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SEC Charges Investment Advisory Firm and its President for Fraudulently Hiding Account Shortfall

On May 5, 2014, the SEC announced fraud charges and an asset freeze against an investment advisory firm and its president for repeatedly hiding a shortfall of more than $700,000 in client assets. According to the SEC’s complaint filed in U.S. District Court for the Southern District of Ohio, Professional Investment Management (PIM) reported to clients that the firm held approximately $7.7 million of client money in a money market fund account when the actual amount held was less than $7 million. The account shortfall was discovered when the SEC conducted an examination of the firm to verify the existence of client assets. The SEC alleges that Douglas Cowgill, the president and chief compliance officer of PIM, attempted to disguise the money market fund account shortfall from SEC examiners by entering a fake trade in PIM’s account records and also transferring funds from a separate client cash account to the money market fund account.

The SEC’s complaint alleges that: (1) PIM and Mr. Cowgill violated the antifraud provisions of the federal securities laws; (2) PIM violated the registration and custody provisions of the Advisers Act; and (3) Mr. Cowgill aided and abetted and caused PIM’s Advisers Act violations.

© 2019 Vedder Price


About this Author

Vedder Price P.C. attorneys provide a full range of services to a diverse financial services clientele. Attorneys practicing in the firm’s Investment Services Group are experienced in all aspects of investment company and investment adviser securities regulations, broker-dealer regulatory and compliance matters, derivatives and financial product matters, and ERISA and tax matters. Clients include mutual fund complexes, hedge and other private funds, money managers, broker-dealers, independent directors, and many other types of institutions such as banks, savings and loans,...