The Securities and Exchange Commission has charged advisory firm Momentum Investment Partners in Stamford, Conn. and one of its principals with fraud for failing to disclose additional fees charged to clients.
The firm, which did business as Avatar Investment Management, and principal Ronald Fernandes moved some clients into newly created mutual funds in 2013 without notifying them of the transfer and higher cost, the SEC said in a litigation announcement Tuesday.
Avatar's clients paid almost $111, 000 in additional fees from May 2013 to March 2014 for no additional advisory services, according to a complaint the agency filed the same day in federal court in Connecticut. The firm had been investing their money directly into various exchange-traded funds and the new mutual funds were designed to mirror that same strategy.
“The Avatar individual advisory client assets proved to be the seed capital for the Avatar mutual funds, but Avatar was not successful in raising additional assets,” the agency said in the announcement. “The funds eventually folded.”
Mr. Fernandes had moved about $11 million from about 20 accounts into four new mutual funds created and managed by Avatar, allowing the firm to collect the additional layer of fees, according to the complaint.
Avatar is now defunct, the SEC said.
Efforts to reach Mr. Fernandes for comment weren't immediately successful.