PHOENIX, AZ – An investment advisory firm, AE Wealth Management, has been ordered to pay $1,159,400 in restitution to 240 former clients in the Tucson area. The firm must also pay a $150,000 administrative penalty to the Arizona Corporation Commission.
According to the Arizona Corporation Commission, AE Wealth Management is a registered investment adviser with the U.S. Securities and Exchange Commission. In November 2016, AE Wealth Management and Smith & Cox, LLC, an Arizona licensed investment adviser, agreed to become co-investment advisers to Smith & Cox’s clients in southern Arizona.
In March 2018, the Arizona Corporation Commission’s Securities Division filed an enforcement action against Smith & Cox and other respondents concerning their sales between 2013 and 2015 of U.S. military veterans’ retirement and disability benefits payments to investors. In September 2019, AE Wealth Management learned of that enforcement action and that Smith & Cox had concealed it from AE Wealth Management.
The Commission found that, instead of terminating its relationship with Smith & Cox and disclosing the 2018 enforcement action to their clients, AE Wealth Management deceived its clients and allowed Smith & Cox to continue to act for eight more months as the clients’ investment adviser.
In settling this matter, AE Wealth Management admits the Commission’s findings, including that it committed investment advisory fraud, for the purpose of this proceeding and agrees to the entry of the consent order.
The case involving the remaining respondents – Cornerstone Wealth Management, LLC, Nathaniel S. Barnhart, Christopher Spence Cox, William Andrew Smith and Smith & Cox, LLC—is still pending, according to the Arizona Corporation Commission.