SEC Charges Investment Adviser and Fund Officers for Liquidity Rule Violations

The SEC announced charges against Pinnacle Advisors LLC, two independent trustees for the mutual fund it advised (Mark Wadach and Lawton “Charlie” Williamson), and two officers of both Pinnacle Advisors and the fund (Robert Cuculich and Benjamin Quilty). The charges allege that Pinnacle Advisors and its officers broke the Liquidity Rule, which prohibits mutual funds from investing more than 15 percent of their net assets in illiquid investments, by holding approximately 21 to 26 percent of the fund's net assets in illiquid investments. In addition, Joseph Masella agreed to a settlement and will pay a civil penalty for causing and willfully counseling the fund’s violations. The litigation is seeking permanent injunctions and civil money penalties. Separately, the SEC charged Pinnacle Investments LLC, an affiliate of Pinnacle Advisors, with false and misleading statements about account reviews and failing to disclose certain conflicts of interests, adopt and implement related policies and procedures, and deliver to clients required information about advisory personnel. Pinnacle Investments will pay disgorgement, a civil penalty, and be censured.