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Ex-Dynasty client closes B-D, RIA after SEC actions

May 6, 2014 @ 1:32 pm

By Bruce Kelly

SEC, Finra, Wells notice, Dynasty Financial Partners, Further Lane Asset Management
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A former adviser client of Dynasty Financial Partners is shutting down both his broker-dealer and registered investment adviser after two actions by the Securities and Exchange Commission.

Michael Araiz, who became a client of Dynasty Financial Partners in 2012, over the past year has faced two separate series of actions, most recently a Wells notice from the SEC's California office. That notice alleges that Mr. Araiz failed to disclose material facts to the underwriters of certain corporate bonds in connection to an investment adviser's purchase of those bonds between 2009 and 2012 in secondary offerings.

Mr. Araiz's RIA, Further Lane Asset Management, which terminated its registration with SEC at the end of March, had $85 million in client assets, according to its Form ADV. A related broker-dealer, Further Lane Securities, in March filed its request for withdrawal from the Financial Industry Regulatory Authority Inc.

Dynasty Financial provides full-service support to RIAs. According to its website, the Dynasty Network has 66 advisers and $20 billion in client assets. The company also has some industry heavy hitters on its board, including former SEC chairman William Donaldson and former American Express chairman and CEO Harvey Golub.

“To be clear, we don't own [Further Lane] or have a piece of them. They are a separate entity,” Jonathan Morris, Dynasty's chief legal and governance officer, said Tuesday. Further Lane “had a service agreement with us and we terminated the service agreement at the time we found out about regulatory matters.”

The firm's regulatory issues were unrelated to the four advisers in Mr. Araiz's wealth management business with which Dynasty worked, he said.

A call to Further Lane Asset Management seeking comment from Mr. Araiz was not immediately returned Tuesday.

Two years ago, Dynasty made a splash out of Mr. Araiz's decision to become a client, claiming in a press release he oversaw $500 million in combined assets in his brokerage and RIA.

The SEC suspended Mr. Araiz last October from the securities industry for a year, finding that he caused a $2 million fund-of-funds he managed to acquire a promissory note from an entity that he owned. Neither Mr. Araiz nor the RIA he managed told investors that the fund of funds could acquire such related-party promissory notes, according to his BrokerCheck report.

Mr. Araiz also engaged in securities transactions with RIA clients through an affiliated broker-dealer and did not disclose that arrangement to clients or get their consent, according to BrokerCheck.

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