A shortfall of more than $700,000 in client assets has resulted in fraud charges for one Ohio advisory firm and its president.
Professional Investment Management, an advisory firm in Columbus, Ohio, and Douglas Cowgill, the firm's president and chief compliance officer, "repeatedly" hid the missing amount, according to the SEC, which successfully sought a freeze on the firm's assets.
The SEC discovered the shortfall in a money market fund account managed by PIM when the agency was conducting an examination of the firm to verify the existence of client assets, according to the commission.
PIM reported in account statements sent to clients that the firm held a total of $7.7 million in a particular money market fund "when in fact the account reflecting these investments held less than $7 million," the SEC said in its complaint, filed in U.S. District Court for the Southern District of Ohio.
Attempts to contact Cowgill for comment were unsuccessful. A Brightscope page refers to the firm as inactive, and the SEC's website shows that while PIM was registered with the SEC as an investment advisor since 1978, it withdrew its registration as of Sept. 30, 2013.
Cowgill attempted to disguise the account shortfall from SEC examiners by entering a fake trade in PIM's account records, according to the SEC complaint. The purported trade was later reversed, the SEC says.
The SEC says Cowgill also provided additional falsified reports to SEC staff and later transferred funds from a separate cash account at another financial institution -- also held for the benefit of clients -- to mask the shortfall in the money market fund account.
"Our complaint alleges that Cowgill went to extraordinary lengths to hide a significant shortfall in client assets, even providing manufactured documents to SEC staff," said Robert J. Burson, associate director of the SEC's Chicago Regional Office, in a statement. "Fortunately our examiners and investigators diligently tested Cowgill's false statements and confirmed the existence of the shortfall in an account holding the investments of many clients."
ASSET FREEZE, RESTRAINING ORDER
In response to the SEC's request for emergency relief for investors, U.S. District Court Judge Algenon Marbley imposed an asset freeze to protect client assets and issued a temporary restraining order, the SEC says.
Cowgill's firm managed approximately $120 million in assets for approximately 325 clients, including a significant number of retirement plans, according to the SEC's complaint.
PIM and Cowgill violated the antifraud provisions of the federal securities laws, the SEC complaint alleged. PIM violated the registration and custody provisions of the Investment Advisors Act, and Cowgill aided and abetted and caused the violations, according to the complaint.
A hearing on the SEC's motion for a preliminary injunction has been scheduled for May 12.
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