SEC charged an investment adviser and CCO with selling fraudulent securities.

The Securities and Exchange Commission (SEC) has charged a New York-based registered investment adviser, its owner, and its chief compliance officer with alleged securities laws violations for unlawfully offering and selling more than $500,000 in unregistered, fraudulent securities.

According to the SEC's complaint, A.G. Morgan Financial Advisors (AGM), of Massapequa, New York, along with AGM's owner, Vincent Camarda, and AGM's former Chief Compliance Officer, James McArthur, were charged Thursday in the United States District Court for the Eastern District of New York with violating the Securities Act of 1933's registration provisions and acting as unregistered broker-dealers in violation of the Securities Exchange Act of 1934. AGM and Camarda were also charged with violating the Investment Advisers Act of 1940's antifraud provisions. Permanent injunctions, disgorgement plus prejudgment interest, and civil monetary penalties are among the SEC's demands.


The SEC said Friday in a litigation release that the unregistered, fraudulent offerings were made with lending company Complete Business Solutions Group, doing business as Par Funding. Par Funding and others were previously charged by the SEC with operating a fraudulent scheme that raised hundreds of millions of dollars from investors across the country. Separate investigations into Par Funding have been launched in Pennsylvania, New Jersey, and Texas.

McArthur was the CCO of AGM from 2015 to 2016, and has been a registered representative of several registered broker-dealers since 2014. According to the complaint, Camarda and McArthur "recommended to their investment advisory clients through in-person meetings and by phone to invest in Par Funding by purchasing securities in the form of Par Funding promissory notes," as part of the alleged scheme.


According to the complaint, Camarda told potential investors that Par Funding "was a company that loaned money to small businesses secured by their receivables" and that it was a "low-risk investment."


According to the complaint, McArthur described the investment to one of AGM's clients as "being fairly safe because of its short one-year term, and given the large volume of loans made by Par Funding, investors had the ability to curtail losses should a large number of loans go into default." According to the complaint, McArthur received 10% of AGM's gross revenues in exchange for his efforts, which included soliciting individuals to invest in Par Funding securities.


According to the SEC, AGM, Camarda, and McArthur raised $75 million from 200 investors and received nearly $7 million in return. Investors were not informed of the conflict of interest.


Camarda and McArthur planned to launch AGM Fund 1 in 2018, with the goal of "raising investor funds for Par Funding through the offer AGM 1 Fund promissory notes, and then funneling the investor funds to Par Funding in exchange for Par Funding promissory notes issued to AGM Fund I." The SEC claimed that the promissory notes were unregistered securities.


AGM provided Par Funding with a $500,000 loan, which it did not disclose to investors, nor did it reveal that Camarda personally guaranteed some of the loans. The defendants allegedly offered and sold securities to investors without the approval of the registered broker-dealer with which they were affiliated, according to the SEC. The complaint also claims that in 2017, AGM and Camarda failed to inform advisory clients that AGM had borrowed $750,000 from Par Funding and had not fully repaid it.


According to the complaint, "AGM and Camarda had an incentive for their clients to invest in Par Funding because Par Funding was paying down AGM’s debt” on loans ”in exchange for Camarda soliciting investors to purchase Par Funding promissory notes. The existence of this conflict-of-interest is a material fact which AGM and Camarda as investment advisers were required to disclose to their clients."


A.G. Morgan Financial Advisors did not comment.

By fLEXI tEAM