The U.S Securities and Exchange Commission (SEC) today announced fraud charges against a Washington D.C.-based investment advisory firm’s former president accused of stealing client funds. The firm and its chief compliance officer separately agreed to settle charges that they were responsible for compliance failures and other violations.
SFX Financial Advisory Management Enterprises is wholly-owned by Live Nation Entertainment and specializes in providing advisory and financial management services to current and former professional athletes. In 2013, boxing world champion Mike Tyson and his wife sued the firm claiming that his adviser misappropriated more than $300,000, and cost Tyson millions in damages from lost income.
The American watchdog now alleges that SFX’s former president Brian J. Ourand misused his authority and control over the accounts of several clients to steal approximately $670,000 over a five-year period by writing checks to himself and initiating wires from client accounts for his own benefit.
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The SEC separately charged SFX and its CCO Eugene Mason, finding that the firm failed to supervise Ourand, violated the custody rule, and made a false statement in a filing. The SEC finds that Mason caused some of SFX’s compliance failures by negligently failing to conduct reviews of cash flows in client accounts, which was required by the firm’s compliance policies, and not performing an annual compliance review. Mason was also responsible for a misstatement that client accounts were reviewed several times each week. SFX and Mason agreed to pay penalties of $150,000 and $25,000 respectively.
“Investment advisers have a fiduciary obligation to safeguard client assets,” said Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “SFX failed to detect an alleged misappropriation for years because it had insufficient internal controls to limit Ourand’s ability to withdraw client funds for personal use.”