SEC Charges Investment Adviser and Principals for Breaching Fiduciary Duties

This post is written on behalf of Girard Bengali, APC.

SEC Charges Investment Adviser and Principals for Breaching Fiduciary Duties

Litigation Release No. 24817 / May 13, 2020

Securities and Exchange Commission v. Ambassador Advisors, LLC, Bernard I. Bostwick, Robert E. Kauffman, and Adrian E. Young, No. 5:20-cv-02274 (E.D. Pa. filed May 13, 2020)

Source: https://www.sec.gov/litigation/litreleases/2020/lr24817.htm

The Securities and Exchange Commission today charged registered investment adviser Ambassador Advisors, LLC, and its principals, Bernard I. Bostwick, Robert E. Kauffman, and Adrian E. Young, with breaches of fiduciary duty arising out of their mutual fund share class selection practices.

The SEC’s complaint alleges that, from August 2014 to December 2018, Ambassador, Bostwick, Kauffman, and Young, failed to adequately disclose conflicts of interest arising from their selection of mutual fund share classes that charged 12b-1 fees, which Bostwick, Kauffman, and Young received, instead of lower-cost share classes of the same funds that were available to clients and that would not have paid 12b-1 fee compensation to Bostwick, Kauffman, and Young. In addition, the complaint alleges that Ambassador, Bostwick, Kauffman, and Young breached their duty to seek best execution for their clients by causing certain advisory clients to invest in fund share classes that charged 12b-1 fees when share classes of the same funds that presented a more favorable value for these clients under the particular circumstances in place at the time of the transactions were available to the clients. According to the complaint, Ambassador also failed to adopt and implement written policies and procedures designed to prevent these violations. Ambassador was eligible to self-report to the SEC pursuant to the Division of Enforcement’s Share Class Selection Disclosure Initiative, but did not do so.

The complaint alleges that Ambassador, Bostwick, Kauffman, and Young violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940, and that Ambassador violated the antifraud provisions of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

The SEC’s investigation was conducted by Oreste P. McClung and supervised by Brendan P. McGlynn, both of the Asset Management Unit in the Philadelphia Regional Office. John Farinacci, an industry expert in the Asset Management Unit, assisted with the investigation. The litigation will be led by Christopher R. Kelly and Jennifer Chun Barry.

related Posts

A Timeline of Robinhood’s Legal and Regulatory Stumbles

Robinhood, the stock trading startup valued at $7.6B, has seen as much volatility as the equities market it allows its users to trade in over the last two years. The brokerage, previously notorious for its less-than-transparent approach to business, is in hot water over its app’s performance during recent market volatility. As pressure begins to

Read More »

Another Prestigious Selection

Securities Fraud Attorneys We Sue Brokerage Firms to Recover Investment Losses Robert J. Girard IIChosen to 2020 Super Lawyers Omar H. BengaliChosen to 2020 Rising Stars We Welcome and appreciate Your Referrals 866-778-6821 Los Angeles • Newport Beach • San Francisco Robert J. Girard II Selected to 2020 Super Lawyers List Robert Girard, co-founding partner

Read More »

UBS Yield Enhancement Strategy a losing option

Some leading investment advisors are in hot water over losing clients tens of millions of dollars in complex investment schemes known as Yield Enhancement Strategies (YES) or Collateral Yield Enhancement Strategies (CYES). UBS Group AG along with Merrill Lynch, Morgan Stanley and others are all accused of selling the strategy to high net worth individuals

Read More »

UBS Lawsuits: Y.E.S. Investments Two Thumbs Down

Girard Bengali, APC, is currently representing clients of UBS who lost money in the YES (Yield Enhancement Strategy). YES was marketed as a safe investment strategy, but unfortunately it was much riskier than investors anticipated and many have lost significant investments.You may be entitled to a recovery of your losses – contact our SEC &

Read More »

FINRA Arbitration Panel Awards $347k for Girard Bengali Client

In an article published today at FinancialPlanning, Girard Bengali, APC partners Robert Girard and Omar Bengali were quoted in relation to the recent award for their client, Laguna Financial Group. The panel ordered Schwab to pay $347,000 in damages and legal fees to Joseph Ziomek, who accused the firm and Purshe Kaplan Sterling Investments of

Read More »
Scroll to Top