Advisers who are members of NAPFA had a range of thoughts and reactions to the news that the SEC last month charged a past president of the organization with taking kickbacks related to unregistered investment pools his firm managed.
On May 20, the Securities and Exchange Commission charged James Putman and a colleague with taking $1.24 million each in kickbacks.
“Most of us are very saddened by it and frustrated by it,” said Diahann Lassus, current president of the National Association of Personal Financial Advisors of Arlington Heights, Ill.
She said she is not aware of any other prominent member of NAPFA, past or present, facing such charges. “There are many difficult feelings. No matter how you look at it, it's a difficult situation for everyone involved,” Ms. Lassus said.
The SEC alleged that Mr. Putman, the founder and majority owner of Wealth Management LLC of Appleton, Wis., and Simone Fevola, the firm's president and chief investment officer, took the payments from investments made by the unregistered investment pools.
According to the SEC's complaint, Wealth Management, Mr. Putman and Mr. Fevola advised clients to invest in the pools from May 2003 through August 2008, the pools' assets are largely illiquid, and the reported values of their assets appear to be substantially overstated. Wealth Management claims to have around $102 million of its clients' assets invested in these pools.
The SEC ordered the company's assets frozen.
“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.
Mr. Putman did not return a call seeking comment last week, but the 57-year-old 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.
He is no longer a member of NAPFA, having left last year, Ms. Lassus said.
Mr. Putman was president of NAPFA in 1996 and 1997. He was also a president of a Wisconsin chapter of a forerunner organization to what became the Financial Planning Association of Denver, according to Wealth Management's website.
In a closed session for NAPFA members this month at the association's annual conference, advisers expressed distress, concern and disappointment at the news, Ms. Lassus said.
She stressed that NAPFA had a very high standard for its members and had spent more than 25 years building its reputation.
Late in 2008 and this year, NAPFA issued statements repudiating advisers who commit fraud. In fact, it used 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 services industry.”
E-mail Bruce Kelly at [email protected].
