SEC Charges Foundations Asset Management for Failing to Disclose Conflicts of Interest

Posted on August 1st, 2019 at 5:10 PM
SEC Charges Foundations Asset Management for Failing to Disclose Conflicts of Interest

From the Desk of Jim Eccleston at Eccleston Law LLC:

The SEC charged Michael Shamburger and Rob Wedel of Foundations Asset Management (FAM) for not properly disclosing potential conflicts of interest and violating broker-dealer registration requirements. Between 2013 and 2016, FAM inappropriately received approximately $254,000 in compensation from Alaska Financial Company (AFC) and McKinley Mortgage Company while acting as an unregistered broker. FAM, specifically Shamburger and Wedel, solicited 62 clients across seven states and recommended an investment of $12 million in AFC promissory notes.

The aforementioned compensation included $126,000 in up-front money calculated as a percentage of initial investment as well as approximately $128,000 in trailing fees based on the number of FAM clients that remained with AFC each quarter. Nevertheless, FAM did not properly disclose the potential conflicts of interest to its clients. FAM, through Shamburger, provided false and misleading statement in five separate Form ADV Brochures filed with the SEC. FAM did not effectively disclose the compensation it received for selling AFC’s securities and advising its own clients.

The money invested by FAM clients constituted approximately 20% of AFC’s capital raised during the relevant time period. FAM did not disclose that the compensation and fees received related to AFC investments were higher than the advisory fees FAM would have received if clients had made other investments. On top of the $250,000 FAM is required to pay in damages, Shamburger and Wedel are expected to pay the SEC $50,000 and $25,000, respectively.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston, sec, conflicts of interest, foundations asset management

Return to Archive

TESTIMONIALS

Previous
Next

Fantastic news!!!!  Your professionalism, support and expertise were greatly appreciated.  You made a difficult situation much more bearable.

Marci M.

LATEST NEWS AND ARTICLES

October 20, 2021
5 First-of-Their-Kind SEC Enforcement Actions Announced

Securities and Exchange Commission (SEC) Enforcement Director Gurbir Grewal recently discussed notable first-of-their-kind enforcement actions that his division has pursued.

October 19, 2021
FINRA Targets SPACs in Most Recent Exam Sweep

The Financial Industry Regulatory Authority (FINRA) has begun an examination sweep of advisors’ involvement with special purpose acquisition companies (SPACs).

October 18, 2021
SEC’s Statement on Complex Exchange-Traded Products

The Securities and Exchange Commission (SEC) recently voted to approve a pair of rule changes proposed by Cboe BZX Exchange, Inc. to list and trade shares of new exchange traded-products: the 2x Long VIX Futures ETC and the -1x Short VIX Futures ETF.