This section contains the nature of the case and procedural background.

Valicenti (D) is the president and sole owner of Advisory (D), an advisory organization registered with P. Throughout 1992, Ds distributed a packet of marketing materials to prospective clients. That packet contained a chart which purported to show D's rates of return on its 'Total Portfolio' between 1987 and 1991. On the Chart, a footnote next to 'Total Portfolio' indicated that the displayed figures represented a 'composite of discretionary accounts with a balanced objective.' P commenced an inspection of D, at which time P became aware of the Chart. P found the Chart to be materially misleading because: (1) a reasonable investor would have understood a 'composite' to include all 'discretionary accounts with a balanced objective'; (2) the Chart reflected the performance of only a selected portion of D's 'balanced' accounts; and (3) the rate of return for 1991 indicated on the Chart was more than seven percentage points higher than it would have been had the Chart incorporated all of D's balanced accounts for that year. P found that Ds acted with a deliberate intent to defraud. Ds essentially doctored the results by calculating the true results and then excluding data that made the results look bad. P found violations of § 206(1), § 206(2), and § 206(4) of the IAA, 15 U.S.C. §§ 80b-6(1), 80b-6(2), 80(b)-6(4), as well as SEC Rule 206(4)-1(a)(5), 17 C.F.R. § 275.206(4)-1(a)(5). P censured Ds, ordered them to cease and desist, and fined D $50,000 and Valicenti (D) $25,000. P also required Ds to send copies of P's opinion and order to all existing clients and in the following year, to all prospective clients. Ds petitioned for review.

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