7/18/12 SEC orders Amish Helping Fund to update info presented to investors
By Nick Sabo
July 19, 2012
474
SUMMARY: May continue to issue home loans while under deferred prosecution agreement
The Amish Helping Fund can still offer mortgages while it is under a deferred prosecution agreement with the Security Exchange Commission (SEC).
The SEC reported Wednesday, July 18 that the Amish Helping Fund (AHF) has been providing prospective investors with outdated information regarding certain aspects of how the AHF conducts business. If the AHF does not follow the terms of the agreement, the SEC could pursue other enforcement actions.
The AHF will be under the deferred prosecution agreement for two years. If the AHF abides by terms outlined in the agreement during that time, it may continue to serve its primary function of providing home loans to Amish families, John J. Sikora, an assistant director of the SECs asset management unit, enforcement division, said.
The question is, does this put the Amish Helping Fund out of business? The answer is no, Sikora said. They are not precluded from doing business as long as they follow the terms of the deferred prosecution agreement.
Under the deferred prosecution agreement, the AHF will be required to update its primary disclosure document, a confidential operating memorandum. The memorandum was presented to prospective investors interested in purchasing investment contracts.
The memorandum was drafted in 1995, and now contains outdated information. The memorandum was factually correct when issued in 1995, according to the SEC. However, over the years, several statements in the memorandum became outdated and were no longer part of the Amish Helping Funds business practices. At least one statement inaccurately represented the funds ability to redeem investments, if the number of redemption requests exceeded a certain level.
No harm was caused by the outdated information, according to the SEC.
Essentially, the SEC took action because investors were being misled by the outdated information as presented in the memorandum. For example, the memorandum states that the AHF keeps back a reserve of 15 percent to cover the needs of the fund in liquid investments such as money market funds, rather than just investing in real estate. According to the deferred prosecution agreement, After the first year of operations, the Fund never maintained a 15 percent reserve in liquid investments.
As part of the SECs action, the fund was required to offer all investors the right to back out of their agreements.
The deferred prosecution agreement gives the SEC additional oversight of the Amish Helping Fund and is intended to prevent further violations, SEC division of enforcement director Robert Khuzami said.
The deferred agreement requires the Amish Helping Fund to cooperate with a certified public account, who will issue an annual audit. The accountant will further issue an opinion as to whether the financial statements issued by the fund are fairly represented.
The Amish Helping Fund was established in 1995 and currently has 3,500 investors, 1,200 borrowers and approximately $125 million in mortgage receivables.
