The SEC charged an investment advisory firm with several Investment Advisers Act violations in relation to allegations that the firm defrauded investors by misleading them about the performance track record of a branded investment strategy.
According to the SEC Complaint, Navellier & Associates, Inc. and its CEO, Louis Navellier (collectively, "Navellier"), misled clients about the performance of the "Vireo AlphaSector" investment strategy that was acquired from another firm, F-Squared Investments, Inc. ("F-Squared"). The SEC alleged that Navellier (i) performed inadequate due diligence and (ii) ignored the red flags that due diligence efforts revealed concerning the branded strategy. After entering into a model manager agreement with F-Squared, Navellier made various false and misleading representations through presentations, advertisements and other marketing initiatives about past performance of the investment strategy. In particular, Navellier claimed that the strategy was not "back-tested" and offered false data to support the supposed performance of funds managed pursuant to the investment strategy. Eventually, Navellier sold the line of business to F-Squared directly for a significant profit.
The SEC charged Navellier with violations of Investment Advisers Act Sections 206(1), 206(2), 206(4) and Rule 206(4)-1(a)(5).
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