Sept 18 (Reuters) - A Tacoma, Washington-area investment advisory firm that engaged in hundreds of trades that regulators said represented a conflict of interest has agreed to pay $600,000 in sanctions, the U.S. Securities and Exchange Commission said on Thursday.
Strategic Capital Group LLC in Gig Harbor, Washington, engaged in nearly 1,100 “principal transactions” through its affiliated brokerage firm, without disclosing the practice to clients or getting their permission, the SEC said in an order. Strategic Capital’s affiliated brokerage, RP Capital, LLC, was not named in the case.
Strategic Capital and the firm’s chief executive, N. Gary Price, neither admitted nor denied the SEC’s findings, according to the settlement. A lawyer for Strategic Capital declined to comment.
A principal transaction occurs when a firm buys and sells securities from its own portfolio. The practice can create potential conflicts of interest between advisers and their clients, the SEC said.
Strategic Capital’s Price, who the agency said had caused some of the violations, agreed to pay a $50,000 penalty, the SEC said. Price, who is also the chief compliance officer of RP Capital, did not immediately return a call requesting comment. His lawyer was unavailable.
The SEC found that Strategic Capital had engaged in the principal trades since mid-2011. Its affiliated brokerage, RP Capital, bought fixed-income securities from other brokerages and resold them at higher prices to Strategic Capital clients for more than a year. Price also signed regulatory forms that falsely stated that the firm had not engaged in principal transactions, the SEC said. Price owns 50 percent of both the advisory firm and brokerage.
The SEC also found that Strategic Capital made a pair of false and misleading advertisements aimed at prospective investors. For example, one advertisement did not disclose that the firm had not deducted its investment fees when calculating its performance. The advertisement “materially overstated” its investment performance as a result, the SEC said.
Strategic Capital managed about $482 million as of Jan. 31, the SEC said. (Reporting by Suzanne Barlyn; Editing by Leslie Adler)