U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21812 / January 13, 2011
Securities and Exchange Commission v. Warren D, Nadel, Warren D. Nadel & Co. and Registered Investment Advisers, LLC, Civil Action No. 11-CV-0215 (DRH) (E.D.N.Y. January 13, 2011)
On January 13, 2011, the Securities and Exchange Commission filed a civil action in the United States District Court for the Eastern District of New York against Warren D. Nadel, his broker-dealer, Warren D. Nadel & Co. (“WDNC”), and his investment advisory firm, Registered Investment Advisers, LLC (“RIA”). The Commission alleges that these Defendants fraudulently induced clients to invest tens of millions of dollars in a purported investment program in order to receive over $8 million in commissions and fees from 2007 through 2009. Defendants deliberately overstated the value and liquidity of client holdings in the Strategy, by misrepresenting and concealing critical information about the way they were supposedly executing it. Although Defendants informed clients repeatedly that they were executing open-market transactions on the clients’ behalf, the vast majority of transactions, however, were not executed on the open market. Most simply consisted of trades between advisory client accounts controlled by Defendants at inflated prices made up by Nadel himself. Defendants thus created the false impression that there was a liquid market for these securities and that the market prices for the securities were consistent with the inflated values that Defendants reported to their clients.
The complaint alleges that the Defendants violated the anti-fraud provisions of the federal securities laws, specifically Defendants Nadel, WDNC and RIA violated Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder; Defendant WDNC violated and Defendant Nadel aided and abetted violations of 17(a) of the Exchange Act and Rules 10b-10 and 17a-4 thereunder; Defendants Nadel and RIA violated Sections 206(1), (2) and (3) and 207 of the Investment Advisers Act of 1940 (“Advisers Act”); Defendant RIA violated and Defendant Nadel aided and abetted violations of Sections 204 of the Advisers Act and Rule 204(2)-(a)(3) thereunder.
The SEC’s case was investigated by Alison T. Conn and Maureen P. King of NYRO with the assistance of Michael Fioribello and Debbie Chan after a joint examination by the broker-dealer examination staff conducted by Linda Lettieri, Jeffrey Berfond and Margaret Lett and the investment adviser examination staff conducted by Joseph P. DiMaria, James E. Anastasia, Steven P. Gilchrist and Julianne M. Lieberman.
The SEC’s litigation effort will be led by Richard G. Primoff and Maureen P. King.