U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21486 / April 14, 2010
Securities and Exchange Commission v. Innovative Advisory Services, Inc., Innovative Advisory Services LLC, Island Trader LLC, and Richard H. Nickles, United States District Court for the Central District of California, Case No. 10-00423 JVS(RNBx) (filed April 7, 2010).
SEC Charges Santa Ana-Based Investment Adviser For Operating A Fraudulent Scheme
The Securities and Exchange Commission today announced that it has obtained a court order to halt a securities fraud orchestrated by an Orange County investment adviser.
In its complaint, the SEC charged Richard H. Nickles, age 53, of Dana Point, Calif., and his three companies, Innovative Advisory Services, Inc., Innovative Advisory Services LLC, and Island Trader LLC, all of which operate from the same location in Santa Ana, Calif. The complaint alleges that since March 2009, Nickles has raised approximately $3 million through advertisements in prominent newspapers for investments that are purportedly insured or U.S. Government guaranteed. In reality, Nickles did not invest the funds as promised.
The SEC alleges that Nickles provided investors with false trade confirmations that identified securities he had not purchased or that were non-existent. In an effort to portray his business as legitimate, Nickles issued the confirmations through Island Trader, a regulated broker-dealer which had no dealings with Nickles or Innovative Advisory since March 2009. According to the complaint, through these confirmations, Nickles succeeded in giving investors the false impression that he was associated with a legitimate broker-dealer and that their investments were insured with the Securities Investor Protection Corp. He allegedly used the name Island Trader LLC for his non-regulated company in order to give further credence to his misrepresentations. The SEC also alleges that Nickles held himself out as a certified financial planner, when, in fact, he was not.
The Honorable James V. Selna, United States District Judge, granted the SEC's application, on April 7, 2010, for a temporary restraining order against the defendants and issued orders freezing defendants' assets, requiring accountings, prohibiting the destruction of documents, and granting expedited discovery. On April 19, 2010, the Court will hold a hearing on the SEC's motion for a preliminary injunction.
The SEC's complaint charges Nickles and Innovative Advisory with violating the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It also charges Nickles and Island Trader LLC with violations of Section 15(a) of the Exchange Act. In addition to the emergency relief, the SEC's complaint seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against all defendants.
See Also: SEC Complaint