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.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Mark Spangler, former chairman of the National Association of Personal Financial Advisors, was sentenced Thursday to 16 years in prison for fraud and money laundering for secretly funneling approximately $47.7 million of clients’ money into two risky startup companies that he co-founded.
In May 2012, the SEC said that Spangler funneled clients’ money into these private ventures despite representing that he would invest primarily in publicly traded securities. Such risky investments were inconsistent with the investment strategies that Spangler promised his clients and contrary to their investment objectives, the SEC said.
Seattle-based Spangler served as chairman and CEO of one of the companies, which is now bankrupt, the SEC says. He was chairman of NAPFA in the late 1990s.
The U.S. Attorney’s Office for the Western District of Washington and the FBI filed parallel criminal charges against Spangler. Spangler’s inactive membership in NAPFA was suspended in October 2011 when the FBI investigation was launched.
At the sentencing on Wednesday, The Seattle Times quoted U.S. District Judge Ricardo S. Martinez as stating that the lengthy sentence was based in part on Spangler’s lack of remorse for deceiving his friends and clients.
“Something happened to change Mark Spangler from the person his family knew, someone his early clients knew, into someone who was willing to lie and cheat and swindle,” Martinez said during sentencing.
“In gambling away his clients’ money in his startups, he risked their retirement funds, children's education, families’ welfare ... their livelihood — all in the hopes, I guess, of hitting it big.”
Addressing the court before his sentencing, The Times said Spangler expressed regret for losing his clients’ money, saying his primary goal was “always to make money for them.”
Beginning around 2003, the SEC said that without notifying investors in the funds, Spangler and his advisory firm The Spangler Group (TSG) began diverting the majority of client money into two private technology companies he created. One of the companies received nearly $42 million from clients before shutting down.
However, Spangler was chairman of the highly successful Tamarac, a software rebalancing and aggregation tool for advisors, which was sold to Envestnet for more than $54 million in February 2012. He stepped down in 2011.
Check out The SEC Sure Isn’t Describing the Mark Spangler I Know, written by Bob Clark before Spangler was found guilty, on ThinkAdvisor.