SEC Charges Investment Adviser for Failing to Disclose Conflicts
Litigation Release No. 24780 / March 25, 2020
Securities and Exchange Commission v. Donald H. Hunter, Civil Action No. 3:20-cv-00391-RNC (D. Conn, filed March 24, 2020)
The Securities and Exchange Commission charged Donald H. Hunter, an unregistered investment adviser based in Ridgefield, Connecticut, with failing to disclose material conflicts of interest related to the sale of shares of You Angel Finance, LLC.
According to the SEC's complaint, in 2012 the Financial Industry Regulatory Authority found that Hunter had committed fraud in connection with the sale of promissory notes to some of his broker-dealer clients, and permanently barred him from associating with any FINRA-registered firm. The complaint alleges that Hunter subsequently established You Angel Finance as a private fund with no FINRA registration. As alleged, from late 2016 through 2018, while acting as investment adviser to You Angel Finance, Hunter raised approximately $430,000 from investors, claiming that You Angel Finance was supplying seed capital to or purchasing shares from a private drug research company. The complaint alleges that Hunter had acquired the company's shares personally or through companies he controlled, but as a result of the FINRA bar he was unable to sell them directly or indirectly to brokerage customers, as he had in the past. The complaint further alleges that Hunter failed adequately to disclose that the fund purchased the shares from Hunter or entities he controlled, or that he set the prices at which he sold those shares to the fund.
The complaint alleges that Hunter violated the antifraud provisions of Sections 206(1), 206(2), 206(3), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. The SEC seeks disgorgement of ill-gotten gains, prejudgment interest, financial penalties, and permanent injunctions against Hunter.
The SEC's investigation was conducted by Robert Baker, James Fay, Lawrence Pisto, and Patrick Noone. The litigation will be led by Senior Trial Counsel Rachel E. Hershfang.