Jurors in Manhattan federal court returned a verdict in the Securities and Exchange Commission’s favor against a brokerage firm and two of its executives.
The SEC charged brokerage firm Portfolio Advisors Alliance Inc., its indirect owner Howard Allen, and its president Kerri Wasserman with fraud and related charges in connection with making material misrepresentations and omissions in American Growth Funding II LLC’s private placement offering. The offering raised approximately $8.6 million from investors from March 2011 to December 2013.
The SEC alleged that American Growth Funding II, which raised capital from investors to provide loans to businesses, and its owner Ralph Johnson, promised investors 12 percent annual returns and falsely claimed in offering documents that its financial statements were being audited each year.
The SEC further alleged that Portfolio Advisors Alliance, Allen, and Wasserman knew the offering documents were inaccurate yet continued using them to solicit sales of American Growth Funding II.
“Brokerage firms have a duty to truthfully disclose all material information about an investment recommended to their customers,” said Marc Berger, regional director of the SEC’s New York regional office. “[The] jury verdict demonstrates that PAA and its principals, Allen and Wasserman, participated in this fraud to the detriment of their customers.”
Earlier this year, the SEC obtained a final consent judgment against American Growth Funding II and Johnson, who were charged with lying to investors who purchased the high-yield securities.
The jury found Portfolio Advisors Alliance, Allen and Wasserman liable on all counts, finding that they violated the certain antifraud provisions of Securities Acts of 1933 and 1934.