SEC Charges Advisory Firm and Owner for Investing Clients in Unsuitable Structured Notes

ADMINISTRATIVE PROCEEDING
File No. 3-22116

September 16, 2024 - The Securities and Exchange Commission today announced settled charges against Vora Wealth Management, PLLC ("Vora Wealth") and its sole owner, investment professional, and Chief Compliance Officer, Dharmesh Virendra Vora ("Vora"), for investing client assets in highly risky structured notes, contrary to the clients' investment objectives, and without adequate disclosures concerning the risks.

The SEC's order finds that, between at least November 6, 2020, through November 4, 2021, Vora Wealth and Vora invested approximately 85% of the client accounts in structured notes tied to four stocks traded on Nasdaq, using approximately $124 million of the approximately $139.5 million in Vora Wealth's total assets under management. According to the order, Vora frequently purchased the structured notes without notice, and when describing the investment to clients, Vora downplayed the possibility that they could lose most, if not all, of their principal. Beginning in November 2021, the order finds that the price of one of the four stocks to which the structured notes were tied fell below the pre-determined minimum market price, stopping the monthly interest payments for the duration of the note term. According to the order, the price of that stock never recovered, and as of July 2024, Vora Wealth's clients' accounts have collectively realized losses of investment principal exceeding $89 million. The order also finds that during the same period, Vora Wealth and Vora received undisclosed benefits from one of the brokers through which they purchased most of the notes, including a wine tasting, as well as payments to subsidize a Vora Wealth client event.

The SEC's order charges Vora Wealth and Vora with willfully violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The order also charges Vora Wealth with willfully violating, and Vora with causing Vora Wealth's violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.

Without admitting or denying the findings in the SEC's order, Vora Wealth and Vora have agreed to a cease-and-desist order and to pay on a joint-and-several basis, disgorgement of $1,114,079, and prejudgment interest of $231,118. In addition, the order censures Vora Wealth, bars Vora from the industry with the right to reapply after three years, and requires Vora to pay a $300,00 civil penalty. The order also establishes a Fair Fund to return monies to harmed investors.

The SEC's investigation was conducted by Ronnie B. Lasky from the Enforcement Division's Asset Management Unit, and Solomon R. Mangolini from the Los Angeles Regional Office, with assistance from Industry Expert John Farinacci, and supervised by Brent Wilner, Associate Director of the Los Angeles Regional Office.