More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
C.S. Capital Management Inc. of Atlanta, Ga., formerly known as Chadwick, Saylor & Co., and owner Paul H. Saylor have been ordered to restore $1.09 million to the Plumbers and Pipefitters National Pension Plan as restitution for improperly investing $25 million in risky private placement bonds. The firm also was ordered to pay $109,990.91 in fines to the federal government.
The U.S. Department of Labor announced on Monday that it had obtained a consent order against the firm, which had been hired by the plan to evaluate and make a recommendation on the purchase of bonds. The plan covers more than 123,000 participants around the country; the bonds were to finance the Playa Vista development project in Los Angeles, Calif.
The Labor Department filed a lawsuit simultaneously with the order in the U.S. District Court for the Northern District of Virginia in Alexandria. The suit alleges that Saylor and the firm violated the Employee Retirement Income Security Act(ERISA)by the purchase of the bonds.
The bonds were purchased in 1998; the issuer has only made a single interest payment, in 2001, and has made no payments since.
The suit also alleges imprudent action by the defendants in purchasing the Playa Vista B bonds, which it says have an unduly low rate of return compared to the risk assumed by the plan, and by purchasing bonds that subordinated the plan's investment to that of Playa Vista A bondholders.
Secretary of Labor Hilda L. Solis said in a statement, “These defendants violated their duty to responsibly manage the plan's investments. Our goal is to return money improperly managed and invested so it can be available to pay pension benefits.”