As for the relationship with Durand Capital Partners, one of Regal’s investment advisors was the portfolio manager for Durand Capital, Kailunas at one time owned a 10% stake in the company and 100% of its revenue came from Regal clients, the SEC said. Despite this, the SEC said, Regal’s marketing materials described Durand Capital as “independent of Regal Investment Advisors.” By January 2019, Kailunas and Yarch, through Regal Holdings of America, acquired a 90% stake in the company. Throughout, Regal continued to pay Durand Capital the portfolio management fees received from Regal clients, and there was a fee-sharing arrangement where Regal received 10% of Durand’s portfolio management fees. The relationship between the two companies was not disclosed to investors until July 2019, according to the filing.
Based on these findings, the SEC said that Regal failed to adopt and implement written policies and procedures “reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with handling of account transitions of departing [investment advisor representatives], review and management of client accounts, and disclosure of all conflicts of interest.”
Regal did not respond to a request for comment by press time.