The SEC has nailed three mid-sized RIA firms for falsely claiming to be based in Wyoming, an action that allowed the firms to maintain their registrations with the SEC.
Craig M. Scariot of Longmont, Colo., and founder of Wyoming Investment Management Services, agreed to a censure and fine of $10,000.
Santa Fe, N.M. resident David A. Nagler, founder of New Line Capital LLC, settled for a censure and $25,000 fine. The SEC alleged that Nagler also misrepresented New Line’s assets under management.
A third advisor, Brenda L. Ridley of Bakersfield, Calif., founder of RIA firm Arete Ltd., which did business as Sky Peak Capital Management, agreed to an industry bar. Arete ceased doing business in 2013 after settling an unrelated case with Colorado securities regulators.
The three advisors neither admitted or denied the SEC’s findings.
All the firms registered as Wyoming-based RIAs after the Dodd-Frank Act increased the threshold for SEC registration to $100 million or more in assets.
Wyoming does not regulate investment advisors, so all RIA firms based in the state, regardless of size, are required to register with the SEC.
“These investment advisors made false filings to become SEC-registered and risked giving investors the misleading appearance that they were larger firms with more assets,” said Julie Lutz, director of the SEC’s Denver office, in a statement.
Another reason some advisors wanted to stay with the SEC was to avoid multiple state registrations, said Cindi Hill, of Hill Compliance Advisors in San Diego.
State-registered advisors must register in every state where they have more than a de minimis number of clients, Hill said, while SEC-registered advisors can make simpler “notice filings” in all the states where they do business, Hill said.
Reached by phone, Scariot had no immediate comment. Messages left for Nagler and Ridley were not immediately returned Wednesday.