June 2024 SEC Updates

1. On June 27, 2024, the SEC instituted administrative proceedings against Jacob Glick who was an investment adviser representative with Advanced Practice Advisors, LLC (“APA”), a previously registered investment adviser. Glick used his discretionary authority to place his advisory clients in unsuitable and risky investments that resulted in losses of almost $2 million. Glick made material misrepresentations to certain advisory clients when investing them in a private placement offering and then misappropriated their investment. Glick obtained over $675,000 from an elderly advisory client and invested her in an unsuitable long-term investment property, while using his remaining funds to pay off his personal debts, including to repay the advisory clients who invested in his private placement offering. Glick used his personal cellphone to advise his clients via text message and then sold his phone without preserving any of his client communications, despite being repeatedly instructed by APA that he was required to do so. Glick was barred.  https://www.sec.gov/files/litigation/admin/2024/ia-6636.pdf

2. On June 25, 2024, the U.S. District Court for the Southern District of Florida entered final judgments against Lufkin Advisors, LLC and its President, Chauncey Forbush Lufkin, III, whom the SEC previously charged with engaging in an ongoing fraud on the private funds they manage and the investors in those funds. The SEC’s complaint alleged that defendants for years engaged in a fraudulent course of conduct that included a loss of control of crypto assets entrusted to them for at least one year without disclosure of that fact to advisory clients, multiple investments with Mr. Lufkin’s spouse’s company without proper disclosure to private fund investors, failure to properly account for withdrawals from the private funds, failure to monitor the value of the investments made by the private funds, and a general derogation of their duty to manage the assets entrusted to them. The complaint also alleged that defendants did not adhere to many of the statutes and rules applicable to registered investment advisers, including rules concerning the custody of assets, the accuracy of reports filed with the SEC, the maintenance of required adviser records, and the production of those records to the SEC Examinations staff.  Mr. Lufkin consented to injunctions against aiding and abetting each of those violations by Lufkin Advisors. Defendants consented to civil penalties totaling $425,000.  https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26036

3. On June 17, 2024, the SEC instituted administrative proceedings against Centaurus Financial, Inc. (“CFI”), Ricky Mantei, and Atul Makharia. Makharia and seven other registered representatives (“RRs”) from CFI’s branch office recommended the sale of complex variable interest rate structured products to ninety-four retail customers for whom they knew, or reasonably should have known, such investments were unsuitable in light of each of the specific customers’ financial situation and needs. CFI and Mantei, the branch manager of CFI’s branch office, also failed reasonably to supervise the CFI RRs, and CFI failed to make and keep certain required records relating to certain customer accounts. CFI was ordered to pay disgorgement in the amount of $4,876, prejudgment interest of $623 and a civil money penalty in the amount of $750,000. Mantei was ordered to pay disgorgement of $92,650, prejudgment interest of $11,842 and a civil money penalty of $206,000. Makharia was ordered to pay a civil money penalty of $35,000.  https://www.sec.gov/files/litigation/admin/2024/34-100360.pdf

4. On June 17, 2024, the SEC instituted administrative proceedings against Pinnacle Investments, LLC, a registered investment adviser and broker-dealer. Pinnacle made false and misleading statements in filings regarding reviews of advisory client accounts, failed to adequately disclose its conflicts of interests in connection with the outside business activities and related compensation arrangements of an investment adviser. Pinnacle was ordered to pay disgorgement in the amount of $83,462, prejudgment interest of $11,874 and a civil money penalty in the amount of $393,381.  https://www.sec.gov/files/litigation/admin/2024/34-100359.pdf

5. On June 17, 2024, the SEC instituted administrative proceedings against David Wells, a former dually registered investment adviser and broker-dealer. Wells misappropriated over $683,000 from three of his investment advisory clients, fraudulently soliciting the clients to give him money to invest on their behalf, but transferring the funds to a personal brokerage account, where Wells lost most of the funds through risky options trading. Wells was barred.  https://www.sec.gov/files/litigation/admin/2024/34-100351.pdf

6. On June 12, 2024, the SEC instituted administrative proceedings against Twenty Acre Capital LP (“Twenty Acre”) regarding misleading, and not fair and balanced, performance advertising. From close to two years, when advertising to prospective investors the performance of a private fund that it advised, Twenty Acre presented performance returns that were experienced by a single investor. These returns did not constitute fund performance, and Twenty Acre’s advertisements did not disclose that this investor’s performance, at times, differed substantially from, and was significantly higher than, the overall performance of the fund and the returns achieved by other investors in the fund due to investment restrictions.   Twenty Acre was ordered to pay a civil money penalty in the amount of $100,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6628.pdf

7. On June 12, 2024, the SEC instituted administrative proceedings against Joseph Paul who was a co-founder of Paul Ellis Investment Associates LLC (“PEIA”). Paul raised more than $3.9 million from more than a dozen investors by misrepresenting PEIA’s investment strategies, assets under management, and investment performance. Paul distributed false marketing materials to prospective advisory clients, and recruited others to solicit clients on behalf of PEIA. Paul initially invested the funds, but then later diverted the funds to be used for improper purposes, which resulted in investor losses that exceeded $1.9 million. This matter is being litigated. https://www.sec.gov/files/litigation/admin/2024/34-100323.pdf

8. On June 12, 2024, the SEC instituted administrative proceedings against Kerry Broderick who was a former registered investment adviser and broker-dealer. Broderick’s supervisor, Andrew Komarow, engaged in a so-called “free-riding” scheme. Komarow knowingly made unfunded automated clearing house (“ACH”) transfers of money from his bank account to his personal brokerage account and engaged in speculative trading with the resulting credits before the transfers were cancelled for insufficient funds. Komarow’s trading resulted in significant losses. Broderick spoke to representatives to initiate trades for Komarow and to assure that the trades that Komarow had placed should be processed and were funded. When Broderick participated in those calls, she knew, or was reckless in not knowing, or should have known that the information she was communicating was false. Broderick was barred.  https://www.sec.gov/files/litigation/admin/2024/34-100318.pdf

9. On June 12, 2024, the SEC charged Joshua Goltry and his investment management firm, JAG Capital Advisors LLC (JAG Advisors), in connection with a three-year scheme to defraud investors of at least $3 million. Goltry, the founder and Chief Investment Officer of a purported equity fund called JAG Cap, LLC, and JAG Advisors, the purported equity fund’s investment manager, raised at least $3 million from nine investors by lying about nearly every aspect of the fund, including its performance, investment activity, and investment risks. Goltry and JAG Advisors used at least $1.1 million on personal expenses, including travel and jewelry, and lost more than $1.7 million through high-risk trading and speculative investments. Goltry and JAG Advisors falsified documents, including expense invoices, to conceal the trading losses from investors.  This matter is being litigated.  https://www.sec.gov/news/press-release/2024-72

10. On June 11, 2024, the SEC instituted administrative proceedings against Anson Funds Management, LP (Anson Funds), a registered investment adviser and Anson Advisors, Inc. (Anson Advisors), a registered exempt reporting adviser who work with activist short publishers who issue reports presenting bearish views of target securities (“short reports”). Anson Investments Master Fund (“AIMF”) Private Placement Memorandum described a short position investment strategy to be used for AIMF but omitted that AIMF’s investment strategy involved working with activist short publishers and trading in the target securities, including around the time the reports were issued by activist short publishers, and paying a portion of AIMF’s trading profits to the short publishers in exchange for the short publishers sharing their work with Anson in advance of posting it publicly. By not disclosing this practice, Anson Funds did not implement its written policy to “clearly articulate” AIMF’s short strategy or the risks associated with this strategy. Anson Advisors was ordered to pay a civil money penalty in the amount of $1,000,000. Anson Funds was ordered to pay a civil money penalty in the amount of $1,250,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6622.pdf

11. On June 7, 2024, the SEC charged Mario Gogliormella, Steven Lacaj, and Karim Ibrahim with fraud for selling unregistered membership interests in LLCs that purported to invest in shares of pre-IPO companies, first on behalf of StraightPath Venture Partners LLC, and, later, on behalf of Legend Venture Partners LLC. Gogliormella, Lacaj, and Ibrahim directed an unregistered sales force of more than 50 callers in boiler rooms to pressure investors into making investments without telling them that the shares had been substantially marked up—between 19 and 105 percent on average above the prices that StraightPath or Legend had paid for the underlying shares. Gogliormella, Lacaj, Ibrahim, and their sales force pocketed more than $45 million in fees from unsuspecting investors. Gogliormella, Lacaj, and Ibrahim were barred.  https://www.sec.gov/news/press-release/2024-69

12. On June 6, 2024, the SEC instituted administrative proceedings against Catalyst Capital Advisors LLC (CCA), a registered investment adviser, engaged in an impermissible joint legal fee arrangement with its client, Mutual Fund Series Trust (the “Trust”), a registered open-end investment company. CCA advised the Catalyst Hedged Futures Strategy Fund, a series of the Trust. CCA and the Trust both retained the same legal counsel to represent them in the Regulatory Inquiries and the Private Lawsuits. Without the approval or knowledge of the Trust’s independent trustees, CCA arranged for the Trust to pay, at least initially, all of the legal fees and related costs resulting from the Regulatory Inquiries and the Private Lawsuits, including the expenses associated with CCA’s legal representation. CCA accrued as liabilities certain of the legal expenses and later reimbursed the Trust for a portion of CCA’s expenses. CCA was ordered to pay disgorgement in the amount of $280,902, prejudgment interest of $30,081 and a civil money penalty in the amount of $200,000.  https://www.sec.gov/files/litigation/admin/2024/34-100294.pdf

13. On June 6, 2024, the SEC instituted administrative proceedings against Paul McGonigle, a formerly associated person with a dually registered investment adviser and broker-dealer with LPL. McGonigle stole at least $1.4 million from the accounts of at least fifteen clients, including those who were elderly or in poor physical and mental health. McGonigle caused unauthorized withdrawals from his clients’ annuities by posing as clients on calls with their annuity companies or by signing their names on forms requesting withdrawals. McGonigle also induced clients to sign documents requesting the surrender of their annuities and the transfer of those funds to McGonigle, by falsely representing that he would invest those funds on their behalf. McGonigle was barred.  https://www.sec.gov/files/litigation/admin/2024/34-100285.pdf

14. On June 5, 2024, the SEC instituted administrative proceedings against Michael Mooney, Britt Wright and Penny Flippen, who worked as an investment adviser representative at Livingston Group Asset Management Company d/b/a Southport Capital (“Southport Capital”), a registered investment adviser. Mooney, Wright and Flippen, in connection with the sale of interests in Horizon Private Equity, III, LLC and while working at Southport Capital, made false statements to investors and otherwise engaged in conduct which operated as a fraud and deceit on investors. Mooney, Wright and Flippen were barred.  https://www.sec.gov/files/litigation/admin/2024/ia-6618.pdf https://www.sec.gov/files/litigation/admin/2024/ia-6619.pdf https://www.sec.gov/files/litigation/admin/2024/ia-6620.pdf

15. On June 5, 2024, the SEC published a Risk Alert to help broker-dealers prepare for an examination. The Risk Alert provides information regarding what Division staff may consider when selecting firms to examine and areas of focus for the examination. It also provides the types of information, including documents, staff may initially request during an examination of a broker-dealer and includes a Sample Initial Information Request List.  https://www.sec.gov/exams/announcement/broker-dealer-risk-alert-06052024

16. On June 4, 2024 the SEC announced that it will close its Salt Lake Regional Office (SLRO) later this year, reducing its regional footprint from 11 regional offices to 10. The SLRO has long been the SEC’s smallest regional office and recently has experienced significant attrition. The agency considered its budget and organizational efficiency in deciding to close the office, and it has no plans to close any other regional offices. All current staff will be aligned to existing SEC organizational components based on their current functions and agency mission needs. The SLRO’s enforcement jurisdiction over the state of Utah will be shifted to the SEC’s Denver Regional Office. The SEC’s National Exam Program previously shifted SLRO’s local jurisdiction to Denver many years ago; thus, regional examinations authority will be unaffected by the closure of the office.  https://www.sec.gov/news/press-release/2024-67