U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 24011/ December 14, 2017
SEC v. Louis G. Mohlman, Jr., Mohlman Asset Management, LLC, and Mohlman Asset Management Fund, LLC, No. 17-cv-502 (N.D. Ind. filed Dec. 8, 2017)
SEC Charges Investment Adviser with Fraudulently Engaging in Conflicted Transactions and Misleading Investors
On December 8, 2017, the Securities and Exchange Commission charged Louis G. Mohlman, Jr. and two investment advisers he owns with engaging in conflicted transactions and misleading investors.
According to the SEC’s complaint, Mohlman owned two advisers, Mohlman Asset Management, LLC (MAM) and Mohlman Asset Management Fund, LLC (MAMF), which managed two private funds. The complaint alleges that, between 2012 and 2015, Mohlman made payments to satisfy the obligations of third parties, and in 2013, used one of the private fund’s assets to make a $150,000 unsecured loan that constituted approximately 16% of the fund’s portfolio. The complaint also alleges that, despite being told by SEC examiners that the loan should be fully disclosed to fund investors, Mohlman misled investors about the nature of the loan. Mohlman also allegedly encouraged many of his clients to invest in what he called his “Roth IRA strategy,” which he said was endorsed by tax and legal opinions he had procured from accounting and law firms. The complaint alleges that these statements were false. Moreover, one accounting firm principal, explicitly told Mohlman “[i]n no way . . . am I recommending this product and would appreciate you and your company leaving our firm’s name out of anything in your future communications. We do not endorse the proposed idea.” The complaint also alleges that MAMF failed to comply with the SEC’s “Custody Rule,” that MAM filed materially inaccurate Forms ADV with the SEC, and that MAM and MAMF had deficient compliance programs.
The SEC’s complaint, filed in federal court in Fort Wayne, Indiana, charges Mohlman, MAM and MAMF with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940; Mohlman and MAM with violating Section 207 of the Advisers Act; Mohlman and MAMF with violating Rule 206(4)-8 under the Advisers Act; MAM and MAMF with violating Rules 206(4)-7 under the Advisers Act; and MAMF with violating Rule 206(4)-2 under the Advisers Act. Without admitting or denying the allegations in the SEC’s complaint, Mohlman, MAM and MAMF agreed to the entry of permanent injunctions and to pay, on a joint and several basis, a $100,000 civil penalty. MAMF also agreed to disgorge $862.03 in ill-gotten gains, plus $75.34 in interest. The settlement is subject to court approval.
The SEC’s investigation was conducted by Raven A. Winters and supervised by Amy S. Cotter of the Chicago Regional Office.