The Securities and Exchange Commission accused a Boulder, Colo.-based advisor with selling unsuitable investments in his risky hedge funds to elderly clients, and failing to disclose $2 million in fees on the securities. The SEC said Neal R. Greenberg told investors that his Agile hedge funds were appropriate for conservative investors who were retired or close to retiring. The funds were hammered amid the financial crisis in September 2008 and stopped making redemptions to more than 100 investors, most of whom were older and wanted low-risk investments that provided significant capital protection.
Greenberg's Tactical Allocation Services LLCmade investment recommendations to clients; he was the lead portfolio manager for Agile Group LLC, which managed the funds. Agile held about $174 million in capital when the redemptions were suspended. Greenberg's claims that the investments were liquid, diversified, and minimally risky were at odds with the disclosures in Agile's own private placement memoranda for 2007 and 2008, the SEC said. The regulator also said that Greenberg failed to tell investors that performance and management fees were levied on the leveraged portion of their investment when one Agile hedge fund invested in another Agile hedge fund; those fees totaled $2 million between 2003 and 2006.
A Branchburg, N.J.-based advisor accused of running a multi-million-dollar fraud that sold phony promissory notes to investors has settled SEC charges in the case, the agency said. Sandra Venetis allegedly told investors that the notes were backed by the Federal Deposit Insurance Corp. and would earn tax-free interest of about 6 to 11 percent annually. The SEC said Venetis also claimed she would use her clients' investments to fund loans to doctors that would be backed by Medicare reimbursement payments to those doctors; to pull it off, she fabricated the names and signatures of “doctors” or forged signatures of other people she told her clients were getting the loans.
Venetis used the money to pay business debts and personal expenses that included gambling, home mortgages, property taxes, cash transfers to relatives, and travel to Alaska, Italy, France, India, and the Caribbean. Venetis and three companies she was involved with agreed to settle the SEC's charges and consented to a court order that froze their assets and that mandated compensation and penalties, the regulator said. Venetis also is barred from association with any investment advisor or broker-dealer. Since 1997, the advisor and her companies obtained at least $11 million from investors, the SEC said. The settlement is pending final court approval.