SEC Charges NY Wealth Adviser for Hiding Conflicts of Interest

The Securities and Exchange Commission has charged a New York-based investment advisory firm and its founder for breaching their fiduciary duties by failing to disclose conflicts of interest and making misleading statements to clients.

Hudson Valley Wealth Management Inc. and founder Christopher Conover agreed to pay over $950,000 to settle the charges, which stem from their undisclosed financial ties to a film production company they were recommending investments in.

According to the SEC's order, between 2017 and 2021, Hudson Valley and Conover advised clients, including a private fund, to invest money in films produced by a particular production firm.

However, they failed to disclose that Conover's affiliated company was receiving payments of around $530,000 from the same production company in exchange for the money invested by Hudson Valley's clients.

The SEC found that Hudson Valley and Conover initially did not reveal these payments, which created a glaring conflict of interest. They later misrepresented that Conover had earned the compensation for work as an executive producer on the films.

"Fully and fairly disclosing conflicts is at the heart of an adviser's fiduciary duty," said Andrew Dean of the SEC's Asset Management Unit. "Investors must have confidence advisers are acting in their best interest."

In a separate violation, the SEC order stated that in May 2021, Hudson Valley and Conover improperly gave preferential treatment to one investor's redemption request from their fund while leaving other clients' requests unsatisfied.

To settle the charges of violating anti-fraud provisions, Hudson Valley agreed to pay a $200,000 civil penalty, while Conover will pay over $600,000 in disgorgement, interest, and a $150,000 penalty. They also agreed to cease-and-desist orders and censures.

The case underscores the SEC's recent crackdown on lax disclosures and breach of fiduciary duty at advisory firms. It serves as a warning to advisers to be fully transparent about potential conflicts to avoid stiff penalties.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.