SEC: Investment Adviser Fraudulently Overbilled Clients, Stole Assets for Personal Expenses

The Securities and Exchange Commission today charged a Los-Angeles based investment advisory firm and its owner with fraudulently overbilling clients and stealing assets from their trusts to pay such personal expenses as his home mortgage, overseas trips, and leases on two Mercedes-Benz vehicles.

The SEC’s complaint alleges that Marc D. Broidy and his firm Broidy Wealth Advisors obtained more than $1.4 million in ill-gotten gains since February 2011.  Broidy allegedly billed clients approximately $643,000 in excess fees and covered it up by altering the amount of management fees recorded on forms issued by brokerage firms before sending the forms to his clients.  The SEC further alleges that Broidy fraudulently obtained additional funds to pay his personal expenses by misappropriating approximately $865,000 in assets from clients’ trusts for which he was trustee. 

According to the SEC’s complaint, Broidy also misled advisory clients about some investments they made in privately-held companies when he didn’t inform them he was affiliated with those companies.

“As alleged in our complaint, Broidy fell well short of his fiduciary obligations as an investment adviser by misappropriating money and failing to disclose important conflicts of interest to his clients,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. 

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against Broidy.

The SEC’s complaint charges Broidy and his firm with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 as well as Sections 206(1) and (2) of the Investment Advisers Act of 1940.  The SEC seeks permanent injunctions and penalties against Broidy and his firm and an officer-and-director bar against Broidy.

The SEC’s investigation was conducted by Lindsay S. Moilanen, Andrew Dean, Kerri Palen, and Sandeep Satwalekar, and the case was supervised by Lara Shalov Mehraban of the New York office.  The litigation will be led by Alexander Janghorbani, Ms. Moilanen, and Mr. Dean.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation.