 302 of the Sarbanes-Oxley Act, attested that the
information contained in the Form N-Q “fairly presents, in all material respects, the financial
condition and results of operations of the Registrant.”
200. On December 3, 2019, the Fund filed with the Commission its semi-annual
shareholder report on Form N-CSRS for the period ending September 30, 2019. The Fund
reported that 24.86% of net assets were represented by illiquid securities as of September 30,
2019 (comprised entirely of the Company Shares).
201. Cuculich and Quilty signed and certified the Fund’s Form N-CSRS for the period
ending September 30, 2019, and pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act,
attested that the information contained in the Form N-CSRS “fairly presents, in all material

39
respects, the financial condition and results of operations of the Registrant.”
H. The NYSA Fund Deregisters with the Commission
202. On June 30, Trustee A spoke with the SEC staff by phone. The SEC staff
expressed their concern that the Company Shares were not accurately valued and, as a result, the
net asset value for the Fund (and the Fund’s resulting share price) might not be accurate.
Immediately after this call, the Fund stopped selling shares.
203. On August 28, 2020, the Board approved a wind-down proposal for the NYSA
Fund, including the creation of a liquidating trust.
204. On September 8, 2020, the NYSA Fund sold all of its liquid assets, made a
distribution to shareholders, and transferred all remaining assets, including the Company Shares,
to the NYSA Liquidating Trust.
205. On September 9, 2020, the NYSA Fund filed a Notice of Application for
Deregistration under Section 8(f) of the Investment Company Act, and on September 29, 2020,
the Commission issued a deregistration order.
206. From the proceeds of the sale of liquid assets, Pinnacle created a cash reserve for
the NYSA Liquidating Trust of approximately $188,565.
207. To date, the Liquidating Trust has used approximately $130,000 to pay the
expenses of maintaining the Company Shares and approximately $39,000 on D&O insurance
policy premiums.
208. To date, the Liquidating Trust continues to hold the Company Shares and has
made no distributions to shareholders.
IX. DEFENDANTS AIDED AND ABETTED THE NYSA FUND’S VIOLATIONS
209. As described above, from June 1, 2019 to June 15, 2020, Pinnacle, Cuculich, and

40
Quilty substantially assisted the Fund in classifying the Company Shares as “less liquid” rather
than “illiquid.” They knew or recklessly disregarded that the Company Shares were “illiquid”
within the meaning of the Liquidity Rule, and that there was no reasonable basis supporting a
“less liquid” classification.
210. Between December June 1, 2019 and June 15, 2020, the Fund did not review the
liquidity classification of the Company Shares on a monthly basis (or more frequently if changes
in relevant market, trading, and investment-specific considerations were reasonably expected to
materially affect the classification) as required by Section (b)(1)(ii) of the Liquidity Rule and by
the December 2019 LRMP. Pinnacle, Cuculich, and Quilty substantially assisted this failure to
comply with the Liquidity Rule and the LRMP.
211. Between June 1, 2019 to June 15, 2020, Pinnacle, Cuculich, and Quilty knew or
recklessly disregarded that the Fund was required to report to the board any occurrence of the
Fund’s illiquid investments exceeding 15% of net assets within one business day of the
occurrence under Rule 22e-4(b)(1). Between June 1, 2019 to June 15, 2020, Pinnacle, Cuculich,
and Quilty failed to have the Fund to report such occurrence to the board.
212. Wadach and Williamson, through their oversight failure, substantially assisted the
Fund’s classification of the Company Shares as “less liquid.” They knew or recklessly
disregarded that the Company Shares were “illiquid” within the meaning of the Liquidity Rule,
and that there was no reasonable basis supporting a “less liquid” classification. Moreover, by
failing to exercise reasonable oversight over the Fund’s LRMP, Wadach and Williamson
violated their duties and responsibilities to the Fund.
213. At all relevant periods of time, the valuation of the Company Shares was a
significant issue for the Fund that was closely being looked at by the Fund’s auditors. If the

41
NYSA Fund had to sell the Company Shares at a price lower than its valuation, the Fund’s
valuation of any remaining Company Shares and the Fund’s Net Asset Value (NAV) would be
negatively impacted.
214. The NYSA Fund and Defendants classified the Company shares as a “less liquid”
investment, as opposed to an “illiquid” investment in order to avoid having to sell any of the
Company shares to meet the 15% limit on illiquid investments.
FIRST CLAIM FOR RELIEF
Aiding and Abetting Violations of Rule 22e-4(b)(1) of the Investment Company Act
(All Defendants)

215. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 214.
216. The Fund NYSA Fund violated Rule 22e-4(b)(1) of the Investment Company Act
[17 C.F.R. § 270.22e-4(b)(1)] by classifying the Company Shares as a “less liquid investment”
rather than a an “illiquid investment;” by failing to periodically review its portfolio
classifications at least monthly; by failing to report the occurrence of more than 15% of its net
assets invested in illiquid investments within one business day to the board of trustees,
explaining the extent and causes of the occurrence; and by failing to present the board with a
plan to bring its illiquid investment that were assets to or below 15% of its net assets.”
217. Pinnacle knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R.
§ 270.22e-4(b)(1)].
218. Cuculich knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R.
§ 270.22e-4(b)(1)].

42
219. Quilty knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R.
§ 270.22e-4(b)(1)].
220. Wadach knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R.
§ 270.22e-4(b)(1)].
221. Williamson knowingly or recklessly provided substantial assistance to the Fund
with respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R.
§ 270.22e-4(b)(1)].
222. By reason of the foregoing, Defendants are liable pursuant to Investment
Company Act Section 48(b) [15 U.S.C. § 80a-47(b)] for aiding and abetting the Fund’s
violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. § 270.22e-4(b)(1)]
and, unless enjoined, Defendants will again aid and abet these violations.
SECOND CLAIM FOR RELIEF
Aiding and Abetting Violations of Rule 30b1-10 of the Investment Company Act
(Pinnacle, Cuculich, and Quilty)

223. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 214.
224. As alleged above, the Fund violated Rule 30b1-10 of the Investment Company
Act [17 C.F.R. § 270. 30b1-10] by failing to report on Form N-LIQUID the occurrence of more
than 15% of its net assets invested in illiquid investments, to be filed with the Commission
within one business day of such occurrence and including: the date(s) on which the fund’s
illiquid investments that were assets exceeded 15% of its net assets; the current percentage of net
assets that were illiquid investments that were assets; the identification of each illiquid

43
investment; and the percentage of the fund’s net assets attributable to that investment.
225. Pinnacle knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270. 30b1-
10].
226. Cuculich knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270. 30b1-
10].
227. Quilty knowingly or recklessly provided substantial assistance to the Fund with
respect to its violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270. 30b1-
10].
228. By reason of the foregoing, Pinnacle, Cuculich, and Quilty are liable pursuant to
Investment Company Act Section 48(b) [15 U.S.C. § 80a-47(b)] for aiding and abetting the
Fund’s violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270.30b1-10]
and, unless enjoined, Pinnacle, Cuculich, and Quilty will again aid and abet these violations.
PRAYER FOR RELIEF

 WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
Permanently enjoining Pinnacle, Cuculich, and Quilty and their agents, servants,
employees and attorneys and all persons in active concert or participation with any of them from
aiding and abetting any violation of Rules 22e-4(b)(1) and 30b1-10 of the Investment Company
Act [17 C.F.R. §§ 240. 270.22e-4(b)(1) and 240. 30b1-10].

44
II.
Permanently enjoining Wadach and Williamson and their agents, servants, employees
and attorneys and all persons in active concert or participation with any of them from aiding and
abetting any violation of Rules 22e-4(b)(1) of the Investment Company Act [17 C.F.R. § 240.
270.22e-4(b)(1)].
VI.
Ordering all Defendants to pay civil monetary penalties under Investment Company Act
Section 42(e) [15 U.S.C. § 80a-41(e)]; and
VII.
Granting any other and further relief this Court may deem just and proper.

JURY DEMAND
 The Commission demands a trial by jury.
Dated:  New York, New York
May 5, 2023
 s/ Todd D. Brody
Todd D. Brody (Bar Number 3264636)
Antonia M. Apps*
Sheldon L. Pollock*
Hane L. Kim*
Danielle R. Srour*
Gwen A. Licardo*
Andrew Sporkin*
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street
Suite 20-100
New York, NY 10004-2616
(212) 336-0080 (Brody)
[email protected]
     *Not admitted in Northern District of New York

ANTONIA M. APPS* 
REGIONAL DIRECTOR 
Sheldon L. Pollock* 
Hane L. Kim* 
Todd D. Brody (Bar Number 3264636) 
Danielle R. Srour* 
Gwen A. Licardo* 
Andrew Sporkin* 
Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
100 Pearl Street, Suite 20-100 
New York, NY 10004-2616 
212-336-0080 (Brody)
[email protected]
*Not admitted in the Northern District of New York

UNITED STATES DISTRICT COURT 
NORTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

-against-

PINNACLE ADVISORS, LLC,  
ROBERT F. CUCULICH, 
BENJAMIN R. QUILTY, 
MARK E. WADACH, and    
LAWTON A. WILLIAMSON,  

Defendants. 

COMPLAINT 

23 Civ. _____ (       ) 

JURY TRIAL DEMANDED 

Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against 

Defendants Pinnacle Advisors, LLC (“Pinnacle”), Robert F. Cuculich (“Cuculich”), Benjamin R. 

Quilty (“Quilty”), Mark E. Wadach (“Wadach”), and Lawton A. Williamson (“Williamson”) 

(collectively, “Defendants”), alleges as follows: 

5:23-cv-547 (FJS/ATB)

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SUMMARY 

1. This case involves the failure of a registered open-end investment company (the 

“NYSA Fund” or the “Fund”) to comply with Rules 22e-4 (the “Liquidity Rule”) and 30b1-10 

under the Investment Company Act of 1940 (the “Investment Company Act”). 

2. From June 2019 to June 2020, more than 15% of the NYSA Fund’s net assets 

were invested in the restricted shares of a medical device company and the Fund failed to comply 

with applicable reporting and filing requirements or to bring its position in the restricted shares 

of the medical device company under the 15% threshold as required by SEC rules. 

3. The NYSA Fund’s adviser, Pinnacle, and its principals, Cuculich and Quilty, 

were primarily responsible for monitoring the liquidity of the Fund’s investments, classifying the 

liquidity of such investments in accordance with the Liquidity Rule, and making the required 

reports to the Fund’s board of trustees (“Board”) and related filings with the Commission. 

Pinnacle, Cuculich, and Quilty aided and abetted the Fund’s violations by not classifying the 

medical device company restricted shares as an “illiquid investment” when the underling 

restrictions, transfer limitations, and lack of any market for the shares required that classification. 

Pinnacle, Cuculich, and Quilty also disregarded the advice of the Fund’s counsel who resigned 

over this issue, as well as the advice of the Fund’s auditors. In addition, they made false and 

misleading statements and omissions about the basis for their improper classification to the 

Commission’s Division of Investment Management (“SEC staff”). Finally, they aided and 

abetted the NYSA Fund’s violations by failing to have the Fund timely submit required reports 

to the Fund’s board of trustees and to the Commission.  

4. The NYSA Fund’s Board, including the independent trustees Wadach and 

Williamson, had their own oversight responsibilities regarding the Fund’s compliance with the 

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Liquidity Rule. Wadach and Williamson aided and abetted the Fund’s violations of Rule 22e-

4(b)(1) because they were keenly aware of the facts that rendered the shares illiquid – 

information they learned as members of the Fund’s Valuation and Audit Committees of the Fund 

– as well as the advice of the Fund’s counsel and auditors, yet they allowed the Fund to 

improperly classify the shares as a “less illiquid” investment instead of an “illiquid investment.” 

5. While the NYSA Fund deregistered with the Commission on September 9, 2020 

and transferred its assets to a liquidating trust (the “NYSA Liquidating Trust”), this illiquid 

investment in the shares of the medical device company still has not been sold. As such, more 

than two-and-a-half years after deregistering, the NYSA Fund investors have yet to receive a 

distribution of any kind relating to these shares. 

VIOLATIONS 

6. By virtue of the foregoing conduct and as alleged further herein, Defendants 

Pinnacle, Cuculich, Quilty, Wadach, and Williamson aided and abetted the NYSA Fund’s 

violations of Rule 22e-4(b)(1) [17 C.F.R. § 270.22e-4(b)(1)] of the Investment Company Act, 

and Defendants Pinnacle, Cuculich, and Quilty aided and abetted the Fund’s violations of Rule 

30b1-10 [17 C.F.R. § 270.30b1-10] of the Investment Company Act. 

7. Unless Defendants are restrained and enjoined, they will engage in the acts, 

practices, transactions, and courses of business set forth in this Complaint or in acts, practices, 

transactions, and courses of business of similar type and object. 

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

8. The Commission brings this action pursuant to the authority conferred upon it by 

Investment Company Act Sections 42(d), 42(e), and 48(b)[15 U.S.C. §§ 80a-41(d), 80a-41(e), 

80a-47(b)]. 

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9. The Commission seeks a final judgment: (a) permanently enjoining Defendants 

from violating the federal securities laws and rules this Complaint alleges they have violated; (b) 

ordering Defendants to pay civil money penalties pursuant to Investment Company Act Section 

42(e) [15 U.S.C. § 80a-41(e)]; and (c) ordering any other and further relief the Court may deem 

just and proper.  

JURISDICTION AND VENUE 

10. This Court has jurisdiction over this action pursuant to Investment Company Act 

Section 44 [15 U.S.C. § 80a-43].  

11. Defendants, directly and indirectly, have made use of the means or 

instrumentalities of interstate commerce or of the mails in connection with the transactions, acts, 

practices, and courses of business alleged herein. 

12. Venue lies in this District under Investment Company Act Section 44 [15 U.S.C. 

§ 80a-43]. Defendants are inhabitants of and transact business in the Northern District of New 

York, and Pinnacle’s and the Fund’s principal place of business are, and were, respectively, in 

this District. In addition, certain of the acts, practices, transactions, and courses of business 

alleged in this Complaint occurred within this District, including actions taken to improperly 

classify an illiquid portfolio investment as “less liquid” rather than “illiquid.” 

DEFENDANTS 

13. Pinnacle is a limited liability company organized in 1996 in New York State, with 

its principal place of business in East Syracuse, New York. Pinnacle has been registered as an 

investment adviser with the Commission since 1996. Pinnacle is owned by six individuals, 

including Quilty and Cuculich. Since 1996, Pinnacle’s sole client has been the NYSA Series 

Trust, a formerly-registered investment company with one investment portfolio, the NYSA Fund. 

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As of March 2023, Pinnacle claimed to manage approximately $529,368.  

14. Cuculich, age 65, is a resident of Liverpool, New York. Cuculich started his 

career in the financial services industry in 1980. Since at least 2008, he has been an investment 

advisory representative and a registered representative associated with Pinnacle Investments, 

LLC (“Pinnacle Investments”), a dually registered investment adviser/broker-dealer that is an 

affiliate of Pinnacle. Since 2013, Cuculich has been the President of Pinnacle and holds an 

estimated 30% equity interest in Pinnacle. From 2013 to September 2020, Cuculich was 

President and portfolio manager of the NYSA Fund. Since 2020, Cuculich has been President of 

the NYSA Liquidating Trust. Cuculich holds the Series 7, 24 52, 53, and 63 securities licenses, 

and held a Series 6 license. 

15. Quilty, age 41, is a resident of Jamesville, New York. Quilty started his career in 

the financial services industry in 2005. In 2010, he became an investment advisory representative 

and a registered representative associated with Pinnacle Investments, and in 2019, he became 

CEO of Pinnacle Investments. Since 2013, he has been Pinnacle’s Chief Compliance Officer 

(“CCO”). In 2015, he acquired a ten percent equity interest in Pinnacle. From 2013 to 2020, 

Quilty was the Chief Financial Officer, Vice President, and Treasurer of the NYSA Fund and 

from 2014 to 2020, he was CCO of the NYSA Fund. Since 2020, he has been the CCO, Vice 

President, and Treasurer of the NYSA Liquidating Trust. 

16. Wadach, age 71, is a resident of Syracuse, New York. He was an independent 

trustee of the NYSA Fund from 1997 to 2020 and, since 2020, has been an independent trustee 

of the NYSA Liquidating Trust. In addition, he is a trustee on the board of a registered 

investment company managed by a Pinnacle affiliate. From at least March 2013 to September 

2020, Williamson served on the NYSA Fund’s Valuation Committee and Audit Committee. 

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17. Williamson, age 66, is a resident of Liverpool, New York. He was an independent 

trustee of the NYSA Fund from 2013 to 2020 and, since 2020, has been an independent trustee 

of the NYSA Liquidating Trust. From March 2013 to September 2020, Williamson served on the 

Fund’s Valuation Committee and Audit Committee. 

OTHER RELEVANT INDIVIDUALS AND ENTITIES 

18. The NYSA Fund was the sole series of the NYSA Series Trust, a Massachusetts 

business trust established in 1996. The NYSA Fund was an open-end1 registered investment 

company until September 2020. In an annual shareholder report filed with the Commission in 

July 2019 for the fiscal year ending March 31, 2019, the NYSA Fund reported total assets of 

approximately $1.89 million. On September 8, 2020, the NYSA Fund sold all of its liquid assets, 

and on September 9, 2020, filed with the Commission a Notice of Application for Deregistration 

under Section 8(f) of the Investment Company Act. On September 29, 2020, the Commission 

issued a deregistration order. The NYSA Fund is now the NYSA Liquidating Trust. 

19. Trustee A, age 73, was a trustee of the NYSA Fund from 1997 to 2021 and the 

CEO of Pinnacle Capital Management, LLC, a registered investment adviser and affiliate of 

Pinnacle and Pinnacle Investments, LLC. Trustee A was an attorney licensed (inactive) in New 

Jersey, but was not legal counsel to the NYSA Fund and did not provide legal services to the 

Fund. 

20. The Company is a private company that develops intellectual property for use in 

medical devices. The Company’s shares were not traded on any securities exchange or over-the-

                                                 
1 An open-end investment company is a management investment company that offers or has outstanding redeemable 
securities of which it is an issuer. See Section 5(a)(1) of the Investment Company Act [15 U.S.C. § 80a-5(a)(1)]. The 
term “redeemable security” is defined in Section 2(a)(32) of the Investment Company Act [15 U.S.C. § 80a-
2(a)(32)] as any security, other than short-term paper, that confers a right upon the holder to receive in return for 
shares an amount proportionate to the value that those shares represent in the total investment assets of the fund.  

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counter market. During the relevant period of time, Cuculich regularly communicated with the 

Company’s President. 

FACTS 

I. THE LIQUIDITY RULE AND LIQUIDITY RISK MANAGEMENT PROGRAMS 

21. Section 22(e) of the Investment Company Act requires a registered investment 

company to satisfy a shareholder’s redemption request within seven days. 

22. In 2016, the Commission adopted Rule 22e-4 under the Investment Company Act, 

commonly referred to as the Liquidity Rule, “to promote effective liquidity risk management 

throughout the open-end investment company industry, thereby reducing the risk that funds will 

be unable to meet their redemption obligations and mitigating dilution of the interests of fund 

shareholders.” 

23. Section (b)(1)(ii) of the Liquidity Rule requires open-end funds to manage 

liquidity risk by, among other things, establishing a written program to classify the liquidity of 

each of the fund’s portfolio investments according to defined categories “using information 

obtained after reasonable inquiry and taking into account relevant market, trading, and 

investment-specific considerations.” The Liquidity Rule refers to this written program as a 

Liquidity Risk Management Program (“LRMP”). 

24. A fund’s board and the administrator of the LRMP (the “Administrator”) are both 

responsible for managing the fund’s liquidity risk. As described in the October 2016 Adopting 

Release for the Liquidity Rule (“Adopting Release”), “the role of the board under the rule is one 

of general oversight, and consistent with that obligation [the Commission] expect[s] that 

directors will exercise their reasonable business judgment in overseeing the program on behalf of 

the fund’s investors.”  

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25. In addition to the board’s general oversight obligations, Section (b)(2) of the 

Liquidity Rule expressly requires the board to (a) initially approve the LRMP; (b) approve the 

designation of the Administrator; and (c) review, no less frequently than annually, a written 

report prepared by the Administrator. As stated by the Commission in the Adopting Release: 

Given the board of directors’ historical oversight role, the Commission continues 
to believe it is appropriate to require a fund’s board to oversee the fund’s liquidity 
risk management program. The rule’s requirements are designed to facilitate the 
board’s oversight of the adequacy and effectiveness of the fund’s liquidity risk 
management program. 
 
26. The Liquidity Rule contains four liquidity classifications for investment assets 

held by an investment company: “highly liquid investment,” “moderately liquid investment,” 

“less liquid investment,” and “illiquid investment.” 

27. Section (a)(8) of the Liquidity Rule defines an “illiquid investment” as “any 

investment the fund reasonably expects cannot be sold or disposed of in current market 

conditions in seven calendar days or less without significantly changing the market value of the 

investment . . . .”  

28. Section (a)(10) of the Liquidity Rule defines a “less liquid investment” as an 

investment that can be sold or disposed of in seven calendar days or less “but where the sale or 

disposition is reasonably expected to settle in more than seven calendar days.” 

29. Section (b)(1)(iv) of the Liquidity Rule limits the amount of illiquid investments 

that can be held by a fund. If a fund holds more than 15% of its net assets in illiquid investments, 

Section (b)(1)(iv)(A) requires the fund to cause the Administrator to report the occurrence to the 

fund board within one business day along with an explanation of the extent and causes of the 

occurrence and to explain how the fund plans to bring its illiquid assets under the 15% limit 

within a reasonable period of time. Rule 30b1-10 [17 C.F.R. § 270. 30b1-10] of the Investment 

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Company Act also requires the fund to report the breach in a confidential filing with the 

Commission on Form N-RN.2   

30. Section (b)(1)(iv)(B) of the Liquidity Rule provides that if the fund’s illiquid 

investments remain above 15% of net assets 30 days from the occurrence (and at each 

consecutive 30 day period thereafter), the fund’s board is required to assess whether the plan 

presented to it by the Administrator to reduce the illiquid investments continues to be in the best 

interest of the fund. 

31. The original date pursuant to which smaller entities (like the NYSA Fund) had to 

comply with all of the provisions of the Liquidity Rule was June 1, 2019. On February 2, 2018, 

the Commission adopted an interim final rule that extended the compliance date for certain 

aspects of the Liquidity Rule for smaller entities until December 1, 2019. 

32. Under the interim final rule, the NYSA Fund was required to adopt and 

implement a LRMP and appoint an Administrator by June 1, 2019. The Fund’s Board, however, 

was not required to approve the LRMP until December 1, 2019.  

33. The NYSA Fund was also required by June 1, 2019 to determine which of its 

investments were “illiquid,” as defined in the rule, for purposes of complying with the rule’s 

15% limit on illiquid investments. 

34. As such, if on June 1, 2019 or at any time thereafter, the NYSA Fund’s illiquid 

investments exceeded 15% of net assets, the Fund was required, within one business day, to 

report such an occurrence to the board—“with an explanation of the extent and causes of the 

occurrence, and how [the Fund] plan[ned] to bring the illiquid investments to or below 15% of 

net assets within a reasonable period of time”—and also make a confidential filing with the 

                                                 
2 During all relevant times referred to herein, Form N-RN was known as Form N-LIQUID. In August 2022, the 
Commission renamed Form N-LIQUID to Form N-RN. 

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Commission on Form N-LIQUID. 

35. Starting on December 1, 2019, the Fund had to review its portfolio investment 

liquidity classifications on at a monthly basis. 

II. THE COMPANY SHARES HELD BY THE FUND WERE ILLIQUID, WERE 
RESTRICTED SECURITIES, AND ALSO WERE SUBJECT TO 
CONTRACTUAL TRANSFER RESTRICTIONS 

 
36. From June 1, 2019 through at least June 16, 2020, the NYSA Fund held 

approximately 21% to 26.38% of its net assets in illiquid investments. 

37. The largest illiquid investment held by the NYSA Fund was 84,332 shares of the 

Company that the Fund purchased in private placement transactions between 2007 and 2009 (the 

“Company Shares”). 

38. In the private placement memoranda (“PPM”) pursuant to which the NYSA Fund 

purchased the shares, the Company disclosed as a “risk factor” that “[t]here is no market for the 

Units, and there can be no assurance that any market will ever develop.” The Company 

specifically warned in the PPM that “[i]nvestors should be prepared to hold their investment in 

the Units indefinitely and cannot expect to be able to liquidate their investment readily, even in 

the case of emergency.” 

39. The subscription agreement pursuant to which the NYSA Fund purchased the 

Company Shares, and signed by Fund’s then portfolio manager, likewise disclosed that the 

shares were not registered under the Securities Act of 1933 (the “Securities Act”) and could not 

be resold or transferred unless they were subsequently registered under the Securities Act or an 

exemption from such registration was available.  

40. The subscription agreement further stated that purchasers were “aware and 

acknowledge that, because of the substantial restrictions on the transferability of the [shares], it 

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may not be possible for you to liquidate your investment in the Company readily even in the case 

of an emergency.” 

41. The subscription agreement also stated that “neither this Agreement nor any rights 

which may accrue to you hereunder may be transferred or assigned.” 

42. The subscription agreement also stated that purchasers “will not, directly or 

indirectly, assign transfer, offer, sell, pledge, hypothecate or otherwise dispose of all or any part 

of your Securities or Warrant Units (or solicit any offers to buy, purchase, or otherwise acquire 

or take a pledge of all or any part of the Securities or Warrant Units) except in accordance with 

the registration provisions of the Securities Act or an exemption from such registration 

provisions . . . and with the terms of the Operating Agreement.” 

43. As of June 1, 2019, the NYSA Fund’s investment in the Company Shares 

represented approximately 23.45% of the Fund’s net assets. 

44. At all times before and after June 1, 2019, the NYSA Fund reported the Company 

Shares as “illiquid” in its shareholder reports and financial statements. 

45. In shareholder reports, the NYSA Fund disclosed that “market quotations . . . are 

not readily available” for the Company Shares. 

46. In addition to the fact that the Company Shares were restricted from resale under 

the Securities Act, contractual provisions in the Company’s operating agreement further limited 

the transferability of the Company Shares. Both the Company and its shareholders had a right of 

first refusal (“ROFR”) that required any shareholder proposing to sell their shares to first make 

the shares available for purchase by the Company (with an exercise period of fifteen business 

days).  

47. If the Company did not intend to exercise its right to purchase the shares, within 

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three business days after the end of its exercise period, the Company had to inform the remaining 

shareholders of the proposed sale. The remaining shareholders then had a ten business day 

exercise period in which to purchase the offered shares.  

48. In sum, the ROFR potentially prevented any sale of the Company Shares by any 

shareholder for twenty-eight business days. 

49. Moreover, pursuant to a “co-sale provision” in the Company’s operating 

agreement, all shareholders had the right to join in the selling opportunity by selling a pro rata 

portion of their own shares to the prospective buyer, on the same terms and conditions as agreed 

to between the selling shareholder and the prospective buyer.  

50. The practical effect of the co-sale provision was that, even if a selling shareholder 

found a purchaser willing to purchase its shares of the Company, the selling shareholder would 

have no certainty of the number of shares it would be able to sell until the remaining 

shareholders decided whether or not to exercise their co-sale rights. 

51. As the Fund’s President and portfolio manager, Cuculich knew that the Company 

Shares were restricted and also subject to contractual limitations on transferability. 

52. As the Fund’s Chief Compliance Officer, Chief Financial Officer, Vice President, 

and Treasurer, Quilty knew that the Company Shares were restricted and also subject to 

contractual limitations on transferability.  

III. WADACH AND WILLIAMSON, THE INDEPENDENT TRUSTEES, ALSO 
KNEW THAT THE COMPANY SHARES WERE ILLIQUID INVESTMENTS 

 
53. The NYSA Fund’s independent trustees made up the Board’s Valuation 

Committee and Audit Committee. The independent trustees, the Valuation Committee, and the 

Audit Committee typically met in executive session each quarter with Quilty (as CCO of the 

Fund) and with the Fund’s counsel. 

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54. As members of the Board’s Valuation Committee and Audit Committee, Wadach 

and Williamson were responsible for, among other things, valuing the Company Shares every 

month according to generally accepted accounting principles (“GAAP”) and meeting with the 

Fund’s auditor at the conclusion of every annual audit, respectively. 

55. The Fund’s written valuation procedures stated that all restricted securities are 

deemed to be illiquid.   

56. Wadach and Williamson frequently discussed the challenges of valuing the 

Company Shares during the quarterly meetings of the independent trustees, the Valuation 

Committee, and the Audit Committee. 

57. Through their valuation work on the Company Shares, Wadach and Williamson 

both knew that the Company Shares were illiquid, as there was no identifiable market for the 

Company Shares, and were subject to numerous transfer restrictions. 

58. At the conclusion of each annual audit of the NYSA Fund, the NYSA Fund’s 

auditors met with Wadach and Williamson in their capacity as members of the Fund’s Audit 

Committee.  

59. At the 2017 audit meeting, the auditors expressed concern to Wadach and 

Williamson that the Company Shares, an illiquid investment, were the second largest portfolio 

holding (then 22.75%).  

60. At the 2018 audit meeting, Wadach and Williamson acknowledged to the auditors 

that the Fund had “no exit strategy” for its investment in the Company Shares. 

IV. FUND COUNSEL REPEATEDLY ADVISED DEFENDANTS THAT THE 
COMPANY SHARES WERE ILLIQUID AND THAT THE BOARD NEEDED TO 
COMPLY WITH THE LIQUIDITY RULE 

 
61. From at least 2013 until June 14, 2019, the NYSA Fund was represented by an 

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attorney with significant experience in the investment management industry (“Fund Counsel”). 

62. At NYSA Fund Board meetings on June 16, 2017 and September 17, 2018, 

attended by all Defendants, Fund Counsel explained the newly-adopted Liquidity Rule, the 

reporting obligations that would take effect in June 2019, and the importance of developing a 

strategy for the Fund’s compliance with the Liquidity Rule. 

63. At a meeting of the independent trustees and the Audit Committee on June 16, 

2017, Wadach stated that he and Williamson had recently met with the Fund’s auditors. Wadach 

stated several times that the auditors were concerned about the Company Shares investment (the 

second largest investment in the Fund) because it was an illiquid investment.  

64. Wadach and Williamson stated that the auditors were “uncomfortable” about the 

Company Shares and the largest position in the portfolio “because if something goes wrong with 

those holdings it could sink the ship.” Wadach reported that he had told the auditors that the 

Board was aware of this. 

65. At the same meeting, Fund Counsel asked Quilty how the Fund could rectify the 

issue. Quilty responded that the Company Shares were restricted securities and could not be sold 

or transferred in the absence of an exemption from the registration requirements.  

66. Quilty also stated that it is very difficult to transfer shares that have been issued in 

a private placement. 

67. On June 11, 2018, the NYSA Fund filed with the Commission on Form N-CSR3 

its annual shareholders report for the year ended March 31, 2018. In the report, signed by 

Cuculich and Quilty, the Fund stated that the Company Shares, which represented more than 

                                                 
3 Sections 30(a), (b), and (e) of the Investment Company Act [15 U.S.C. §§ 80a-29(a), (b), and (e)] require 
registered investment companies to file and/or provide annual and semi-annual reports to their shareholders. Form 
N-CSR must be filed within ten days after the transmission to shareholders of any annual or semi-annual report that 
is required pursuant to Rule 30e-1 under the Investment Company Act [17 C.F.R. § 270.30e-1].  

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20% of the Fund’s net assets, “are subject to restrictions such as transferability and market 

quotations that are not readily available for the purpose of valuing this portfolio holding.” The 

report also stated that the Company Shares were illiquid securities and that while the Fund “may 

not invest more than 15% of its net assets in illiquid securities . . . the 15% limitation is not 

violated unless the excess results immediately and directly from the acquisition of any security.” 

68. At the combined meeting of the independent trustees, Audit Committee, and 

Valuation Committee on June 18, 2018, Wadach reported to the Audit Committee that he and 

Williamson had met with the Fund’s auditors to discuss the most recent annual audit, and the 

auditors had asked why the Fund had held onto the Company Shares for over thirteen years. 

Wadach explained that the reason was because the Company had the potential to be bought out 

or taken over.  

69. Fund Counsel responded to Wadach that it was unusual for a company trying to 

position itself to be taken over to not have audited financial statements and reminded Wadach 

and Williamson “that they play a watchdog role, a risk oversight role—for the Fund.” She stated 

that the more information that the Trustees have, then the better they can fulfill their obligations 

for the Fund.”  

70. At this June 18, 2018 combined meeting, Fund Counsel also stated that she was 

concerned that the Fund was so concentrated in a few securities and advised the Fund to have a 

plan in place to adopt and implement an LRMP. Fund Counsel informed the trustees, when 

Williamson asked, that the Fund would need to have an LRMP in place by June 2019. 

71. At the NYSA Fund’s quarterly Board meeting on September 17, 2018, attended 

by all Defendants, Fund Counsel stated that the Fund would have to comply with the Liquidity 

Rule by June 1, 2019, and that “now is the time to look at the rule and develop a strategy for the 

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Fund.” 

72. At the combined meeting of the independent trustees, Audit Committee, and 

Valuation Committee on December 14, 2018, Fund Counsel told Wadach, Williamson, and 

Quilty that there “continues to be a concern for the percentage of illiquid securities within the 

Fund.” 

73. On February 20, 2019, the SEC staff communicated to Fund Counsel their 

comments on the NYSA Fund’s June 11, 2018 Form N-CSR filing: 

It appears that the Fund invests significantly in illiquid securities [Company 
Shares]. Given the liquidity profile of these investments, please explain how the 
Fund determined that its investment strategy is appropriate for the open-end 
structure. Your response should include general market data on the types of 
investments and information concerning the relevant factors referenced in the 
release adopting 22e-4 under the 1940 Act. See Investment Company Liquidity 
Risk Management Programs, Rel. No. IC-32315. October 13, 2016 (Adopting 
Release) at pages 154-155.  
 
74. On the same day she received the SEC staff’s comments, Fund Counsel sent a 

memorandum to Cuculich, Quilty, and Trustee A, providing the SEC staff’s comments and 

stating: “Let’s discuss this request at the [quarterly compliance] meeting tomorrow, and again 

once you have had an opportunity to look at Rel. No. IC-32315 [the Liquidity Rule Adopting 

Release], especially pages 154 and 155.” 

75. On February 21, 2019, Fund Counsel met with Cuculich, Quilty, and Trustee A 

for the quarterly compliance meeting.  

76. Fund Counsel explained that SEC staff was asking for a response in the next 30 

days as to how Fund management had determined that the illiquid Company Shares and other 

illiquid investments were appropriate for an open-end investment company. Fund Counsel stated 

“if we read between the lines of the SEC’s questioning, we can conclude that these illiquid 

investments are not appropriate for the Fund.”  

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77. Fund Counsel recommended that the Fund develop an exit strategy for the illiquid 

securities by June 1, 2019, and noted that the LRMP needed to be in place by June 1, 2019. 

78. On February 24, 2019, Fund Counsel sent a second memorandum to the Fund’s 

Board in which she wrote:  

We will focus a significant amount of time during the [Board’s March 7, 2019 
annual self-assessment] meeting on the requirements of Rule 22e-4 relating to the 
Mutual Fund Liquidity Risk Management Programs . . . . The Board of Trustees 
will be required to approve the LRM Program, as well as the Administrator of the 
LRM Program, and will have oversight responsibility for the program. We will 
discuss the responsibilities of the Board of Trustees for the LRM Program at our 
meeting on March 7, 2019. 
  
79. In an email dated February 26, 2019, Fund Counsel recommended to Cuculich 

and Quilty that they become familiar with the Liquidity Rule and the Commission’s FAQs on 

liquidity risk management programs, and provided a link to the FAQs.  

80. At the NYSA Fund’s quarterly Board meeting on March 8, 2019, attended by all 

Defendants, Fund Counsel stated that the percentage of the Fund’s net assets invested in illiquid 

securities was well over 15%, and noted that, if the portfolio included over 15% of net assets in 

illiquid securities on June 1, Fund management would be required to provide the trustees with a 

plan for restructuring the portfolio to bring that percentage down to 15%.  

V. IN APRIL AND MAY 2019, THE FUND SPECIFICALLY TOLD THE 
COMMISSION THAT THE COMPANY SHARES WERE ILLIQUID 
INVESTMENTS 

 
81. On April 2, 2019, in response to the SEC staff’s comments to Fund Counsel in 

February 2019, the NYSA Fund sent a letter to the SEC staff stating that 22.75% of the Fund’s 

net assets were in illiquid securities. At that time, the Company Shares represented 

approximately 21.41% of the Fund’s net assets.  

82. The letter stated that “Management also recognizes that [the Company Shares] are 

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subject to restrictions on transfer, and that, accordingly . . . would be appropriately classified as 

‘restricted’ securities which, by definition, are illiquid securities in the absence of any trading 

market.” Cuculich and Quilty signed the letter. 

83. On April 3, 2019, Fund Counsel emailed Cuculich, Quilty, and Trustee A, stating 

that the SEC staff had informed her that the Fund’s April 2, 2019 letter did not address the 

specific factors described in the Liquidity Rule and the Adopting Release for determination of 

the appropriate liquidity classification of the Company Shares and also asked that the Fund 

provide a supplemental response.  

84. In early May 2019, Fund Counsel, Cuculich, Quilty, and Trustee A exchanged 

multiple emails to formulate a response to the SEC staff’s questions and also participated in at 

least one conference call to discuss this issue. 

85. In connection with the discussions to formulate the response, on May 6, 2019, 

Trustee A emailed Cuculich, Quilty and Fund Counsel, stating:  

Identifying a potential purchaser of a portion of NYSA’s [Company Shares] at 
this time would be difficult given the uncertainty over the terms and conditions of 
the [Company’s intellectual property sale]; the timing of the sale; exactly how 
[the Company] intends to dispose of the proceeds from the sale; and the number 
of shares Nysa [Fund] would actually want to sell. 
 
86. Fund Counsel agreed by email, and suggested that the Fund could still “scope out 

the parameters of such a sale” and “do the math” to determine the number of shares the Fund 

would need to sell to comply with the 15% limit on illiquid investments. 

87. On May 9, 2019, Quilty sent a letter to the Company with questions from Fund 

Counsel. The letter also stated that the Fund intended to inform the SEC of an impending sale of 

intellectual property from the Company to a third-party.  

88. On May 13, 2019, Trustee A emailed Cuculich, Quilty, and Fund Counsel. 

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Trustee A stated that, in response to Quilty’s letter, the Company replied that it “wants no public 

disclosure of its pending transaction.” Trustee A continued that “[g]iven that the pending 

transaction was the essence of our argument to the SEC to allow the Nysa Fund to maintain 

ownership of [the Company Shares], it looks like we’ll need to reconsider our position.”  

89. In a separate email on May 13, 2019, Trustee A circulated a draft letter to SEC 

staff to Cuculich, Quilty, and Fund Counsel. 

90. The following day, on May 14, 2019, Fund Counsel emailed comments on the 

draft letter to SEC staff to Cuculich, Quilty, and Trustee A: 

I think that the letter would be stronger if we could categorically state (1) that the 
Fund is currently seeking a purchaser or purchaser for a portion of the [Company 
Shares] position, (2) that we have identified an exemption from the registration 
requirements of the Securities Act of 1933 pursuant to which shares of [the 
Company] could be sold, and (3) that we expect that the sale of those shares 
would occur much sooner than the target disposition date. I say that because the 
Fund has known since October of 2016 that it would have to pare down its 
position in illiquid securities. I also believe that the staff would consider two and 
a half years an ample period of time to divest all or a portion of the position in 
order to be in compliance with the rule by its compliance date which has been 
extended to June 1, 2019 for smaller Funds. That is, regulators could take the 
position that the Fund has been on notice that it needed to restructure its portfolio 
since 2016 and, if the Fund has not divested a sufficient portion of its illiquid 
investments by June 1, the Fund will be viewed as having disregarded the rule.  

 
(emphasis in original). 

 
91. On May 14, 2019, Cuculich replied to Quilty and Trustee A, leaving Fund 

Counsel off of the email: “I am finding avenues to dispose of some of the [Company Shares]. I 

am not at this time seeking a purchaser. I do not want to be boxed into a date.” 

92. On May 17, 2019, the NYSA Fund sent a letter to SEC staff noting that the 

Company Shares comprised approximately 23.45% of the Fund’s net assets and that “[t]he Trust 

considers its position in [the Company Shares] to be an illiquid investment as that term is defined 

in Rule 22e-4.” The NYSA Fund proposed that it be allowed to retain the Company Shares until 

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November 1, 2019 in light of the anticipated intellectual property transaction between the 

Company and a third-party. The letter also proposed that if the Fund continued to hold more than 

15% of net assets in illiquid securities by November 1, 2019, the Fund would “expeditiously take 

all appropriate and necessary steps to reduce the amount of illiquid investments in its portfolio to 

the limit prescribed by Rule 22e-4.” Cuculich and Quilty signed the letter. 

93. On May 20, 2019, Fund Counsel suggested that Quilty ask the Company whether 

it would exercise the ROFR and on May 21, Quilty attempted to contact the Company President. 

94. On May 22, 2019, the Company’s President emailed Quilty in response to 

Quilty’s voicemail message from the prior day “regarding transferability of securities” and 

attached the Company’s operating agreement, subscription agreement, and private placement 

memorandum. The Company’s President specifically referred Quilty to Article XI, “Transfer of 

Securities,” in the operating agreement, and paragraph 8(f) on page 7, “Transfers and 

Transferability,” of the subscription agreement. These sections outline, respectively, the ROFR 

and co-sale provisions, which limited the resale and transfer of the Company Shares, and the 

requirement to register any resale or transfer under the Securities Act, unless an exemption from 

such registration was available. 

95. During this time frame, Cuculich also asked the Company’s President if the 

Company could help the Fund sell some of its shares but was told that the Company could not 

provide this assistance. 

96. On May 24, 2019, Fund Counsel emailed a memorandum to Cuculich, Quilty, and 

Trustee A, summarizing her discussions with SEC staff who had told her that the NYSA Fund’s 

response was not satisfactory. Fund Counsel stated that the SEC staff wanted the Fund to explain 

“why the proposed timeline described in your draft letter is a ‘reasonable period of time.’”  

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97. Fund Counsel noted these issues had to be discussed “sooner rather than later” 

given that “[t]he Fund’s portfolio has been under scrutiny by [SEC staff] for several years now.” 

98. On May 28, 2019, Fund Counsel emailed an agenda to Cuculich, Quilty, and 

Trustee A for a meeting later that day. The agenda topics included: “Review and Discussion of 

[Fund Counsel’s] Memorandum dated as of 05-25-19”; developing a response to SEC staff’s 

inquiry; “Formulation of Plan of Divestiture” for the Company Shares, including a discussion of 

the implications of Rule 22e-4(b), actions to be taken before and after June 1, 2019, and 

“Discussions with [the Company] – Counsel’s Recommendations”; disclosures relating to 

investments in illiquid securities for the Fund’s registration statement; and the upcoming 

quarterly meeting of the Board on June 14, 2019.  

99. In a separate email on the same day, Fund Counsel emailed Cuculich, Quilty, and 

Trustee A a chart of compliance dates for the Liquidity Rule. 

VI. DEFENDANTS CLASSIFY THE COMPANY SHARES AS “LESS LIQUID,” 
REJECTING THE ADVICE OF FUND COUNSEL AND THE AUDITORS 
 
100. On May 29, 2019 at 11:31a.m., Trustee A emailed Cuculich, Quilty, and Fund 

Counsel, questioning for the first time whether the Company Shares, in fact, met the definition of 

an “illiquid investment” under the Liquidity Rule. 

101. That night, at 7:44 p.m., Fund Counsel emailed her response to Cuculich, Quilty, 

Trustee A, and added the Fund’s auditors, concluding that “[w]here, as here, there is no trading 

market for the portfolio security in question, and where there appear to be restrictions on trading 

and also contractual limitations on transfer, I believe that [the Company Shares are] properly 

classified as an illiquid investment for purposes of financial statement disclosure, prospectus 

disclosure and Rule 22e-4.” 

102. Later that night, at 9:20 p.m., Cuculich forwarded Trustee A’s 11:31 a.m. email to 

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Williamson without also forwarding the responsive email from Fund Counsel. 

103. On May 30, 2019, Trustee A emailed Fund Counsel, copying Cuculich, Quilty, 

and the Fund’s auditors, stating that it appeared reasonable to him that the Company Shares were 

a less liquid investment and “[a]s for the position the Fund should take with the SEC, I think that 

should be dictated by the language of Rule 22e-4 and how the Fund’s management, board, 

outside counsel and auditors apply that language to the [Company] holding.” 

104. On May 31, 2019, Fund Counsel emailed Cuculich, Quilty, Trustee A, and the 

Fund’s auditors recommending that the NYSA Fund retain the “illiquid” classification for the 

Company shares.  

105. In this email, Fund Counsel added that, since her 7:44 p.m. email on May 29, 

2019: 

I have received a copy of a [Company] Share Certificate from Ben [Quilty] which 
evidences both legal restrictions on transfer, as evidenced by the standard 1933 
Act legend, and contractual restrictions on transfer, resulting from the reference to 
the agreement which gives [the Company] a right of first refusal in the event that 
a member of the company wishes to sell his, her or its shares. Moreover, Bob 
Cuculich has told me that he has spoken with [the Company’s President], and that 
[the Company] has no interest in re-purchasing shares owned by the Fund. I do 
not believe that there is any trading market for shares of [the Company], and the 
fact that we have already signaled to the SEC that we cannot readily sell a 
sufficient number of shares to bring the total percentage of illiquid investments to 
below 15% also favors a conclusion that the [Company] investment is an illiquid 
investment. 
 
106. Fund Counsel also expressed a concern about the “optics of attempting to re-

classify the [Company Shares] as a ‘less liquid’ investment just as the Fund must comply with 

Rule 22e-4.” 

107. Fund Counsel further advised that “if the board were to consider a 

reclassification, it would be very important to document a conclusion to re-classify the 

[Company Shares]. What would be the date of the re-classification? Would the auditors be asked 

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to re-classify the holding for purposes of the Annual Report to Shareholders?” 

108. On June 2, 2019, Fund Counsel circulated a draft LRMP to the trustees, 

Cuculich, Quilty, and the auditors, noting that Cuculich and Quilty had only asked her 

two days prior to draft the LRMP for the Fund and stated:  

Given the fact that the effective date of the Program is June 1, 2019, and that we 
have been requested to provide a copy of it to the SEC this week, we really do not 
have the luxury of time to go back and forth with rounds of comments . . . Note 
also that management must provide the divestiture plan to the trustees by 
tomorrow.  
 
109. The draft LRMP also contained the following: 

While the Board of Trustees has appointed the Administrator to implement the Program, 
the Board of Trustees acknowledges that it has oversight responsibility for this Program 
as well as general oversight responsibility for the risks attendant to operations of the 
Fund. . . .  

 
110. The language in Fund Counsel’s draft LRMP concerning the oversight 

responsibility of the Board relating to the liquidity program was similar to statements made in 

the Fund’s July 27, 2018 and July 29, 2019 Statements of Additional Information, issued as a 

part of the Fund’s registration statements, that “[u]nder the supervision of the Board of Trustees, 

the Adviser [Pinnacle] determines the liquidity of the Fund’s investments.” 

111. The draft LRMP circulated by Fund Counsel included numerous references to the 

fact that the Fund held positions in illiquid securities that were in excess of 15% of the Fund’s 

net assets and stated that on June 3, 2019, the Administrator would provide the Board with a 

written report explaining the extent and causes of the occurrence and a plan to bring the illiquid 

investments to or below 15% of net assets, and would file the Form N-LIQUID with the 

Commission.  

112. On June 3, 2019, Trustee A emailed his edits to the draft LRMP to Fund Counsel, 

Cuculich, and Quilty. At each reference of the existence of illiquid investments in the Fund’s 

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portfolio, or that the illiquid investments exceeded 15% of the Fund’s net assets, Trustee A 

added comments questioning whether the Board or Fund management had reached these 

conclusions. 

113. Fund Counsel replied to Trustee A, asking whether he had discussed these issues 

with Williamson and Wadach in light of the SEC staff’s question how the trustees had concluded 

that the proposed November timeframe to dispose some of the Company Shares was 

“reasonable.”  

114. Fund Counsel also asked also whether there was any news from the Fund’s 

auditors on their views regarding the Liquidity Rule classification for the Company Shares. 

115. On June 3, 2019, Quilty emailed Fund Counsel seeking clarification on the 

mechanics of filing the Form N-LIQUID (which would be required if the Fund’s net assets 

included more than 15% of illiquid investments), to which Fund Counsel replied: 

Here’s the thing. Why even file [the Form N-LIQUID] if you accept [Trustee A’s] 
position that [the Company Shares are] not an illiquid investment? But then if you 
take that position, how will you respond to the SEC’s most recent comment which 
encompasses both [the Company Shares and another portfolio investment] . . . I 
am recommending that [Trustee A] call [the Fund’s auditor] to get his opinion . . . 
I have given my opinion that [the Company Shares are] an illiquid security, and I 
am standing behind it. 
 
116.  On June 4, 2019, Fund Counsel emailed Quilty, copying Cuculich and Trustee A:  

Ben, Rule 30b1-10 requires open-end Funds to file, on a nonpublic basis, Form N-
LIQUID to report (a) holdings of Illiquid Investments in excess of the Illiquid 
Investments threshold at any time . . . The form is to be filed, as applicable, within one 
business of day (sic) of a final determination that the Fund is not in compliance with the 
applicable limit. See attached, and give me a call to discuss. Compliance date—June 1, 
2019. 
 
117. Quilty replied to Fund Counsel’s email on the same day, attaching a draft Form 

N-LIQUID: “Here’s what I have for Form N-LIQUID, if we deem the security illiquid.” 

118. On June 6, 2019, Quilty sent a revised unanimous written consent to the trustees. 

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The revised consent stated that the Board appointed Pinnacle as Administrator effective June 3, 

2019, and approved the Administrator’s delegation of responsibility for implementing the LRMP 

to Cuculich and Quilty. 

119. On June 6, 2019, Fund Counsel circulated a revised draft LRMP to Cuculich, 

Quilty, and Trustee A, reiterating that Fund management needed to acknowledge the necessity of 

managing the portfolio in accordance with applicable regulations, including the Liquidity Rule.  

120. Fund Counsel also wrote “I see no reason to strike the sentence [stating that the 

portfolio includes securities currently classified as illiquid] and I would recommend that it not be 

eliminated, especially in view of the fact that the Fund has not yet resolved issues relating to 

liquidity raised by the staff of the SEC over three months ago. I believe that this sentence 

illustrates a reality that needs to be addressed, and that the inclusion of the sentence will be 

viewed favorable (sic) by the staff.”  

121. Fund Counsel added a comment to the draft LRMP asking what conclusion has 

been reached with regard to the illiquid investments in the portfolio. 

122. Fund Counsel also advised against deleting a statement in the LRMP that stated 

that “it will not be sufficient to rely on the definitions of each classification found in Rule 22e-

4(a). For example, as noted in the Adopting Release, the Fund also must consider the 

investment’s market depth in classifying the investment.” In her comments, Fund Counsel 

explained that “in the adoption of Rule 22e-4, the SEC placed much of the important information 

for Funds in the Adopting Release, and later in the FAQs.” 

123. In an exchange of emails on June 7, 2019, between Fund Counsel, Cuculich, 

Quilty, and Trustee A, Trustee A asked Fund Counsel to hold off providing the LRMP to the 

SEC staff and expressed his understanding that the classification presented to the SEC staff 

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would be the Administrator’s preliminary classification, and not a classification actually adopted 

by the board. Trustee A also stated that the auditors believed that the Company Shares should be 

classified as illiquid. Trustee A also reported that he spoke with Wadach that morning and that 

Wadach was “inclined to agree with the auditors and outside counsel on the [Company Shares] 

classification, but wanted to know what Charlie’s [Williamson’s] opinion was.” Trustee A stated 

that he would call Williamson the same day. 

124. Also on June 7, 2019, Quilty emailed a draft Form N-LIQUID to Trustee A. 

Trustee A replied, adding Cuculich, that “[t]his is no longer the appropriate filing.” 

125. On June 10, 2019 at 8:54 a.m., Trustee A emailed Cuculich and Quilty: “Are you 

available for a call this morning at 10:00 about NYSA? My understanding is that Nysa’s LRMP 

Administrator has decided to classify [the Company Shares] as illiquid, as opposed to less liquid, 

which is contrary to what I reported to the Nysa independent trustees on Friday [June 7, 2019].” 

126. On June 10, 2019 at 11:21 a.m., Quilty sent Cuculich and Trustee A a draft letter 

addressed to SEC staff regarding the “less liquid” classification for the Company Shares. The 

draft letter stated that the Administrator concluded that the Company Shares “could be expected 

to be sold or disposed of within seven calendar days or less without the sale or disposition 

significantly changing the market value of the investment,” based upon recent sales of the 

Company Shares, investor interest at the Fund’s affiliated broker-dealer, the positive news that 

the Company was closing on a sale of its intellectual property (a medical device) to a third-party, 

and the stated preference by the Company’s President that the Fund not re-sell its shares at a 

price less than the Company’s then-offering price of $5.50/share.  

127. Trustee A provided Quilty with edits on the draft letter, adding that the 

Company’s ROFR, combined with its preference that the Fund not re-sell its own shares at a 

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price of less than $5.50/share, “presents another potential buyer for the Fund ion (sic) the event it 

sought to sell some or all of its [Company Shares].” 

128. Later that day, at 4:06 p.m., Cuculich forwarded the revised draft letter to Fund 

Counsel. 

129. That night, Fund Counsel emailed Cuculich, Quilty, and Trustee stating: “I have 

repeatedly said that I see no basis for classifying [the Company Shares] as a ‘less liquid’ 

investment under Rule 22e-4.” 

130. On June 10, 2019, against the advice of Fund Counsel, Cuculich, Quilty, and 

Trustee A had the Fund send the SEC staff a letter, signed by Cuculich, stating that the LRMP 

Administrator concluded that the Company Shares were a “less liquid” investment (the “June 10 

Letter”). 

131. The June 10 Letter claimed that the NYSA Fund could sell the Company Shares 

within seven calendar days or less, but omitted to disclose the transfer restrictions, or to address 

the fifteen-day and ten-day ROFR exercise periods or the co-sale provision. 

132. The June 10 Letter claimed that the ROFR provision represented another potential 

buyer for the Company Shares held by the Fund, which was misleading because the letter did not 

disclose that the Company’s President had expressly told Cuculich, Quilty, and the board, on or 

around May 16, 2019, that the Company would not purchase any of the Fund’s shares. 

133. The June 10 Letter claimed that the Company had “recently sold its shares” at a 

price higher than the Fund’s valuation of the Company Shares, which was false or misleading 

because, as Quilty, Cuculich, and Trustee A knew or recklessly disregarded, the Company had 

last issued shares in August 2018, almost one year prior. 

134. The June 10 Letter claimed that customers of the Fund’s affiliated broker-dealer 

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had expressed interest in purchasing the Company’s shares, which was false or misleading 

because, in fact, none had done so, which Cuculich, Quilty, and Trustee A knew or recklessly 

disregarded. 

135. The June 10 Letter claimed that the news of an impending sale of intellectual 

property by the Company to a third-party had “stimulated interest in the company,” which was 

false or misleading because the potential sale had not been publicly disclosed, which Cuculich, 

Quilty, and Trustee A knew or recklessly disregarded. 

136. On June 11, 2019, Fund Counsel sent a revised LRMP (the “June 2019 LRMP”) 

to Cuculich, Quilty, and Trustee A. In her email, Fund counsel commented, “I did not realize 

until yesterday, that the re-classification of investments currently classified as ‘illiquid’ would 

occur with (sic) a discussion of the Board of Trustees. I strongly encourage management to 

discuss these issues with the Board at the meeting scheduled for this week (June 14).” 

137. Also on June 11, 2019, Fund Counsel resent her June 7, 2019 email to Trustee A, 

Cuculich, and Quilty, reiterating that a full board discussion would be needed to change the 

classification of the Company Shares from “illiquid” to “less liquid.”  

138. Trustee A replied to Fund Counsel on the same day, copying Cuculich and Quilty, 

objecting to her claim that she had repeatedly advised that there was no basis for the “less liquid” 

classification, and describing the reasoning for the Fund’s “less liquid” classification as had been 

articulated in the June 10 letter that the Fund sent to the SEC staff. 

139. On June 13, 2019, Fund Counsel responded to Trustee A, copying Cuculich and 

Quilty, stating that “[f]or the reasons that we have discussed, I have not agreed with the analysis. 

The four corners of the rule includes much more than the definition [in the Liquidity Rule] to 

which you refer. Reasonable people can disagree. For now, I will just note that the advice that 

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you provided is not advice that I would have given.” 

140. On June 13, 2019, Fund Counsel sent Wadach, Williamson, and Quilty an agenda 

for the combined meetings of the independent trustees, the Audit Committee, and the Valuation 

Committee, to be held the following day. The agenda included: a review of fund governance 

standards, a discussion of the responsibilities of the independent trustees under the LRMP, a 

discussion of the risk profile of the fund, and a discussion of the SEC staff’s inquiry.  

141. On June 13, 2019, and in connection with the Board meeting scheduled for the 

following day, the Board’s Secretary emailed the trustees the June 2019 LRMP. The document 

included the following statement: “While the Board of Trustees has appointed the Administrator 

to implement the Program, the Board of Trustees acknowledges that it has oversight 

responsibility for this Program as well as general oversight responsibility for the risks attendant 

to operations of the Fund.” 

VII. FUND COUNSEL RESIGNS AT THE JUNE 2019 BOARD MEETING 
 
142. On June 14, 2019, the NYSA Fund Board met at Pinnacle’s offices for its 

regularly scheduled quarterly meeting (the “June 2019 meeting”). The June 2019 meeting was 

attended by all Defendants. 

143. Before any of the agenda items were discussed, Fund Counsel announced her 

resignation and distributed a letter of resignation. 

144. Fund Counsel then met privately with Wadach and Williamson. At the conclusion 

of the private meeting, Fund Counsel excused herself from the boardroom and left the office. 

145. In the full Board meeting, Wadach and Williamson declined to disclose what they 

had privately discussed with Fund Counsel. 

146. Wadach and Williamson were required to meet in an executive session with 

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Quilty as independent trustees and as members of the Valuation Committee and Audit 

Committee. At Quilty’s recommendation, they decided not to hold the executive session. 

147. Quilty informed the Board that the “less liquid” classification for the Company 

Shares had been presented to SEC staff, and that he and Cuculich, as the LRMP Administrators, 

would present the classification and would also discuss the LRMP at the September 2019 Board 

meeting. 

148. Notwithstanding Fund Counsel’s advice that a full Board discussion be had before 

changing the classification of the Company Shares from “illiquid” to “less liquid,” there was no 

discussion concerning the change in classification at the June 2019 meeting.  

149. At the June 2019 meeting, Quilty also stated that the “auditors are focused on the 

valuation of the private placements [largely comprised of the Company Shares] in the portfolio.” 

150. On the same day, the Board appointed Pinnacle as Administrator, effective June 

3, 2019, and approved the Administrator’s delegation of responsibility for implementing the 

LRMP to Cuculich and Quilty. 

151. On June 14, 2019, Fund Counsel emailed the SEC staff “to advise that my firm 

has terminated its engagement with Nysa Series Trust (811-07963), effective as of this date (06-

14-19)” and asked that her firm’s “name be removed from the Trust’s registration statement on 

Form N-1A.” 

152. On June 24, 2019, Cuculich sent the SEC staff a second letter (drafted by him, 

Quilty, and Trustee A) (the “June 24 Letter”), that was virtually identical to the June 10 Letter, 

stating that Pinnacle, as the Administrator, had concluded that the Company Shares were a “less 

liquid” investment. The June 24 Letter attached a copy of the June 2019 LRMP, and stated that 

the Administrator would present its preliminary classification of the Fund’s investments to the 

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board at the September 2019 board of trustees meeting, and “[a]t that time, the Board’s 

assessment of the investment liquidity classifications will be taken into account by the 

Administrator for final determination.” Cuculich signed the letter as President of the NYSA 

Fund. 

VIII LIQUIDITY DISCUSSIONS AFTER FUND COUNSEL RESIGNS 

A. The September 2019 Board Meeting 

153. On September 13, 2019, the NYSA Fund Board met at Pinnacle’s offices for its 

regularly scheduled quarterly meeting. The meeting was attended by all Defendants. 

154. The materials provided to the Board prior to the meeting included the June 2019 

LRMP, which included the language: “While the Board of Trustees has appointed the 

Administrator to implement the Program, the Board of Trustees acknowledges that it has 

oversight responsibility for this Program as well as general oversight responsibility for the risks 

attendant to operations of the Fund.” 

155. The first item discussed at the meeting was the fee structure for the Fund’s new 

counsel (“New Counsel”) who subsequently appeared by telephone and was introduced to the 

board of trustees. 

156. At the meeting, Trustee A reviewed for the Board the sequence of events that led 

to the “less liquid” classification for the Company Shares. 

157. New Counsel, who had just been engaged, expressed that he did not have an 

opinion as to the liquidity classification for the Company Shares. 

158. Wadach stated that the Fund’s auditors opined to him that the Company Shares 

were “illiquid,” and requested an update from the auditors, who were not in attendance at the 

meeting, as to their opinion on the classification.  

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159. New Counsel and Quilty told the Board that they would discuss the liquidity 

classification issue with the Fund’s auditors and report back to the Board. New Counsel and 

Quilty did not speak to the auditors about the liquidity classification, however, until December 

30, 2019. 

B. The December 2019 Board Meeting 

160. On or around October 11, 2019, the third-party terminated the asset purchase 

agreement with the Company, declining to purchase the Company’s intellectual property. This 

impending sale, and the alleged investor interest in the Company resulting from this agreement, 

purported to be one of the factors relied upon by the NYSA Fund and Defendants as the basis for 

the “less liquid” classification” of the Company Shares. 

161. Shortly thereafter, the Company’s President informed Cuculich in a phone call of 

the termination of the Company’s intellectual property asset purchase agreement. 

162. On December 13, 2019, the NYSA Fund Board met at Pinnacle’s offices for its 

regularly scheduled quarterly meeting. The meeting was attended by all Defendants except 

Quilty. 

163. At the meeting, the Board approved a revised LRMP for the Fund (the “December 

2019 LRMP”). 

164. The December 2019 LRMP required the Administrator to review the NYSA 

Fund’s liquidity classifications on the last business day of each month using an “Asset Liquidity 

Classification Evaluation Form” designed for that purpose. 

165. At no time did Cuculich, or Quilty ever complete any Asset Liquidity 

Classification Form concerning the Company Shares. 

166. The December 2019 LRMP provided that in the event that an investment 

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classified as “illiquid” held by the NYSA Fund exceeded 15% of the Fund’s net assets, the 

Administrator was required to report this occurrence to the board within one business day and 

file a Form N-LIQUID with the Commission. 

167. The December 2019 LRMP removed the references to the Board’s oversight 

responsibility for the LRMP that were in the June 2019 LRMP. 

C. The December 22, 2019 Liquidity Memorandum 

168. On December 20, 2019, Trustee A emailed Quilty, copying New Counsel, 

Wadach, and Williamson, and stated that he, New Counsel, and the independent trustees had a 

conference call that morning where the primary discussion was the liquidity classification of the 

Company Shares. Trustee A informed Quilty that a second call was scheduled for December 23 

and that they wanted Quilty to distribute a memo in advance of the call presenting and explaining 

management’s position and also to present management’s position at the December 23 call. 

169. On December 22, 2019, Cuculich and Quilty sent a memorandum to the Board 

regarding the liquidity classification of the Company Shares (the “December 22, 2019 Memo”). 

The memorandum described Quilty and Cuculich as “Administrators of the Liquidity Risk 

Management Program,” and stated that they had concluded that the Company Shares satisfy the 

requirements of the “less liquid” classification under the Liquidity Rule. 

170. The December 22, 2019 Memo restated mostly verbatim the rationale for the “less 

liquid” classification provided to the SEC Staff in the June 10, 2019 and June 24, 2019 Letters, 

but failed to disclose that the Company’s intellectual property asset purchase agreement had been 

terminated in October. 

171. On December 23, 2019, the Board met to discuss the liquidity classification for 

the Company Shares. This was not a regularly scheduled Board meeting. 

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172. On December 30, 2019, New Counsel and Quilty had a phone call with the 

Fund’s auditors to discuss the liquidity classification, at which time the auditors continued to 

express their belief that the Company Shares were illiquid. 

173. On February 10, 2020, New Counsel asked Quilty to provide him with copies of 

the Company’s private placement memorandum and operating agreement. 

174. On February 20, 2020, New Counsel emailed Quilty: 

I looked at the Sect. 17a exemptions which might afford the Fund the opportunity 
to liquidate the holdings and I don’t believe we will be able to make it happen 
given the fact that we may not have an ‘independent valuation’ which meets Sect. 
17a-7 at this time. Therefore, we may be stuck with just keeping the holdings 
notwithstanding the growing position of possible illiquid assets until the company 
either makes another offering or the company is sold. I am going to run my 
thoughts by a colleague of mine and get his take on it. I do have other options 
which I will get to you shortly. 

 
D. At the February 2020 Board Meeting, New Counsel Advises that the Fund 

Should Consider Classifying the Company Shares as Illiquid  
 
175. On February 21, 2020, the NYSA Fund Board of trustees met at Pinnacle’s 

offices. The meeting was attended by all Defendants. 

176. At the Board meeting, New Counsel advised that the Fund needed to consider 

classifying the Company Shares as “illiquid” because the Fund could not likely sell the shares 

within a seven day period. He further advised that he would research and determine how the 

Fund should proceed. 

177. The minutes from the Board meeting do not reflect any decision made to 

reclassify the Company Shares as illiquid investments. 

E. The NYSA Fund’s Auditors Resign  

178. On April 23, 2020, the Fund’s auditors resigned due to concerns about the 

valuations of the Company Shares NYSA Fund’s illiquid securities, which were primarily the 

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Company Shares, and material weakness in the Fund’s internal controls based primarily on 

Quilty’s “gross negligence” in performing asset diversification tests in 2018 and 2019, resulting 

in the Fund losing its regulated investment company status under Subchapter M of the Internal 

Revenue Code over a period of six months. 

179. The NYSA Fund’s refusal to follow Fund Counsel’s advice on the liquidity 

classification for the Company Shares was an additional consideration in the auditors’ 

determination of a weakness in the NYSA Fund’s internal controls and in the auditors’ decision 

to resign. 

F. The NYSA Fund Changes the Liquidity Classification 

180. On May 22, 2020, New Counsel emailed Quilty and suggested that Quilty review 

the LRMP to determine whether the Fund needed to file a Form N-LIQUID and suggested that 

they discuss the matter the following week. Quilty acknowledged the suggestions. 

181. At some point between May 22 and June 2, 2020, Quilty, Cuculich, and Trustee A 

decided that the Company Shares should be classified as an illiquid investment. On June 2, New 

Counsel emailed Quilty asking whether Quilty had scheduled a call with the trustees to discuss 

the Form N-LIQUID filing, necessitated by the “illiquid” classification of the Company Shares. 

182. On May 29, 2020, Trustee A for the NYSA Fund contacted the SEC staff. Trustee 

A informed the SEC staff that the Fund would be unable to timely file its annual shareholders’ 

report and audited financial statements because the Fund’s auditors had resigned and, therefore, 

the Fund was going to file a “notification of late filing” on Form 12b-25. Trustee A explained 

that the auditors resigned because of concerns relating to the valuation of the Company Shares. 

Trustee A also stated that fund management and the Board were considering winding the Fund 

down. 

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183. On June 9, 2020, Trustee A again spoke with the SEC staff concerning the 

resignation of the Fund’s auditors. He told the SEC staff that the Fund expected to file the Form 

12b-25 the following day but indicated again that the “longer term plan” was to wind down the 

Fund. (The NYSA Fund, in fact, filed the Form 12b-25 later that same day.) 

184. Trustee A also informed the SEC staff on the June 9 call that the NYSA Fund was 

now classifying the Company Shares as an illiquid investment. When asked by the SEC staff 

about the reasons for the reclassification from “less liquid” to “illiquid,” Trustee A responded 

that in 2019, the Fund was aware of sales of shares made by the Company at prices higher than 

the price at which the Fund carried those shares, but that more recently, through discussions with 

the portfolio manager and others, it had become apparent that the investment was illiquid. The 

SEC staff asked Trustee A when the change in classification had taken place. Trustee A also 

suggested to the SEC staff that the Fund might need to attribute zero value to the Company 

Shares. 

185. On June 9, 2020, Trustee A emailed Wadach, Williamson, Cuculich, and Quilty 

to inform them about his conversation with SEC staff. Trustee A also asked Cuculich and Quilty 

for an update as to the status of the Form N-LIQUID filing, and asked them for the date that the 

Fund changed its classification of the Company Shares from “less liquid” to “illiquid.” 

186. On June 11, 2020, Quilty emailed a draft Form N-LIQUID to Cuculich and 

Trustee A, which stated that June 1, 2020 was the date that the Fund’s illiquid investments 

exceeded 15% of net assets. In a series of emails, Trustee A questioned Quilty about the basis for 

the June date. 

187. On June 15, 2020, Cuculich, Quilty, and Trustee A had a conference call in which 

they discussed that the Company Shares were determined to be “illiquid” at the February 21, 

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2020 Board meeting and that the Form N-LIQUID would be filed on June 16, 2020. 

188. Later that day, Quilty emailed Cuculich and Trustee A that the date the Fund 

changed the liquidity classification from “less liquid” to “illiquid” was February 21, 2020. 

189. On June 16, 2020, Quilty provided the Form N-LIQUID to the NYSA Fund’s 

service provider for filing. The Form N-LIQUID stated that the Fund’s illiquid investments 

exceeded 15% of net assets on February 21, 2020, and that 23.84% of the then-current net assets 

were illiquid investments, comprised entirely of the Company Shares. 

190. On June 16, 2020, Quilty also emailed the Board and Cuculich informing them of 

the filing, and stating that the Administrator would provide more information, at or before the 

next Board meeting, about this matter and the plan going forward for this investment. 

G. Notwithstanding the Classification of the Company Shares from June 2019 
through July 2020 as “Less Liquid” for Purposes of the Liquidity Rule, 
Shareholder Reports During this Period Describe the Investment as Illiquid 

 
191. At all relevant periods of time, the NYSA Fund provided annual, semi-annual, 

and quarterly reports to Fund shareholders, which included financial statements. 

192. The Fund’s annual and semi-annual shareholder reports were filed with the 

Commission on Form N-CSR. The Fund’s quarterly reports were filed with the Commission on 

Form N-Q. All shareholder reports filed with the Commission were available publicly on the 

Commission’s website. 

193. The shareholder reports were also provided to Wadach and Williamson in the 

“board books” distributed prior to Board meetings. 

194. On July 25, 2019, the Fund filed with the Commission its annual shareholder 

report on Form N-CSR for the year ending March 31, 2019.  

195. Despite the fact that the Fund had classified the Company Shares as “less liquid” 

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for purposes of Rule 22e-4, the Fund described the Company Shares as “illiquid” in the annual 

shareholder report and audited financial statements. 

196. The Fund reported that 22.56% of net assets were represented by illiquid 

securities as of March 31, 2019 (of which 21.23% were the Company Shares). 

197. Cuculich and Quilty signed and certified the Fund’s Form N-CSR for the year 

ending March 31, 2019, and pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 

2002 (the “Sarbanes-Oxley Act”), attested that the information contained in the Form N-CSR 

“fairly presents, in all material respects, the financial condition and results of operations of the 

Registrant.” 

198. On August 22, 2019, the Fund filed with the Commission its quarterly shareholder 

report on Form N-Q for the quarter ending June 30, 2019. The Fund reported that 24.19% of net 

assets were represented by illiquid securities (comprised entirely of the Company Shares). 

199. Cuculich and Quilty signed and certified the Fund’s Form N-Q for the quarter 

ending June 30, 2019, and pursuant to Section 302 of the Sarbanes-Oxley Act, attested that the 

information contained in the Form N-Q “fairly presents, in all material respects, the financial 

condition and results of operations of the Registrant.” 

200. On December 3, 2019, the Fund filed with the Commission its semi-annual 

shareholder report on Form N-CSRS for the period ending September 30, 2019. The Fund 

reported that 24.86% of net assets were represented by illiquid securities as of September 30, 

2019 (comprised entirely of the Company Shares). 

201. Cuculich and Quilty signed and certified the Fund’s Form N-CSRS for the period 

ending September 30, 2019, and pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, 

attested that the information contained in the Form N-CSRS “fairly presents, in all material 

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respects, the financial condition and results of operations of the Registrant.” 

H. The NYSA Fund Deregisters with the Commission 

202. On June 30, Trustee A spoke with the SEC staff by phone. The SEC staff 

expressed their concern that the Company Shares were not accurately valued and, as a result, the 

net asset value for the Fund (and the Fund’s resulting share price) might not be accurate. 

Immediately after this call, the Fund stopped selling shares. 

203. On August 28, 2020, the Board approved a wind-down proposal for the NYSA 

Fund, including the creation of a liquidating trust. 

204. On September 8, 2020, the NYSA Fund sold all of its liquid assets, made a 

distribution to shareholders, and transferred all remaining assets, including the Company Shares, 

to the NYSA Liquidating Trust. 

205. On September 9, 2020, the NYSA Fund filed a Notice of Application for 

Deregistration under Section 8(f) of the Investment Company Act, and on September 29, 2020, 

the Commission issued a deregistration order. 

206. From the proceeds of the sale of liquid assets, Pinnacle created a cash reserve for 

the NYSA Liquidating Trust of approximately $188,565. 

207. To date, the Liquidating Trust has used approximately $130,000 to pay the 

expenses of maintaining the Company Shares and approximately $39,000 on D&O insurance 

policy premiums. 

208. To date, the Liquidating Trust continues to hold the Company Shares and has 

made no distributions to shareholders. 

IX. DEFENDANTS AIDED AND ABETTED THE NYSA FUND’S VIOLATIONS 

209. As described above, from June 1, 2019 to June 15, 2020, Pinnacle, Cuculich, and 

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Quilty substantially assisted the Fund in classifying the Company Shares as “less liquid” rather 

than “illiquid.” They knew or recklessly disregarded that the Company Shares were “illiquid” 

within the meaning of the Liquidity Rule, and that there was no reasonable basis supporting a 

“less liquid” classification. 

210. Between December June 1, 2019 and June 15, 2020, the Fund did not review the 

liquidity classification of the Company Shares on a monthly basis (or more frequently if changes 

in relevant market, trading, and investment-specific considerations were reasonably expected to 

materially affect the classification) as required by Section (b)(1)(ii) of the Liquidity Rule and by 

the December 2019 LRMP. Pinnacle, Cuculich, and Quilty substantially assisted this failure to 

comply with the Liquidity Rule and the LRMP. 

211. Between June 1, 2019 to June 15, 2020, Pinnacle, Cuculich, and Quilty knew or 

recklessly disregarded that the Fund was required to report to the board any occurrence of the 

Fund’s illiquid investments exceeding 15% of net assets within one business day of the 

occurrence under Rule 22e-4(b)(1). Between June 1, 2019 to June 15, 2020, Pinnacle, Cuculich, 

and Quilty failed to have the Fund to report such occurrence to the board. 

212. Wadach and Williamson, through their oversight failure, substantially assisted the 

Fund’s classification of the Company Shares as “less liquid.” They knew or recklessly 

disregarded that the Company Shares were “illiquid” within the meaning of the Liquidity Rule, 

and that there was no reasonable basis supporting a “less liquid” classification. Moreover, by 

failing to exercise reasonable oversight over the Fund’s LRMP, Wadach and Williamson 

violated their duties and responsibilities to the Fund. 

213. At all relevant periods of time, the valuation of the Company Shares was a 

significant issue for the Fund that was closely being looked at by the Fund’s auditors. If the 

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NYSA Fund had to sell the Company Shares at a price lower than its valuation, the Fund’s 

valuation of any remaining Company Shares and the Fund’s Net Asset Value (NAV) would be 

negatively impacted. 

214. The NYSA Fund and Defendants classified the Company shares as a “less liquid” 

investment, as opposed to an “illiquid” investment in order to avoid having to sell any of the 

Company shares to meet the 15% limit on illiquid investments. 

FIRST CLAIM FOR RELIEF 
Aiding and Abetting Violations of Rule 22e-4(b)(1) of the Investment Company Act 

(All Defendants) 
 

215. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 214. 

216. The Fund NYSA Fund violated Rule 22e-4(b)(1) of the Investment Company Act 

[17 C.F.R. § 270.22e-4(b)(1)] by classifying the Company Shares as a “less liquid investment” 

rather than a an “illiquid investment;” by failing to periodically review its portfolio 

classifications at least monthly; by failing to report the occurrence of more than 15% of its net 

assets invested in illiquid investments within one business day to the board of trustees, 

explaining the extent and causes of the occurrence; and by failing to present the board with a 

plan to bring its illiquid investment that were assets to or below 15% of its net assets.” 

217. Pinnacle knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. 

§ 270.22e-4(b)(1)]. 

218. Cuculich knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. 

§ 270.22e-4(b)(1)]. 

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219. Quilty knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. 

§ 270.22e-4(b)(1)]. 

220. Wadach knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. 

§ 270.22e-4(b)(1)]. 

221. Williamson knowingly or recklessly provided substantial assistance to the Fund 

with respect to its violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. 

§ 270.22e-4(b)(1)]. 

222. By reason of the foregoing, Defendants are liable pursuant to Investment 

Company Act Section 48(b) [15 U.S.C. § 80a-47(b)] for aiding and abetting the Fund’s 

violations of Rule 22e-4(b)(1) of the Investment Company Act [17 C.F.R. § 270.22e-4(b)(1)] 

and, unless enjoined, Defendants will again aid and abet these violations. 

SECOND CLAIM FOR RELIEF 
Aiding and Abetting Violations of Rule 30b1-10 of the Investment Company Act 

(Pinnacle, Cuculich, and Quilty) 
 

223. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 214. 

224. As alleged above, the Fund violated Rule 30b1-10 of the Investment Company 

Act [17 C.F.R. § 270. 30b1-10] by failing to report on Form N-LIQUID the occurrence of more 

than 15% of its net assets invested in illiquid investments, to be filed with the Commission 

within one business day of such occurrence and including: the date(s) on which the fund’s 

illiquid investments that were assets exceeded 15% of its net assets; the current percentage of net 

assets that were illiquid investments that were assets; the identification of each illiquid 

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investment; and the percentage of the fund’s net assets attributable to that investment. 

225. Pinnacle knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270. 30b1-

10]. 

226. Cuculich knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270. 30b1-

10]. 

227. Quilty knowingly or recklessly provided substantial assistance to the Fund with 

respect to its violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270. 30b1-

10]. 

228. By reason of the foregoing, Pinnacle, Cuculich, and Quilty are liable pursuant to 

Investment Company Act Section 48(b) [15 U.S.C. § 80a-47(b)] for aiding and abetting the 

Fund’s violations of Rule 30b1-10 of the Investment Company Act [17 C.F.R. § 270.30b1-10] 

and, unless enjoined, Pinnacle, Cuculich, and Quilty will again aid and abet these violations. 

PRAYER FOR RELIEF 
 

 WHEREFORE, the Commission respectfully requests that the Court enter a Final 

Judgment: 

I. 

Permanently enjoining Pinnacle, Cuculich, and Quilty and their agents, servants, 

employees and attorneys and all persons in active concert or participation with any of them from 

aiding and abetting any violation of Rules 22e-4(b)(1) and 30b1-10 of the Investment Company 

Act [17 C.F.R. §§ 240. 270.22e-4(b)(1) and 240. 30b1-10].  

  

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II. 

Permanently enjoining Wadach and Williamson and their agents, servants, employees 

and attorneys and all persons in active concert or participation with any of them from aiding and 

abetting any violation of Rules 22e-4(b)(1) of the Investment Company Act [17 C.F.R. § 240. 

270.22e-4(b)(1)]. 

VI. 

Ordering all Defendants to pay civil monetary penalties under Investment Company Act 

Section 42(e) [15 U.S.C. § 80a-41(e)]; and 

VII. 

Granting any other and further relief this Court may deem just and proper.  

 
JURY DEMAND 

 The Commission demands a trial by jury.  

Dated: New York, New York 
May 5, 2023 

 s/ Todd D. Brody   

Todd D. Brody (Bar Number 3264636) 
Antonia M. Apps* 
Sheldon L. Pollock* 
Hane L. Kim* 
Danielle R. Srour* 
Gwen A. Licardo* 
Andrew Sporkin* 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
100 Pearl Street  
Suite 20-100 
New York, NY 10004-2616 
(212) 336-0080 (Brody) 
[email protected]  

     *Not admitted in Northern District of New York 
 

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