SEC Charges Florida-Based Investment Adviser and Principal for Misleading Statements
April 22, 2024
ADMINISTRATIVE PROCEEDING
File No. 3-21918
April 22, 2024 - The Securities and Exchange Commission today announced settled charges against Fort Lauderdale, Florida-based investment adviser LM Global Investments LLC, d/b/a Fratarcangeli Wealth Management ("FWM") and its principal, Jeffrey Fratarcangeli, for misleading statements relating to advisory clients about the management and performance of FWM-managed accounts.
As set forth in the SEC's order, FWM and its owner, Fratarcangeli, placed the majority of their clients in FWM-managed accounts that invested in accordance with FWM-developed models. Many of FWM's models made investments based on, and bore names similar to, investment strategies managed by third-party money managers. The order finds that, in certain communications with prospective and existing advisory clients, FWM and Fratarcangeli failed to differentiate between the FWM models and the third-party strategies on which they were based. The order therefore finds they did not describe clearly that clients would be invested in accounts following FWM's models, and not the third-party strategies. As set forth in the settled order, FWM and Fratarcangeli also often included historical performance and fact sheets for the third-party strategies in information provided to prospective and existing clients without making it clear that FWM's investments and past performance had differed, and would likely continue to differ, from the results for the strategies reflected in those materials. As a result, the order finds that these written communications were misleading in their presentation of clients' investments or proposed investments and performance history.
Without admitting or denying the SEC's findings, FWM and Fratarcangeli consented to an order that finds that FWM violated Section 206(2) of the Investment Advisers Act of 1940 and that Fratarcangeli was a cause of FWM's violation. FWM and Fratarcangeli agreed to a cease-and-desist order, to pay penalties of $100,000 and $50,000, respectively, and to complete undertakings designed to strengthen compliance with the securities laws, and FWM agreed to a censure.
The SEC's investigation was conducted by Cynthia Storer Baran, under the supervision of Jeffrey Shank, Corey Schuster, and Andrew Dean of the Division of Enforcement's Asset Management Unit.