LPB Capital d/b/a Family Office Group, LLC and Gary G. Pappas were the subject of a recent cease and desist order issued by the SEC. The adviser located in North Carolina, has been registered with the SEC since 2008.
The SEC, in its complaint, alleges that LPB Capital filed false information within its Form ADV with the SEC in connection with the amount of its assets under management. In order to “qualify” to register with the SEC, an investment adviser must have at least $25 million of assets under management. Apparently, in order to maintain its registration with the SEC and avoid investment adviser registration with its home state of North Carolina, LPB Capital indicated on Form ADV as filed with the SEC that it qualified to be registered with the SEC, citing assets under management in excess of $25 million when LPB Capital and Mr. Pappas knew that its assets under management at no time reached that amount. Such alleged false reporting to the SEC is a violation of Section 204 and Rule 204-2(e)(8) under the Advisers Act. In addition, for the fiscal year ended December 2009, LPB Capital had insufficient funds to cover its operating costs. However, LPB Capital failed to disclose it precarious financial condition to clients as required under Section 206(4) of the Advisers Act.
Mr. Pappas is cited in the SEC's request for the cease and desist order as being responsible for filing the false information to the SEC. The staff of the SEC alleges in its complaint that the cease and desist order should be issued based upon the seriousness and number of violations alleged to have occurred.