SEC Charges Provider of “Premier” Advisory Services with Fraud
Professional athletes and high net worth individuals who seek concierge type advisory services can become the victims of the advisers they trust to manage their affairs. One such case was SFX Financial Advisory Management Enterprises, Inc., Adm. Proc. File No. 3-16591 (June 15, 2015) where weak controls and an unscrupulous agent resulted in a the misappropriation of client funds. Another is a matter discovered by the Commission’s exam staff, SEC v. Blazer, Civil Action No. 1:16-cv-03384 (S.D.N.Y. Filed May 6, 2016).
Defendant Louis Martin Blazer III created a “premier” personal services advisory firm that catered to professional athletes, entertainers and high net worth individuals and their families. Based in Pittsburgh, Pennsylvania, Mr. Blazer, through a series of controlled entities, two of which were registered investment advisers for a time, performed services such as paying client bills, managing aspects of their personal lives and financial commitments, creating budgets and paying taxes.
Mr. Blazer had other activities. In 2009 he agreed to raise money for two feature films after meeting an actor and producer involved with the projects. Mr. Blazer hoped to raise about $1 million for the two films from his advisory clients. From Client 1 he was able to raise about $550,000 for the films. Client 1, however, was unaware of the investment. When approached by Mr. Blazer about investing in the films prior to the theft he refused. Mr. Blazer then misappropriated the money.
When Client 1 discovered the theft he demanded that the funds be returned. They were. Mr. Blazer misappropriated the funds from Client 2, repaying Client 1. That client did not discover the theft until the Commission’s exam staff uncovered the malfeasance. When the exam staff confronted Mr. Blazer with the evidence of his wrongful acts he lied, claiming the transactions were authorized. They were not. Client 2 immediately terminated his relationship with the adviser when informed of the misappropriation.
Overall it turned out that Mr. Blazer had misappropriated about $2.3 million from clients between October 1, 2010 and January 2013. He had, however, returned about $790,000. The complaint alleges violations of Securities Act Sections 17(a)(1) and (3), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and 206(2). The case is pending.