Criterion Wealth Management Securities Investigation

SEC Reportedly Charges Criterion Wealth Management Insurance Services with Allegedly Defrauding Clients

According to the Securities and Exchange Commission this week, the regulator  charged Criterion Wealth Management Insurance Services, Inc., a Santa Clarita, California, investment advisory firm, and its then co-owners for allegedly defrauding their advisory clients.

The SEC alleges that Criterion Wealth and its co-owners purportedly breached their fiduciary duty by allegedly failing to disclose significant financial conflicts of interest when purportedly recommending investments in private real estate investment funds.

According to the complaint, between 2014 to 2017 the defendants allegedly recommended that their advisory clients invest more than $16 million in four private real estate investment funds without purportedly disclosing that the fund managers had paid them more than $1 million, which was reportedly on top of the fees that defendants were already allegedly charging their clients directly.

The SEC further alleges the defendants were purportedly incentivized to keep their clients invested in the funds, rather than allocate their capital elsewhere. The additional side compensation was purportedly recurring and depended on Criterion’s clients remaining invested. For two of the Criterion funds, this undisclosed compensation arrangement unfortunately reportedly resulted in reduced investment returns for the defendants’ advisory clients.

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