RIA charged for not disclosing commissions earned from selling risky tech stock

Tamara Steele and her firm didn't disclose the $2.5 million in commissions she earned for selling shares of a company that was later charged with fraud, SEC claims

Sep 14, 2018 @ 2:59 pm

By Ryan W. Neal

The Securities and Exchange Commission is charging an investment advisory firm with selling $13 million of high-risk securities to public school teachers without disclosing the exorbitant commissions the firm collected.

A complaint filed Friday in Indiana federal district court claims Steele Financial, a registered investment adviser with 450 clients and $60 million in assets under management, sold shares of Behavioral Recognition Systems, a private technology company charged with fraud by the SEC in 2017, from December 2012 through October 2016.

In total, Tamara Steele, 49, and her firm sold $15 million of BRS securities, collecting 8% to 18% commissions that amounted to more than $2.5 million. The SEC says she did not disclose the commissions to 120 of the clients, who invested approximately $13 million.

In addition to defrauding clients, the SEC says Ms. Steele and the firm acted as brokers without a registration, meaning the commissions were illegally received.

The firm and Ms. Steele allegedly targeted clients who generally don't invest in individual stocks. Many are current and former teachers, or other employees in public education, according to the SEC's complaint.

The complaint also alleges Ms. Steele, a former teacher herself, took steps to hide her involvement in BRS from clients, and the broker-dealer she was affiliated with, by submitting false letters, invoices and consulting agreements.

The SEC is seeking disgorgement of ill-gotten gains with interest, penalties and permanent injunctions.

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