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June 28, 2010 |
Financial Advisor Charged With Fraud, Breaching Fiduciary Duty |
The Securities and Exchange Commission has charged a financial advisor with fraud and breach of fiduciary duty for taking $6.9 million in client money and investing it in promissory notes of a real estate company that buys and renovates distressed properties.
The SEC today charged that Jeffrey S. Preston and his firm Life Wealth Management Inc. in Valencia, Calif., placed clients in unsuitable investments and failed to disclose their risks when he invested their money in unsecured promissory notes issued by Atherton-Newport Investments in Irving, Calif. Life Wealth Management manages approximately $18.5 million in assets and has 206 accounts, according to the firm's ADV statement.
The SEC’s complaint says Preston recommended the Atherton-Newport unsecured promissory notes to his clients despite the fact that in July 2005, Life Wealth’s attorney had cautioned him about the “enormous risk” of such an investment. Nevertheless, not only did Preston recommend the notes to clients, he also falsely reassured clients that their principal would be safe, the complaint says.
Even though Preston began to doubt the viability of Atherton-Newport in early 2007, he did not disclose his concerns to Life Wealth clients, the SEC charges. Preston then redeemed his own unsecured promissory note several weeks before Atherton-Newport defaulted on all of the outstanding notes. Even after Atherton-Newport defaulted on the notes, Preston persuaded three Life Wealth clients to invest $235,000 in unsecured promissory notes issued by Atherton-Newport. In addition, Preston recommended the notes to clients even though the investment was highly unsuitable for many of them, such as one client who invested 86.2% of her total net worth in the notes, the complaint adds.
Preston’s attorney, Connie M. Anderson in Los Angeles, was unavailable for comment on the charges.
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Financial Advisor Charged With Fraud, Breaching Fiduciary Duty |
