SEC fines NY investment advisor firm, former officers over $500k for fiduciary failures

The SEC has announced a settlement with New York-based registered investment adviser Momentum Advisors, along with its former managing partner Allan J. Boomer and former chief operating officer Tiffany L. Hawkins, over breaches of fiduciary duties related to the misuse of fund and portfolio company assets.

According to the Securities and Exchange Commission, from August 2021 through February 2024, Hawkins misappropriated approximately $223,000 from portfolio companies linked to a private fund she co-managed with Boomer.

The SEC statement Friday said Hawkins used portfolio company debit cards for over 100 personal transactions, covering expenses such as vacations and clothing, and received unauthorized compensation amounting to $24,000 beyond her approved salary.

The SEC order further states that Hawkins concealed her actions from Momentum Advisors, the portfolio companies’ bookkeeper, and SEC staff. Aside from withholding information, she reportedly misrepresented tens of thousands of dollars in personal travel expenses as business-related trips, and bought designer clothing under the pretext of replacing customer garments damaged by various dry-cleaning businesses the fund had stakes in.

According to the SEC, Boomer, who was Hawkins' direct supervisor until October 2023, failed in his fiduciary duty to watch her despite signs of misconduct.

"Boomer was aware of facts that should have constituted red flags of potential misappropriation by Hawkins, but he failed to reasonably supervise Hawkins," the SEC said in its order against Momentum Advisors and Boomer. Among other signs, the SEC pointed to a spike in expenses related to customer garment replacements starting in 2022 and how by November that year, excessive travel expenses had started to weigh on the fund's investment returns.

Additionally, the SEC found that Boomer caused the fund to cover a $346,904 business debt that should have been paid by an entity he and Hawkins controlled, providing an improper benefit to the entity. The agency also determined that Momentum Advisors failed to implement sufficient compliance policies and did not conduct a required audit of the fund.

“As the orders find, Hawkins and Boomer breached their fiduciary duties and misused fund and portfolio company assets for their own benefit, all to the detriment of their clients,” said Thomas P. Smith, Jr., associate regional director in the SEC’s New York office.

The SEC found that Hawkins and Boomer violated antifraud provisions of the Investment Advisers Act of 1940, while Momentum Advisors failed to comply with the Act’s custody and compliance rule provisions.

Without admitting or denying the findings, Hawkins, Boomer, and Momentum Advisors agreed to settle the charges. Hawkins consented to a cease-and-desist order, a $200,000 civil penalty, and an industry bar. Boomer agreed to pay an $80,000 civil penalty and will serve a 12-month supervisory suspension. Momentum Advisors received a censure and will pay a $235,000 civil penalty.