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Tuesday, August 5, 2014

COURT ENTERS JUDGEMENT AGAINST BROKER FOR SELLING UNREGISTERED STOCK IN ALZHEIMER'S TREATMENT COMPANY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Court Enters Judgment Against Unregistered Broker for Role in Investment Scheme Involving Purported Alzheimer's Treatment

The Securities and Exchange Commission announced that on July 31, 2014, a California federal court entered a final judgment against Kenneth Gross, of Porter Ranch, California, who was named as a defendant in an action filed by the Commission in June 2013. The Commission charged Gross with selling unregistered stock in Your Best Memories International Inc. without being registered as a broker-dealer as required by the federal securities laws. Your Best Memories was a California company purportedly raising money for a Massachusetts-based company in the business of developing products intended to improve memory function in individuals suffering from Alzheimer's disease and other conditions. Gross consented to the entry of this judgment.

The final judgment entered by the United States District Court for the Central District of California holds Gross liable for disgorgement of $269,000, representing money he was paid for the sale of unregistered securities, plus prejudgment interest of $10,897.81, but waives payment of the disgorgement and interest and does not impose a civil penalty based on Gross's financial condition. Previously, the court entered a partial judgment on March 14, 2014, based on Gross's consent, which enjoined him from violating Sections 5(a) and (c) of the Securities Act of 1933 (the securities registration provisions of the Securities Act) and Section 15(a) of the Securities Exchange Act of 1934 (the broker-dealer registration provisions of the Exchange Act). The Commission also issued an Order against Gross on June 6, 2014, permanently barring him from the securities industry.

On June 10, 2014, the Court entered final judgments by default against the other Defendants in the action, Your Best Memories, its president, Robert Hurd, and Smokey Canyon Financial Inc., another company controlled by Hurd. The Commission charged Your Best Memories and Hurd with misleading investors about how their funds would be used and making misleading statements that one of the products touted to investors had received approval from the U.S. Food and Drug Administration as a treatment for Alzheimer's disease. The final judgments imposed permanent injunctions prohibiting Your Best Memories and Hurd from future violations of the antifraud and registration provisions of the federal securities laws, ordered Your Best Memories, Hurd, and Smokey Canyon to pay $963,000 in disgorgement plus prejudgment interest of $34,170, and ordered Your Best Memories and Hurd to pay a civil penalty of $963,000.

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