Massachusetts Registered Investment Adviser Charged with Fraud

RoundIcons-Free-Set-11Family Endowment Partners, L.P. (“FEP”), a Massachusetts registered investment adviser,  and its owner Lee Dana Weiss (“Weiss”) have been accused of violating the antifraud provisions of the federal securities law and related Securities and Exchange Commission (“SEC”) antifraud rules. Furthermore, the SEC alleges that FEP and Weiss aided and abetted violations of SEC rules related to custody of client assets and failure to disclose material facts.

The complaint filed in U.S. District Court for the District of Massachusetts describes Weiss and FEP’s scheme whereby 11 clients, and two (2) hedge funds they advised (FEP Fund I and the Catamaran Fund, collectively the “Hedge Funds”) invested over $40 million in illiquid securities issued by several French companies who purportedly designed methods to reduce the harmful effects of smoking. Weiss failed to disclose he had a personal investment in the parent French company. According to the complaint, the investments were not publically traded and in the form of “loan agreements” but were in fact securities.

The SEC alleged FEP and Weiss employed “material misrepresentations and omissions and multiple schemes to defraud” investors.  The SEC discovered numerous conflicts of interest such as FEP’s failure to disclose Weiss’ ownership interest in the parent company of the companies. FEP and Weiss also failed to disclose that investor’s money would be spent to pay FEP’s financial obligations and convinced an FEP client to invest $2.5 million in a company Weiss knew would use the funds to pay delinquent interest owed to other FEP clients.

Antonia Chion, Associate Director in the SEC’s Division of Enforcement, stated that “Investment advisers have an obligation to act in their clients’ best interests. However, as alleged in the complaint, FEP and Weiss repeatedly abused their clients’ trust and placed their own interests ahead of their clients’ interests.”  FEP and Weiss have been ordered to disgorge the ill-gotten gains obtained from the violations.

Jacko Law Group, PC (“JLG”) can assist your firm with identifying and disclosing potential conflicts of interest. If you are considering investing in a new product, we can conduct due diligence on that product to determine if it sound. For more information or to speak with a securities attorney on this and other related subjects, please contact us at info@jackolg.com or (619) 298-2880.

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