U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23370 / September 29, 2015
Securities and Exchange Commission v. Lee D. Weiss, et al., Civil Action No. 1:15-cv-13460 (D. Mass., filed September 29, 2015)
The Securities and Exchange Commission today announced fraud charges against a registered investment adviser and its owner for allegedly engaging in self-dealing and failing to disclose material facts to clients regarding conflicts of interest, use of investor funds, and the risks of the investments they recommended.
In a complaint filed in U.S. District Court for the District of Massachusetts, the SEC alleges that Family Endowment Partners LP and its owner, Lee Dana Weiss, of Newton, Massachusetts, urged their clients to invest more than $40 million in illiquid securities issued by several related companies without disclosing that Weiss had an ownership interest in the parent company of these entities and received payments from these entities.
In addition, the SEC's complaint alleges that FEP and Weiss recommended that their clients invest in entities that Weiss owned and controlled without disclosing that the investments would be used primarily to benefit FEP. FEP and Weiss also allegedly advised clients to invest in a consumer loan portfolio while concealing that Weiss himself would secretly pocket half of the clients' profits from these investments.
According to the SEC's complaint:
The SEC alleges that FEP and the Weiss violated the antfraud provisions of the federal securities laws and related SEC antifraud rules and that FEP violated and Weiss aided and abetted violations of SEC rules concerning custody of client assets and the need to provide timely disclosure of significant events.
The SEC's investigation was conducted by Stacy Bogert with assistance from Bert Braganza, and supervised by Alexander Koch. The SEC's litigation will be conducted by Kevin Lombardi, David Mendel, and Ms. Bogert. A related SEC examination was conducted by Eric Whitman, Peter DiMartino, Erin Harrison, Steven Morton, and Steven Dittert of the Philadelphia office's investment adviser examination program.