Close Close
ThinkAdvisor

Portfolio > Investment VIPs

Fraud, securities law violation accusations levied against high-profile Baltimore advisor

X
Your article was successfully shared with the contacts you provided.

A wide range of violations are being levied against a high-profile advisor in the Baltimore area in a case fraught with ethics issues.

Maryland Attorney General Brian E. Frosh announced last month that his office is seeking to shut down the investment advisory operations of Everest Wealth Management, Inc. and Everest Investment Advisors, located in Towson, Md., based on allegations of fraud and Maryland securities law violations.

In an official news release, the Securities Division of the Office of the Attorney General said it is also seeking to permanently prohibit the owner of both companies, Philippe Rousseaux, ChFC, CIMA, RICP, from offering investment advisory services in Maryland.

Everest Investment Advisors, Inc. (EIA) and Everest Wealth Management, Inc. (EWM) are Florida corporations majority-owned and owned by Rousseaux that, at all times relevant, have maintained a place of business in Towson. While EIA has been a registered investment advisor in Maryland since 2011, EWM has never been registered as an investment advisor in Maryland.

Rousseaux and his companies are widely known in the Baltimore region for their frequent infomercial advertising, which promotes him and his team as “The Money Guys,” part of what Rousseaux has said is a $1 million yearly marketing campaign. The shows appear on multiple stations and seek to attract customers with promises of guaranteed returns and limited risk.

According to the case’s Order to Show Cause, which contains the wide-ranging allegations, Rousseaux and his companies have used “prohibited marketing tactics to blur the distinction between insurance products and fee-based investment advisory services, a breach of fiduciary responsibility.” The companies continued the practice despite repeated warnings from regulators in the Securities Division, the news release stated. Rousseaux has promoted his marketing strategy to insurance and financial industry peers as “psychological warfare” and “mind games” explicitly designed to attract more investments.

Rousseaux also misrepresented the fee structure of a proprietary investment model, according to the Order, which it should be noted does not include allegations of misappropriated funds.

“When investment promises sound too good to be true, they almost always are,” Attorney General Frosh said. “Consumers need to be on the lookout for slick advertising campaigns that highlight the upside while minimizing the risk of the investment program. We took this step to stop these activities and to raise awareness of these misleading tactics. We also want to prevent unlawful activities in the future.”

Rousseaux and his companies face multiple counts of Maryland securities law violations, including fraud in connection with the offer, sale or purchase of securities; fraud in connection with the offer and sale of investment advice; dishonest and unethical practices; and acting as an unregistered investment adviser.

According to additional allegations contained in the Order, Rousseaux and the companies:

  • Misrepresented the total amount of assets Everest Investment Advisors was managing, making the company look larger for marketing purposes.
  • Falsified forms used to transfer client assets from one institution to another, reducing the opportunity for clients to change their minds after agreeing to do business with him.
  • Created a new investment program called the Everest Dynamic Growth Model in 2013, telling customers the program outperformed the Standard & Poor’s 500 Index by 37 percent over a 10-year period. But he knowingly used performance figures that did not reflect his investment strategy, did not tell customers they were based on a retroactive calculation, and did not reflect actual results.

The administrative allegations are a result of findings obtained during audits by the Securities Division of the Office of the Maryland Attorney General dating to 2012 and subsequent investigations. Rousseaux will have an opportunity to respond to the allegations through an administrative hearing process that will determine whether the Maryland Securities Commissioner will impose the proposed penalties, which include fines (up to $5,000 per violation) and a permanent ban on doing investment advisory business in Maryland.

Among the lessons? Don’t market yourself primarily as an insurance agent offering fixed indexed annuities and then have every intention of also providing investment services, especially if you are not registered as an investment advisor in the very state where you do the majority of your business.

And if regulators are giving you warnings, you might want to pay attention to them and do whatever it takes to become compliant immediately.