Compliance Solutions for Investment Advisers

SEC Charges Adviser in Soft Dollar Fraud

The SEC charged an investment advisor with fraud for lying to clients about how brokerage commission rebates, or “soft dollars,” were being used and producing phony documents to cover up the fraud during an SEC examination.

The SEC alleges that Kurt Hovan of Hovan Capital Management misappropriated more than $178,000 he claimed to be using to pay for legitimate investment research on his clients’ behalf. In reality, the SEC says Hovan was secretly funneling the money for such undisclosed uses as office rent, computer hardware and his brother’s salary.

When SEC examination staff asked Hovan to provide documentation to back up his claims, the SEC says he created phony research reports.

 

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