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

Advisers beware: tax law has unintended consequences

Commission accounts could be preferable for some clients, and advisers could be incentivized to move from employee broker-dealers to independent channels.

Recommended Video

Path to growth

Latest news & opinion

Bond investors have more to worry about than a government shutdown

Inflation worries, international rates pushing Treasuries yields higher.

Morgan Stanley reports a loss of advisers after exiting the protocol for broker recruiting

The firm said it lost 47 brokers in the fourth quarter, the most in any quarter of 2017.

Morgan Stanley's wealth management fees climb to all-time high

Improvement reflect firm's shift of more clients into fee-based accounts priced on asset levels, which boosts results as markets rise.

Legislation would make it harder for investors to sue mutual funds over high fees

A plaintiff would have to state in their initial complaint why fiduciary duty was breached, and then prove the violation with 'clear and convincing evidence.'

Relying on trainees, Merrill Lynch boosts adviser headcount in 2017

Questions remain about long-term effectiveness of wirehouse's move away from recruiting experienced brokers.

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