U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23925 / August 31, 2017
Securities and Exchange Commission v. Navellier & Associates, Inc. and Louis Navellier, Civil Action No. 17-CV-11633 (District of Massachusetts, filed August 31, 2017)
Advisory Firm and Founder Charged for False Performance Claims in Advertising Materials
The Securities and Exchange Commission today announced fraud charges against investment adviser Navellier & Associates, Inc. and its founder and chief investment officer, Louis Navellier. The SEC's complaint, filed in federal court in Boston, Massachusetts, alleges that from 2010 to 2013, Mr. Navellier and his firm defrauded their clients and prospective clients, misleading them about the performance track record of the "Vireo AlphaSector" investment strategies that the firm offered under the "Vireo" brand name. First, Mr. Navellier and his firm allegedly breached their fiduciary duty to clients and prospective clients by ignoring and concealing red flags that should have alerted them that the investment strategies had not performed as advertised. Second, Navellier & Associates allegedly distributed materially false advertisements and client communications about the performance track record of the investment strategies. Third, as Mr. Navellier and his firm realized their misrepresentations could get them in legal trouble, they allegedly sold the Vireo line of business in August 2013 for $14 million, rather than correcting their prior misrepresentations to their clients or informing their clients about their conflicts of interest in selling the Vireo business.
Navellier & Associates' advertisements claimed that client assets had been invested in the investment strategies from April 2001 to September 2008 and that the strategies had significantly outperformed the S&P 500 Index from April 2001 to September 2008. In fact, no client assets had tracked the strategy from April 2001 through September 2008, and even as a back-test the claimed performance was substantially overstated.
The SEC's complaint alleges that Navellier & Associates violated Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-1(a)(5) and that Louis Navellier violated and, in the alternative, aided and abetted Navellier & Associates' violations of Sections 206(1) and 206(2) of the Advisers Act.
The SEC's case is being handled by Rory Alex, William Donahue, and Marc Jones of the Boston Regional Office and Robert Baker of the Asset Management Unit.