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SEC Charges Advisor for Overbilling Fees, Stealing Assets

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The Securities and Exchange Commission charged a Los-Angeles based investment advisory firm and its owner with fraudulently overbilling clients and stealing assets from their trusts to pay such personal expenses as his home mortgage, overseas trips and leases on two Mercedes-Benz vehicles, according to the complaint released Wednesday.

According to the SEC, Marc D. Broidy and his firm Broidy Wealth Advisors obtained more than $1.4 million in “ill-gotten gains” since February 2011.

Broidy allegedly billed clients approximately $643,000 in excess fees and covered it up by altering the amount of management fees recorded on forms issued by brokerage firms before sending the forms to his clients. 

The SEC further alleges that Broidy fraudulently obtained additional funds to pay his personal expenses by misappropriating more than $865,000 in assets from clients’ trusts for which he was trustee. To cover up his personal use of the trusts’ assets, Broidy claimed to sell to the trusts shares that he personally owned in two privately-held, risky, start-up companies.

According to the SEC’s complaint, Broidy also misled advisory clients about some investments they made in privately-held companies when he didn’t inform them he was affiliated with those companies.

“As alleged in our complaint, Broidy fell well short of his fiduciary obligations as an investment adviser by misappropriating money and failing to disclose important conflicts of interest to his clients,” Andrew M. Calamari, director of the SEC’s New York Regional Office, said in a statement. 

The SEC seeks permanent injunctions and penalties against Broidy and his firm and an officer-and-director bar against Broidy. In a parallel action on Wednesday, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against Broidy and Broidy Wealth Advisors.

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