The SEC has charged a Columbus, Ohio, investment firm and its president with repeatedly hiding a shortfall of more than $700,000 in client assets, the agency announced Monday.
The assets of Professional Investment Management were frozen after the SEC filed a complaint for fraud in U.S. District Court for the Southern District of Ohio against the firm and Douglas Cowgill, the president and chief compliance officer.
A shortfall in a money market fund account managed by the firm was discovered when the SEC conducted an examination of the firm to verify the existence of client assets. PIM reported in account statements sent to clients that the firm held a total of approximately $7.7 million in a particular money market fund when in fact the account reflecting these investments held less than $7 million, the SEC says.
Cowgill attempted to disguise the shortfall from SEC examiners by entering a fake trade in PIM’s account records, the complaint says. The trade was later reversed.
Cowgill allegedly provided additional falsified reports to SEC staff, and he later transferred funds from a cash account at another financial institution to eliminate the shortfall in the money market fund account. However, that cash account also was held for the benefit of clients, so Cowgill merely moved the shortfall from one asset holding to another in an effort to avoid detection, the SEC says.
“Our complaint alleges that Cowgill went to extraordinary lengths to hide a significant shortfall in client assets, even providing manufactured documents to SEC staff,” says Robert J. Burson, associate director of the SEC’s Chicago Regional Office.
PIM manages approximately $120 million in assets for approximately 325 clients, including a significant number of retirement plans. PIM was registered with the SEC as an investment adviser from 1978 until September 2013 when it withdrew its registration.
The investigation started after the SEC learned PIM had failed to arrange for independent verification of client assets.