Regulator Fines Maryland Advisory Firm $800,000 for Fraud Tied to CEO Suicide
The Commodities Futures Trading Commission has fined Convergent Wealth Advisors, a once high-flying registered investment adviser, $800,000 over a fraud perpetuated by its former chief executive who committed suicide two years ago.
The Potomac, Md.-based firm, which earlier this year sold its assets to advisory firm Pathstone Federal Street, is liable for misrepresenting the performance of a commodities pool run by David Zier from 2007 until his death in October 2014, according to a settlement issued by the regulator on Monday.
Zier fraudulently solicited more than $2.9 million from 20 investors, including Convergent founder Steve Lockshin, to invest in his Zier Asset Management LLC. He also executed some trades for the fund company through Convergent, according to the settlement.
Zier’s fraud began after the commodities pool operator suffered severe losses in 2007, prompting him to make high-risk trades over several years in an attempt to recoup the losses. He also falsely marketed the fund as profitable and drafted fictional performance reports in an attempt to raise additional money for the pool in 2010, the settlement said.
“Certain of Zier’s acts, omissions, and failures and his use of CWA resources to conduct ZAM business occurred within the course and scope of his employment with CWA,” the CFTC said. “Therefore, CWA is liable for Zier’s conduct.”
Convergent settled the case without admitting or denying the allegations. A spokesperson at Pathstone, which is based in Fort Lee, NJ, did not respond to a call for comment on the settlement.
Convergent was a prominent RIA which once had more than $8.6 billion in client assets. Following Zier’s death, many of its advisors jumped to other firms.
The settlement directly related the suicide to questions that compliance officials began asking Zier in 2014 about irregularities in ZAM’s client statements. ZAM investors have been made whole to the tune of more than $9 million as a result of life insurance policies that Zier had purchased, according to the settlement.
Lockshin and his partners had sold Convergent to Los Angeles-based City National Bank in 2003. Royal Bank of Canada’s U.S. wealth management division bought City National in November 2015.