SEC charges Criterion Wealth with fraud in real estate investments
The Santa Clarita, Calif.-based RIA and its two principals got kickbacks from fund managers
The Securities and Exchange Commission has charged Criterion Wealth Management Insurance Services Inc., a Santa Clarita, Calif.-based registered investment adviser, with breaching its fiduciary duty and defrauding clients when it recommended investments in private real estate investment funds.
The firm’s then co-owners, Robert Gravette and Mark MacArthur, also were charged.
The SEC’s complaint alleges that from 2014 to 2017, the defendants recommended that their advisory clients invest more than $16 million in four private real estate investment funds without disclosing that the fund managers had paid them more than $1 million, which was on top of fees that defendants were charging clients directly.
The complaint also alleges the defendants were incentivized to keep their clients invested in the funds, rather than allocate their capital elsewhere, because the additional side compensation was recurring and depended on Criterion’s clients remaining invested. For two of the funds, this undisclosed compensation arrangement resulted in reduced investment returns for the defendants’ advisory clients.
The complaint seeks permanent injunctions from future violations of these provisions, disgorgement and prejudgment interest, and civil penalties from all defendants.
[More: SEC won’t offer any grace period for Reg BI compliance]
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