SEC Charges Adviser with Hiding Trading Losses and Diverting Client Funds

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The Securities and Exchange Commission has charged a Miami-based investment adviser for defrauding his clients by concealing trading losses and diverting investor funds for personal use.

The SEC alleges that Anand Sekaran and his firm Wasson Capital Advisors Ltd. fabricated documents showing illusory profits after his trading strategy became unprofitable in 2008 and produced substantial losses for clients. Sekaran also misused client funds to pay various personal and business expenses, and he collected fees in excess of what he was due under the arrangements he had with clients.

Sekaran and Wasson agreed to resolve the SEC’s charges as well as a parallel criminal action announced Friday by the U.S. Attorney’s Office for the Southern District of New York.

'An investment adviser’s fiduciary duty applies equally in good times and bad', said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. 'Sekaran breached that duty when he concealed trading losses and misled clients rather than simply admitting that his investment strategy was unsuccessful'.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Sekaran provided investors with a spreadsheet inaccurately showing that Wasson was profitable. He inflated account balances on some clients’ account statements, using the letterhead of a defunct British Virgin Islands trust company for one client and the letterhead of a New Zealand firm for another client. He misappropriated investor money for personal mortgage and maintenance payments, restaurant and travel expenses, entertainment and event tickets, employee salaries and health insurance, and rent and office expenses.

In settling the SEC’s charges, Sekaran and Wasson consented to a final judgment imposing permanent injunctions from future violations of the anti-fraud provisions of the federal securities laws. Sekaran separately consented to an SEC order barring him from the securities industry and penny stock industry. Sekaran is required to pay $2.3m to satisfy restitution and forfeiture orders in the criminal matter.

 

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