South Florida Arbitration & Litigation Lawyer Blog
Unregistered Investment Advisor Fraud and Misrepresentation Litigation and Arbitration Attorney, Russell L. Forkey, Esq.
April, 2012:
In the Matter of Brian J. Smart
Recently, the Securities and Exchange Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against Brian J. Smart (Smart).
In the Order, the Division of Enforcement alleges that: From 2003 until 2009, Smart owned and operated an unregistered investment adviser, Smart Assets, LLC (Smart Assets). On June 8, 2011, a final judgment was entered against Smart and Smart Assets, permanently enjoining defendants from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, and ordering defendants to pay $2,059,077 in disgorgement, prejudgment interest of $597,426, and a civil penalty of $2,059,077, in the civil action titled SEC v. Brian J. Smart, et al., Civil Action Number 2:09-CV-00224, in the United States District Court for the District of Utah. The Court found that Smart and Smart Assets, inter alia, misappropriated over $2.05 million from investors through a “systematic program of deception and fraud.” The Court found that Smart falsely represented that he would place investor funds in safe, principal guaranteed investments. Instead, the Court found, Smart used investor money to pay personal expenses, to invest in risky real estate ventures and hard money loans, and to pay purported “dividends” to other investors.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Smart with an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest. The Order requires that the administrative law judge issue an initial decision no later than 210 days from the date of service of the Order. (Rel. IA-3397; File No. 3-14851)