SEC Announces Deferred Prosecution Agreement with Amish Fund

On July 18, 2012, the SEC announced a deferred prosecution agreement with a non-profit corporation that offers securities to fund mortgage and construction loans to young Amish families in Ohio.  The agreement with the non-profit, Amish Helping Fund (“AHF”), hopes to ensure that its investors receive more timely and accurate information.  Formed in 1995, the AHF funds its loans by selling securities in the form of investment contracts. The AHF has approximately 3,500 investors, 1,200 borrowers, and $125 million in mortgage receivables.  There is no evidence of a foreclosure during AHF’s history.

However, their offering memorandum had not been updated for 15 years and thus contained material misrepresentations about the fund and securities.  Although the old offering memorandum violated federal securities laws, the SEC found no evidence of AHF investors suffering any undue harm or investment losses as a result.  The AHF immediately cooperated with the SEC once informed of the alleged violation.  The AHF updated the memorandum and took other significant remedial steps in an expedited manner. Such steps included offering all existing investors the right of rescission, retaining a certified public account to perform ongoing audits, and registering its securities offerings with the Ohio Division of Securities and consented to a cease-and-desist order with the agency.  Due to these steps, the SEC entered into a Deferred Prosecution Agreement (“DPA”) and will not file an enforcement action against the AHF, provided it adheres to the provisions of the agreement. The DPA is part of the Cooperation Initiative the Enforcement Division announced in 2010 to facilitate and reward cooperation in SEC investigations.

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