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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23659 / September 28, 2016

Securities and Exchange Commission v. Peter R. Kohli, DMS Advisors, Inc., Marshad Capital Group, Inc., and The DMS Funds, Civil Action No. 16-cv-5413 (E.D. Pa.)

SEC Charges Former Stockbroker with Fraud in Running Mutual Fund Business

The Securities and Exchange Commission today announced charges and an emergency asset freeze against a former stockbroker for defrauding investors in his failing mutual fund business.

The SEC's complaint, filed in federal court in Philadelphia, Pennsylvania, alleges that, from 2012 through 2015, Peter R. Kohli, of Pottstown, Pennsylvania, fraudulently raised more than $3.2 million from at least 120 investors. The complaint alleges that, among other things, Kohli filed false mutual fund registration statements with the SEC, misappropriated investor funds, and made false and misleading statements when selling securities in a company controlled by Kohli. At the time of his misconduct, Kohli was a registered representative and investment adviser representative associated with a dually-registered broker-dealer and investment adviser.

According to the SEC's complaint, in 2012, Kohli launched DMS Funds, which ultimately consisted of four emerging market mutual fund series. DMS Advisors, Inc. was DMS Funds' investment adviser, and a separate Kohli-controlled company (Marshad) owned DMS Advisors. The complaint alleges that Kohli filed registration statements with the SEC that falsely overstated DMS Funds' sophistication and ignored the key risk that DMS Advisors and Kohli would be unable to pay the funds' expenses, sold Marshad warrants, falsely telling investors that Marshad had taken steps toward an initial public offering, stole money meant to be invested in the mutual funds, and used it instead to pay fund expenses and, as the funds neared collapse, lied to investors and sold Marshad promissory notes with no reasonable expectation that the purchasers could be repaid.

The SEC's complaint charges Kohli with violations of Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Sections 206(1), 206(2), 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940. The complaint charges DMS Advisors with violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), 206(4) of the Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also charges Marshad with violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint also names DMS Funds as a relief defendant for the purpose of recovering investor funds in its accounts. The SEC seeks preliminary and permanent injunctions, disgorgement plus prejudgment interest, and financial penalties.

Judge Schmehl for the U.S. District Court for the Eastern District of Pennsylvania granted the SEC's request for a temporary restraining order and asset freeze against Kohli, DMS Advisors, Marshad, and DMS Funds. A court hearing has been scheduled for October 7, 2016, on the SEC's motion for a preliminary injunction.

The SEC's continuing investigation is being conducted by Brian P. Thomas, Brian R. Higgins, Kelly L. Gibson and Scott A. Thompson of the Philadelphia Regional Office. The SEC's litigation will be led by David L. Axelrod and Mark R. Sylvester, and the case is being supervised by G. Jeffrey Boujoukos. The examination that led to the investigation was conducted by Scott Fisher, Peter Simons and Peter J. DiMartino of the Philadelphia Regional Office, under the supervision of Eric A. Elefante. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2016/lr23659.htm


Modified: 09/28/2016