Wednesday, September 28, 2011
SEC Charges Bay Area Investment Adviser for Defrauding Clients and Falsifying Documents During SEC Exam
The SEC charged a San Francisco-area investment adviser with fraud for lying to clients about how brokerage commission rebates were being used and producing phony documents to cover up the fraud during an SEC examination. The SEC alleges that Kurt Hovan misappropriated more than $178,000 in “soft dollars” that he falsely claimed to be using to pay for legitimate investment research on his clients’ behalf. In reality, Hovan was secretly funneling the money for such undisclosed uses as office rent, computer hardware, and his brother’s salary. When SEC examination staff asked Hovan to provide documentation to back up his claims, he created phony research reports.
The SEC also charged his wife Lisa Hovan and his brother Edward Hovan for their roles in the fraudulent scheme at Hovan Capital Management (HCM).
The SEC’s complaint charges Kurt Hovan, Lisa Hovan, Edward Hovan, and HCM with violating the antifraud provisions of the federal securities laws, and asserts additional recordkeeping violations against Kurt Hovan and HCM. The complaint seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties.