U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21901 / March 25, 2011
Securities and Exchange Commission v. Daniel Sholom Frishberg, Civ. Action No. 4:11-cv- 01097 (United States District Court for the Southern District of Texas, Houston Division).
SEC Sues Houston Businessman for Fraudulent Conduct in Connection with Investment Advisory Firm
On March 25, 2011, the Commission filed suit in U.S. District Court in Houston against Daniel Sholom Frishberg (“Frishberg”), principal of Daniel Frishberg Financial Services (“DFFS”), a Commission-registered investment adviser. This suit is related to S.E.C. v. Albert Fase Kaleta and Kaleta Capital Management, Case No. No. 4:09-cv-03674 (S.D. Tex.) (For further information, see Litigation Release No. 21293 (November 13, 2009)).
The Commission alleges that DFFS, with Frishberg’s approval, advised its clients to invest in notes issued by Kaleta Capital Management (“KCM”), a private company owned by Frishberg associate Albert Fase Kaleta, and by Business Radio Networks, L.P. d/b/a “BizRadio” (“BizRadio”), a struggling media company controlled by Frishberg and Kaleta. According to the complaint, Frishberg authorized Kaleta to offer the notes to clients, but failed to provide clients with critical disclosures. The Commission alleges, for example, that investors were not told of BizRadio’s poor financial condition and likely inability to repay its notes. The Commission further alleges that investors were not told of Frishberg’s significant conflicts of interest in the note offerings, such as the fact that the note proceeds funded BizRadio’s operating expenses, including Frishberg’s and Kaleta’s salaries.
The complaint alleges that Frishberg violated Section 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”), and aided and abetted violations of Sections 206(1) and 206(2) of the Advisers Act. Without admitting or denying the Commission’s allegations, Frishberg consented to the entry of a permanent injunction against these violations and to pay a $65,000 civil penalty. Frishberg has also consented to the institution of follow-on administrative proceedings that will bar him from association with an investment adviser.