SEC Obtains Sanctions Against Investment Adviser

Litigation Release No. 24640 / October 10, 2019

Securities and Exchange Commission v. Thomas Conrad, Jr. et al., No. 1:16-cv-2572-LMM (N.D. Ga.) (filed July 15, 2016)

On September 30, 2019, the United States District Court for the Northern District of Georgia entered a final judgment against Thomas Conrad, Jr. ("Conrad") of Alpharetta, Georgia. The SEC's complaint alleged that between 2010 and late 2014, Conrad directed preferential redemptions and other disbursements out of a hedge fund and its feeder funds operated by firms he controlled. According to the complaint, Conrad directed disbursements to himself, his extended family, and certain favored investors, while representing to other investors that redemptions were suspended. The complaint also alleged that Conrad failed to disclose conflicts of interest arising from loans the funds made to Conrad's family members, and from Conrad's appointment of himself as a sub-manager, for which he received a fee. As alleged, offering documents the firms gave to prospective investors touted Conrad's significant experience in the securities industry, but failed to disclose his disciplinary history, which included an industry bar that the SEC imposed on him in 1971.

The Court previously ruled that the SEC was entitled to summary judgment against Conrad and the two advisory firms he controlled on its fraud claims based on the defendants' fraudulent redemption practices and their failure to disclose Conrad's disciplinary history. After the Commission dismissed its remaining claims, the Court entered a final judgment against Conrad enjoining Conrad from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206 (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Court also imposed a civil penalty against Conrad in the amount of $327,500.

The SEC is represented by M. Graham Loomis, William P. Hicks, and Kristin W. Murnahan of the Atlanta Regional Office in this litigation.

See also: Litigation Release No. 24390 and Litigation Release No. 23597