Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, March 2, 2010

SEC Charges Orange County Adviser with Stealing Clients' Funds

The SEC yesterday charged Newport Beach-based former registered investment adviser Envision Direct L.L.C., and its owner, Gary R. Headding, for defrauding clients, including a young college student who invested her mother's life insurance policy proceeds with Headding. Envision Direct, a firm that managed almost $40 million in funds in 2007, de-registered in 2009 immediately after the Commission's investment advisory examination staff alerted Headding about a regulatory examination of the firm.

The Commission's complaint, filed in the federal court for the Central District of California, alleges that between April 2007 and May 2008, Headding stole at least $274,000 from two clients and used the monies for his personal purposes, including funding his own individual retirement account. The SEC alleges that although clients gave Headding discretionary authority to trade in their accounts, they did not authorize him to squander their money for his benefit. Headding used tactics such as obtaining clients' on-line passwords to effectuate his fraud. The Commission's complaint further alleges that Envision Direct and Headding withdrew inflated advisory fees of nearly $50,000 from three clients. Despite its agreement to charge advisory fees of no more than 2.0% of the asset value, Envision Direct extracted as much as 12.9% in unauthorized fees from some clients.

The Commission seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties.

http://lawprofessors.typepad.com/securities/2010/03/sec-charges-orange-county-adviser-with-stealing-clients-funds.html

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