August 2, 2019
Alaska Investment Adviser Ordered to Pay Over $400K in SEC Settlement
WHAT HAPPENED?
On July 24, 2019, the US Securities and Exchange Commission released a settlement with an Alaska investment adviser, which was penalized for its failure to properly disclose compensation conflicts to clients.
Foundations Assets Management (FAM) and two of its principals, Michael Shamburger and Rob Wedel, were named in the settlement. The Commission found that the wrongdoing occurred from May 2013 through June 2016. During that time, FAM received about $254,000 in up-front and trailing fees for recommending that retail clients invest in a private real estate fund, Alaska Financial Company III (AFC). FAM received compensation from AFC which was, in some circumstances, more than double the typical advisory fee.
Shamburger and Wedel told clients via written disclosures that FAM “receives revenue from Alaska Financial Company for the clients it recommends for investment to Alaska Financial Company.” However, the disclosure was found to be inadequate and not completely descriptive of the conflicts of interest stemming from the firm’s relationship with AFC.
The issue was originally discovered in 2016, when the Commission issued FAM a deficiency letter. The firm was also disciplined for failing to register as a broker-dealer and making false statements in several Form ADV 2A filings.
WHAT DOES THIS MEAN FOR ME?
As a result of the violations, FAM was ordered to pay over $250,000 disgorgement, $25,000 in interest, a civil penalty of $85,000, and was censured by the Commission. In addition, Wedel was ordered to pay $25,000 and Shamburger to pay $50,000 in further civil penalties.
The disciplinary action faced by the firm and its principals could have been avoided by the group providing retail clients more detailed and forthright information regarding the compensation arrangements with AFC. Failure to do so resulted in harm to the ill-informed clients.
Fairview is committed to helping your firm maintain full regulatory compliance. Reach out to Fairview directly with questions regarding conflicts of interest, disclosure requirements, and registration-related issues.
