More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
The Securities and Exchange Commission told a judge in Boston on Tuesday that a news release it issued on an advisor accused of a fake hedge fund scheme would not taint the advisor's separate criminal trial on a tax matter.
Reuters reported that U.S. District Judge Mark L. Wolf had ordered SEC attorney Julie Riewe to explain why her comments about the advisor, Gregg Caplitz, did not violate a rule prohibiting lawyers from making “extrajudicial statements” that could taint a jury pool.
As AdvisorOne reported, Caplitz, of Insight Onsite Strategic Management in Wilmington, Mass., has had his assets frozen by the SEC, which alleges he stole client funds by telling them they were investing in a hedge fund. The fund was nonexistent.
As Reuters reported, Caplitz is also a defendant in a separate criminal tax case in the same federal court district; that is slated for trial in September.
In his letter to Riewe, Wolf wrote that she should “address whether she was aware when she made her statement that Gregg D. Caplitz is also a defendant in a pending criminal case ... and whether she or the SEC have communicated or cooperated with government agents,” Reuters reported.
According to Reuters, the SEC told Wolf on Tuesday that the statement “was reviewed and approved by Ms. Riewe’s supervisors” and that it would not violate the court’s rules because “it does not go beyond the public record and therefore cannot impact the defendant’s right to a fair trial.”
The SEC noted that its complaint against Caplitz was public at the time of the press release.
According to the agency, Caplitz and his firm brought in at least $1.1 million that, instead of being invested in a hedge fund, was transferred to the firm’s chief investment officer and other members of her family, who spent it on personal expenses. The firm’s SEC filings indicate that it has $100 million in assets under management; the purported hedge fund has no assets at all.
The asset freeze targets not just Caplitz and his firm, but others who received investor money; they have been named as relief defendants so that investor money in their possession can be recovered.
Legal experts told Reuters that Wolf's effort to enforce the court’s extrajudicial statement rules is rare. “On the few occasions when similar rules are enforced by judges, they tend to involve high-profile criminal matters like the case of Durham County District Attorney Michael Nifong, who was disbarred in 2007 for making improper pretrial statements in the Duke lacrosse rape case,” Reuters wrote.
------Read SEC Enforcement Roundup: CR Intrinsic Slapped With Record Insider Trading Fine on AdvisorOne.