The founders of Chicago investment advisory firm Advanced Equities Inc. were charged by the SEC in connection with two-private equity sales of an alternative energy company in 2009 and 2010.
The founders of Chicago investment advisory firm Advanced Equities Inc. were charged by the SEC in connection with two-private equity sales of an alternative energy company in 2009 and 2010.
Co-founder Dwight Badger misled potential investors by telling them the unnamed energy company had order backlogs of more than $2 billion, when at most, the backlog was $42 million, the Securities and Exchange Commission said in an administrative order. He also exaggerated the value of other orders and of a government loan to the firm, the SEC said.
Co-founder and chairman Keith G. Daubenspeck heard Mr. Badger's misstatements and failed to correct them or take steps to supervise Mr. Badger, the commission said in the order issued on Tuesday.
Both men and the firm agreed to settle the allegations without admitting or denying the claims. The firm will pay $1 million, Mr. Badger will pay $100,000 and be barred from association for a year with a broker-dealer or adviser, and Mr. Daubenspeck agreed to a $50,000 penalty and one-year supervisory suspension, the SEC said.
“Dwight Badger misled investors by embellishing key facts about the energy company's sales orders and its loan application to the Department of Energy,” said Merri Jo Gillette, director of the SEC's Chicago office. “The SEC will continue to be vigilant in uncovering fraud in private-securities offerings and holding registered securities professionals accountable.”
According to news reports, Mr. Badger left the company after he and Mr. Daubenspeck disclosed in broker registration filings that they had received Wells notices from the SEC in January 2012 and that SEC administrative actions could follow.
Mr. Daubenspeck, who founded parent firm Advanced Equities Financial Corp., is still with the company, according to its website. Calls to Advanced Equities, and its Chicago attorney in the SEC case, were not immediately returned.
Calls to Mr. Badger's New York attorney, Howard Elisofon, and Mr. Daubenspeck's Chicago attorney, Steven Scholes, also were not returned Wednesday.
Advanced Equities Financial sold its First Allied Holdings Inc. independent broker-dealer, registered investment adviser, wealth management and other businesses in November 2011 to Lovell Minnick Partners LLC.
