SEC Charges Investment Adviser with Defrauding Trusts and Orders Distribution of $300,000
Aug. 1, 2019
File No. 3-19301
August 1, 2019 - The Commission today filed settled fraud charges against Kendall J. Groom, CPA, a Fresno, California, resident for diverting assets from two trusts for which he was the investment adviser.
According to the SEC's order, Groom - who has been associated with SEC registered investment advisers and affiliated broker-dealers for the last 19 years - became the trustee and investment adviser for two trusts in 2012. The order finds that between March 2012 and January 2016, Groom diverted approximately $460,000 of trust assets to accounts he controlled, including his personal bank and brokerage accounts. As also stated in the order, Groom's diversions from the trusts exceeded his disclosed trustee fees, and reduced the amount of trust assets to be distributed to non-profit charitable organizations.
The SEC ordered Groom, who agreed to settle the charges against him without admitting or denying the Commission's findings, to cease and desist from committing or causing violations of the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC's order also imposed associational, investment company, and penny stock bars against Groom with a right to reapply in five years. In addition, Groom was ordered to disgorge ill-gotten gains of $262,498 plus prejudgment interest of $38,489, and to pay a $185,000 civil penalty.
The SEC simultaneously entered an order directing the distribution of $300,946 to the six beneficiaries of the trusts that were harmed by Groom's violations.
The investigation, conducted by Jen Peltz, Scott J. Hlavacek, and Robert M. Moye, and supervised by Paul Montoya, of the Chicago Regional Office, is ongoing. The SEC's examination that led to the enforcement action in this matter was conducted by Jeson Patel, John Ekdale, and Brady Daggett, and was supervised by Maureen Dempsey.