B-D chief in $1.5M settlement with SEC over claims of misleading comp disclosure

Settlement comes five months after Finra complaint over misuse of cash by equipment leasing funds

Oct 15, 2013 @ 2:00 pm

By Bruce Kelly

The head of a broker-dealer that distributes illiquid equipment-leasing funds last month reached a $1.5 million settlement with the Securities and Exchange Commission after the agency alleged that a related fund group misled investors regarding compensation practices at the funds.

The SEC's cease-and-desist order against Commonwealth Income & Growth Fund Inc. and Kimberly Springsteen-Abbott, the owner and chief executive of wholesaling broker-dealer Commonwealth Capital Securities Corp., stated that the fund company “made misleading disclosures concerning the expenses that it charged to nine equipment-leasing funds that were sponsored by” the fund company's parent, which the SEC identified as the Commonwealth Funds.

The settlement came five months after the Financial Industry Regulatory Authority Inc. filed a complaint against Ms. Springsteen-Abbott that alleged persistent misuse of $345,000 in investor cash over a three-year period to pay for personal expenses such as home remodeling and decorations, and various trips. According to the Finra complaint, Commonwealth Capital Securities, the wholesaling broker-dealer, had distributed 13 equipment-leasing funds to be sold by various independent broker-dealers from 1993 to the present, raising more than $240 million.

Commonwealth Income & Growth Fund and Ms. Springsteen-Abbott have already paid $1.4 million of the $1.5 million disgorgement to the various equipment-leasing funds in question, according to the SEC order. The order requires the two to pay $78,000 in interest and a civil penalty of $150,000.

Commonwealth Income & Growth Fund, based in Chadds Ford, Penn., and Clearwater, Fla., and Ms. Springsteen-Abbott neither admitted to nor denied the findings of the SEC order. Chris Anderson, Commonwealth Capital Securities' general counsel, did not return phone calls Monday and Tuesday seeking comment.

Finra spokeswoman Nancy Condon did not respond to an inquiry regarding the status of Finra's complaint against Ms. Springsteen-Abbott.

The SEC's cease-and-desist order focuses on an alleged failure of full disclosure about compensation practices between the various Commonwealth entities.

Commonwealth Income & Growth Fund “represented in the funds' offering documents, which were reviewed and approved by its chief executive officer Springsteen-Abbott, that the salary expenses of [Commonwealth Income & Growth Fund's' and its parent's 'controlling persons' would not be charged to the funds,” according to the order.

Commonwealth Income & Growth Fund and Ms. Springsteen-Abbott “negligently failed to disclose that she was the sole controlling person under their interpretation of the definition and that [Commonwealth Growth & Income Fund] and its corporate parent routinely expensed a portion of the salaries of all other employees, executive officers and directors to the Commonwealth Funds,” according to the order.

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