Boston Adviser Investigated for Losing $12 Million of Clients’ Money
Hans Peter Black, founder of Boston-based Interinvest Corp., has been charged by the Securities and Exchange Commission (SEC) for defrauding investors and losing up to $12 million of the $17 million of clients’ money invested in Canadian penny stock companies in which he had undisclosed financial stakes.
Penny stocks are low-priced, small-cap stocks which usually cost under $5.
Conflict of Interest
In a complaint filed in Federal court in Boston, the SEC alleged that Black served on the boards of the four companies in which he put his clients’ investments. A separate entity Black controls received $1.7 million, which Black contends represent reimbursement for travel, hotel and conference expenses over several years.
The SEC also alleges that none of the relationships with the four companies was disclosed to clients or in Interinvest’s form ADV.
In fact, Interinvest greatly underrepresented Black’s involvement in the companies in a new ADV filed last year after a routine SEC examination asked for additional documentation.
Paul Levenson, director of the SEC regional office in Boston says investment advisers have a duty to put their clients’ interests first and fully disclose all conflicts of interest.
Freezing Interinvest’s Assets
The SEC asked the court to freeze Interinvest’s assets and to stop Black from exercising control over client assets. Interinvest claims it has about $95 million in client assets as of April 2015, when it filed its amended ADV.
For his part, Black, who lives in Westmount, Canada, said the SEC claims are totally outrageous. He said that smaller-cap companies have generated very good returns for his clients over the years.
The SEC sent Interinvest a subpoena in February 2015 asking to see documentation of the company’s bank accounts, trades and compliance policies, but Mr. Black failed to comply with regulators’ request.
The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.
Source: Investment News