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Regulation and Compliance > Federal Regulation > SEC

Advisor Barred for Claiming Fund Was ‘SEC Approved’

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The principal of GLR Advisors, LLC, pled guilty to conspiracy to commit mail and wire fraud and was barred from the industry for making misleading statements to investors including claims that its funds were “SEC approved.” 

According to the SEC’s complaint, since at least 2005, John Geringer raised in excess of $60 million from investors by misrepresenting the performance and strategy of a private investment fund, the GLR Growth Fund L.P., based in Scotts Valley, California, and used false and misleading marketing materials claiming that the fund has returned between 17% and 25% in every year of its operation through investments tied to well-known stock indexes such as the S&P 500, Nasdaq and Dow Jones, as well as in oil, natural gas and technology-related companies.

However, the vast majority of money raised went to two illiquid private companies, to pay back other investors, and to three entities Geringer controlled. To the extent Geringer engaged in actual securities trading, far from generating high annual returns, he consistently lost money, the SEC complaint says.

Geringer is the sole member of GLR Advisors LLC, which was registered as an investment advisor with the state of California from 2003 to 2013. Geringer, 50, is a resident of Santa Cruz, California.

Periodic account statements that Geringer prepared and mailed to investors falsely claimed the funds were approved by the SEC and the National Association of Securities Dealers, now the Financial Industry Regulatory Authority. The Commission said that it never “approved” the fund or investments in the fund, and that neither GLR Capital, GLR Advisors, GLR LLC, nor the Fund was a member of the NASD, now FINRA.

Cipperman Compliance Services notes that regulators “always take exception when firms claim or even suggest that a firm or recommended investments are ‘approved.’ Registration does not mean approval, and the regulators view any suggestion to the contrary as materially misleading.”

The complaint notes that to conceal the fraud, Geringer falsified the fund’s brokerage account records, and this information was provided to investors. Moreover, of the money raised from investors, millions was used to pay back earlier investors, giving the false appearance of profitability, as in a Ponzi scheme.

— Check out Top 9 Investor Threats for 2015: NASAA on ThinkAdvisor.


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