The following are summaries of administrative actions and orders taken from April 1 through June 30, 2016.
Ralph W. Lillard and Stanley B. Catlin: Cease and Desist, Fines
Texas Securities Commissioner John Morgan on May 31 entered consent orders that fined two unregistered individuals who solicited clients for Fuller Capital Management (FCM) of Fort Worth without being registered as investment adviser representatives.
Catlin was registered as an agent of Cambridge Investment Research Inc. from 2002 to 2010. He has never been registered as an investment adviser or investment adviser representative.
Since 2010 Catlin solicited potential clients for FCM, a registered investment adviser. The firm paid Catlin 35% of the asset management fees it collected from the clients Catlin solicited. Catlin was paid his solicitor’s fee on an ongoing basis based on the assets FCM managed for the clients he solicited.
Lillard was registered as an agent of Cambridge Investment Research from 2002 to 2004. Like Catlin, he has never been registered as an investment adviser or investment adviser representative.
Lillard solicited clients for FCM under the same fee agreement as Catlin.
Post Oak Investment Management: Fine, Reprimand
Texas Securities Commissioner John Morgan on May 23 entered a Consent Order against Post Oak Investment Management Inc., a Houston investment adviser.
Post Oak Investment Management paid a $1,000 fine and was reprimanded for violating the State Securities Board’s “custody rule,” which requires registered investment advisers to comply with certain requirements if they maintain custody of client funds or securities.
As the general partner for a pooled investment vehicle, the Post Oak Investment Fund LP (the “Fund”), Post Oak had custody of client funds and securities. Post Oak did not implement certain safeguards required by the custody rule.
Specifically, Post Oak failed to reasonably ensure that the custodian delivered the Fund’s account statements to the investors and failed to retain an independent public accountant to conduct unannounced and independent verification of the funds and securities in the custody of Post Oak.
Post Oak could have qualified for exceptions to these particular safeguards if the Fund’s investors had been provided annual financial statements audited by an accountant registered with the Public Company Accounting Oversight Board. Post Oak did not qualify for this exception, however.
In addition to paying the administrative fine, Post Oak must provide certain account statements, dating from January 2012, to each limited partner of the Fund.
Post Oak must also provide financial summaries prepared by an independent accountant to the Fund’s limited partners.
Robert Michael Kuhn: Suspension, Fine
Texas Securities Commissioner John Morgan on May 23 entered a Disciplinary Order that granted the application for registration of Robert Michael Kuhn, but also suspended Kuhn for 30 days and fined him $5,000.
In February Kuhn applied for registration as an investment adviser representative of Capital Preservation Group in McKinney. The sanctions contained in the May 23 Disciplinary Order stemmed from Kuhn’s failure to timely disclose liens against him when he was an agent and investment adviser representative of UBS Financial Services.
In 2012, Kuhn, with UBS’ approval, invested in a private company and personally guaranteed multiple lines of credit on behalf of the company.
The company failed to make payments on at least four lines of credit. Following that, liens were entered against Kuhn from December 2013 to September 2015.
Kuhn failed to disclose that information in regulatory filings, as required by Texas State Securities Board rules.
Fuller Capital Management: Fine, Reprimand
Texas Securities Commissioner John Morgan on May 11 entered a Disciplinary Order that reprimanded and fined Fuller Capital Management of Fort Worth for the use of unregistered solicitors.
Fuller Capital paid a fine of $5,000.
Starting in May 2010, Fuller Capital paid two solicitors for client referrals to the firm. For every client referred to the firm, Fuller Capital paid the solicitors 35% of the annual fee charged to that client.
The solicitors were not registered as investment adviser representatives, as required by Texas State Securities Board rules. State Securities Board staff discovered the use of unregistered solicitors in an inspection of the firm this year.