The Securities and Exchange Commission charged a Georgia-based investment advisor with offering and selling unregistered funds to investors, eventually raising at least $5.1 million from more than 24 clients.
In October 2017, John Robert Jones Jr. began soliciting and selling limited partnership interests to investors for two unregistered private funds he owned, the PED Index Fund and PED Index Fund A1, according to the SEC. The regulator says Jones falsely claimed that investors’ principal would be protected and any losses they might sustain would not be extensive. According to sales materials, investments were formulated so that 90% of investors’ wealth would be “safely secured,” with the downside being “totally quantified to a level most people dream of,” according to the SEC’s complaint.
An index fund private offering memorandum (POM) stated that Jones had developed his investment practice “in concert with a purported entity” known as the National Financial Research Laboratory, and he also told investors that their funds would be protected with insurance and would not lose more than 15%, according to the SEC.
“These representations were false,” the complaint read. “As Jones knew, investors’ downside exposure was not limited to 10-15% loss of capital, the ‘National Financial Research Laboratory’ was non-existent—Jones made it up—and there was no insurance protecting the PED Funds investors.”
Jones, a resident of Carrollton, Ga., was registered with several different firms he owned from 2002 through January 2019, including the broker/dealer Astral Financial Group, Crown Jewel Concepts and most recently Regalia Financial Advisors. Jones was registered with the SEC with Regalia from October 2015 to January 2019, according to public disclosures.
The advisor allegedly tried to make the case that the funds did not have to be registered because they were private offerings intended for accredited investors. But the funds failed to verify that investors were accredited, and in the case of one of the funds, not all of the investors met the criteria, according to the SEC.
Jones could not be immediately reached for comment.
By December 2018, the two funds faced losses of 48% to 66% of investors’ net contributions into them, and the two funds closed by the end of that month, due to “stock market volatility, interest rate and dividend decreases, and oil price declines,” according to the complaint. Investors lost about $2.6 million (or 57%) of the total $5.1 million in funds Jones raised, while he indirectly made $86,823 on management fees.
The SEC is seeking an injunction against Jones, as well as disgorgement of allegedly ill-gotten gains with interest as well as a civil penalty.