SEC Charges Washington State Investment Adviser for Failing to Disclose Conflicts of Interest
July 24, 2019
File No. 3-16267
July 24, 2019 - The Securities and Exchange Commission today announced that recidivist N. Gary Price, a principal of formerly registered investment adviser Genesis Capital LLC, agreed to settle charges that he failed to disclose to clients significant conflicts of interest relating to recommendations to invest in securities issued by Aequitas Commercial Finance, LLC. The SEC previously charged Aequitas Management LLC and four of its affiliates, including ACF, with fraudulently raising more than $350 million from investors.
According to the SEC's order, from 2013 through 2015, Genesis made several investments for its mutual fund clients in promissory notes issued by ACF. Price, of Gig Harbor, Washington, approved these investments through Genesis's investment committee. At the time Genesis made these investments, Price benefited from significant financial ties to Aequitas entities. In particular, the SEC's order found that Price held ownership stakes in two Aequitas-affiliated businesses that together received $3.6 million in loans from ACF as well as a $10 million line of credit. At the same time, a broker-dealer part-owned by Price allegedly received fees from another Aequitas affiliated-business for referring other investors to ACF. Despite several opportunities to disclose his ties to Aequitas, the SEC's order found that Price repeatedly failed to do so.
The SEC's order found that Price violated Section 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the SEC's findings, Price consented to a cease-and-desist order, and agreed to pay disgorgement and prejudgment interest of $67,033 and a civil penalty of $75,000. The order also bars Price from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, with the right to apply for reentry after one year.
The SEC's investigation was conducted by Thomas J. Eme of the San Francisco Regional Office and supervised by Steven D. Buchholz and Erin E. Schneider. An examination of Genesis contributed to the investigation and was conducted by Bradley Cline, Thomas J. Dutton, Matthew M. O'Toole, and Edward G. Haddad of the San Francisco Regional Office. The SEC acknowledges the assistance of the Financial Industry Regulatory Authority in this matter.