Massachusetts RIA Fined $425K Over Conflicted Advice
The firm's two owners asked clients to invest in an agricultural tech company where they had stakes, regulators say.
The Securities and Exchange Commission and Massachusetts securities regulators have fined Strategic Planning Group a total of $425,000 over conflicts of interest.
Owners of the SEC-registered investment firm — David Alexander Rourke Sr. and Jarrod Andrew Sherman — suggested that clients invest up to 5% of their portfolios in Ecoark Holdings, an agricultural technology company for which both Rourke and Sherman served as consultants at the time (from mid-2013 to mid-2016).
Rourke, who owns 90% of SPG, had invested about $800,000 of his own money in the agtech firm; Sherman, the 10% owner of SPG, had put in some $300,000.
“Both Rourke and Sherman had a financial incentive to invest clients’ funds in Ecoark stock to support or increase Ecoark’s stock price,” according to Secretary of State William Galvin’s office.
The RIA, it added, “failed to provide documentation to investors disclosing the involvement of its owners in Ecoark [despite the fact that] forms filed by SPG stated explicitly that the company did not buy or sell securities that it also recommended to its advisory clients.”
The SEC also is requiring Rourke and Sherman to each pay $75,000.
Both regulatory groups have censured SPG, which has agreed to “permanently cease and desist” in further violations of state securities laws and certain sections of the Investment Advisers Act of 1940, according to the regulators.
“We take this finding seriously. The integrity of our client relationships and our company is of utmost importance to us. We are reaching out to our clients to inform them of this development and the actions we are taking as a result,” SPG said in a statement.
As of March 30, SPG managed about $215 million in client assets, the majority of which is managed on a discretionary basis.