The Securities and Alternate Fee charged a Foxboro, Mass.-based advisor and his registered funding advisory agency for failing to reveal conflicts of curiosity associated to Aequitas Capital Administration, which was offering his agency with a $1.5 million mortgage and entry to a $2 million line of credit score. Kristofor R. Behn, founding father of Fieldstone Monetary Administration Group, beneficial purchasers put money into securities issued by Aequitas Industrial Finance, a subsidiary of the Lake Oswego, Ore.-based different investments agency that made a nasty wager on scholar loans, in line with the SEC.
Behn touted Aequitas’ issued securities as a horny funding chance. Throughout the subsequent two years, practically 40 of Behn’s purchasers at Fieldstone invested greater than $7 million in securities issued by Aequitas, the SEC says.
Nonetheless, Behn allegedly didn't disclose that he was discussing the main points of a mortgage from Aequitas to Fieldstone totaling $1.5 million to assist him pay down private debt. Moreover, Fieldstone secured a line of credit score from Aequitas, with the settlement structured in such a manner that it will enhance as extra Fieldstone purchasers invested in Aequitas securities. The order notes Behn by no means drew on the road of credit score. Fieldstone’s Kind ADVs additionally didn't disclose the conflicts of curiosity, the SEC alleged.
“Behn flagrantly disregarded his most simple duties as an funding adviser by concealing the numerous monetary incentives he and his agency would obtain by recommending investments in Aequitas,” mentioned Erin E. Schneider, the director of the SEC’s San Francisco Regional Workplace.
The SEC additionally claimed that Behn fraudulently acquired a $1 million funding from a Fieldstone consumer, intending to make use of the cash to pay down debt and different bills; the consumer was additionally invested in Aequitas securities. Behn framed the funds as a 10% possession curiosity in Fieldstone that will strengthen the agency’s enterprise. In response to the SEC, inside 10 days of receiving the cash, Behn had spent $500,000, together with paying down $300,000 in private taxes.
Fieldstone and Behn didn't admit nor deny the SEC’s findings. The SEC censured Fieldstone and ordered them to pay disgorgement and prejudgment curiosity of $1,047,971 and a penalty of $275,000 which will probably be distributed amongst traders who had been impacted. Behn was additionally barred from associating with any brokers or funding advisors.
In 2016, the SEC additionally charged Aequitas with hiding its fragile monetary state whereas concurrently elevating greater than $350 million from greater than 1,500 traders all through the nation.
“We allege that Aequitas had extreme and chronic money stream shortages and high executives knew they weren’t utilizing cash raised from traders like they mentioned they'd,” Jina L. Choi, the director of the SEC’s San Francisco workplace mentioned on the time. “However they refused to reveal the true monetary situation, continued to attract profitable salaries, and roped much more unknowing traders right into a dropping enterprise.”
In February, Chicago-based FourStar Wealth Advisors bought Fieldstone’s property with the help of Succession Useful resource Group.
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