A New Jersey investment advisor and frequent Fox Business guest will be censured and pay a total of more than $400,000 to settle charges related to failure to disclose conflicts of interest regarding Aequitas Management, which itself was found to be runing a $617 million Ponzi-like scheme.
Morristown, N.J.-based Sica Wealth Management and its president and owner, Jeffrey Carmen Sica, agreed on Thursday to pay the fines, accept a censure and abide by a cease-and-desist order in a U.S. Securities and Exchange Commission administrative proceeding.
According to the SEC’s complaint, Sica violated the Advisers Act in recommending securities issued by Aequitas Commercial Finance, whose parent company, Aequitas Management, was embroiled in a Ponzi-scheme scandal that bilked hundreds of investors, most notably in unpaid alternative asset notes related to the now-defunct for-profit Corinthian College, before unraveling in 2015 and 2016. The scandal resulted last year in one of the largest securities lawsuit settlements in history, when firms accused of aiding the scheme, including Deloitte, EisnerAmper, TD Ameritrade, Integrity Bank & Trust and Duff & Phelps, agreed to pay more than $234 million.
Sica is one of many advisors caught up in SEC charges regarding payments from Aequitas. In 2019, at least two advisors, Foxboro, Mass.-based Kristofer Behn and N. Gary Price of Gig Harbor, Wash., agreed to cease-and-desist orders, fines and industry bars for failing to disclose conflicts to their clients when recommending Aequitas securities.
The SEC claims that Sica and “certain Aequitas officers had an understanding” that his firms would receive some form of compensation from Aequitas, then Sica would recommend the firm’s securities to his clients.
Sica allegedly failed to disclose to clients that he, Sica Wealth Management and a second firm he owned and controlled were being compensated by Aequitas via two separate consulting agreements and a loan agreement, which created a conflict of interest when recommending the Aequitas securities to his clients. Furthermore, he allegedly offered some clients forms that inaccurately described his relationship with Aequitas.
All told, from October 2013 to January 2014, Sica Wealth Management and the second firm received $2 million from Aequitas, which Sica benefitted from as the sole owner of both firms, according to the SEC.
The SEC also claims that from October 2013 to March 2015, 45 of Sica’s clients invested approximately $30.6 million in promissory notes issued by Aequitas Commercial Finance. When red flags were raised, Sica went directly to Aequitas to redeem the investments and was able to return $21 million in client assets.
Sica's behavior was at odds with section 206(c) of the Advisers Act, which prohibits advisors from engaging in “in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client."
In comments made to Financial Advisor on Thursday afternoon via e-mail, Sica defended his practices: