SEC charges former adviser with pawning off trading losses to clients

SEC charges former adviser with pawning off trading losses to clients
Laurence I. Balter, founder of Oracle Investment Research, also allegedly charged clients both an advisory fee and a fund-management fee.
OCT 14, 2016
The Securities and Exchange Commission charged a former registered investment adviser Tuesday with keeping trading profits for himself while saddling clients with losses and misrepresenting his fees. The SEC's claim against Laurence I. Balter — a resident of Kihei, Hawaii, founder of Oracle Investment Research and manager of Oracle Mutual Fund — states that he instituted a day-trading strategy in a single account that included his and his clients' trades. Without telling his clients, the SEC alleged that from April 21, 2012, to May 30, 2013, and from July to December 2013, Mr. Balter would wait to see which trades were profitable and put those in his own account while allocating less profitable trades to his clients, who were in separately managed accounts.  The SEC said Mr. Balter realized approximately $490,000 in profits while his clients lost money. The agency also claimed that Mr. Balter charged his fund clients both an advisory fee and a fund-management fee after telling clients he would give them a credit for the management fee. “We allege that [Mr.] Balter reaped more than a half-million dollars in ill-gotten gains by siphoning winning trades from his clients and withdrawing more than his fair share of management fees,” Jina L. Choi, director of the SEC's San Francisco Regional Office, said in a statement. “Investment advisers breach their fiduciary duty when they favor their own interests and force clients to take less profitable trades without their knowledge.” A lawyer for Mr. Balter did not immediately respond to a request for comment. (More: Former Morgan Stanley broker barred for unauthorized borrowing from clients) The SEC will conduct administrative proceedings to determine punishment, which could include disgorgement and civil penalties. The case is another one in which a financial regulator is targeting abuse of senior investors. “The majority of [Mr.] Balter's clients were individual investors, many of whom were over 60 years old, retired or nearing retirement, and unsophisticated investors with little investment experience,” the SEC order states. Mr. Balter is no longer registered with the SEC or the state of Washington, where Oracle Investment Research conducted business on Fox Island. Oracle Mutual Fund closed in August 2013.

Latest News

Finra's Reg BI Enforcement: Is it 'ineffective, costly'?
Finra's Reg BI Enforcement: Is it 'ineffective, costly'?

The industry watchdog's own reports reflect failures to deter "willful" and "repeat" violations, raising a crucial question about the future of regulation.

SEC prepares to back away from defending climate rule in court
SEC prepares to back away from defending climate rule in court

Acting Chairman Mark Uyeda directed SEC staff to initiate a pause in court while the commission awaits a quorum. The SEC may decide to withdraw from defending itself in a lawsuit over last year's climate disclosure rule.

wealth.com welcomes Kathy Wunderli in private wealth push
wealth.com welcomes Kathy Wunderli in private wealth push

The top estate planning platform's veteran hire will lead its legal team's efforts to develop estate planning, tax analysis, and wealth transfer solutions for ultra-high-net-worth clients.

Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam
Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam

“If Morgan Stanley had called my client’s son, this wouldn’t have happened,” the investor's attorney said.

LPL welcomes $630M sibling advisor duo from Corebridge
LPL welcomes $630M sibling advisor duo from Corebridge

Meanwhile, Ameriprise has bolstered its own ranks as an LPL defector joins its branch channel in California.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.