SEC Targets AUM-Faking, Athlete-Swindling Advisors
The SEC has issued a cease-and-desist order against a financial advisor the regulator says lied about having more than half a billion dollars in assets under management when in fact he had no clients and no assets. In a separate case the regulator has ordered disgorgements against an FA who allegedly defrauded his athlete clients.
In 2015, Robert Wilson allegedly registered investment advice firm Black Diamond with the SEC and claimed on his initial Form ADV that the company was managing $583,750,000 in 26 to 100 discretionary accounts, the regulator says in its cease-and-desist document. But Black Diamond allegedly never met the SEC’s minimum requirements to register as an investment advisor, never had any clients and never held any assets under management, the regulator claims.
Wilson had formed Black Diamond in 2013 as a Wyoming limited liability company but ran it from his homes in New York.
On his second Form ADV, submitted in 2016, Wilson again claimed to be the sole executive of Black Diamond and once more said the firm had at least 26 clients, the SEC says. This time around, however, Wilson said the firm managed between $25 million and $100 million in regulatory assets under management, according to the regulator. But Black Diamond still had no clients nor assets under management, the SEC alleges.
Nonetheless, Wilson allegedly used the information he submitted on the two ADV forms to solicit prospects through Black Diamond’s website, according to the regulator. He also went after prospects directly, the SEC says in the cease-and-desist order.
The SEC is accusing Wilson – who registered himself as Black Diamond’s sole managing director, chief compliance officer and chief investment officer – with violating anti-fraud provisions of the Advisers Act. Wilson is scheduled to appear in front of an administrative law judge within the next couple of months, according to the regulator.
Separately, the U.S. District Court for the Southern District of New York has ordered a Pittsburgh financial advisor to pay close to $2 million in fines for fleecing several high net worth clients, including professional athletes, the SEC announced.
The regulator had accused Louis Martin Blazer III, founder of Blazer Capital Management, of taking approximately $2.35 million from five clients without their permission to invest in movie projects and then making “Ponzi-like payments,” according to the SEC’s charges filed in May 2016.
In one case, a client Blazer pitched a film project to refused to invest, but Blazer allegedly moved more than half a million dollars from the client’s account to the project anyway, according to the SEC.
Blazer had agreed to settle the SEC charges without admitting or denying fault, the regulator says, and was permanently barred from the industry. This week, the court ordered Blazer to pay $1.8 million in disgorgement and interest and a $150,000 civil penalty, according to the SEC.