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Oct. 27 — Beverly Hills, Calif., investment adviser Marc Broidy is facing civil and criminal charges he overcharged his clients and misappropriated their assets to pay personal expenses ( SEC v. Broidy, E.D.N.Y., 1:16-cv-05960, 10/27/16 ; United States v. Broidy, E.D.N.Y., 16-cr-__, 10/27/16 ).
Broidy's investment advisory business, Broidy Wealth Advisors, also was named in the Securities and Exchange Commission's civil lawsuit.
The alleged misconduct netted the two approximately $1.5 million in unlawful profits. Their lawyer, Gerard Riso, Stein Riso Mantel McDonough LLP, New York, didn't respond immediately to an e-mailed request for comment.
Enforcement actions against investment advisers are on the upswing at the SEC. The agency filed a record number of cases—160—involving investment advisers and investment companies during fiscal 2016 (197 SLD, 10/12/16).
According to the SEC's lawsuit, Broidy over-billed clients approximately $643,000. He allegedly tried to cover up the excessive fees by doctoring broker-dealers forms before sending the forms to his clients.
Broidy also allegedly misappropriated approximately $865,000 from client trusts and didn't tell advisory clients that he was affiliated with certain companies in which they invested.
“Broidy fell well short of his fiduciary obligations as an investment adviser by misappropriating money and failing to disclose important conflicts of interest to his clients,” SEC regional enforcement director Andrew Calamari said in an Oct. 27 release.
The agency is seeking penalties and permanent injunctions against Broidy and his firm and an officer/director bar against Broidy.
In the criminal case, Broidy was arrested and slated to appear Oct. 27 before a magistrate judge in Los Angeles. In a release, federal prosecutors said they will seek removal to the U.S. District Court for the Eastern District of New York, where the SEC case was filed.
If convicted, Broidy faces up to 20 years in prison.
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To see the SEC complaint, go to http://www.bloomberglaw.com/public/document/Securities_and_Exchange_Commission_v_Broidy_et_al_Docket_No_116cv.
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