SEC Weighs Fraud Charges Against Navellier
Navellier & Associates, a well-known registered investment adviser that sub-advises retail accounts in dozens of broker-dealers’ wrap-fee programs, expects to be charged with fraud and procedural violations by the Securities and Exchange Commission, it said in a regulatory filing this month.
“[T]he enforcement staff in its Boston office has made a preliminary determination to recommend that the Commission file enforcement actions against Navellier & Associates, Inc. (“Navellier”) and against Louis Navellier in connection with the advertising and sale of several VIREO investment strategies Navellier offered prior to October 2013,” it wrote in Form ADV brochure filing on March 1. “Navellier and Louis Navellier each deny that they committed the alleged violations.”
Navellier, founded in 1987, appears to have been caught up in the regulator’s continuing probes of advisory firms that marketed exchange-traded fund investment strategies devised by the now defunct F-Squared Investments. The Boston-based firm admitted to marketing inflated performance records for its strategies, and at least 13 RIAs and broker-dealers last August reached settlements with the SEC for repeating the claims in their marketing materials.
Unlike those firms, which neither admitted nor denied the SEC’s fraud and advertising findings but paid fines of up to $500,000, Navellier and its founder also expect to be charged with supervisory violations, according to its disclosure about the so-called Wells notice received from the commission’s staff.
Louis Navellier, whose company employs six investment advisors managing $1.1 billion in 2,285 accounts for clients in dozens of portfolios and who edits five investing newsletters, did not immediately respond to a request for comment. The company’s VIREO portfolios were based on F-Squared AlphaSector indices, according to a Navellier in 2010.
Tanya Alexander, the Reno, Nevada-based firm’s former chief compliance officer, resigned last month “to pursue outside business interests” and has been replaced by Louis Navellier, according to the filing.
The filing separately disclosed that Navellier & Associates is investigating whether some of its clients were overcharged transaction fees on directed brokerage accounts from January 1, 2015 through March 31, 2016.
If the registered investment adviser finds that some third-party brokers charged fees higher than they had represented to Navellier, the firm “has voluntarily offered to refund” the overcharges to clients. The disclosure did not say whether Navellier or its clients are considering any other actions regarding the unnamed outside brokerage firms.
The filing also indicated that the firm’s founder has re-assumed his position as lead portfolio manager of the Navellier Large Cap Growth fund, which it has advertised as its “flagship” portfolio. Shawn Price, the fund’s former lead manager, resigned in June 2016 to start his own advisory firm.
Navellier, which has called itself “one of the charter firms in the retail wrap business,” offers some 30 strategy portfolios to its clients and through wrap-fee platforms offered by dozens of brokerage firms ranging from giants such as Morgan Stanley, Charles Schwab Citigroup, Wells Fargo through smaller regional and independent firms including Robert J. Baird, Cetera, Stifel Nicolaus, Benjamin F Edwards, Oppenheimer, according to its promotional literature. RIA custodians such as Schwab, TD Ameritrade, Fidelity and RBC Correspondent Services also offer Navellier-managed funds to other registered investment advisers.