SEC bars advisor who broke trust of amorous partner, client

A veteran financial advisor who had a long-running romantic relationship with a client was barred from the securities industry on Monday by the Securities and Exchange Commission (SEC), which charged the advisor, James D. Warring, with a variety of violations of the 1940 Advisers Act in connection to the personal relationship.

Warring, 64, is the majority owner of the corporate parent of SEC-registered investment adviser EagleStone Wealth Advisors, based in Rockville, Md. with $198 million in client assets. He is also a certified public accountant.

“Over a period of years, Warring, acting knowingly or recklessly, breached his fiduciary duty to one of his investment advisory clients,” according to the SEC’s order, which was issued Monday.

“Warring and the client entered into a romantic relationship,” according to the SEC. “After the relationship commenced, Warring arranged for the client to make and forgive a loan to his family members; charged the client and certain of her trusts unauthorized and undisclosed fees; and advised the client to enter into agreements purportedly authorizing, waiving, and forgiving problematic transactions and fees.”

“During certain portions of the investment advisory relationship, EagleStone and Warring charged the client unauthorized and undisclosed fees,” according to the SEC.

A representative of EagleStone said that Warring told an InvestmentNews reporter on Monday that Warring no longer worked at the firm. Warring agreed to the settlement with the SEC without admission or denial of the Commission’s findings.

Warring was a registered broker with Emerson Equity until the start of last month, according to his BrokerCheck report, and was registered with Triad Advisors, now part of Osaic Inc., from 2009 to 2020.

According to a filing with the SEC in August, EagleStone Wealth Advisors, Warring and another EagleStone employee settled a legal action in Maryland where client alleged fraud, conversion and breach of fiduciary duty for $5 million.

Already a veteran CPA, Warring began his career in the securities industry in 1999, according to his BrokerCheck report.

He met the unnamed client in 1994, became financial advisor to the client and her then-spouse in 2002, managing certain portions of the couple’s assets. The bulk of the client’s assets continued to be managed by a family office.

After Warring founded EagleStone in 2007, he managed more of her assets and started the romantic part of their relationship.

She then moved more assets from a family office to EagleStone, and during the course of the investment advisory relationship, Warring recommended or advised that the client use her assets to make certain loans as investments.

In one instance from December 2016, Warring arranged for the client to loan $350,000 to a limited liability company, and the members of the limited liability company were Warring’s mother and son, facts which were not disclosed to the client.

“The limited liability company used the loaned funds to purchase real estate in Massachusetts, where Warring’s son was attending college,” according to the SEC. “In 2019, Warring arranged for the client to ‘forgive’ the loan In doing so, Warring failed to fully and fairly disclose to the client all material facts related to the transaction, including the details of this investment and his conflicts of interest.”