SEC Charges Firm With Inflating AUM on Form ADV

Vista Financial Advisors repeatedly failed to corroborate its asset levels, the SEC said.

The Securities and Exchange Commission has charged Vista Financial Advisors LLC and the firm’s co-owner and chief compliance officer, Ruben Cedrick Williams, with inflating the firm’s assets under management on Form ADV.

Why it matters: Firms cannot misrepresent their AUM to the SEC or to the public.

The case: According to the complaint, filed in the U.S. District Court for the Southern District of New York, Vista and Williams made material misrepresentations in Vista’s Forms ADV for 2022 and 2023. The firm falsely claimed in its 2022 Form ADV filing that Vista had $10 billion in regulatory assets under management, or RAUM.

While Vista represented in its Form ADV filed on April 14, 2022, that it had $10 billion in RAUM, “it subsequently failed to provide the Commission with evidence to corroborate this statement,” the order states.

Vista has also “ignored repeated requests from the Commission staff to substantiate, correct, and/or withdraw the statement,” the order says, adding that “to the extent that Vista had any RAUM, such assets did not remotely approach the $10 billion in RAUM represented in the Form ADV.”

Rather than undertaking any corrective measures in response to the Commission’s inquiries, on April 5, 2023, Vista filed an updated Form ADV representing that Vista’s RAUM had grown to nearly $11.5 trillion, “compound[ing] the misrepresentation,” according to the complaint.

To the extent that Vista had any RAUM, “such assets did not remotely approach the $11.5 trillion stated in the 2023 Form ADV,” the order states.

In addition, based on records produced by Vista, the 2022 Form ADV failed to disclose the identity of one of Vista’s owners, and misstated how Vista’s ownership interest was divided among its remaining owners.

Williams signed and certified both Form ADV filings, the SEC states.

Looking Ahead: The SEC’s complaint charges Vista with violations of Sections 203A and 207 of the Investment Advisers Act of 1940, and Williams with violations of Section 207 of the Advisers Act and aiding and abetting Vista’s violations of Section 203A of the Advisers Act.

The complaint seeks permanent injunctive relief and civil penalties.

Image: Bloomberg

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