Based upon an order issued by the New Hampshire Bureau of Securities barring a state investment adviser and his firm from being licensed in New Hampshire, the SEC, in a recent action (see In the Matter ofNicholas Rowe, IA Release No. 4332, February 9, 2016), barred the adviser and his firm from the securities industry.
While it is not unusual for a state securities regulator to take enforcement action against a person for wrong doing as cited by the SEC in an enforcement action, in this case, the SEC followed the lead of the state regulator by taking enforcement action for the same wrong doing that was the focus of the state enforcement action.
In the New Hampshire enforcement case the staff alleged that the owner and his investment advisory firm engaged in an investment strategy involving leveraged and inverse exchange traded funds (ETFs) that were unsuitable for clients, and misrepresented to clients the amount of fees to be charged and the advisory firm owner’s qualifications. Based on the staff allegations, the New Hampshire securities regulator barred the owner and his advisory firm from being licensed under the state securities law, revoked the firm’s investment adviser license, and was ordered to pay a $20,000 fine.
Drawing from the New Hampshire enforcement action, the SEC basically “piggy backed” on the New Hampshire allegations to bar the advisory owner from association with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or materially recognized statistical organization.