On September 18, 2014, the SEC settled charges against Strategic Capital Group, LLC and its CEO, N. Gary Price, for engaging in hundreds of principal transactions through its affiliated broker-dealer without informing clients or obtaining their consent and for distributing false and misleading advertisements to investors. According to the SEC’s order, Strategic Capital engaged in more than 1,100 principal transactions through its broker-dealer affiliate without making the required disclosures to clients or obtaining consent. The SEC found that Strategic Capital also failed to seek best execution for the transactions it executed through its broker-dealer affiliate, and that Mr. Price signed regulatory filings incorrectly stating that Strategic Capital did not engage in principal transactions. The SEC also found that Strategic Capital distributed false and misleading advertisements to prospective investors, with one advertisement failing to disclose that the portrayed results were partially based on returns of an index rather than actual, historical returns, and the other advertisement failing to disclose that the results portrayed were gross of fees.
The SEC’s order found that Strategic Capital violated the antifraud, principal transactions, advertising, compliance and reporting provisions of the Advisers Act. The SEC’s order also found that Mr. Price caused Strategic Capital’s violations of the compliance and reporting provisions of the Advisers Act. Strategic Capital agreed to pay nearly $600,000 to settle the SEC’s charges and Mr. Price agreed to pay a $50,000 penalty. Strategic Capital also agreed to retain an independent compliance consultant.