Securities Lawyers Blog
The Securities and Exchange Commission (SEC) announced fraud charges against a Stamford, Connecticut based investment advisory firm Atlantic Asset Management LLC (AAM) and accused the firm of investing clients in certain Native American tribal corporation bonds with a hidden financial benefit to a broker-dealer affiliated with the firm. The SEC alleged that AAM invested more than $43 million of client funds in the illiquid bonds without disclosing the conflict of interest that the bond sales generated a private placement fee for the broker-dealer.
According to the SEC, AAM committed securities fraud in August 2014 and in April 2015 by investing client funds in debt securities without telling its clients that the investments would benefit individuals affiliated with one of AAM’s owners, BFG Socially Responsible Investments Ltd. (BFG), which holds a significant ownership interest in AAM’s parent holding company due to an undisclosed investment in AAM. AAM never disclosed BFG’s capital contribution to and indirect ownership in AAM to its clients or in its filings with the SEC in violation of the federal securities laws. The SEC stated that these dicsloures were not made even after BFG’s principal representative was charged by the SEC and criminally in an unrelated securities fraud.
The SEC alleged that BFG has used its undisclosed ownership interest in AAM to dictate AAM’s investment of its clients’ funds in ways that benefited BFG and its principals and affiliates. The SEC alleged that clients’ funds were invested in dubious, illiquid bonds issued by a Native American tribal corporation at the behest of individuals associated with BFG.