SEC Charges Momentum Advisors Executives with Misappropriating Over $220,000

The Securities and Exchange Commission (SEC) has alleged that two executives at New York-based investment firm Momentum Advisors, including its chief compliance officer, misappropriated more than $220,000. The allegations, disclosed in an SEC press release on Friday, concern breaches of fiduciary duties and misuse of fund and portfolio assets by the executives.

Investment firms are entrusted with large sums of money from the public and are required to adhere to strict SEC regulations regarding the safeguarding, oversight, and reporting of financial transactions. According to the SEC, Tiffany Hawkins, former Chief Operating Officer and partner at Momentum, and Allan Boomer, former Chief Compliance Officer and current partner at the firm, violated these obligations. Both executives have agreed to settle with the SEC without admitting or denying the findings.

“As the orders find, Hawkins and Boomer breached their fiduciary duties and misused fund and portfolio company assets for their own benefit, all to the detriment of their clients,” stated Thomas Smith Jr., associate regional director of the SEC’s New York Regional Office, in the release.

The SEC further alleged that Momentum failed to establish and enforce adequate policies regarding transactions and auditing procedures. The firm did not provide investors with audited financial statements on an annual basis, violating regulatory requirements.

As of March 29, 2024, Momentum Advisors reported approximately $353 million in regulatory assets under management across 300 accounts.

In 2020, Hawkins helped establish a new investment fund that focused on nine dry-cleaning franchise businesses. The Franklin Morgan Fund, which Hawkins managed daily and Boomer oversaw, quickly gained traction, attracting $5 million in investments. As a partner in the fund, Hawkins opened checking accounts for multiple dry-cleaning companies and used a debit card to cover business expenses.

However, according to the SEC’s order, Hawkins exploited her access to misappropriate approximately $223,000 from the dry-cleaning businesses between August 2021 and February 2024. The SEC alleges she conducted over 100 fraudulent transactions, using the stolen funds for personal vacations, clothing, and other expenses.

The SEC further claimed that Hawkins deceived Momentum’s bookkeeper and even misled some SEC staff.

At the time of the fraudulent activities, Boomer, who served as the firm’s Chief Compliance Officer, failed to properly oversee Hawkins and ignored clear warning signs of the theft, the SEC alleged. Boomer stepped down as CCO in March 2024 but continues to be a partner at Momentum.

Additionally, the SEC accused Boomer of improperly using nearly $347,000 from the Franklin Morgan Fund to pay off a business debt that should have been settled by a separate entity controlled by him and Hawkins.

The SEC determined that both Hawkins and Boomer violated the compliance, custody, and antifraud provisions of the Investment Advisers Act of 1940. As part of the settlement, Hawkins agreed to a $200,000 penalty and will face an associational bar, preventing her from working in the industry. Boomer will pay an $80,000 penalty and serve a 12-month supervisory suspension. Momentum Advisors itself has agreed to be censured and will pay a $235,000 penalty.

By fLEXI tEAM