Sun, 27 Feb 2000, 2:26pm EST

California Regulators Seize Investment Fund After Its Y2K Bets Lose 60%

By David Evans

California Seizes Investment Fund After Its Y2K Bets Lose 60% Los Angeles, Feb. 27 (Bloomberg) -- Schultz Investment Advisory was seized by California securities regulators who allege the fund lost more than $5 million in December on high-risk bets that Y2K concerns would depress technology stocks. The fund, with 240 investors, was run by Eric Vonn Schultz while he was a stockbroker with the Los Angeles branch of Schoff & Baxter Inc.. He operated it from his home in the Los Angeles suburb of Simi Valley, said Bill McDonald of the California Department of Corporations.

The seizure came after an administrative action was filed against Schultz by the California agency on Feb. 18. A new federal law gives state regulators exclusive authority over investment advisers who manage less than $25 million. California alleged Schultz failed to keep his clients' cash and securities in separate accounts, as state law requires for money managers that aren't set up as mutual funds. It also said he misrepresented his investment strategies and didn't keep proper records.

``It was sort of like a mutual fund,'' said John Fay, a manager at Schoff & Baxter's Los Angeles office. ``Every time I talked to his customers, they were happy.''

Schultz's clients lost 60 percent of their money in December, as the value of the fund dropped to $3.6 million from $8.9 million at the end of November, McDonald said.

Schultz wasn't available to comment. His voice mail was full, and said it was unable to record new messages.

``He was betting Y2K would be a big event,'' said Los Angeles attorney David Ray, who was appointed conservator of Schultz's fund. Ray said Schultz's trading was done through the Burlington, Iowa-based firm where he worked as a broker, Schoff & Baxter.

Ray said he's liquidated the fund and is sorting out its books and records. Investors can reach Ray at (310) 444-6459. Schultz continued working as a broker for Schoff & Baxter's Los Angeles office until he was ``permitted to resign'' Saturday, said Harry Baxter, managing director of the firm.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=dc8e9127f1a8e4b0b3e95550ea22ec3b

-- Carl Jenkins (Somewherepress@aol.com), February 27, 2000

Answers

I guess this was just the higher stakes version of many "doomers" stockpiling of non-perishables and liquidating assets (and maybe investing in gold).

Pity.

-- JXD (JXD29@hotmail.com), February 27, 2000.

Read it again JXD.....snip regulators who allege the fund lost more than $5 million in December on high-risk bets that Y2K concerns would "depress technology stocks".

-- kevin (innxxs@yahoo.com), February 27, 2000.

I wonder if his puts would have been the right investment in just a few more weeks.

-- Dana (A_Non_O_Moose@xxx.com), February 27, 2000.