Adviser misused $8 million in client funds: SEC

Settlement requires him to pay more than $500,000

Jul 17, 2014 @ 3:00 pm

By Bruce Kelly

An investment adviser in Seattle fraudulently misused more than $8 million of client assets to make loans to himself, buy a luxury vacation home and refinance a vintage automobile, according to the Securities and Exchange Commission.

According to an SEC administrative proceeding released on Thursday, the SEC's investigation found that Dennis H. Daugs Jr. and his firm, Lakeside Capital Management, borrowed $3.1 million from a client without obtaining her consent.

Mr. Daugs also improperly directed an investment fund managed by the firm to make more than $4.5 million in loans and investments to facilitate personal real estate deals as well as fend off claims from unhappy Lakeside Capital clients, according to the SEC. Mr. Daugs diverted more than $500,000 from the fund to pay a settlement with the disgruntled clients.

Mr. Daugs did not return calls to his office on Thursday afternoon.

Lakeside Capital, which had $124 million in assets, and Mr. Daugs, who eventually paid back the diverted funds and personal loans, agreed to settle the SEC's charges and pay more than $340,000 in disgorgement and interest to the client and investment funds. That amount represented the gains Mr. Daugs retained after he paid back the loans, according to the SEC.

He and his firm also agreed to pay a $250,000 penalty and Mr. Daugs will be barred from the securities industry for at least five years. An independent monitor will oversee Lakeside Capital winding down its operations.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

How 401(k) advisers can use 'centers of influence' to grow their business

Leveraging relationships with accounting, benefits, and property and casualty insurance firms can help deliver new business leads for retirement plan advisers.

Latest news & opinion

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

Cadaret Grant acquired by private-equity-backed Atria

75-year-old owner Arthur Grant positions the IBD for the 'next 33 years.'

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print