SEC brings fraud charges against former investment adviser
The United States Securities and Exchange Commission (SEC) has taken action against former investment adviser, Jacob C. Glick, who defrauded advisory clients, including senior citizens and retirees, beginning in at least September 2015.
The complaint against Glick was filed at the Arizona District Court. From October 2012 until September 2015, Glick was an investment adviser representative at JPMorgan. Glick joined Advanced Practice Advisors, LLC (APA) as an investment adviser representative in September 2015. In June 2017, APA terminated Glick for, among other things, making unsuitable investments.
The SEC stresses that, as an investment adviser, Glick owed a fiduciary duty to put the interests of the clients he advised first, to deal with clients with the utmost honesty, to disclose all conflicts or potential conflicts of interest, and to use reasonable care in providing investment advice. Glick repeatedly violated his fiduciary duty, ignored the interests of the clients he advised, and defrauded them.
The complaint alleges that Glick breached his fiduciary duty to the clients he advised when he made investments that were not suitable for them. Glick also failed to disclose the substantial risks involved in investing in stock options (as opposed to stock) and in having a portfolio with a very high concentration of one security rather than a balanced portfolio. Indeed, Glick invested elderly clients’ funds in primarily one security, Rite Aid (ticker symbol “RAD”), including high-risk RAD stock options. Glick’s unsuitable investments in RAD resulted in over $1 million in realized and unrealized losses for the clients advised by Glick.
In addition, Glick solicited two clients to invest in a private placement offering by making materially false misrepresentations about how and when he would invest the funds, and by falsely representing that he would not personally receive any compensation. Instead, Glick invested – and lost – the clients’ investment of $250,000 by using the funds for his own personal use and to make unsuccessful trades in RAD without ever disclosing to his clients that he lost their money. To cover up this fraud, Glick used funds from another client, an elderly widow in her seventies, to repay the investors in his private placement, in a Ponzi-like fashion.
Finally, in another fraudulent scheme, Glick misappropriated over $300,000 from the same Client A, who was estranged from her family, and who had no trading or finance experience and limited retirement resources outside of the funds she had Glick manage for her. Glick received a check from Client A with the understanding that Glick would invest the funds and create an income stream for her. Glick spent the bulk of Client A’s investment funds on personal expenditures that he hid from Client A’s family after she suffered a stroke, and invested the remainder in a long-term real estate investment that was unsuitable for her.
The SEC accuses Glick of violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b- 6(1) and (2)], the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and aided and abetted violations of Section 204(a) of the Advisers Act [15 U.S.C. § 80b-4], and Rule 204-2 thereunder [17 C.F.R. § 275.204-2].
By this action, the SEC seeks a permanent injunction prohibiting such future violations, disgorgement of Glick’s ill-gotten gains plus prejudgment interest, and imposition of civil penalties.