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Regulation and Compliance > Federal Regulation > SEC

Mike Tyson’s Former Advisor Bilked Athletes at Live Nation-Owned Firm: SEC

By Melanie Waddell

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The Securities and Exchange Commission announced fraud charges on Monday against Washington-based SFX Financial Advisory Management Enterprises’ former president for stealing funds from current and former professional athletes.

The firm and its chief compliance officer separately agreed to settle charges that they were responsible for compliance failures and other violations that lead to the president’s ability to steal the client funds.

SFX Financial Advisory Management Enterprises is wholly owned by Live Nation Entertainment and specializes in providing advisory and financial management services to current and former professional athletes. The SEC did not name any clients that were defrauded.

The SEC Enforcement Division alleges that SFX’s former president Brian J. Ourand misused his discretionary authority and control over the accounts of several clients to steal approximately $670,000 over a five-year period by writing checks to himself and initiating wires from client accounts for his own benefit.

Mike Tyson, the former boxer, sued SFX and Ourand, his former advisor, in 2013 for $5 million in damages for breach of fiduciary duty and other claims. Tyson’s case has not been settled. Some of Ourand’s former clients were former NBA stars Juwan Howard and Allen Iverson.

The charges by the SEC will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate, according to the SEC.

The SEC separately charged SFX and its CCO Eugene S. Mason, finding that the firm failed to supervise Ourand, violated the custody rule, and made a false statement in a Form ADV filing. 

The SEC finds that Mason “caused some of SFX’s compliance failures by negligently failing to conduct reviews of cash flows in client accounts, which was required by the firm’s compliance policies, and not performing an annual compliance review.”

Mason also was responsible for a misstatement in SFX’s Form ADV that client accounts were reviewed several times each week, the SEC states. SFX and Mason agreed to pay penalties of $150,000 and $25,000, respectively.

Marshall Sprung, co-chief of the SEC Enforcement Division’s Asset Management Unit, noted in a statement that investment advisors “have a fiduciary obligation to safeguard client assets. SFX failed to detect an alleged misappropriation for years because it had insufficient internal controls to limit Ourand’s ability to withdraw client funds for personal use.”

Cipperman Compliance Services notes that the SEC alleges that Ourand used his signature authority for client accounts to take client funds and use their credit cards. The firm serviced professional athletes with family office services that included bill payment. 

“The SEC asserts that the firm’s policies and procedures did not ensure secondary review of all payments made from client accounts. Also, the firm did not follow its own procedures by failing to conduct annual reviews of cash movements. Additionally, the CCO did not conduct an annual compliance review in 2011,” Cipperman notes.

Cipperman advises firms to “avoid assuming signature authority over client funds. If the business requires that the firm offers such services, CCOs must implement very tight procedures including requiring at least two signatures to move funds and ongoing (monthly?) reviews of cash disbursements.”

The SEC said its investigation is continuing.

— Check out SEC Enforcement: Phony Hedge Fund Manager Charged With Duping Small Businesses Out of $4M on ThinkAdvisor.

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