SEC Charges Investment Adviser for Disclosure, Supervisory, and Compliance Failures
Jan. 14, 2021
File No. 3-20204
January 14, 2021 - The Securities and Exchange Commission today announced settled charges against Advanced Practice Advisors, LLC (APA), a formerly SEC-registered investment adviser, and its sole principal, Paul C. Spitzer of La Quinta, California, for failing to make certain disclosures, which allowed an individual not formally associated with APA to advise APA clients under the guise of his son's association with APA.
According to the SEC's order, in 2015, APA and Spitzer would not associate with an individual who was the subject of an ongoing FINRA investigation and instead allowed the individual's son to join APA as an investment adviser representative. The SEC's order finds that the investment adviser representative, who was supervised by Spitzer, allowed his father to advise APA clients even though his father was not formally associated with APA. The order further finds that APA and Spitzer knew or should have known that the investment adviser representative's father was advising APA clients because APA and Spitzer knew that the investment adviser representative had no real experience and no clients of his own, and that his father, who had previously worked as an investment adviser representative at another firm, wanted to continue advising clients and shared an office with his son. According to the order, APA and Spitzer failed to disclose to advisory clients that the investment adviser representative's father was not formally associated with APA. The SEC's order also finds that APA and Spitzer failed reasonably to supervise the investment adviser representative and that APA failed to implement certain compliance policies and procedures.
Without admitting or denying the findings, APA and Spitzer each consented to the entry of an order finding that they willfully violated Section 206(2) of the Investment Advisers Act of 1940 and failed reasonably to supervise the investment adviser representative within the meaning of Section 203(e)(6) of the Advisers Act. The SEC's order further finds that APA willfully violated, and that Spitzer willfully aided and abetted and caused APA's violations of, Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. APA consented to the entry of a cease-and-desist order, a censure, and certain undertakings. Spitzer consented to the entry of a cease-and-desist order, civil penalties in the amount of $20,000, and certain undertakings. Spitzer also agreed to limitations that prevent him from acting in a supervisory capacity.
The SEC's investigation was conducted by Teri M. Melson and supervised by Victoria A. Levin of the SEC's Los Angeles Regional Office. The SEC examination that led to the investigation was conducted by Emanuel Asmar and Yasin Shah and supervised by Christopher Martinez and Christine Connolly.