Sapere Wealth Management, LLC and Scott Trease

The Securities and Exchange Commission today announced settled charges against Sapere Wealth Management, LLC, a Matthews, North Carolina-based investment adviser, and its principal, Scott Trease, for unsuitably recommending that three clients invest $7.3 million in risky, alternative-investment deals.

According to the SEC's complaint, filed in the United States District Court for the Western District of North Carolina, Trease befriended a self-described financier based on shared religious interests in July 2017. The complaint further states that from 2018 through early 2019 this financier helped identify numerous alternative-investment opportunities for Trease and Sapere to consider. The opportunities, which were unlike any others in which Trease or Sapere had ever invested, consistently fell apart and, according to the SEC, raised several red flags indicating that these types of alternative investments were unsuitable for Sapere's and Trease's clients. Nevertheless, the complaint states, in May 2019 Sapere and Trease recommended three clients invest a total of $7.3 million in two such alternative investments that Sapere and Trease incorrectly believed were collateralized by gold. The SEC alleges that Sapere and Trease did not reasonably understand the investments and thus lacked a reasonable basis to recommend them to clients. The complaint further states that in one of the investments, a client ultimately lost $2.3 million, while in the other, $5 million of client money was placed at risk, though the defendants and the self-described financier ultimately secured the funds' return.

The complaint charges Sapere and Trease with breaching their fiduciary duties of care in violation of Section 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the SEC's allegations, Sapere and Trease have consented to the entry of a final judgment imposing a permanent injunction against future violations of Section 206(2); a five-year injunction requiring Sapere and Trease to engage due-diligence consultants to review certain potential future transactions; a $100,000 civil penalty against Trease; and an undertaking to distribute the SEC's complaint and the final judgment to Sapere's and Trease's clients. The settlement is subject to court approval.

The SEC's investigation was conducted by Joshua Hess of the Atlanta Regional Office, and supervised by Matthew F. McNamara and Justin C. Jeffries. The SEC appreciates the assistance of the Australian Securities and Investments Commission.