SEC Nails Bay Area Investment Adviser

(CN) – Valentine Capital Asset Management and its owner-operator John Leo Valentine will return $400,000 to customers and pay a $70,000 fine for juggling clients’ investments between related funds to increase his commissions, the SEC said in a settled complaint. Valentine, of San Ramon, Calif., manages $211 million for more than 500 clients, according to its latest filing, the SEC said.

     Valentine, 48, has owned and operated the firm since it began, according to the SEC’s cease-and-desist order.
     Valentine’s clients paid 4 percent annual commissions until they had paid 10 percent of their investments as commissions, at which point the commission payments would stop, the SEC said in announcing the settlement.
     When clients were close to reaching the 10 percent threshold, “Valentine began advising clients to exchange at least some portion of their Series A holdings for Series B of the same fund – a largely identical investment but with higher leverage,” the SEC said. “But by making the switch, clients would have to restart the process of making the 4 percent annual commission payments. VCAM and Valentine did not clearly disclose this conflict of interest when advising clients to make a fund switch that would restart their commission charges.”
     The cease-and-desist order states that about 140 of his clients made the switch, which brought Valentine more than $400,000 in additional commissions.
     “I neither deny nor admit the charges, and the lawyer fees would be much higher than the cost to simply settle,” Valentine said in a statement. “I am happy that this is behind me.”

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