The U.S. Securities and Exchange Commission (SEC) announced yesterday that it has charged Fieldstone Financial Management Group LLC and its principal Kristofor R. Behn with defrauding retail investment advisory clients.
Behn also fraudulently misused approximately $500,000 of one investor’s funds to pay personal expenses.
According to the SEC approximately 40 retail clients of Behn and Fieldstone invested more than $7 million in Aequitas securities, which were the subject of a previous Commission enforcement action. Behn and Fieldstone failed to disclose to their clients that Aequitas had provided Fieldstone with a $1.5 million loan and access to a $2 million line of credit, both of which had terms that created a significant financial incentive for Behn and Fieldstone to recommend Aequitas securities to their clients.
Behn flagrantly disregarded his most basic duties as an investment adviser by concealing the significant financial incentives he and his firm would receive by recommending investments in Aequitas,” said Erin E. Schneider, Director of the SEC’s San Francisco Regional Office. “The Commission is committed to rooting out breaches of fiduciary duty to retail investors.
Fieldstone and Behn were ordered to cease and desist from future violations, and were fined $275,000. They also need to pay a prejudgment interest of $1,047,971, which will be distributed to harmed investors. Behn will also be permanently barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.