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Taylor English Partner Gerald Kline Defeats Securities and Exchange Commission Emergency Motion

Taylor English Duma LLP Partner Gerald Kline has defeated an emergency motion by the Securities and Exchange Commission (SEC) to appoint a receiver and to impose an asset freeze over his client Southport Capital, a registered investment advisor.

Claiming an alleged Ponzi scheme had occurred, the SEC recently filed suit against Southport Capital and others in the United States District Court for the Northern District of Georgia (Atlanta Division) [United States Securities and Exchange Commission, Plaintiff vs. John J. Woods; Livingston Group Asset Management Company d/b/a Southport Capital; and Horizon Private Equity, III, LLC, Defendants; Civil Action File No. 1:21-cv-03413-SDG]. On August 24, the Court conducted a hearing on the SEC’s Motion for a Temporary Restraining Order and Other Emergency Relief.

The SEC urged the Court to enter a restraining order against Southport, to freeze its assets and to have a receiver appointed over its operations and assets. Kline countered that the SEC’s complaint was broad on legal conclusions and correspondingly lacking concrete facts that demonstrated any alleged pervasive participation among Southport Capital’s branches and employees around the country to conspire in any alleged wrongdoing. He observed that the Commission failed to show Southport Capital has received any monies from the claimed scheme. Kline also argued to the Court that Southport never contracted with Defendant Horizon Private Equity, III, LLC (“Horizon”) for it to be a sub-advisor, sub-manager or other service provider to Southport’s clients. He also reasoned that Horizon was competing against -- not conspiring with -- Southport, as the SEC alleges. Each time a Southport Capital client sold assets and transferred money from its Southport investment account to invest in Horizon, that transfer immediately impacted the amount of investment management fees Southport Capital could earn for managing that investment account. At the conclusion of the hearing, the Court denied the Commission’s request to impose a receiver over Southport Capital and to freeze its assets.

On September 1st, the Court entered its formal Order on the SEC’s motion. The Order states in part: “. . . upon the documents submitted therewith and upon consideration of the record in this case, Plaintiff’s Motion for a Temporary Restraining Order and Other Emergency Relief as to Defendant Livingston Asset Management Company d/b/a Southport Capital, including the appointment of a receiver and an order freezing its assets is DENIED without prejudice as to Defendant Livingston Asset Management Company d/b/a Southport Capital.” The civil suit will now proceed to its pre-trial discovery stage.

“The SEC’s recent court filings came as a shock to many at Southport Capital, and we are pleased with the court’s favorable decision to deny the Commission’s request to place Southport into a receivership and freeze its assets,” said Kline. “We maintain Southport never engaged Horizon Private Equity to provide asset management services for its valued advisory clients. We intend to vigorously defend Southport as it has only ever sought to operate with its clients’ best interests at heart.”

Kline focuses his legal practice on corporate governance, fiduciary duty and shareholder disputes; business interference and fraud; restrictive covenant litigation; trust and estate fiduciary disputes; and securities law disputes. For four decades, he has represented investors, broker-dealers, registered investment advisors, registered securities personnel and fund managers.


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