Angel Oak Capital Advisors to pay $1.75 Million in Civil Penalties
According to a press release, on Aug. 10, 2022 the Securities and Exchange Commission charged Angel Oak Capital Advisors, LLC and its portfolio manager for allegedly misleading investors about the firm’s fix-and-flip loan securitization’s delinquency rates.
In March 2018, Angel Oak allegedly raised $90 million through a first-of-its-kind securitization of loans made to borrowers for the purpose of purchasing, renovating, and selling residential properties, also known as “fix-and-flip” loans, which were originated by an Angel Oak-affiliated entity, according to the SEC’s order.
The deal reportedly included a provision that would accelerate Angel Oak’s obligation to return funds to certain investors if delinquencies reached a pre-defined threshold. Soon after the deal closed, loan delinquency rates increased unexpectedly.
Due to concerns about damage that may be done to the business from an early repayment, Angel Oak and its portfolio manager allegedly improperly diverted funds held to reimburse borrowers for renovations made to the mortgaged properties to pay down outstanding loan balances.
Since these actions were allegedly undisclosed, the performance data that was shared with investors purportedly provided an inaccurate view of the actual delinquency rates on the mortgages in the securitization pool as well as the securitization’s compliance with the early repayment trigger.
SEC rules require that firms provide investors with “full and accurate information regarding the performance of an investment, even after closing, to ensure the integrity of our markets.”
Without admitting or denying the SEC’s findings, Angel Oak and its portfolio manager agreed to a cease-and-desist order, a censure, and civil monetary penalties of $1.75 million and $75,000, respectively.
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Tags: Angel Oak Capital Advisors civil penalty, Angel Oak Capital Advisors complaints, Angel Oak Capital Advisors sanctioned, Angel Oak Capital Advisors SEC charges, securities fraud attorney Last modified: August 11, 2022