The Securities and Exchange Commission (SEC) fined SignalPoint Asset Management after it allegedly failed to disclose conflicts of interest to their clients. The SEC claimed that SignalPoint misrepresented the source of funds used to start the business. The three principals of the company, Jonathan Timson, Dennis Walker, and John Handy Jr., as well as Comptroller Michael Orzel, all consented to the SEC fine without admitting or denying the allegations. The four men were fined a total of $215,000.
Cabot Investment Properties and its principals, Carlton Cabot and Timothy Kroll, were charged with real estate fraud after allegedly loosing investor money in fraudulent tenancy-in-common (TIC) deals. The investors were looking for retirement income and invested over five million dollars in eight different fraudulent TICs, causing them to lose their money. The Secretary of the Commonwealth, William Galvin, also charged the defendants with funneling $9 million of investor funds into their own personal accounts, which he believes to have funded their lavish lifestyles.
Max E. Zavanelli, a Florida based money manager, was banned from the securities industry. An administrative law judge found that the SEC presented sufficient evidence to establish that Zavanelli provided misleading information to Morningstar. Zavanelli and his firm, ZPR Investment Management Inc., were also required to pay a fine totaling $660,000. The SEC believes that Zavanelli falsely reported his firm's compliance with the Global Investment Performance Standards in newsletters and advertisements. According to an Investment News report, Zavanelli refused to take responsibility for any of the allegations and was said to be extremely defiant throughout all the proceedings.
Chicago advisor Neal Goyal and his investment firms Caldera Advisors, LLC and Blue Horizon Asset Management, LLC are facing fraud charges after allegedly operating a Ponzi scheme. According to the SEC, Goyal falsely told investors that all of their money would be placed into funds that were invested in stocks. Goyal provided investors with false account statements and used new investor money to pay the older investors. An Investment News article reports that Goyal had accepted $11.4 million from 35 clients. He allegedly used the money on personal items including luxury cars, two homes and his wife's business ventures.
After a forty-two day trial, four DBSI principals were found guilty of fraud by a Boise federal jury. Douglas Swenson, Mark Ellison, David Swenson, and Jeremy Swenson were convicted of multiple fraud charges. These charges stemmed from them publically relaying that DBSI was a profitable enterprise with a net worth totaling over a $100 million, but in reality DBSI was an unprofitable Ponzi scheme. All four defendants were convicted of forty-four counts of securities fraud and will be sentenced in late August.
American Pension Services Inc. (APS) and its founder, Curtis L. DeYoung, are facing fraud charges from the Securities and Exchange Commission (SEC) for allegedly investing client funds in questionable high-risk business ventures. APS's clients are said to have lost $22 million. On April 24, 2014, US District Court Judge Robert Shelby froze both APS and DeYoung's assets and placed APS under receivership. The allegations stemmed from 2005 when DeYoung supposedly advised clients to put their money into self-directed individual retirement accounts. DeYoung maintained complete control over their money and provided clients with inaccurate statements regarding the activity in their accounts. According to an Investment News report, "Savers allegedly were told there was $45.9 million in the master trust accounts at the end of 2012, when the balance was really $23.8 million, reflecting a shortage of $22 million."
Travis Wetzel, an advisor from Frederick, Maryland was indicted on wire fraud charges last month. Wetzel was the branch operations manager at Research Financial Strategy, an advisory firm located in Rockville, Maryland. Wetzel allegedly embezzled $1,282,224 from a clients of the firm. On May 9, 2014, FINRA permanently barred Wetzel from the securities industry
Total Wealth Management Inc., a San Diego-based investment firm, faces fraud charges after allegations by the Securities and Exchange Commission (SEC) that they had mislead investors. These allegations arose after the firm allegedly invested approximately three-fourths of its clients' funds into Altus Funds. Altus Funds are a group of proprietary funds that had a revenue sharing agreement with Total Wealth Management. Even though not all revenue sharing agreements are illegal, Total Wealth failed to disclose to their clients that they were receiving kickbacks for funneling investments to Altus.
After incidents like the Bernie Madoff scandal, it is extremely hard for investors to trust their brokers. There is no real or possible way to tell if your broker is being 100% honest with you. The Public Investors Arbitration Bar Association (PIABA) recently criticized the Financial Industry Regulatory Authority (FINRA) for the measures they're taking to protecting investors from potentially dishonest brokers. PIABA believes that FINRA's safeguard, BrokerCheck, is not enough. Critics believe that BrokerCheck should be more comprehensive and include more specific details such as criminal record, terminations, liens, and bankruptcies. Some believe that BrokerCheck would be more helpful if it provided an actual full disclosure of a broker's complaint history. FINRA defended BrokerCheck by saying, "While BrokerCheck is not perfect, FINRA remains committed to improving the system to help investors obtain free, unbiased information about investment professionals and firms."
Many brokerage firms and advisors have been experiencing difficulty with clashes between social media endorsements and the Securities and Exchange Commission (SEC) Rule 206(4)-1. This rule deals with testimonials and previously did not provide enough guidance to clearly outline protocol for social media sites and other third party review sites. The SEC has come to the conclusion that an advisor is not violating the testimonial rule when a client posts a review on a review site as long as the commentary is complete and cannot be changed or altered. The SEC also decided that if a review site has an average score (i.e. four out of five stars) the advisor may cite that rating on their website or on other advertising media. The SEC will not hold an advisor accountable for any positive reviews as long as the third-party review site is completely independent from one another.