Two advisors have agreed to pay a combined $564,000 for not adequately disclosing their conflicts of interest related to Oregon-based Aequitas Management, a firm they persuaded their clients to invest in, the Securities and Exchange Commission said.
The SEC previously charged Aequitas and three of its top executives with fraudulently raising more than $350 million from about 1,500 investors. The SEC also previously charged advisors in Massachusetts and Washington for failing to disclose their Aequitas-related conflicts of interest to advisory clients.
In two separate orders issued Thursday, the SEC found that from 2013 to 2015, Jeffrey C. Sica of Morristown, New Jersey; William M. Malloy III of La Jolla, California; and the investment advisory firms that they each controlled, steered advisory clients to invest in Aequitas securities. That was despite the fact that, at the same time, Aequitas was compensating the firms of Malloy and Sica via loans or for consulting services that included introducing investors to Aequitas, the SEC said.
According to the order against Sica and his firm, Sica Wealth Management, the firm received about $2 million from Aequitas pursuant to a consulting and loan agreement. However, Sica and SWM failed to adequately disclose the agreements and payments to their clients who invested in Aequitas securities, according to the SEC.
According to the order against Malloy and his firm, Fortress Investment Management, Fortress received monthly payments of $15,000 from Aequitas. However, Malloy failed to adequately disclose the payments to clients who invested in a Fortress fund that invested significantly in Aequitas securities, the SEC said. Malloy also inaccurately claimed that another advisor he controlled had the $100 million in assets under management required for SEC registration, causing it to remain improperly registered, the SEC charged.