SEC Settles Charges Against RIA for Improper Alternative Investment Sales
Lefavi Wealth Management (LWM), a registered investment adviser with approximately $303 million of assets under management, has agreed to settle charges with the Securities and Exchange Commission stemming from its alleged failure to disclose conflicts of interest related to the recommendation and sales of alternative investments to advisory clients.
Lefavi Wealth Management (LWM), a registered investment adviser with approximately $303 million of assets under management, has agreed to settle charges with the Securities and Exchange Commission stemming from its alleged failure to disclose conflicts of interest related to the recommendation and sales of alternative investments to advisory clients.
The SEC claims that from June 2014 through December 2016, Lefavi Wealth recommended and invested certain advisory client assets in alternative investments at a share price that reflected a 7 percent commission, but failed to disclose to clients that the same investment was available at a lower share price. The investments included non-traded real estate investment trusts, business development companies, and private placements.
The SEC said that the firm did not adopt and implement written policies and procedures to prevent the alleged violations and failed to disclose potential conflicts of interest associated with selling commission-based products to its advisory clients.
“LWM’s practice of recommending and investing advisory client assets in alternative investments with embedded commissions, rather than seeking for clients lower share prices for the exact same investments, was inconsistent with [its] duty to seek best execution for those transactions,” the SEC stated.
The regulators also claim that certain advisory clients were also eligible for volume discounts for many of the investments, which they did not receive.
Without admitting or denying the findings, Lefavi Wealth Management will pay nearly $1.3 million, comprised of $994,300 in disgorgement, $144,000 in prejudgment interest, and a civil penalty of $150,000.
