SEC Sues Santa Clarita-Based Investment Advisers

Money and dollar bills
Money and dollar bills

LOS ANGELES (CNS) – The U.S. Securities and Exchange Commission is suing a Santa Clarita investment advisory firm and its former co-owners for allegedly breaching their fiduciary duty and defrauding clients of $16 million by failing to disclose significant conflicts of interest when recommending private real estate investment funds, according to court documents obtained
The SEC’s lawsuit alleges that from 2014 to 2017, Criterion Wealth Management Insurance Services, Robert Gravette, 54, of Santa Clarita, and Mark MacArthur, 52, of Newhall, recommended that their advisory clients invest more than $16 million in four private real estate investment funds without disclosing that the fund managers had paid them more than $1 million in income on top of the fees that defendants were already charging their clients

The complaint, filed Wednesday in Los Angeles federal court, further alleges the defendants were incentivized to keep their clients invested in the funds, rather than allocate their capital elsewhere because the additional side compensation was recurring and depended on Criterion’s clients remaining invested.
For two of the funds, the undisclosed compensation arrangement resulted in reduced investment returns for the defendants’ advisory clients, the SEC alleges.
The suit seeks permanent injunctions from future alleged violations of SEC provisions, disgorgement and prejudgment interest and civil penalties from each of the defendants.