Two Anchorage, Alaska-based registered investment advisors and their firm agreed to pay more than $400,000 to settle charges related to their recruitment of investors for a real estate fund that was running a multimillion-dollar fraud, according to the SEC.

Michael Shamburger and Rob Wedel, and the firm of which they are principals, Foundations Asset Management (FAM), were accused by the SEC of not disclosing to clients that they substantially profited by steering the clients into the fund.

From May 2013 to June 2016, the firm and its principals failed to disclose conflicts related to its recommending investments in Alaska Financial Company III LLC (AFC III), a private real estate fund which, during that same period, paid FAM about $254,000 in exchange for the firm's recommendations, according to the SEC's complaint.

"The order finds that FAM, Shamburger, and Wedel failed on multiple occasions to adequately disclose to clients the conflicts of interest presented by FAM’s AFC III compensation, including that FAM earned significantly more money by recommending AFC III investments as compared to other investments," the SEC said.

AFC III and its manager were the subject of a separate 2018 SEC fraud complaint that led to the fund agreeing to repay $30 million to investors, according to the SEC.

The compensation to FAM included about $126,000 in up-front compensation calculated as a percentage of an initial investment and about $128,000 in trailing fees based on FAM client investments that remained with AFC III each quarter, according to the complaint.

"Although FAM did not charge clients an advisory fee on AFC III investments, the compensation received by FAM was higher than the typical 1% assets-under-management annual advisory fee that FAM received based on recommending other investments," the complaint stated.

Shamburger, 55, and Wedel, 49, are both residents of Anchorage and hold Series 65 licenses, according to the SEC. They are both certified financial planners, according to FAM's website. Both advisors are the sole owners of FAM, each owning a 50% share, the SEC said.

FAM ended up recommending that clients put about $12 million into AFC III, the SEC said. FAM was also charged with failing to register as a broker and making false statements regarding its compensation.

The SEC noted that Shamburger and Wedel gave a written disclosure to some clients who invested in AFC III after 2013; it stated that FAM “receives revenue from Alaska Financial Company for the clients it recommends for investment to Alaska Financial Company.” But the agency went on to say in the complaint, "The disclosure acknowledgment form did not adequately address the conflicts of interest that FAM had with respect to recommending AFC III investments. ... FAM did not adequately disclose the conflicts of interest until June 2016, after receiving a deficiency letter from" the SEC.

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