The SEC filed a civil action charging that Jeremy Drake collected outsized management fees from a professional athlete client after having promised the athlete and his wife that he would charge the couple "VIP" fees. The SEC seeks a permanent injunction, disgorgement, and civil penalties against Drake for allegedly violating the Investment Advisers Act (SEC v. Drake, August 22, 2017).
Drake, who holds a Series 66 license, was a registered investment adviser representative at HCR Wealth Advisors, itself registered with the SEC as an investment adviser since 1999, until he was fired for engaging in misconduct related to his client accounts. Specifically, the SEC alleged that Drake promised the couple mentioned in the complaint a special, lower management fee rate, but instead charged them many times the stated rate. The couple ultimately had $35 million in assets under management with Drake and paid $1.5 million in management fees ($1.2 million above the promised rate).
Drake had earned a $60,000 base salary plus 40- to 50-percent of fees under an incentive-based compensation arrangement. More recently, HCR agreed to Drake’s request that he be paid 60 percent of management fees instead of a base salary. According to the SEC, Drake received $900,000 in incentive-based compensation. The SEC also claimed that Drake employed a false persona and email address and falsified account statements in furtherance of the deception.
At one point, Drake allegedly confessed to the professional athlete client’s wife that he had deceived the couple, including that there was no "’credit’ system" to cut management fees. But the SEC also said Drake nevertheless implored the wife to perpetuate his lies with a brokerage firm and that the unraveling of the scheme may subject the couple to "bad publicity."
The SEC alleged that Drake’s conduct violated Sections 206(1) and 206(2) of the Investment Advisers Act and that he aided and abetted those violations. The agency seeks a permanent injunction against Drake plus disgorgement and a civil penalty.
HCR opened for business in 1986 and recently had 500 clients with $900 million in assets under management. Drake had over 20 clients with $50 million in assets under management.
The case is No. 17-cv-06204.
Companies: HCR Wealth Advisors
MainStory: TopStory BrokerDealers Enforcement FraudManipulation InvestmentAdvisers NewLawsuitsNews CaliforniaNews
Interested in submitting an article?
Submit your information to us today!Learn More
Securities Regulation Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on securities regulation legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.