Three advisors at a San Diego-based RIA -- including one who apparently once worked for the FBI -- are now facing SEC charges for allegedly paying themselves concealed revenue sharing fees from investments they recommended to clients.
The SEC's Enforcement Division said Tuesday that Total Wealth Management, along with firm owner and CEO Jacob Cooper, entered into "undisclosed revenue-sharing agreements through which they paid themselves kickbacks or so-called 'revenue sharing fees.' "
Failing to disclose the resulting conflicts of interest, Cooper and Total Wealth Management then proceeded to recommend the investments in the Altus family of funds to clients and investors, according to the SEC.
The investment firm and the fund family are deeply linked, according to the SEC order instituting administrative proceedings: "Total Wealth, which was founded by Cooper and Shoemaker, is an investment advisor to the Altus Funds," the order says. "Total Wealth is also the owner and managing member of Altus Management, which is the general partner to the Altus Funds. Cooper makes all of the investment decisions and recommendations for Total Wealth clients, including those who invested in the Altus Funds."
Two investment advisor representatives, Nathan McNamee (at the time also Total Wealths chief compliance officer) and Douglas Shoemaker (a firm co-founder), are accused by the regulatory agency of breaching their fiduciary duties and defrauding clients "by failing to disclose conflicts of interest and concealing the kickbacks they received from the investments they recommended," the SEC says.
Shoemaker, who hosts a radio show called Intelligent Wealth, worked for the FBI prior to beginning his career as a certified financial planner, according to his bio on Total Wealth Management's website. (The FBI did not immediately confirm his employment with the agency.)
Investment advisors owe a fiduciary duty of utmost good faith and full and fair disclosure to their clients, Michele Wein Layne, director of the SECs Los Angeles Regional Office, said in a statement. Total Wealth violated that duty with its pervasive practice of placing clients in funds holding risky investments while concealing the revenue sharing fees they paid themselves.
Messages left on the Total Wealth Management main number and with Shoemaker were not returned. Cooper's mailbox was full and not able to accept any additional voice messages. McNamee left Total Wealth in December and is now a Ph.D researcher at the University of Surrey in the United Kingdom, according to his LinkedIn profile, and could not be reached. Defense attorney Michelle Jacko of San Diego did not immediately return calls for comment.
The SEC says that Total Wealth and Cooper "willfully violated the antifraud provisions of the federal securities laws" with McNamee and Shoemaker violating or aiding and abetting violations of the antifraud provisions. They also face disclosure and custody rule charges related to their ADV forms.
The SEC is seeking the return of "ill-gotten gains plus interest" as well as financial penalties and a cessation of violations.
Register or login for access to this item and much more
All On Wall Street content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access