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Advisor, RIA Charged over Account Statement Fraud

By Alex Padalka October 5, 2017

The SEC has charged an advice firm and its owner with fraud related to inflating fund performance, according to a press release from the regulator.

San Marino, Calif.-based Tweed Investment Services, Inc. and its owner, Robert Russel Tweed, allegedly told potential investors their money would go into a master fund that would employ a quantitative stock trading strategy, the SEC says.

TISI and Tweed successfully raised over $1.7 million from 22 investors for the fund from 2008 to 2010, according to the complaint. But the money eventually went into two other investments, which wound up losing around $800,000, the SEC alleges.

To cover up the losses, TISI and Tweed apparently sent clients bogus account statements showing the fund as profitable, according to the press release. Furthermore, when Tweed and TISI paid back money to investors who wanted to redeem, they paid them based on the inflated values, which meant those investors received money they weren’t entitled to, the SEC says.

The practice continued for years, according to the regulator, and Tweed and his firm only disclosed the losses after state regulators and SEC examiners discovered the fraud.

(Getty)

The SEC is seeking permanent injunction and civil penalties. Finra also has a pending disciplinary proceeding against Tweed alleging negligent misrepresentations and omissions related to his fundraising, according to the SEC’s complaint.