A non-profit corporation that offers securities to fund mortgage and construction loans to young Amish families in Ohio entered into a deferred prosecution agreement with the Securities and Exchange Commission (SEC).
The SEC investigated the Amish Helping Fund (AHF), which was formed in 1995 by a group of Amish elders interested in furthering the Amish way of life.
The fund was represented by John Carney of Baker Hostetler in New York.
AHF funds its loans by selling securities in the form of investment contracts.
The SEC alleges that AHF’s offering memorandum, drafted in 1995, was not updated for 15 years and thus contained material misrepresentations about the fund and the securities being offered.
Despite violating federal securities laws by disseminating a stale offering memorandum, the SEC found no evidence that AHF investors suffered any undue harm or investment losses as a result of these misrepresentations.
The SEC said that when informed of its alleged violations by the SEC, AHF immediately cooperated, updated its offering memorandum, and took other significant remedial steps in an expedited manner.
As a result, the SEC has entered into a deferred prosecution agreement and will not file an enforcement action against AHF provided it adheres to the provisions of the agreement.
AHF is entering into the agreement with the SEC as part of the Cooperation Initiative the Enforcement Division announced in 2010 to facilitate and reward cooperation in SEC investigations.
“Cooperation provides real and substantial benefits for companies that respond appropriately to the discovery of wrongdoing in their ranks,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Here, the SEC acknowledged and rewarded AHF’s cooperation because, among other things, it acted swiftly and completely in correcting the misleading statements provided to investors, agreeing to annual audits of the fund holding the securities, and implementing significant remedial measures to prevent future violations of the securities laws.”
AHF currently has nearly 3,500 investors, more than 1,200 borrowers, and approximately $125 million in mortgage receivables.
The SEC staff has not found any evidence of a foreclosure during AHF’s history.
Under the terms of the DPA, the SEC will refrain from filing an enforcement action against AHF if the company complies with certain undertakings.
Among other things, AHF has updated and corrected its offering materials and agreed to register its new securities offerings and provide current investors with timely and accurate financial information.