The Securities and Exchange Commission has charged a San Luis Obispo, Calif.-based investment adviser and its owner with fraud for allegedly failing to disclose a material conflict of interest.
The SEC alleges that WealthWise and its principal Jeffrey Forrest recommended that more than 60 of their clients invest approximately $40 million in Apex Equity Options Fund, a hedge fund that allegedly made undisclosed subprime and other high-risk investments. The fund was managed by Salt Lake City-based Thompson Consulting.
According to the SEC's complaint, WealthWise and Forrest failed to disclose a side agreement in which WealthWise received a portion of the performance fee that Apex paid Thompson Consulting Inc. for all WealthWise assets invested in with it. From April 2005 to September 2007, WealthWise received more than $350,000 in performance fees from TCI.
Apex collapsed in August 2007, and WealthWise clients lost nearly all of the money they invested.
On March 4, the SEC filed a civil action in federal district court in Salt Lake City against TCI and three of its principals in connection with the collapse of Apex and another hedge fund.
The SEC seeks an injunction, an accounting of the total amount of performance fees WealthWise received from TCI, disgorgement of those fees, and financial penalties.