Securities Law Prof Blog

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

Friday, May 18, 2012

SEC Charges Former NAPFA Officer with Defrauding Advisory Clients

On May 17 the SEC charged Mark Spangler, a Seattle-based investment adviser and a former chairman of the National Association of Personal Financial Advisors, with defrauding clients by secretly investing their money in two risky start-up companies he co-founded.

According to the SEC, Spangler funneled approximately $47.7 million of client money into these private ventures despite representing that he would invest primarily in publicly-traded securities. Spangler served as chairman and CEO of one of the companies, which is now bankrupt.

The U.S. Attorney’s Office for the Western District  of Washington announced parallel criminal charges against Spangler.

According to the SEC’s complaint filed in federal court in Seattle, Spangler raised more than $56 million from his clients since 1998 for several private investment funds he managed. Beginning around 2003, without notifying investors in the funds, Spangler and his advisory firm The Spangler Group (TSG) began diverting the majority of client money into two private technology companies he created. One of the companies received nearly $42 million from the funds before shutting down operations.

The SEC alleges that Spangler and his firm secretly reaped $830,000 from the companies in addition to any management fees that TSG received from clients.

According to the SEC’s complaint, Spangler concealed his diversion of client funds for years. He disclosed it only after he placed TSG and the funds he managed into state court receivership in 2011.

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