U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23847 / May 26, 2017
Securities and Exchange Commission v. Momentum Investment Partners LLC (D/B/A Avatar Investment Management) and Ronald J. Fernandes, No. 16-cv-00832 -VLB (D. Conn. filed May 31, 2016)
SEC Obtains Final Judgments Against Connecticut-Based Investment Adviser and CEO for Failure to Disclose Fees to Clients
The Securities and Exchange Commission today announced that it obtained final judgments by consent against Connecticut-based investment adviser Momentum Investment Partners LLC (doing business as Avatar Investment Management) ("Avatar"), and its CEO, Ronald J. Fernandes, for failing to disclose to some of Avatar's advisory clients certain fees they were being charged. Among other things, the judgments order the defendants to pay a total of over $230,000.
On May 31, 2016, the Commission filed a complaint in federal court in Hartford, Connecticut, alleging that Avatar and Fernandes failed to disclose material conflicts of interest in connection with investments Avatar made in new mutual funds that it created and managed. Specifically, the complaint alleges that Avatar and Fernandes failed to disclose that moving clients' assets into these newly-created mutual funds would increase the clients' total advisory fees paid to Avatar without changing the clients' investment strategy. The complaint alleges that between May 2013 and March 2014, Avatar's clients paid almost $111,000 in additional fees, including approximately $61,000 that was ultimately paid to Avatar, for no additional services.
The final judgments, entered by the Honorable Vanessa L. Bryant of the U.S. District Court for the District of Connecticut on May 26, 2017, permanently enjoin Avatar and Fernandes from violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"), Avatar from violating Sections 204, 206(4) and 207 of the Advisers Act and Rules 204-1 and 206(4)-7 thereunder, and Fernandes from aiding and abetting violations of Sections 204, 206(4) and 207 of the Advisers Act and Rules 204-1 and 206(4)-7 thereunder. The judgments also order the defendants to disgorge, on a joint and several basis, $61,275.52 in ill-gotten gains plus $7,400.85 in prejudgment interest, for a total of $68,676.37, and order Avatar to pay a civil penalty of $125,000 and Fernandes to pay a civil penalty of $40,000. The defendants neither admit nor deny the allegations in the SEC's complaint.