SEC Charges California-Based Investment Adviser with Marketing Rule, Policies and Procedures, and Recordkeeping Violations

ADMINISTRATIVE PROCEEDING
File No. 3-22379

December 20, 2024 – The Securities and Exchange Commission today announced settled charges against Atlas Financial Advisors, Inc. (“Atlas”), a registered investment adviser based in Oroville, California, for violations of several rules under the Investment Advisers Act of 1940. 

According to the SEC’s order, Atlas advertised “Portfolio Shield” investment strategies on its public websites with false and misleading claims about the strategies and their hypothetical performance.  The order finds that Atlas claimed Morningstar, Inc. had “verified” and “validated” the strategies’ hypothetical performance even though Morningstar never did so.  In addition, the order finds that Atlas attributed hypothetical performance to the Portfolio Shield strategies without disclosing that the performance was calculated from model portfolios that did not consistently follow the strategies’ advertised investment formulas and made additional false and misleading statements about the strategies’ operation and the experience of the strategies’ creator.  The order also finds that Atlas both advertised gross hypothetical performance without also presenting net hypothetical performance and advertised hypothetical performance to mass audiences on its website without adopting and implementing the required policies and procedures.  In addition, according to the SEC’s order, Atlas personnel failed to adhere to a provision in its compliance manual requiring Atlas representatives to conduct client business before personally trading the same or similar securities.

The SEC’s order finds that Atlas willfully violated the books and records and Marketing Rule provisions of Sections 204 and 206(4) of the Investment Advisers Act of 1940 and Rules 204-2(a), 206(4)-1(a), 206(4)-1(d), and 206(4)-7 thereunder.  Without admitting or denying the order’s findings, Atlas consented to a cease-and-desist order, a censure, to comply with undertakings to review and update its policies and procedures and to ensure its advertisements comply with the Marketing Rule, and a civil penalty of $175,000. 

The SEC’s investigation was conducted by Jonathan T. Menitove and J. Jordan Lamothe and was supervised by Colin Forbes, Andrew Dean, and Corey Schuster, all of the Enforcement Division’s Asset Management Unit. The team was assisted by Brad Gaedje, Thu Bao Ta, Ricky Flanders, and Vadim Glukhovsky of the Division of Examinations of the San Francisco Regional Office.