SEC Cracks Down On San Diego Fee-Only Planner For Alleged Kickbacks

Friday, November 11, 2011 07:49
SEC Cracks Down On San Diego Fee-Only Planner For Alleged Kickbacks

Tags: fiduciaries

Another prominent fiduciary is in trouble, this time for what the SEC calls a combination of secret commissions and outright "lying" about the liquidity of various investments.

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Kevin O'Rourke of San Diego firm Western Pacific Capital Management has been charged with steering clients to a private equity offering in exchange for a 10% "success fee."


This does not appear to be an investor-paid sales load, but did represent an undisclosed conflict of interest in the SEC's eyes.


In all, Western Pacific sold about $4.8 million in the non-traded stock.


Compounding the problem, the firm allegedly misrepresented the portfolio of its in-house hedge fund as being far more liquid than it was.


The SEC says Western Pacific advertised its holdings as 75% marketable securities, when in reality transfers into the non-traded private equity vehicle and other illiquid investments crowded out all but 10% of the portfolio.


Touted as one of the best wealth managers in San Diego in recent years, Western Pacific does not appear to have updated its public ADV in two years.


But it does tell us that at least back in 2009, they were operating as a fee-only enterprise, almost entirely providing financial planning and investment advisory services in exchange for a percentage of AUM.

Comments (4)

Scott, this doesn't seem to be a story about a fee only fiduciary.

If O'Rourke was getting paid from a source other than the clients for clients investing, then he was not fee only. Furthermore, not disclosing the conflict and claiming to be fee only would mean he was not acting as a fiduciary.

So if that is the case, then this is a story about a liar.
bramsay , November 11, 2011
This all bodes well for FINRA, and its efforts to gain regulatory oversight over RIAs.
vguettlein , November 11, 2011
Bramsay, I can't call him too many names, but the SEC would agree with you. "Self-proclaimed 'fee-only fiduciary'" might be the better way to go, since that's what the business model on his ADV indicates.

VGuettlein, the week's news flow does look ominous.
ScottMartin , November 11, 2011
Not sure why this would bode well for FINRA when it was the SEC that discovered the problem. FINRA does not have a particularly noteworthy record of catching and fretting out such problems.
cblackman , November 13, 2011

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