SEC censures, penalizes Utah hybrid $150,000 for improper alts sales

Lefavi Wealth Management acknowledges receiving 7% commissions on top of fees

Sep 4, 2019 @ 12:54 pm

By InvestmentNews

The Securities and Exchange Commission has censured Lefavi Wealth Management, a hybrid firm in Salt Lake City, Utah, managing $303 million, and required it to pay a $150,000 penalty for breaching its fiduciary duty and failing to make necessary disclosures in selling alternative investments to clients.

[More: Finra bars rep fired by Merrill Lynch over improper fund sales]

In an administrative proceeding against the firm, the SEC said that from June 2014 through December 2016, Lefavi recommended and invested client assets in nontraded real estate investment trusts, business development companies and private placements at a share price that reflected a 7% commission. At the same time, it failed to disclose that it could have invested advisory client assets in the same investments at a lower share price that did not include commissions.

The SEC also noted that Lefavi failed to disclose the conflict of interest associated with its selling of those investments with a commission, which was inconsistent with its fiduciary duty to seek best execution for those transactions.

The transactions were conducted through Bruce A. Lefavi Securities, a broker-dealer affiliated with Lefavi Wealth Management through common ownership.

[Recommended video: Ron Carson on why the fiduciary debate is so frustrating]

In addition to its censure and payment of the $150,000 civil monetary fine, Lefavi Wealth Management has agreed to pay disgorgement of $994,296 and prejudgment interest of $144,439.

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