U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23554 / June 2, 2016
Securities and Exchange Commission v. Richard W. Davis, Jr., et al., Civil Action No. 3:16-cv00285 (W.D.N.C.)
SEC: Adviser Steered Investor Money to His Own Companies
The Securities and Exchange Commission today charged a North Carolina-based investment adviser with defrauding investors by secretly steering portions of real estate-related investments into deals with companies that he owned or operated himself.
The SEC alleges that Richard W. Davis Jr. breached his fiduciary duty and took no steps to disclose or ameliorate the conflicts of interest involved with using investor money to enter into transactions with entities he beneficially owned or controlled. The SEC further alleges that Davis made false or misleading statements to investors before and after they made their investments, failed to inform investors of their losses as his companies failed to pay the loans, and improperly received at least $1.5 million from bank accounts commingling investor funds when he was only entitled to less than $150,000 in management fees.
Davis has agreed to a settlement subject to court approval with disgorgement plus interest and penalties to be determined by the court at a later date.
According to the SEC's complaint filed in federal court in Charlotte, N.C.:
The SEC's complaint charges Davis with violations of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 as well as Sections 5 and 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. Without admitting or denying the allegations, Davis agreed to the partial settlement that bars him from any further sale of securities in a pooled investment vehicle as well as from future violations of antifraud and securities registration provisions of the federal securities laws. He also is required to cooperate with a court-appointed receiver.