September 2024 SEC Updates

1. On September 27, 2024, the SEC instituted administrative proceedings against Moloney Securities Co., Inc. (“Moloney”), Donald Hancock (“Hancock”), David La Grange (“La Grange”), and Laura Barnes (“Barnes”) who failed to comply with Regulation Best Interest (“Regulation BI”) in connection with recommendations of corporate bonds called “L Bonds” offered by GWG Holdings, Inc. (“GWG”) to retail customers. Moloney failed to exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations. Moloney also recommended the purchase of L Bonds to certain retail customers for whom it did not have a reasonable basis to believe that the recommendations were in the customers’ best interest based on the customers’ investment profiles and the potential risks, rewards, and costs associated with the L Bonds. Moloney also failed to establish written policies and procedures reasonably designed to identify and disclose, mitigate, or eliminate conflicts of interest associated with recommendations and enforce those policies and procedures that it did have and to disclose material conflicts of interest associated with its recommendations of L Bonds created by its Chief Executive Officer’s and other employees’ personal ownership of GWG securities. Moloney further failed to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Regulation BI. Moloney was ordered to pay disgorgement in the amount of $58,698, prejudgment interest of $8,218 and a civil money penalty in the amount of $250,000. Hancock was ordered to pay disgorgement in the amount of $7,331, prejudgment interest of $1,010 and a civil money penalty in the amount of $50,000. La Grange was ordered to pay disgorgement in the amount of $20,442, prejudgment interest of $2,848 and a civil money penalty in the amount of $12,500. Barnes was ordered to pay disgorgement in the amount of $12,744, prejudgment interest of $1,754, and a civil money penalty of $12,500.  https://www.sec.gov/files/litigation/admin/2024/34-101213.pdf

2. On September 27, 2024, the SEC charged William Carlton and Hans Hernandez, a former investment adviser representative for each conducting separate multi-year cherry-picking schemes that defrauded their clients. Carlton and Hernandez, each profited at his clients’ expense by cherry picking trades using personal trading accounts and observing the daily price movements of the securities. Carlton and Hernandez delayed allocating the securities until after he had observed the securities’ price movement over the course of the trading day. By watching the price movements in their personal accounts before deciding whether to keep trades for themselves or allocate the trades to their clients, Carlton and Hernandez each disproportionately allocated profitable trades to their personal accounts and unprofitable trades to their clients’ accounts. Carlton generated $5.3 million in illicit first-day profits through the scheme. Hernandez generated more than $1 million in illicit first-day profits through the scheme. This matter is being litigated.  https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26135

3. On September 27, 2024, the SEC instituted administrative proceedings against First Allied Advisory Services, Inc. (“First Allied”), a formerly registered investment adviser and Cetera Investment Advisers LLC (“Cetera”), registered investment adviser. First Allied and Cetera failed to supervise William Carlton and Hans Hernandez, both of whom were investment adviser representatives associated with First Allied and later Cetera and (a) engaged in separate fraudulent trade allocation or “cherry-picking” schemes; (b) failure to adopt and implement policies and procedures reasonably designed to prevent violations of the Advisers Act and its rules; and (c) false and misleading statements in First Allied’s and Cetera’s disclosure brochures concerning supposed safeguards in place to prevent their investment adviser representatives from placing their own interests ahead of those of advisory clients. Carlton and Hernandez both purchased stocks in their personal accounts and then, later in the day and after the opportunity to observe price movements, allocated shares among personal and clients’ accounts. Hernandez also sometimes made the initial purchase in an account in the name of one or more of his largest clients before making a belated allocation of shares. Carlton and Hernandez disproportionately allocated profitable trades to personal accounts and disproportionately allocated unprofitable trades to their advisory clients. First Allied and Cetera was ordered to pay a civil money penalty in the amount of $200,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6734.pdf

4. On September 26, 2024, the SEC instituted administrative proceedings against Macellum Advisors, LP, a formerly registered investment adviser, for failing to adequately disclose payments a Macellum affiliate received from third party investment advisers and the resulting conflicts of interest. Macellum had agreements with unaffiliated investment advisers pursuant to which the advisers invested their clients alongside Macellum’s private funds in an activist investment strategy and paid a Macellum affiliate a performance-based fee, which was equal to a fixed percent of any profits earned by these advisers in relation to the joint investment campaign. These agreements posed a financial conflict of interest because they created an incentive for Macellum to potentially favor the interests of these outside entities over those of its clients, and Macellum failed to fully and fairly disclose the payments it received and the resulting conflicts of interest. Macellum was ordered to pay a civil money penalty of $75,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6731.pdf

5. On September 26, 2024, the SEC charged GQG Partners LLC, a registered investment adviser. GQG asked certain potential employees (“Candidates”) to sign a non-disclosure agreement (“NDA”) that raised impediments to a Candidate’s voluntarily reporting potential violations. A total of 12 Candidates signed an NDA with GQG. The NDA prohibited them from disclosing, including to government agencies specifically, that they had confidential information about GQG. While the NDA permitted them to respond to requests for information from the SEC, it required notification to GQG of any such request and prohibited them from responding to requests arising from a Candidate’s voluntary act of disclosure. GQG was ordered to pay a civil money penalty of $500,000.  https://www.sec.gov/files/litigation/admin/2024/34-101200.pdf

6. On September 25, 2024, the SEC charged Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer and investment adviser, failed to adequately to inform certain clients that a third-party investment adviser, Harvest Volatility Management LLC (“Harvest”), materially exceeded investment exposure levels specifically designated by such clients in a strategy that Harvest managed. Merrill knew or reasonably should have known that certain clients’ actual investment levels exceeded the dollar amounts designated and agreed upon between the clients and Harvest, which caused certain clients to pay higher fees, to be subject to increased market exposure and, ultimately, to incur investment losses. Merrill was ordered to pay a civil money penalty in the amount of $1,000,000.  https://www.sec.gov/files/litigation/admin/2024/34-101158.pdf

7. On September 25, 2024, the SEC charged Harvest Volatility Management LLC a registered investment adviser, for failing to follow the terms of the Investment Management Agreement (“IMA”) in managing an options overlay strategy for certain clients referred by Merrill Lynch, Pierce, Fenner & Smith (“Merrill”). Specifically, in its Collateral Yield Enhancement Strategy, or “CYES,” Harvest purchased and sold options contracts at levels materially above the levels clients authorized in the IMA. By failing to comply with the IMA, Harvest caused hundreds of clients to be overexposed to the strategy, resulting in higher fees and financial losses. Harvest was ordered to pay a civil money penalty of $2,000,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6726.pdf

8. On September 25, 2024, the SEC instituted administrative proceedings against Adage Capital Management, L.P., a registered investment adviser, for failing to file on a timely basis multiple required Section 16(a) reports of holdings and/or transactions in the securities of GCM Grosvenor, Inc. (“GCM”) and Advent Technologies Holdings, Inc. (“Advent”) it executed on behalf of an affiliated private fund it managed that held greater than 10% of GCM’s and Advent’s respective registered classes of common stock. Adage also failed to timely file an initial statement required under Section 13(d) with respect to beneficial ownership in GCM. Adage was ordered to pay a civil money penalty of $200,000.  https://www.sec.gov/files/litigation/admin/2024/34-101159.pdf

9. On September 25, 2024, the SEC instituted administrative proceedings against The Bank of Nova Scotia (“Scotiabank”). Scotiabank acquired greater than 5% beneficial ownership of a registered class of equity securities of at least 22 issuers. Scotiabank’s beneficial ownership derived in part from certain of its subsidiaries that include broker-dealers and investment advisers operating worldwide, including certain subsidiaries. Scotiabank failed to timely file as required on Schedule 13D, or in lieu thereof, on Schedule 13G. Scotiabank was ordered to pay a civil money penalty of $375,000.  https://www.sec.gov/files/litigation/admin/2024/34-101160.pdf

10. On September 25, 2024, the SEC instituted administrative proceedings against Essex Woodlands Management, Inc., a registered investment adviser, for failing to file on a timely basis multiple required Section 16(a) reports of holdings and transactions in the securities of TELA Bio, Inc. (“TELA”) on behalf of a reporting group of Essex Woodlands’ affiliated entities and private funds that shared direct or indirect beneficial ownership of more than 10% of TELA’s registered class of common stock. Essex Woodlands also failed to timely file an initial statement and certain amendments required under Section 13(d) with respect to beneficial ownership in TELA. Essex was ordered to pay a civil money penalty of $225,000.  https://www.sec.gov/files/litigation/admin/2024/34-101161.pdf

11. On September 25, 2024, the SEC instituted administrative proceedings against David Kanen, the principal owner and managing member of Kanen Wealth Management, LLC (“Kanen Wealth Management”), a registered investment adviser. Kanen failed to timely file initial statements and/or required amendments with respect to beneficial ownership of the registered classes of common stock of BBQ Holdings Inc. (“BBQ”), CarParts.com, Inc. (“CarParts”), and Lazydays Holdings, Inc. (“Lazydays”), and violated Section 16(a) by failing to timely file multiple required reports of holdings and/or transactions in BBQ’s, CarParts’ and Lazydays’ securities. Kanen was ordered to pay a civil money penalty of $109,000.  https://www.sec.gov/files/litigation/admin/2024/34-101162.pdf

12. On September 25, 2024, the SEC instituted administrative proceedings against Oaktree Capital Management, L.P., a registered investment adviser, for failing to file on a timely basis multiple required Section 16(a) reports of holdings and/or transactions in the securities of the issuers Eagle Bulk Shipping Inc. (“Eagle”), CBL & Associates Properties Inc. (“CBL”), Infinera Corp. (“Infinera”), and Runway Growth Finance Corp. (“Runway”), and failed to timely file certain amendments required under Section 13(d) to the Schedules 13D Oaktree filed with respect to Eagle and Runway and the Schedule 13G Oaktree filed with respect to the issuer Berry Corp. (“Berry”). Oaktree was also a cause of violations of such requirements by a reporting group of Oaktree’s affiliated entities, private funds, and control persons, which shared direct or indirect beneficial ownership of the relevant securities. Oaktree was ordered to pay a civil money penalty of $375,000.  https://www.sec.gov/files/litigation/admin/2024/34-101163.pdf

13. On September 25, 2024, the SEC instituted administrative proceedings against The Goldman Sachs Group, Inc. Goldman failed to file on a timely basis multiple Section 16(a) reports of holdings and/or transactions in these issuers’ securities that it and certain Goldman affiliates were required to file. Goldman was ordered to pay a civil money penalty of $300,000.  https://www.sec.gov/files/litigation/admin/2024/34-101169.pdf

14. On September 25, 2024, the SEC instituted administrative proceedings against FIG LLC (“Fortress”), a registered investment adviser. Fortress and its affiliates did not timely file four reports of their beneficial ownership of certain securities. Fortress took responsibility for making the beneficial ownership filings on behalf of itself and its affiliates. Fortress was ordered to pay a civil money penalty of $200,000.  https://www.sec.gov/files/litigation/admin/2024/34-101174.pdf

15. On September 25, 2024, the SEC instituted administrative proceedings against Stilwell Value LLC, a registered investment adviser. Stilwell Value and various related parties have taken an activist position in dozens of publicly-traded companies by asserting shareholder rights, engaging management, running alternate slates of directors, and seating representatives on company boards of directors. Stilwell Value did not timely file a Schedule 13D or Schedule 13G.  Stilwell Value was ordered to pay a civil money penalty of $75,000.  https://www.sec.gov/files/litigation/admin/2024/34-101178.pdf

16. On September 25, 2024, the SEC instituted administrative proceedings against Federal Prep Advisors, Inc., a registered investment adviser and Michael Kerper, Federal Prep’s CEO, COO, and an IAR. Federal Prep and Kerper provided information regarding Thrift Savings Plan (“TSP”) fees, TSP investment options, and IRA money manager fees that was false or that omitted material facts. This included telling clients that TSP fees were .50% when in fact TSP fees were approximately one-tenth that amount and continuing to provide that inaccurate information to clients after the SEC Exams notified Kerper of the inaccuracy. Moreover, despite the low costs of the TSP and the significantly higher costs associated with the advisory IRA recommended by Federal Prep and Kerper—Federal Prep clients pay advisory fees plus third-party money manager and underlying investment fees that often total 1.50% to over 2.00% per year—Federal Prep and Kerper did not adequately consider any total fee comparisons in advising clients to roll assets out of their TSP accounts, nor did Federal Prep or Kerper have an adequate understanding of the total costs associated with the rollover investment strategy that they recommended to clients. Federal Prep and Kerper also failed to adequately consider, and lacked an adequate understanding of, the investment options available within the TSP and how those options compared to the investments that they recommended clients make in a rollover advisory IRA. Federal Prep was ordered to pay a civil money penalty of $200,000. Kerper was ordered to pay a civil money penalty of $80,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6732.pdf

17. On September 24, 2024, the SEC instituted administrative proceedings against Fusion Investment Advisors LLC d/b/a Coppell Advisory Solutions, LLC and Fusion Capital Management, a registered investment adviser. Fusion failed to fully and fairly disclose material facts and conflicts of interest with respect to its receipt of certain compensation, as well as material facts regarding its fee calculations. Fusion offers a portfolio management platform on which its investment adviser representatives (“IARs”) and clients, as well as others, can select certain investment options, including model portfolios designed by Fusion and by third-party investment advisers. Fusion entered into an agreement under which an independent third-party adviser agreed to provide investment models for use on Fusion’s portfolio management platform and to pay Fusion a fee based on the amount of funds invested in that adviser’s model portfolios. Fusion disclosed this arrangement to clients in its firm brochure pursuant to Form ADV Part 2A (“brochure”), but it falsely represented in its brochure that such an arrangement should not create a material conflict of interest. Fusion also made misleading disclosures to clients about its portfolio management fees. These disclosures, contained in Fusion’s brochures, presented the annual asset management fee as a flat percentage of the client’s managed assets, when in fact Fusion calculated this fee using a tiered or “blended” method, which resulted in certain accounts being assessed higher fees than represented. Fusion also failed to maintain required books and records, to implement written compliance policies and procedures. Fusion was ordered to pay disgorgement in the amount of $94,412, prejudgment interest of $14,054 and a civil money penalty of $150,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6725.pdf

18. On September 24, 2024, the SEC instituted administrative proceedings against Eric Hollifield who was a registered representative of a broker dealer registered, co-owner, principal, managing member, and an investment adviser representative of Hamilton Investment Counsel, LLC, a registered investment adviser.  Hollifield defrauded two advisory clients and one brokerage customer by misappropriating their funds for his personal use, including using $1.7 million of client and customer funds to purchase a home. Hollifield enticed the clients and customer to invest in Century Warehouse, Inc. (“Century”), an entity Hollifield controlled or otherwise had account authority over, without disclosing his relationship to Century or the conflict of interest the investment presented. Century purportedly provided shipping logistics and warehousing services. when clients invested in Century, Hollifield often immediately wired a significant portion of investor funds to his own accounts for his personal use. Hollifield misappropriated client and customer funds through a variety of schemes and used the money to purchase Hollifield’s home. Hollifield was barred.  https://www.sec.gov/files/litigation/admin/2024/34-101149.pdf

19. On September 24, 2024, the SEC instituted administrative proceedings against Zigmund Strzelecki who serves as the Vice President of Investments of Muntz Financial LLC (“Muntz Financial” or “the Adviser”), a state-registered investment adviser. Strzelecki improperly allocated profitable trades to his personal accounts, family members’ accounts, and other affiliated accounts (the “Favored Accounts”) at the expense of his other advisory clients. Strzelecki allocated a disproportionate share of trades with positive first day returns to the Favored Accounts, while allocating a disproportionate share of trades with negative first day returns to other client accounts he managed (the “Disfavored Accounts”). Strzelecki was able to do this by trading equities and options in a master, or omnibus, account and then waiting until later in the day to allocate those trades to his own personal or his clients’ accounts. The Favored Accounts received excess profits of approximately $63,928 ($51,312 of which went to Strzelecki’s personal accounts), while the Disfavored Accounts suffered corresponding excess losses. Strzelecki was ordered to pay disgorgement in the amount of $51,312, prejudgment interest of $8,390 and a civil money penalty of $63,928.  https://www.sec.gov/files/litigation/admin/2024/ia-6723.pdf

20. On September 24, 2024, the SEC charged 11 firms, comprising broker-dealers, investment advisers, and one dually-registered broker-dealer and investment adviser, for widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications. The firms have agreed to pay combined civil penalties of $88,225,000. https://www.sec.gov/newsroom/press-releases/2024-144

21. On September 23, 2024, the SEC instituted administrative proceedings against Brighton Securities Corp. a registered investment adviser, for failing to disclose to advisory clients conflicts of interest arising from various incentives Brighton received from the clearing firm that it recommended to its clients for clearing, execution, and custodial services (“Clearing Firm A”). Because of this failure, which also occurred at a now-closed Brighton affiliate that shared the same compliance personnel, and whose client accounts were taken over by Brighton, Brighton breached its fiduciary duty of care. Brighton also failed to adopt and implement written policies and procedures. Brighton was ordered to pay a civil money penalty in the amount of $175,000.  https://www.sec.gov/files/litigation/admin/2024/34-101130.pdf

22. On September 23, 2024, the SEC charged Atom Investors LP, a registered investment adviser. Atom’s personnel, including at senior levels failed to maintain and preserve off-channel communications. Atom personnel, including at senior levels, sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given in their advisory business, as well as related to the placing and execution of orders to purchase and sell securities for investment advisory clients. This matter is being litigated.  https://www.sec.gov/newsroom/press-releases/2024-143

23. On September 23, 2024, the SEC instituted administrative proceedings against Centerline Investment Management Limited’s violation of Rule 105 of Regulation M through transactions made in the accounts of one of Centerline Investment’s private fund clients (the “Centerline Fund”) Centerline Investment’s conduct resulted in gains to the Centerline Fund of $1,476,907.15. Centerline Investment was ordered to pay disgorgement of $1,476,907, prejudgment interest of $194,119 and a civil money penalty of $111,614.  https://www.sec.gov/files/litigation/admin/2024/34-101133.pdf

24. On September 20, 2024, the SEC announced that it will host a virtual national seminar for investment advisers on Nov. 7, 2024. This seminar is intended to help Chief Compliance Officers and other senior personnel at investment companies and investment advisory firms enhance their compliance programs for the protection of investors. The full agenda is available here.  https://www.sec.gov/newsroom/press-releases/2024-142

25. On September 20, 2024, the SEC charged Raymond DiMuro, a former principal of Your Source Financial, PLC, a formerly registered investment adviser. DiMuro principally traded for Your Source clients by placing securities trades through a block trading account; block accounts facilitate purchases of securities for multiple client accounts. DiMuro placed trades throughout the trading day but did not allocate portions of the block trades until later in the trading day, which allowed DiMuro to consider whether the traded security had gone up or down in price since the block trade had been executed in determining how to allocate the block trade. DiMuro disproportionately allocated profitable trades to three favored clients and unprofitable trades to other Your Source clients. DiMuro’s favored clients received over $785,000 in day-of-trade profits and Your Source’s other clients suffered over $1 million in day-of-trade losses. DiMuro was ordered to pay a civil money penalty in the amount of $750,000.  https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26114

26. On September 20, 2024, the SEC instituted administrative proceedings against George Collett, a registered investment adviser, for failing to reasonably supervise another associated person who engaged in a multi-year “cherry picking” scheme in which Respondent’s supervisee (the “Advisor”) disproportionately allocated profitable trades to favored clients and unprofitable trades to other clients. This matter is being litigated.  https://www.sec.gov/files/litigation/admin/2024/ia-6715.pdf

27. On September 20, 2024, the SEC instituted administrative proceedings against ACP Venture Capital Management Fund LLC(“ACPVC”). ACPVC took the position that it qualified for an exemption from registration available to investment advisers that manage only private funds with assets under management of less than $150 million (the “Private Fund Adviser Exemption”). ACPVC did not qualify for this exemption because there was operational and ownership overlap between ACPVC and Partners Capital Services Inc. (“Partners”), an affiliate of ACPVC that is registered as an investment adviser. ACPVC was required to register as an adviser, it also was subject to the Custody Rule. ACPVC failed to either undergo independent verifications (“surprise examinations”) or annual audits and therefore failed to comply with the Custody Rule. ACPVC was ordered to pay a civil money penalty of $45,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6714.pdf

28. On September 20, 2024, the SEC instituted administrative proceedings against Closed Loop Partners, LLC, a registered investment adviser, for failing to disclose certain conflicts of interest to its private fund clients (“Funds”). Closed Loop failed to disclose the resulting conflict of interest to, and obtain prior consent to the loan from, the Fund. Closed Loop failed to disclose certain conflicts of interest related to short-term loans that Closed Loop and a related entity made to two other Funds that Closed Loop advised. Because Closed Loop and the related entity became creditors of the two Funds, Closed Loop was required to disclose the resulting conflict of interest to, and obtain prior consent to the loans from, those Funds. Closed Loop also failed to timely distribute annual audited financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) to the investors of four special purpose vehicle Funds and one single-limited partner Fund, the assets of which it had custody, or otherwise ensure that client funds and securities were verified by actual examination by an independent public accountant, for multiple fiscal years. Closed Loop was ordered to pay a civil money penalty of $250,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6712.pdf

29. On September 19, 2024, the SEC charged Inspire Investing LLC, a registered investment adviser, for making misleading statements and for compliance failures related to the execution of its “biblically responsible investing” strategy. Inspire Investing represented that it used a data-driven methodology to evaluate companies and that it would not invest in companies that had “any degree of participation” in certain enumerated business practices that Inspire determined did not align with biblical values. Inspire Investing relied on a manual research process and did not typically perform research on individual companies to evaluate them for eligibility under its investing criteria. Inspire Investing also lacked written policies and procedures setting forth a process for evaluating companies’ activities as part of its investment process, which at times resulted in inconsistent application of its investment criteria. Inspire Investing was ordered to pay a civil money penalty of $300,000. https://www.sec.gov/newsroom/press-releases/2024-139

30. On September 19, 2024, the SEC instituted administrative proceedings against Jordan/Zalaznick Advisers, Inc. (“JZAI”), a registered investment adviser. JZAI failed to implement certain aspects of the compliance program applicable to JZAI, including its relying advisers and their personnel. JZAI’s compliance policies and procedures called for JZAI to conduct compliance training for all supervised persons, which JZAI failed to do. JZAI also did not conduct spot-checks of books and records required to be maintained by JZAI, nor did JZAI conduct periodic inspections of the principal places of business of its relying advisers, both of which were required by its compliance manual. JZAI was ordered to pay a civil money penalty of $150,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6711.pdf

31. On September 19, 2024, the SEC charged Macquarie Investment Management Business Trust (MIMBT), registered investment adviser, for overvaluing approximately 4,900 largely illiquid collateralized mortgage obligations (CMOs) held in 20 advisory accounts, including 11 retail mutual funds, and for executing hundreds of cross trades between advisory clients that favored certain clients over others. MIMBT managed the Absolute Return Mortgage-Backed Securities strategy, a fixed-income investment strategy primarily invested in mortgage-backed securities, CMOs, and treasury futures. Strategy investments included thousands of smaller-sized, “odd lot” CMO positions that traded at a discount to institutional, larger-sized positions. MIMBT valued the odd lot CMOs using prices obtained from a third-party pricing service that were intended for institutional lots only. The pricing service did not provide separate valuations for odd lots. MIMBT had no reasonable basis to believe it could sell the odd lot CMOs at the pricing vendor’s valuations, and thousands of odd lot CMO positions were marked at inflated prices. MIMBT attempted to minimize losses to redeeming investors by arranging cross trades with affiliated accounts, rather than selling the overvalued CMOs into the market. MIMBT executed 465 internal cross trades between a selling account and 11 retail mutual funds above independent current market prices. These trades resulted in the retail mutual funds absorbing losses that otherwise would have been borne by the selling account in a market sale. MIMBT also arranged for approximately 175 dealer-interposed cross trades in which MIMBT temporarily sold odd lot CMO positions to third-party broker-dealers and then repurchased those same positions for allocation to one or more affiliated client accounts, providing liquidity to redeeming investors in an otherwise illiquid market, often at above-market prices. MIMBT was ordered to pay disgorgement in the amount of $7,633,671, prejudgment interest of $2,197,535 and a civil money of $70,000,000.  https://www.sec.gov/newsroom/press-releases/2024-140

32. On September 18, 2024, the SEC instituted administrative proceedings against First Horizon Advisors, Inc., a registered investment adviser. First Horizon’s failed to comply with Regulation Best Interest (“Reg BI”), specifically Reg BI’s Compliance Obligation, which requires broker-dealers to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI. First Horizon’s Reg BI policies and procedures applicable to structured note recommendations required its registered representatives to determine whether the customer’s investment profile met First Horizon’s requirements; to determine whether the resulting customer holdings would not exceed First Horizon’s concentration limit for that product type in the brokerage account; to submit to First Horizon customer-signed structured note disclosures; and to submit to First Horizon customer-signed letters when the customer liquidated holdings in certain products and used those funds to purchase a structured note. First Horizon was ordered to pay a civil money penalty of $325,000.  https://www.sec.gov/files/litigation/admin/2024/34-101071.pdf

33. On September 17, 2024, the SEC instituted administrative proceedings against Nebari Partners, LLC, a registered investment adviser. Nebari failed to conduct an audit of and timely distribute annual audited financial statements to the investors in 14 pooled investment vehicles (the “Special Purpose Vehicles”) for which Nebari-related persons served as managing member or general partner. Nebari was ordered to pay a civil money penalty of $80,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6701.pdf

34. On September 17, 2024, the SEC instituted administrative proceedings against Traphagen Investment Advisors, LLC, a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. Traphagen failed to file Forms 13F. Traphagen was ordered to pay a civil money penalty of $225,000.  https://www.sec.gov/files/litigation/admin/2024/34-101063.pdf

35. On September 17, 2024, the SEC instituted administrative proceedings against TD Private Client Wealth LLC, a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. TD Private was ordered to pay a civil money penalty of $475,000.  https://www.sec.gov/files/litigation/admin/2024/34-101062.pdf

36. On September 17, 2024, the SEC instituted administrative proceedings against NEPC, LLC, a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. NEPC failed to file Forms 13F. NEPC was ordered to pay a civil money penalty of $725,000.  https://www.sec.gov/files/litigation/admin/2024/34-101061.pdf

37. On September 17, 2024, the SEC instituted administrative proceedings against Mason Investment Advisory Services, Inc., a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. MIASI failed to file Forms 13F. MIASI was ordered to pay a civil money penalty of $525,000.  https://www.sec.gov/files/litigation/admin/2024/34-101059.pdf

38. On September 17, 2024, the SEC instituted administrative proceedings against Focus Financial Network, Inc., a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. FFN failed to file Forms 13F. FFN was ordered to pay a civil money penalty of $475,000.  https://www.sec.gov/files/litigation/admin/2024/34-101058.pdf

39. On September 17, 2024, the SEC instituted administrative proceedings against Financial Synergies Wealth Advisors, Inc., a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. FSWA failed to file Forms 13F. FSWA was ordered to pay a civil money penalty of $225,000.  https://www.sec.gov/files/litigation/admin/2024/34-101057.pdf

40. On September 17, 2024, the SEC instituted administrative proceedings against Bulltick Wealth Management, LLC, Respondent, a registered investment adviser, has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. Bulltick failed to file Forms 13F. Bulltick was ordered to pay a civil money penalty of $175,000.  https://www.sec.gov/files/litigation/admin/2024/34-101055.pdf

41. On September 17, 2024, the SEC instituted administrative proceedings against Azzad Asset Management, Inc., a registered investment adviser. Azzad has had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. Azzad failed to file Forms 13F. Azzad was ordered to pay a civil money penalty of $225,000.  https://www.sec.gov/files/litigation/admin/2024/34-101054.pdf

42. On September 17, 2024, the SEC instituted administrative proceedings against Ashton Thomas Private Wealth, LLC, a registered investment adviser. Ashton had investment discretion over at least $100 million of reportable securities and was therefore obligated to file quarterly Forms 13F. Ashton failed to file Forms 13F.  Ashton was ordered to pay a civil money penalty of $375,000.  https://www.sec.gov/files/litigation/admin/2024/34-101053.pdf

43. On September 16, 2024, the SEC instituted administrative proceedings against Frank Mercado who was the founder, manager, registered agent and Chief Investment Officer of Tiger Wolf Capital, LLC (“Tiger Wolf”). Mercado and Tiger Wolf defrauded Tiger Wolf Capital Fund, LP (“Tiger Wolf Partnership Fund”), by diverting to themselves fund assets provided by Tiger Wolf advisory clients who had intended to purchase interests in the Tiger Wolf Partnership Fund. Mercado and Tiger Wolf falsely represented to individual advisory clients that clients’ funds were invested in either the Tiger Wolf Partnership Fund or in other funds managed and advised by Mercado and Tiger Wolf. Mercado and Tiger Wolf sent false account statements to clients indicating that clients had earned profits, and otherwise engaged in a variety of conduct which operated as a fraud and deceit on Tiger Wolf clients. Mercado was barred.  https://www.sec.gov/files/litigation/admin/2024/ia-6695.pdf

44. On September 16, 2024, the SEC instituted administrative proceedings against Vora Wealth Management, PLLC (“Vora Wealth”), a registered investment adviser, and Dharmesh Vora, Vora Wealth’s sole owner and principal investment professional, who invested the majority of his advisory clients’ assets in structured notes without adequate disclosure. Vora Wealth and Vora used their discretionary authority over advisory client accounts to purchase structured notes that were inappropriate for the majority of their clients, particularly given the clients’ expressed safety and income goals, net worth, retirement status, and sophistication.. Vora Wealth and Vora was ordered to jointly pay disgorgement of $1,114,079 and prejudgment interest of $231,118.  Vora was ordered to pay a civil money penalty of $300,000. https://www.sec.gov/files/litigation/admin/2024/ia-6696.pdf

45. On September 12, 2024, the SEC instituted administrative proceedings against Frank Vecchio who was associated with at least twenty broker-dealers registered and held Series 7 and 63 licenses. Vecchio was charged with making deceptive and misleading sales solicitations. Vecchio was hired as a sales agent by StraightPath Venture Partners LLC (the “SP Fund Manager”) to solicit investments in unregistered membership interests in limited liability companies (the “SP Funds”) that purportedly owned shares of private companies that had prospects of going public through initial public offerings (“IPOs”). despite being paid 10 percent upfront fees, Vecchio told investors he solicited on behalf of the SP Funds that there were no upfront fees and that the only way he or the SP Fund Manager earned any money was via backend fees on any profits earned by the investors on the pre-IPO shares after an IPO occurred, and that Vecchio knew or recklessly disregarded that these representations were false or misleading. Vecchio was barred.  https://www.sec.gov/files/litigation/admin/2024/34-101008.pdf

46. On September 12, 2024, the SEC instituted administrative proceedings against Ruben Williams who was the CEO, CCO, and co-owner of Vista Financial Advisors LLC (“Vista”), a formerly registered investment adviser. Vista and Williams made material representations in Vista’s 2022 and 2023 Form ADV filings concerning Vista’s regulatory assets under management (“RAUM”) by falsely claiming in Vista’s 2022 Form ADV filing that Vista had $10 billion in RAUM and by stating that its RAUM had grown to nearly $11.5 trillion in the 2023 Form ADV filing. Additionally, the 2022 Form ADV failed to disclose the identity of one of Vista’s owners, and misstated how Vista’s ownership interest was divided up among its remaining owners. Williams signed and certified both Form ADV filings. Williams was barred.  https://www.sec.gov/files/litigation/admin/2024/ia-6694.pdf

47. On September 11, 2024, the SEC instituted administrative proceedings against Randolph Abrahams who was the founder and President of ExWorks Capital, a formerly registered investment adviser. ExWorks managed four private funds(“Funds”) that made loans to small and middle market companies. The Funds’ loan portfolio experienced challenges due to liquidity constraints and problems facing certain large loans in the portfolio. Abrahams, reviewed, edited, and approved quarterly newsletters sent to limited partners, or investors, in the Funds that made misleading statements concerning the Funds’ sale of warrants of a large borrower in the Funds’ portfolio.  Abrahams was ordered to pay a civil money penalty of $125,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6692.pdf

48. On September 10, 2024, the SEC charged Donald Anthony Wright and his company, Retirement Specialty Group, Inc., a registered investment adviser, with defrauding several investors. Wright primarily targeted Christian clients by promoting his and RSG’s “faith-based” approach to investing. Wright and RSG recommended and sold over $2 million in fraudulent promissory notes to at least five advisory clients and one other investor. In recommending and selling these notes, some of which promised monthly interest of up to 20%, Wright misled investors concerning the nature and safety of investing in the notes. Wright misappropriated most of the note proceeds for his own personal benefit and then lied to the investors about the repayment status of the notes. Wright fabricated an $8.1 million wire-transfer confirmation that he gave to a client to falsely assure him that repayment of his note was forthcoming. Wright also failed to disclose his business and financial ties with the issuers of the notes, which created conflicts of interest. This matter is being litigated. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26100

49. On September 10, 2024, the SEC instituted administrative proceedings against Hi2 Investment Management, LLC, a formerly registered investment adviser. Hi2 Manager had custody of client assets in seven private funds accounts it advised. Hi2 Manager failed to distribute to investors within the required time period audited annual financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) and audited by a PCAOB-registered independent public accountant, and Hi2 Manager otherwise failed to comply with the Custody Rule. Hi2 Manager failed to obtain or deliver annual financial statements audited by a PCAOB-registered independent public accountant altogether, and in others, Hi2 Manager delivered audited annual financial statements to investors years later, in response to the Staff’s investigation. Hi2 Manager also failed to adopt and implement written policies and procedures. Hi2 Manager was ordered to pay a civil money penalty in the amount of $75,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6691.pdf

50. On September 9, 2024, the SEC instituted administrative proceedings against Farnham Fisher Collins d/b/a Collins Capital Management (CCM), for failing to comply with the independent verification requirement for client funds and securities. CCM also failed to adopt and implement written policies and procedures. CCM was ordered to pay a civil money penalty of $65,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6688.pdf

51. On September 9, 2024, the SEC charged 9 registered investment advisers for disseminating advertisements that included untrue or unsubstantiated statements of material fact or testimonials, endorsements, or third-party ratings that lacked required disclosures. The firms have agreed to pay combined civil penalties of $1,240,000. https://www.sec.gov/newsroom/press-releases/2024-121

52. On September 9, 2024, the SEC instituted administrative proceedings against Ronald Hannes who was associated with a dually-registered broker-dealer and investment adviser. Hannes engaged in an extensive, long-term fraud against his clients by convincing them to write checks to Hannes Financial Services, Inc. for off-the-books investments, then using the money for unknown purposes. Hannes defrauded at least nineteen clients, with total losses exceeding $2.9 million and appears to have falsified checks during an internal investigation conducted by the dually-registered broker-dealer and investment adviser with which Hannes was associated at the time. Hannes was barred.  https://www.sec.gov/files/litigation/admin/2024/34-100976.pdf

53. On September 5, 2024, the SEC instituted administrative proceedings against Raskob Kambourian Financial Advisors, Ltd., a formerly registered investment adviser, for failing to disclose financial planning and investment management fee increases to its clients. RKFA charged its clients fees that were higher than the amounts set forth in its clients’ respective agreements. RKFA periodically increased its fees, but, as a matter of general practice, did not expressly disclose those fee increases to clients, in breach of the firm’s fiduciary duties. The “brochure rule” required RKFA to disclose each fee increase as a “material change” to its Form ADV Part 2A (the “Brochure”) that the firm filed on an annual basis. The brochure rule further required RKFA to deliver to each client, within 120 days of the end of the firm’s fiscal year, its current Brochure, or, a summary of material changes to its Brochure with an offer to deliver the full Brochure. RKFA was ordered to pay disgorgement of $1,364,513, prejudgment interest of $256,068 and a civil money penalty in the amount of $225,000.  https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26097

54. On September 5, 2024, the SEC instituted administrative proceedings against Arcis Capital Investment Advisors LLC, a registered investment adviser, for failed to timely distribute annual audited financial statements to investors in pooled investment vehicles that it advised. Arcis was ordered to pay a civil money penalty of $30,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6676.pdf

55. On September 4, 2024, the SEC charged three affiliated registrants, registered broker-dealer Nationwide Planning Associates, Inc. and investment adviser NPA Asset Management, LLC, and state-registered investment adviser Blue Point Strategic Wealth Management, LLC. Nationwide, NPA, and Blue Point asked 11 retail clients to sign confidentiality agreements in connection with payments made by the entities to the clients’ investment accounts. These agreements contained provisions that impeded clients from reporting potential securities law violations. The payments were intended to compensate the clients for losses caused by the firms’ breaches of federal or state securities laws. Nationwide was ordered to pay a civil money penalty in the amount of $70,000. NPA was ordered to pay a civil money penalty of $160,000. Blue Point was ordered to pay a civil money penalty of $10,000.  https://www.sec.gov/newsroom/press-releases/2024-115

56. On September 4, 2024, the SEC instituted administrative proceedings against Sean Kelly and Jeffrey Ward who was the president of Red Rock Secured, LLC (“Red Rock”). While acting as unregistered investment advisers, Red Rock, Kelly and Ward persuaded hundreds of retirement account investors to sell their existing securities, transfer the proceeds into self-directed individual retirement accounts that Red Rock helped clients establish, and invest the proceeds in gold or silver coins. Red Rock, Kelly and Ward made materially false and misleading statements, including regarding the markups that Red Rock charged on the price of coins, the purported value of “premium” coins, and the performance of the stock market. Kelly was barred.  https://www.sec.gov/files/litigation/admin/2024/ia-6675.pdf  and https://www.sec.gov/files/litigation/admin/2024/ia-6690.pdf

57. On September 3, 2024, the SEC instituted administrative proceedings against International Assets Investment Management, LLC (“IAIM”), a registered investment adviser, for failing to fully and fairly disclose to its advisory client’s material facts and conflicts of interest that arose out of a relationship between IAIM affiliated broker-dealer International Assets Advisory, LLC (“Affiliated Broker-Dealer”), and an unaffiliated clearing broker (“Clearing Broker”), concerning certain financial incentives and revenue sharing payments that its Affiliated Broker-Dealer received from the Clearing Broker. IAIM was ordered to pay disgorgement in the amount of $576,134, prejudgment interest of $174,276 and a civil money penalty of $150,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6673.pdf

58. On September 3, 2024, the SEC instituted administrative proceedings against ClearPath Capital Partners, LLC, a registered investment adviser. ClearPath failed to timely distribute annual audited financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) to investors in certain private funds that it advised. In its advisory agreements and certain private fund partnership and operating agreements, ClearPath used hedge clauses that contained misleading statements regarding the scope of its unwaivable fiduciary duty and could lead a client to believe incorrectly that the client had waived a non-waivable cause of action against the adviser provided by state or federal law. ClearPath was ordered to pay a civil money penalty of $65,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6672.pdf

59. On September 3, 2024, the SEC instituted administrative proceedings against Colony Capital Investment Advisors, LLC (“Colony”), a registered investment adviser, for failing to follow certain contractually agreed procedures governing the timely disclosure of and consent to expenses that Colony allocated to eight private real estate investment funds it managed (the “Funds”) for services provided by affiliates of Colony to the Funds. The limited partnership agreements (“LPAs”) for the Funds provided that the Funds, at the direction of Colony, may enter into transactions and agreements with Colony’s affiliates, which may create conflicts of interest, and specified how such transactions were to be disclosed and approved. The LPAs required that transactions with affiliates be fully disclosed in advance to the Funds’ limited partners, approved by the Funds’ limited partnership advisory committees (“LPACs”) or the majority-in-interest of its limited partners, as applicable, and, with respect to one Fund, that material amounts paid to affiliates be disclosed to the Fund’s LPAC during the same fiscal year as the expenses are incurred. Colony caused certain of the Funds to incur and pay fees and expenses pursuant to 40 agreements between these Funds and affiliates of Colony and the Funds’ general partners. Colony was ordered to pay a civil money penalty of $350,000.  https://www.sec.gov/files/litigation/admin/2024/ia-6671.pdf

60. On September 3, 2024, the SEC charged Black Dragon Capital, LLC (“Black Dragon Capital”), Black Dragon Capital Investment Management, LLC a/k/a Black Dragon Capital Investment Management, Inc. (“Black Dragon CIM”), advisers to private funds, and their CEO, Louis Hernandez, Jr. Black Dragon Entities and Hernandez improperly failed to register as investment advisers. Black Dragon Entities and Hernandez through their use of certain performance data on their website, provided misleading performance information in Black Dragon CIM’s marketing materials, and failed to maintain certain books and records. This matter is being litigated.  https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26095

61. On September 3, 2024, the SEC charged Galois Capital Management LLC (“GCM”), a former registered investment adviser for a private fund that primarily invested in crypto assets, for failing to comply with requirements related to the safeguarding of client assets, including crypto assets being offered and sold as securities. Galois misled fund investors about the notice period required for redemptions. GCM failed to ensure that certain crypto assets held by the private fund that it advised were maintained with a qualified custodian. GCM held certain crypto assets in online trading accounts on crypto asset trading platforms, including FTX Trading Ltd., that were not qualified custodians. GCM misled certain investors by representing to them that redemptions required at least five business days’ notice before month end while allowing other investors to redeem with fewer days’ notice. GCM was ordered to pay a civil money penalty of $225,000.  https://www.sec.gov/newsroom/press-releases/2024-111

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