The Securities and Exchange Commission was awarded a summary judgment on April 24 by a Wisconsin federal court on its claims against James Putman, in an action filed by the SEC in May 2009.
In its original complaint, the SEC alleged that Putman, founder and CEO of Wealth Management LLC, a registered investment advisor located in Appleton, Wis., accepted $1.24 million between 2006 and 2007 in undisclosed payments derived from life insurance premium financing investments made by Wealth Management's clients. The SEC further claimed that Putman breached his fiduciary duty and engaged in fraud by misrepresenting the safety and stability of Wealth Management's client investments.
The court's decision granting the SEC's motion orders Putman to pay disgorgement and prejudgment interest in the amount of $1.5 million and a civil money penalty of $130,000, for a total amount of more than $1.6 million.
Putnam, a former president of the National Association of Personal Financial Advisors, had been charged with taking kickbacks from unregistered investment pools in which his Wisconsin advisory firm placed $102 million in client assets. Putman served as Napfa president in 1996-1997 and is co-founder and first president of the Northeast Wisconsin Chapter of the International Association for Financial Planning, now the Financial Planning Association.
Putman, along with Simone Fevola, a former president and chief investment officer at Wealth Management, each accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools, according to a civil complaint filed by the SEC.
As detailed in the SEC's original complaint, Putman and Fevola caused clients to invest in the pools from May 2003 through August 2008, and Wealth Management claims to currently have approximately $102 million of its clients' assets invested in these pools. The SEC's complaint alleges that the pools' assets are largely illiquid, the reported values of their assets appear to be substantially overstated, and Wealth Management and Putman have been providing redemptions to investors based on likely overstated valuations.
The SEC's complaint also had charged both defendants with violations of the anti-fraud provisions of the federal securities laws, and with aiding and abetting Wealth Management's violations.