Momentum Investment Partners fraudulently failed to disclose higher fees, SEC says

The firm, which did business as Avatar, moved clients into newly created, higher-priced mutual funds without disclosing it.

May 31, 2016 @ 3:42 pm

By Christine Idzelis

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.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Here's how we came up with our list of undiscovered talent in mutual funds

Senior columnist John Waggoner talks with assistant managing editor Susan Kelly about how hard work, curiosity and passion landed some fund managers on our list.

Latest news & opinion

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.'

SEC advice rule seeks to tighten reins on brokers

The proposed rule puts new restrictions on brokers, but it is still unclear how strongly the SEC is clamping down.

SEC advice rule hearing updates

Commission says a lot of work ahead, public will have 90 days to comment.

SEC advice proposal unveiling: Here's what to expect

Chairman Jay Clayton will initiate momentous action Wednesday, as the commission meets to debate a rule on broker and adviser standards.

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