Advice Firms with Disciplinary Records Tapped Millions in PPP Dollars

July 27, 2020

Among the hundreds of investment advice firms that received loans through the Paycheck Protection Program, several have serious black marks on their disciplinary records, according to news reports. 

An FA-IQ analysis of SEC disclosures found dozens of RIAs that received forgivable PPP loans, offered as part of the Coronavirus Aid, Relief, and Economic Security Act signed into law in March. And a list of more than 661,200 companies that had borrowed $150,000 or more under the program released by the Small Business Administration earlier this month includes 1,435 investment advice providers, as reported. 

Some of the wealth management practices that took advantage of the program have less-than-stellar backgrounds, according to FA-IQ sister publication FundFire. Investment advice firm Navellier and Associates, for example — which took a loan of between $150,000 and $350,000, according to the SBA data — was sued by the SEC in February over misleading marketing of investment strategies from now-defunct F-Squared Investments, FundFire writes. In June, the firm and its founder and chief investment officer, Louis Navellier, agreed to pay more than $30 million to settle with the SEC, according to the publication.

Meanwhile, Chicago-based broker-dealer TJM Investments, which took a loan of between $1 million and $2 million, according to the SBA, has eight disclosures on its record over the past decade, FundFire writes. The company paid monetary fines for all eight violations, which include misrepresenting customer status to Merrill Lynch, failure to properly register associated persons and failure to obtain best prices for orders, according to the publication, which cites BrokerCheck. 

Likewise, Florida-based broker-dealer Money Concepts Capital Corp. — which took out a PPP loan of $1 million to $2 million, according to the SBA — also has eight disciplinary disclosures, ranging from non-compliance with supervisory issues to failure to report customer-related complaints, FundFire writes. 

Meanwhile, West Virginia-based broker-dealer Hazlett, Burt & Watson, which received a loan between $350,000 and $1 million, was ordered to pay over $120,000 in restitution by the SEC over breaches of fiduciary duty in 2019, according to the publication.

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By Alex Padalka
  • To read the FundFire article cited in this story, click here if you have a paid subscription.