Firm hiked AUM by moving decimal point to the right: SEC

Claims Barthelemy Group exaggerated assets 'tenfold'

Nov 21, 2012 @ 11:59 am

By Jeff Benjamin

Two financial advisory firms have been sanctioned for impeding examinations by the Securities and Exchange Commission.

Both firms agreed to settle the charges against them.

According to an SEC announcement Tuesday, Evens Barthelemy, owner of the New York-based Barthelemy Group LLC, misled examiners by inflating the firm's claimed assets under management “tenfold in an apparent attempt to show that the firm was eligible for SEC registration.”

Another investigation by the commission found that Seth Richard Freeman, principal of Moraga, Calif.-based EM Capital Management LLC, “delayed nearly 18 months in producing books and record related to the firm's mutual fund advisory business.”

In the Barthelemy Group case, SEC examiners found that the assets associated with a list of client accounts had been altered by moving decimal points one place to the right. The strategy made the firm's total assets under management appear as $26.28 million, as opposed to the actual assets of $2.628 million.

Mr. Barthelemy did not respond to a request for comment.

According to the SEC, the firm improperly registered with the SEC from July 2009 to early 2011 “on the basis of aspirational AUM that was 10 times higher than reality.”

Mr. Barthelemy also was found to have failed to adopt reasonable compliance policies and procedures, to maintain required books and records concerning codes of ethics, and to provide the firm's disclosure brochure to clients.

Without admitting or denying the allegations, Mr. Barthelemy consented to cease-and-desist orders. He has been barred from the securities industry and from associating with an investment company, with the right to reapply after two years.

In the EM Capital case, involving the failure to furnish the required books and records upon request by SEC staff in December 2010, Mr. Freeman and EM Capital agreed to pay a $20,000 penalty.

According to the SEC, the firm did not fully comply with the requests for documentation until September 2012.

Without admitting or denying the SEC's findings, Mr. Freeman and EM Capital agreed to censures and cease-and-desist orders. Mr. Freeman said he was dealing with medical issues at the time of the SEC exam that prevented him from providing the requested information in a timely fashion.

"This truly is a purely administrative and internal issue," he said. "We weren't able to meet the deadlines because the documents needed to be reviewed prior to handing them over."

He added: "Bottom line is it is behind us now and we are moving forward."

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

WisdomTree's Maute: Developing elegant tech-enabled solutions

Advisers need unique technology-enabled solutions in order to have more time to expand their practice, according to WisdomTree's Alisa Maute. What can be done today to create a more thriving business of tomorrow.

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print