Texas Securities Commissioner Travis J. Iles revoked the registration of George A. “Gus” Marwieh, who fraudulently sold more than $5 million in pension-linked investments and real estate development notes to clients without disclosing his excessive commissions, misuse of client funds, and conflicts of interest.
Marwieh, the president of Marwieh Advisory Services LLC in Austin, consented to the Oct. 11 Disciplinary Order. The order revoked the investment adviser registration of Marwieh Advisory Services and the investment adviser representative registration of Marwieh.
The revocation order stemmed from a May 7 inspection of Marwieh by staff of the State Securities Board’s Inspections and Compliance Division.
The inspection revealed that from mid-2013 through 2017, Marwieh almost exclusively recommended and sold two securities: investments from Future Income Payments LLC (FIP), which were supposedly based on the payout from pensions, and promissory notes issued by real estate developers that Marwieh said would pay 18% annually.
The investments paid off – for Marwieh. He reaped $343,431 in commissions from selling the pension income investments and the real estate notes.
Marwieh collected $228,109 in commissions from selling $2.2 million in the real estate notes and $115,322 from selling pension income investments totaling $1.8 million.
Marwieh also charged his clients an annual management fee of 1% to 2% of the value of their assets – even though the pension-linked and real estate investments required no managing.
Marwieh violated his fiduciary duty to clients by not disclosing the conflicts of interest that gave him a financial incentive to recommend the investments.
In the Form ADV Part 2, which an investment adviser must provide to clients as the primary disclosure document, Marwieh stated that neither he nor his firm receives any external compensation for the sale of securities to clients.
In fact, his advisory business was based almost entirely on investments he sold while concealing the costs and conflicts of interest.
Marwieh also misused funds intended to purchase interests in the real estate notes.
Marwieh opened what he said was an escrow account to hold investor funds, but he operated it like his personal account. Marwieh controlled the account, it was never audited, and investors never received monthly statements about the real estate notes.
In a one-week period in 2017, Marwieh took in $189,881 from three clients who intended to invest in the development notes. Marwieh never transferred the money to the developers.
Instead, Marwieh used the money to pay $194,918 to a different investor whose development note had reached maturity.
Investor funds in the escrow account also paid for Marwieh’s personal expenses, including credit card payments, rent, automobile loans, and insurance.