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Apr 30 2012 | 11:01am ET
The Securities and Exchange Commission has fined an Atlanta investment adviser for failing to disclose payments it received from an allegedly fraudulent hedge fund.
Montford Associates and its owner, Ernest Montford, were ordered to pay $650,000 in penalties. The firm is not accused of knowledge of or participation in Stanley Kowalewski's alleged $16.5 million fraud at his SJK Investment Management, but of lying to investors about compensation it received from SJK for recommending it to clients.
"The independence of an investment adviser like Montford Associates is critical to the trust investors place in them," William Hicks of the SEC's enforcement division said. "Undisclosed payments from a recommended hedge fund, like the ones at issue here, compromise that independence and would erode the public's trust if left unchecked."
Worse, according to the SEC's complaint, "Montford knew that the schools and charitable organizations that were his clients were managed by part-time volunteers who relied on his investment advice and valued stable and consistent investments." So when Kowalewski left Columbia Partners Investment Management to start SJK, Montford "knew [his] clients would be uncomfortable moving their investments a third time to have Kowalewski manage their money." But he and his firm pushed them to do so, anyway, the SEC said, and were paid $210,000 for "consulting services" and "marketing and syndication fees."
Montford has until May 11 to appeal the SEC decision.
The SEC sued Kowalewski last year, accusing his of misappropriating $16.5 million from SJK.
Jan 23 2015 | 1:00pm ET
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