SEC charges former president of NAPFA and his firm with taking $2.48M in kickbacks

James Putman’s firm ran unregistered investment pools whose assets were overstated and largely illiquid, commission alleges

Jun 8, 2009 @ 12:01 am

By Bruce Kelly

The SEC has charged James Putman, who held executive positions at NAPFA, and a colleague with taking $1.24 million each in kickbacks related to unregistered investment pools that their firm managed.

On May 20, the Securities and Exchange Commission alleged that James Putman, the founder and majority owner of Wealth Management LLC of Town of Grand Chute, Wis., and Simone Fevola, the firm’s president and chief investment officer, took the kickbacks from investments made by the unregistered investment pools.

The SEC order froze the assets of Wealth Management.

Mr. Putman was the past president of the National Association of Personal Financial Advisors of Arlington Heights, Ill from 1996 to 1997 and was also co-founder and first president of the northeast Wisconsin chapter of the former International Association for Financial Planning, a predecessor organization to the Financial Planning Association of Denver, which was created in 2000.

NAPFA is an organization of financial advisers who charge clients fees for services.

Mr. Putman is no longer a member of the organization and left last year, said Diahann Lassus, president of the organization.

In a closed session for NAPFA members last week at the association's annual conference, advisers expressed distress, concern and disappointment at the news, she said.

“Most of us are very saddened by it and frustrated by it,” Ms. Lassus siad.

She stressed that NAPFA had a very high standard for its members, and had spent over 25 years building its reputation.

She added that she was not aware of a prominent member of NAPFA facing such charges in the past.

According to the SEC's complaint, Wealth Management, Mr. Putman and Mr. Fevola caused clients to invest in the pools from May 2003 through August 2008.

Wealth Management claims to currently have approximately $102 million of its clients' assets invested in these pools.

The SEC's complaint alleges that the pools' assets are largely illiquid and the reported values of their assets appear to be substantially overstated.

Late in 2008 and earlier this year, NAPFA made clear and outspoken statements about advisers committing fraud.

In fact, it took the Bernard Madoff Ponzi scheme as an opportunity to stress the role and fiduciary responsibility of financial advisers.

On Dec. 16, NAPFA issued a press release with the headline "How to Monitor Your Financial Adviser," noting that the "Madoff case adds to lack of investor confidence in the financial service industry."

"As we allege in our complaint, Putman and Fevola put their own financial greed ahead of the safety and stability of their clients' investments," Merri Jo Gillette, director of the SEC's Chicago regional office, said in a statement.

The 57-year-old Mr. Putman said he has been cooperating with federal authorities and offered "sincere apologies to Wealth Management clients and staff for the concern and controversy this is causing," according to The Associated Press.

An earlier version of the story referred to the founder and owner of Wealth Management LLC as James Putnam. His correct name is James Putman.

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