SEC Charges Investment Advisers and Principals for Fraudulent Statements
July 17, 2019
File No. 3-19256
July 17, 2019 - The Securities and Exchange Commission announced settled fraud charges against Colorado-based investment advisers Salus, LP and S.A.I.C., Limited ("SAIC"), and their owners, Brandon E. Copeland and Gregory M. Prusa, for making materially false statements to prospective investors and in SEC filings.
According to the SEC's order, from December 2017 through June 2019, Salus made numerous false statements in its Form ADV filings, claiming to have up to $178 million in assets under management and 20 high net worth individual clients. Further, according to the order, Salus promoted itself to prospective clients as an SEC-registered investment adviser. The order finds that Salus never had any assets under management or any individual clients and was never eligible to register as an investment adviser with the SEC. Additionally, the order finds that the Salus hedge fund (the "Fund"), whose general partner was SAIC, made material misrepresentations to prospective advisory clients, overstating the experience and expertise of SAIC and Copeland, and falsely claiming to have hired a specific accountant, legal counsel, prime broker, and custodian for the Fund, when no such professionals had been hired.
The order finds that Salus, SAIC, Copeland, and Prusa violated the antifraud provisions of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rule 206(4)-8 thereunder. The order also finds that Salus, Copeland and Prusa violated and aided and abetted and caused violations of the registration provisions of Sections 203A and 207 of the Advisers Act. The respondents each consented, without admitting or denying the findings in the SEC's order, to the entry of a cease-and-desist order. Additionally, Salus and SAIC consented to a censure and an investment company bar, and Copeland and Prusa both consented to separate civil penalties of $25,000 each, and to permanent collateral associational bars and investment company bars.
The SEC's investigation was conducted by Jennifer R. Turner with assistance from Leslie J. Hughes, and was supervised by Mary S. Brady, Greg Kasper, and Jason J. Burt of the SEC's Denver office. The SEC examination that led to the investigation was conducted by Susan L. Day and Bruce G. Ketter, and was supervised by Nicholas F. Madsen, Lisa Byington and Thomas M. Piccone.